<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
(Mark
One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 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 No. 1-4115
ZENITH ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1000 Milwaukee Avenue, Glenview, 60025-2493
Illinois (Zip Code)
(Address of principal executive
offices)
(847) 391-7000
(Registrant's telephone number, including area code)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
As of July 31, 1999, there were 67,525,447 shares of Common Stock, par
value $1 per share, outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Millions, Except Per Share Amounts
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
----------------- -----------------
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net sales.................................... $217.2 $224.0 $367.8 $444.7
------ ------ ------ ------
Costs, expenses and other:
Cost of products sold...................... 195.5 204.8 330.2 418.3
Selling, general and administrative........ 25.4 31.2 51.3 61.9
Engineering and research................... 7.4 11.4 15.4 22.2
Other operating expense (income), net (Note
4)........................................ (7.9) (7.9) (15.6) (15.1)
Restructuring charges (Note 3)............. 4.1 4.8 7.4 7.4
------ ------ ------ ------
Operating loss............................... (7.3) (20.3) (20.9) (50.0)
Gain on asset sales, net..................... 0.3 0.3 -- 0.1
Interest expense............................. (1.7) (4.4) (3.9) (8.1)
Interest expense--related party.............. (11.1) (6.9) (20.3) (11.4)
Interest income.............................. 0.4 0.3 0.6 0.6
------ ------ ------ ------
Loss before income taxes..................... (19.4) (31.0) (44.5) (68.8)
Income taxes................................. 1.5 -- 1.5 --
------ ------ ------ ------
Net loss..................................... $(20.9) $(31.0) $(46.0) $(68.8)
====== ====== ====== ======
Net loss per share of basic and diluted
common stock (Note 5)....................... $(0.31) $(0.46) $(0.68) $(1.02)
====== ====== ====== ======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Millions
<TABLE>
<CAPTION>
July
3, December 31, June 27,
ASSETS 1999 1998 1998
------ ------ ------------ --------
<S> <C> <C> <C>
Current assets:
Cash........................................... $ 2.8 $ -- $ 16.3
Receivables, net of allowance for doubtful
accounts of $21.2, $42.0 and $2.1,
respectively.................................. 114.5 127.0 15.0
Receivable from related party.................. 6.8 8.5 --
Inventories (Note 7)........................... 105.3 84.2 128.6
Transferor certificates (Note 6)............... -- -- 82.6
Other.......................................... 18.6 10.8 26.8
------ ------ ------
Total current assets......................... 248.0 230.5 269.3
Property, plant and equipment, net............... 42.9 50.2 158.6
Property held for disposal (Note 11)............. 3.7 43.0 5.7
Receivable from related party.................... 12.1 21.3 --
Other noncurrent assets.......................... 10.8 5.0 35.5
------ ------ ------
Total assets................................. $317.5 $350.0 $469.1
====== ====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Short-term debt (Note 8)....................... $ 6.6 $ 47.8 $102.0
Short-term debt with related party (Note 8).... 220.3 192.1 30.0
Current portion of long-term debt (Note 8)..... 11.5 5.8 41.8
Accounts payable............................... 84.6 48.1 63.6
Accounts payable with related party (Note 9)... 141.4 136.1 136.3
Income taxes payable........................... 5.2 4.2 0.6
Accrued expenses............................... 150.1 167.8 135.6
------ ------ ------
Total current liabilities.................... 619.7 601.9 509.9
Long-term liabilities............................ 5.4 3.6 9.1
Long-term liabilities with related party......... 10.9 11.2 10.1
Long-term debt (Note 8).......................... 92.0 97.8 97.8
Stockholders' equity:
Preferred stock................................ -- -- --
Common stock................................... 67.6 67.6 67.6
Additional paid-in capital..................... 506.8 506.8 506.8
Retained earnings (deficit).................... (983.2) (937.2) (730.5)
Treasury stock................................. (1.7) (1.7) (1.7)
------ ------ ------
Total stockholders' equity................... (410.5) (364.5) (157.8)
------ ------ ------
Total liabilities and stockholders' equity... $317.5 $350.0 $469.1
====== ====== ======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Millions
<TABLE>
<CAPTION>
Increase (Decrease) in Cash
Six Months Ended
--------------------------------
July 3, 1999 June 27, 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................. $(46.0) $(68.8)
Adjustments to reconcile net loss to net
cash used by operations:
Depreciation............................ 8.6 16.8
Other................................... 3.1 0.4
Gain on asset sales, net................ -- (0.1)
Changes in assets and liabilities:
Current accounts...................... 10.4 (13.1)
Other assets.......................... 3.4 2.2
Other liabilities..................... 1.5 2.2
------------- -------------
Net cash used by operating
activities......................... (19.0) (60.4)
------------- -------------
Cash flows from investing activities:
Capital additions....................... (1.4) (4.8)
Proceeds from asset sales............... 36.3 30.0
------------- -------------
Net cash provided by investing
activities......................... 34.9 25.2
------------- -------------
Cash flows from financing activities:
Short-term borrowings, net.............. (13.1) 60.0
Principal payments on long-term debt.... -- (8.5)
------------- -------------
Net cash provided (used) by
financing activities............... (13.1) 51.5
------------- -------------
Increase in cash.......................... 2.8 16.3
Cash at beginning of period............... -- --
------------- -------------
Cash at end of period..................... $ 2.8 $ 16.3
============= =============
Increase (decrease) in cash attributable
to changes in current accounts:
Receivables, net........................ $ 14.2 $ 6.7
Transferor certificates................. -- (12.9)
Income taxes, net....................... 1.0 (0.1)
Inventories............................. (21.1) 36.9
Other assets............................ (7.8) (0.5)
Accounts payable and accrued expenses... 24.1 (43.2)
------------- -------------
Net change in current accounts............ $ 10.4 $(13.1)
============= =============
Supplemental disclosure of cash flow
information:
Cash paid during the period for:..........
Interest................................ $ 9.4 $ 20.2
Income taxes............................ 0.5 (0.1)
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note One--Basis of presentation
The accompanying unaudited condensed consolidated financial statements
("financial statements") have been prepared in accordance with generally
accepted accounting principles and pursuant to the rules and regulations of
the Securities and Exchange Commission. The accuracy of the amounts in the
financial statements is in some respects dependent upon facts that will exist,
and procedures that will be performed by the company, later in the year. In
the opinion of management, all adjustments necessary for a fair presentation
of the financial statements have been included and are of a normal, recurring
nature. For further information, refer to the consolidated financial
statements and notes thereto included in the company's Form 10-K for the year
ended December 31, 1998.
Note Two--Subsequent events
On July 20, 1999, the company announced that it had begun soliciting
bondholder votes for its prepackaged plan of reorganization.
The solicitation process follows an agreement with an ad hoc committee of
bondholders to support the company's restructuring plan as discussed below. As
announced in April, members of this committee (who informed the company that
they hold or control over fifty percent of the outstanding principal amount of
the company's 6 1/4 percent subordinated debentures due 2011) agreed to vote
for and support the prepackaged plan.
As previously announced, under the plan, trade creditors and vendors will
not be impaired and will continue to be paid in the ordinary course of
business. The company also expects to continue to pay employees' pre-petition
and post-petition wages, salaries and benefits without interruption, and to
fulfill obligations to customers throughout the reorganization.
The company is seeking acceptance of its prepackaged plan in anticipation
of the commencement of a case under Chapter 11 of the U. S. Bankruptcy Code in
order to implement the previously announced restructuring of the company. The
prepackaged plan provides that, upon consummation of the company's
reorganization, current holders of the $103.5 million in principal amount of
the 6 1/4 percent subordinated debentures will receive $50.0 million of new
8.19 percent senior debentures maturing in November 2009.
The voting deadline is 5 p.m. Eastern Daylight Time on August 20, 1999.
Upon acceptance of the plan, the company intends to promptly file its case and
seek confirmation of the prepackaged plan. The company will continue to
operate under Chapter 11 in the ordinary course of business.
Pursuant to an agreement with the company, LG Electronics Inc. ("LGE") has
agreed to exchange $200.0 million of its claims for 100 percent of the equity
of the reorganized company and to exchange the remainder of its claims for
assets and new restructured notes, interest on which is payable in kind under
certain circumstances. Under the plan, all outstanding common stock will be
canceled, and stockholders will receive no distribution and retain no
property.
As discussed below, as announced in April, the company has entered into a
binding agreement with Citicorp North America Inc. to provide a $150.0 million
debtor-in-possession financing facility to cover the period during the
abbreviated court proceeding and a new three-year, $150.0 million credit
facility to cover the period following the completion of the company's
restructuring.
In July 1999, the company sold substantially all of its Chihuahua, Mexico
facility for approximately $10.2 million less escrowed amounts, including a
$2.0 million escrow contingent upon the company's purchase of specified
quantities of set-top boxes over a fifteen-month period.
5
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
Note Three--Restructuring charges
During the three months and six months ended July 3, 1999, the company
recorded $4.1 million and $7.4 million, respectively, of restructuring
charges, primarily related to costs associated with work performed by outside
consulting and law firms to support the development of the operational and
financial restructuring plans and the prepackaged plan of reorganization.
Restructuring charges of $4.8 million and $7.4 million were recorded for the
three and six months ended June 27, 1998, respectively, for fees paid to
outside professionals for work to support the development of the company's
operational and financial restructuring plans.
A summary of the restructuring reserve recorded in 1998 and 1999 is as
follows (in millions):
<TABLE>
<CAPTION>
Restructuring 1999 1999 Restructuring
Reserve at Restructuring Cash Reserve at
Dec. 31, 1998 Charges Payments July 3, 1999
------------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Severance and other
employee costs......... $15.4 $0.5 $(11.6) $ 4.3
Plant closure and
business exit cost..... 15.0 -- (8.0) 7.0
Professional fees....... 0.6 6.9 (5.8) 1.7
Other................... 0.3 -- (0.2) 0.1
----- ---- ------ -----
Total restructuring
reserve.............. $31.3 $7.4 $(25.6) $13.1
===== ==== ====== =====
</TABLE>
The $13.1 million reserve appears, at this time, to be adequate to cover
the remaining costs of the restructuring activity reserved for at December 31,
1998.
In addition, as of December 31, 1998 and July 3, 1999, the company had
reserves for asset impairment of $103.7 million and $94.2 million,
respectively, which were provided for in 1997 and 1998 and are included in
fixed assets.
Note Four--Other operating expense (income)
Other operating expense (income) consisted of the following (in millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------- -----------------
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
--------- --------- ------- --------
<S> <C> <C> <C> <C>
Royalty income--tuner system
patents..................... $(7.1) $(6.4) $(13.3) $(12.7)
Royalty income--VCR direct
ship........................ (0.5) (0.3) (1.1) (0.5)
Royalty income--other........ (0.6) (0.8) (1.9) (1.1)
Bank fees.................... 0.6 0.5 0.9 0.9
Other........................ (0.3) (0.9) (0.2) (1.7)
--------- --------- ------ ------
Total other operating
income, net............... $(7.9) $(7.9) $(15.6) $(15.1)
========= ========= ====== ======
</TABLE>
Note Five--Loss per share
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", the company computed basic loss per share by dividing
net loss by the weighted average number of shares of common stock outstanding
during the periods. Diluted loss per share, assuming conversion of the 6 1/4
percent convertible subordinated debentures due 2011 and outstanding stock
options, is not presented because the effect of the assumed conversion is
antidilutive. The weighted average number of shares was 67.5 million for both
the three months and six months ended July 3, 1999 and 67.5 million and 67.3
million for the three months and six months ended June 27, 1998, respectively.
6
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
Note Six--Receivables
During the third quarter of 1998, the company's trade receivables
securitization was terminated. As a result, the company's financial statements
for the period ended July 3, 1999 reflect that receivables, net of allowance
for doubtful accounts, are no longer sold and transferor certificates (which
represented the company's retained interest in the pool of receivables that
were sold) do not exist.
Note Seven--Inventories
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
July 3, December 31, June 27,
1999 1998 1998
------- ------------ --------
<S> <C> <C> <C>
Raw materials and work-in-process........... $ 41.5 $47.1 $ 81.7
Finished goods.............................. 63.8 37.1 46.9
------ ----- ------
Total inventories......................... $105.3 $84.2 $128.6
====== ===== ======
</TABLE>
Note Eight--Short-term debt and credit arrangements; Long-term debt
Between November 1997 and February 1998, the company entered into a series
of new financing transactions designed to enhance the company's liquidity and
financial flexibility. The company obtained a total of $110.0 million in
unsecured and uncommitted credit facilities through four lines of credit with
various lenders. The credit lines were guaranteed by LGE for which LGE is
entitled to receive a fee in an amount up to 2.0 percent of the outstanding
amount of the loans. During the second and third quarter of 1998, LGE made
payments under demands against guarantees on $72.0 million of the facilities;
during the second quarter of 1999, LGE made payment under demands against a
guarantee on $30.0 million and the company is obligated to LGE for all these
payments plus interest. The company's obligations to LGE are secured by a
second lien on certain assets of the company.
In March 1998, the company entered into a secured credit facility with LGE
which provides for borrowings of up to $45.0 million. As of July 3, 1999,
$30.0 million was outstanding under the facility. See Note Nine for further
discussion.
In April 1997, the company entered into a sale-leaseback transaction
whereby the company sold and leased back manufacturing equipment in its
Melrose Park, Illinois, plant and in its Reynosa and Juarez, Mexico,
facilities. The company's payment obligations, along with certain other items
under the lease agreement, were fully guaranteed by LGE. In July 1998, LGE
made payment under the guarantees of the leases in the amount of $90.1 million
under a negotiated settlement with the lessor. As equipment previously
included in the sale-leaseback transaction is sold, the proceeds of such sales
will reduce the company's debt to LGE for this payment. As a result of initial
asset sales and payments to LGE, the company's second quarter financial
statements reflect a reduced $88.3 million current liability to LGE (included
in "Short-term debt with related party" on the balance sheet).
The company's Citibank credit facility (as amended) provides for up to
$125.0 million of revolving loans, subject to borrowing base restrictions. The
revolving loans must be repaid on or before the earlier of (a) the company
filing for a prepackaged plan of reorganization or (b) August 31, 1999. In
addition, the company is required to make repayments: (i) to the extent of the
excess of borrowings over the borrowing base and (ii) with
7
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
the proceeds of most sales of capital stock or assets. The obligations of the
company under the amended Citibank credit facility are secured by certain of
the company's assets. The amended Citibank credit facility requires the
company, among other things, to meet certain financial tests regarding the
amount of tuner patent royalties and the average outstanding payable to LGE
for products purchased in the ordinary course of business. The facility also
contains covenants which, among other things, restrict the ability of the
company and its subsidiaries to incur indebtedness, issue guarantees, incur
liens, declare dividends or pay management or consulting fees to affiliates,
make loans and investments, engage in transactions with affiliates, liquidate,
sell assets or engage in mergers. Interest on borrowings is based on market
rates. As of July 3, 1999, $6.6 million was outstanding under this credit
facility.
On March 31, 1999, the company entered into a Commitment Letter (the
"Commitment") with Citicorp North America, Inc. pursuant to which Citicorp
North America, Inc. agreed to provide up to $150.0 million of debtor-in-
possession financing during the pendency of the company's bankruptcy
proceeding and agreed to provide a new three-year $150.0 million credit
facility following completion of the company's bankruptcy proceeding, subject
in each case to borrowing base restrictions. The new facilities will be
secured by certain of the company's assets, including inventory, receivables,
fixed assets and intellectual property, and will be subject to other terms and
conditions. The Commitment is subject to the completion of definitive
documentation and other conditions and provides for interest on borrowings
based on specified margins above LIBOR or the prime rate.
The new credit facilities will be in addition to the $60.0 million post-
restructuring credit support to be provided by LGE to the company pursuant to
the terms of the restructuring agreement between the parties.
On March 29, 1999, the company was advised by LGE that LGE had received
Korean regulatory approval to permit LGE to consummate the transactions set
forth in the restructuring agreement between the company and LGE, including
authorization for LGE to provide the company with $60.0 million of post-
restructuring credit support, on the terms and conditions of the restructuring
agreement.
The company did not make the April 1, 1999 sinking fund ($5.8 million) and
interest ($3.2 million) payments on its subordinated debentures due 2011. The
company's failure to make such payments on April 1, subject to grace periods
(if any) provided in the indenture, constitutes a default under the indenture
relating to the subordinated debentures.
The lenders under the Citicorp credit facility waived the cross default
under the credit facility related to the company's failure to make the
payments on the subordinated debentures. In addition, LGE waived the cross
default under the Note Agreement between LGE and the company and certain
related security documents related to the company's failure to make the
payments on the subordinated debentures.
On March 31, 1999, the company, LGE and an ad hoc committee of holders of
the company's 6 1/4 percent Convertible Subordinated Debentures due 2011
reached an agreement with respect to the terms of the company's proposed
prepackaged plan of reorganization. The ad hoc committee is comprised of
Loomis Sayles & Company, Mariner Investment Group and Caspian Capital
Partners, L.L.P. (the "Debenture Committee"). The members of the Debenture
Committee have represented to the company that they collectively hold or
control over 50 percent of the outstanding principal amount of the
subordinated debentures.
The company, LGE and the Debenture Committee have agreed to the terms of
the proposed restructuring of the subordinated debentures. The parties have
agreed, among other things, that under the prepackaged plan, if approved,
holders of the subordinated debentures will receive a pro rata distribution of
$50.0 million of new 8.19 percent senior debentures of the company due 2009.
The Debenture Committee has agreed to support confirmation of the company's
prepackaged plan, and has agreed to forbear from enforcement of any defaults
8
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
that might occur with respect to the subordinated debentures until the
prepackaged plan is confirmed. However, the obligations of the members of the
Debenture Committee terminate if, among other circumstances, the prepackaged
plan has not been filed with the Bankruptcy Court on or before September 15,
1999, or the prepackaged plan has not been confirmed by the Bankruptcy Court
on or before December 31, 1999. The agreement also contains other customary
provisions.
Note Nine--Related party
In November 1995, a change in control of the company occurred, in which LGE
and an affiliate (LG Semicon Co., Ltd.) purchased shares of the company
pursuant to a combined tender offer and purchase of newly issued shares of
common stock from the company. As of July 3, 1999, LGE owned 36,569,000
shares, excluding vested but unexercised options, of common stock of the
company, which represents 54.2 percent of the outstanding common stock. On
April 29, 1999, the company was informed by LGE that on April 28, 1999, LGE
had acquired 26,095,200 shares of common stock of the company along with the
associated common stock purchase rights from LG Semicon Co., Ltd. The company
was informed that the aggregate purchase price for such shares was 10 Korean
Won (approximately US$0.01). Because LGE owns a majority of the issued and
outstanding common stock, it effectively controls the outcome of any matter
requiring action by a majority of the company's stockholders, including the
election of a majority of the company's directors and any future change in
control of the company.
On August 7, 1998, the company entered into a Restructuring Agreement with
LGE which sets forth the terms and conditions pursuant to which LGE has agreed
to participate in and assist the company with its proposed financial and
operational restructuring plans.
LGE is a leading international brand-name manufacturer of five main groups
of products: televisions; audio and video equipment; home appliances;
computers and office automation equipment; and other products, including video
displays, telecommunication products and components, and magnetic media. The
following represent the most significant transactions between the company and
LGE during the three and six month periods ended July 3, 1999 and June 27,
1998.
Product purchases: In the ordinary course of business, the company
purchases VCRs, television-VCR combinations and components from LGE and its
affiliates. The company purchased $16.8 million and $19.6 million of these
items during the three and six month periods ended July 3, 1999, respectively,
and $15.2 million and $23.0 million of these items during the three and six
month periods ended June 27, 1998, respectively. Sales of products purchased
from LGE and its affiliates contributed $13.1 million and $20.5 million to
sales during the three and six month periods ended July 3, 1999, respectively,
and $15.2 million and $35.3 million to sales during the three and six month
periods ended June 27, 1998, respectively. The purchase prices were the result
of negotiations between the parties and were consistent with third party bids.
In 1998, the company and LGE entered into a direct shipment arrangement
pursuant to which LGE sells and ships VCRs directly to the company's two
largest customers and pays the company a license fee for the use of the
company's brand names on such products and the inclusion of the company's
patented tuner technology in such products. The license fee payable by LGE is
comparable to licensing rates charged by the company to unrelated parties.
During the three and six month periods ended July 3, 1999, the company accrued
approximately $0.5 million and $1.1 million, respectively, in royalties for
the use of the company's brand names pursuant to this direct shipment program.
The company accrued approximately $0.3 million and $0.5 million for such
royalties in the three and six month periods ended June 27, 1998,
respectively. A similar arrangement was entered into in April 1997, in Canada
where LGE's Canadian affiliate sells Zenith branded VCRs under a license from
the company. Pursuant to that arrangement, the company accrued approximately
$0.2 million and $0.4 million in the three and six month periods ended July 3,
1999, respectively. Approximately $0.3 million was accrued in both the three-
and six-month periods ended June 27, 1998.
9
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
Product and other sales: The company sells televisions, picture tubes,
yokes and other manufactured subassemblies to LGE and its affiliates at prices
consistent with amounts charged by the company to its major customers. Sales
by the company to LGE and its affiliates were $7.9 million and $13.1 million
during the three and six month periods ended July 3, 1999, respectively, and
$11.2 million and $22.5 million during the three and six months ended June 27,
1998, respectively.
In December 1996, the company closed its wholly-owned Canadian distributor
and sold the remaining inventory to LGE at book value. The company entered
into a distributor agreement with an LGE subsidiary whereby such subsidiary
became the Canadian distributor for the company. During 1997, the company
entered into a similar agreement with an LGE subsidiary in Mexico to sell the
company's products in Mexico. During the three and six months ended July 3,
1999, the company's sales to the LGE Canadian and Mexican subsidiaries were
$3.1 million and $4.8 million, respectively and $3.9 million and $9.2 million,
respectively. During the three and six month periods ended June 27, 1998, the
company's sales to the LGE Canadian and Mexican subsidiaries were $7.7 million
and $3.2 million, respectively, and $12.0 million and $8.5 million,
respectively. These amounts are included in the sales by the company to LGE
and its affiliates discussed above.
Other Items: In March 1998, the company entered into a secured credit
facility with LGE which provides for borrowings of up to $45.0 million. The
interest rate is LIBOR plus 6.5 percent per annum. The term of the facility
(as amended) provides that no demand for repayment can be made, absent a
default, prior to August 31, 1999. The first such borrowing occurred in May
1998, and as of July 3, 1999, $30.0 million was outstanding under the
facility. The facility is secured by a second lien on certain of the company's
assets, including its VSB technology and is subject to certain terms and
conditions.
Accounts payable with related party consists of $141.4 million and $136.3
million to LGE and its affiliates as of July 3, 1999 and June 27, 1998,
respectively. In April 1997, the company and LGE entered into an arrangement
whereby LGE provided a vendor credit line to the company to finance the
company's purchases of certain goods from LGE in the ordinary course of
business. Prior to April 1997, the company's accounts payable arising in the
ordinary course of business to LGE were extended for certain periods of time,
but no formal arrangement was in place. The amount of extended payables was
$141.1 million and $134.4 million as of July 3, 1999 and June 27, 1998,
respectively. The company is charged interest on the extended period at rates
reflecting then-current market conditions in Korea.
The $21.3 million noncurrent receivable from related party as of December
31, 1998 represents the appraised fair value of the manufacturing equipment,
previously part of the sales-lease back agreement, which is receivable from
LGE. This receivable has been reduced to $12.1 million as of July 3, 1999, as
the company purchased equipment prior to its selling the equipment to third
parties.
The company believes that the transactions between the company and LGE have
been conducted on terms no less favorable to the company than could have been
obtained with unrelated third parties.
Note Ten--Segment and geographic data
The company adopted Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" as of
December 31, 1998. This statement established new disclosure requirements
related to operating and geographic segments.
10
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Concluded)
Financial information, summarized by operating segment, is as follows (in
millions):
<TABLE>
<CAPTION>
Consumer Network Corporate
Electronics Systems and Other Consolidated
----------- ------- --------- ------------
<S> <C> <C> <C> <C>
Six months ended July 3, 1999
Net sales................... $311.1 $56.7 $ -- $367.8
Income (loss) before income
taxes...................... (5.9) 3.2 (41.8) (44.5)
Six months ended June 27, 1998
Net sales................... $407.4 $37.3 $ -- $444.7
Loss before income taxes.... (24.7) (8.1) (36.0) (68.8)
</TABLE>
It should be noted that in the information presented, certain costs such as
interest and administrative costs are not allocated to the Consumer
Electronics or Network Systems segments. These unallocated costs are reported
above in the Corporate and Other column.
Note Eleven--Property held for disposal
Under the operational restructuring, the company intends to transform
itself from an integrated manufacturer and distributor of consumer electronics
products into a sales, distribution and technology company. The operational
restructuring requires that the company close and dispose of all, or
substantially all, of its manufacturing facilities and outsource all, or
substantially all, product lines. During the first six months of 1999, the
decrease in property held for disposal resulted from the sale of all, or
substantially all assets at the company's Juarez and Matamoros, Mexico
facilities and most equipment at its Melrose Park, Illinois facility.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The company's second quarter net loss, excluding restructuring charges, was
$16.8 million in 1999 compared to $26.2 million in 1998. Including a $4.1
million restructuring charge, the company reported a 1999 second quarter net
loss of $20.9 million or $0.31 per basic and diluted common share. In the 1998
second quarter, including a $4.8 million restructuring charge, the company
reported a net loss of $31.0 million or $0.46 per basic and diluted common
share.
The second quarter of 1999 and 1998 restructuring charges related primarily
to costs associated with work performed by outside consulting and law firms to
support the development of the operational and financial restructuring plans
and the prepackaged plan of reorganization.
The company's core business--the development, manufacture and distribution
of a broad range of products for the delivery of video entertainment--is
composed of two major product areas--Consumer Electronics (which includes
color television sets and other consumer products) and Network Systems (which
includes the design and manufacture of digital and analog set-top boxes along
with data modems sold primarily to cable and satellite television operators).
Total second quarter sales were $217.2 million in 1999, down 3 percent from
$224.0 million in 1998. Consumer electronics sales declined $12.7 million (or
6 percent) in the 1999 quarter compared with the same period in 1998, driven
largely by planned sales reductions in lower-margin color television products.
The 1999 sales decrease also resulted from a delay in new product
introductions including projection televisions and DVD's and LGE's Canadian
affiliate purchasing less in 1999.
Sales of Network systems products increased $5.9 million (or 30 percent) in
the second quarter of 1999 compared with a year ago. The increase reflected a
strong demand for digital set-top boxes from both domestic customers and
emerging international markets which began in late 1998.
Despite lower sales, the company's 1999 second quarter gross margin was
$21.7 million compared to $19.2 million in the prior year. This was primarily
the result of: (i) lower depreciation expense and other fixed
11
<PAGE>
manufacturing costs eliminated in the 1999 second quarter (due to operational
restructuring activities begun in the fourth quarter of 1998), (ii) a favorable
change in product mix to more Network Systems products, (iii) lower spending
and material costs at the Reynosa plant, and (iv) a planned reduction in the
sale of lower-margin business.
Selling, general and administrative expenses were $25.4 million in the
second quarter of 1999, compared with $31.2 million in the previous year.
Expenses for 1999 benefited from lower advertising costs and the company's
continuing efforts to reduce expenses and downsize staffing.
Other operating expense (income) was $(7.9) million for both the second
quarter of 1999 and 1998. Other operating income in the second quarter of 1999
includes $7.1 million of accrued royalty income from manufacturers of
television sets and VCRs who have taken licenses under some of the company's
U.S. tuner system patents. This income was $6.4 million in the second quarter
of 1998.
Interest expense was $12.8 million in the second quarter of 1999, compared
with $11.3 million in the comparable period of the previous year. The change
resulted from higher funding requirements in 1999 (at generally higher interest
rates) for company operations and the accrued interest on the amount the
company owes LGE pursuant to LGE's payment of the company's obligation under a
sale-leaseback agreement.
For the first six months of 1999 the company reported a net loss, excluding
restructuring charges, of $38.6 million compared to $61.4 million in the same
period in 1998. Including a $7.4 million restructuring charge, the company
reported a 1999 six month net loss of $46.0 million or $0.68 per basic and
diluted common share. In the first six months of 1998, including a $7.4 million
restructuring charge, the company reported a net loss of $68.8 million or $1.02
per basic and diluted common share. First-half sales were $367.8 million in
1999 and $444.7 million in 1998.
Liquidity and Capital Resources
During the six months ended July 3, 1999, $19.0 million of cash was used by
operating activities principally as a result of $37.4 million of net losses
(adjusted for depreciation) from operations. This was partially offset by $10.4
million of cash provided by the change in current accounts, which was
principally composed of a $24.1 million increase in accounts payable and
accrued expenses and a $14.2 million decrease in receivables, which was
partially offset by a $21.1 million increase in inventories. The decrease in
receivables was the result of lower revenue in the second quarter of 1999 and
the company's continued effort to reduce its aged receivables. The increase in
accounts payable and accrued expenses resulted primarily from the seasonal
build-up of inventories; however, inventories were $23.3 million lower than the
amount at June 27, 1998 due to the decreasing manufacturing activities.
During the six months ended July 3, 1999, $34.9 million of cash was provided
by investing activities. This was composed of $36.3 million of cash received
from the sale of certain property, partially offset by $1.4 million of cash
used for capital additions.
During the six months ended July 3, 1999, $13.1 million of cash was used by
financing activities. This was composed primarily of an $11.2 million repayment
of revolving credit borrowings under the amended Citibank credit facility and
$1.8 million repaid to LGE from proceeds from the sale of equipment previously
included in the sale-leaseback transaction.
As of July 3, 1999, the company had $471.5 million of interest-bearing
obligations which consisted of: (i) $141.1 million of extended-term payables
with LGE, (ii) $103.5 million of 6 1/4 percent convertible subordinated
debentures due 2011 (the current portion of which was $11.5 million), (iii)
$30.0 million outstanding under a secured credit facility with LGE, (iv) $88.3
million owed to LGE as a result of LGE's payment under the guarantees of the
leveraged leases, (v) $102.0 million owed to LGE as a result of LGE's payments
under demands against guarantees on the unsecured and uncommitted credit
facilities and (vi) $6.6 million outstanding under the amended Citibank credit
facility.
12
<PAGE>
Between November 1997 and February 1998, the company obtained a total of
$110.0 million in unsecured and uncommitted credit facilities through four
lines of credit with various lenders. The credit lines were guaranteed by LGE
for which LGE is entitled to receive a fee in an amount up to 2.0 percent of
the outstanding amount of the loans. The company granted liens in favor of LGE
on the capital stock of the company's domestic subsidiaries, on the company's
intellectual property (other than tuning patents, tuning patent royalties and
related license agreements) and certain other company assets to secure the
guarantees of LGE for borrowings under these credit lines. During the second
and third quarter of 1998, LGE made payments under demands against guarantees
on $72.0 million of the facilities; during the second quarter of 1999, LGE
made payment under demands against a guarantee on $30.0 million and the
company is obligated to LGE for all these payments plus interest.
In March 1998, the company entered into a secured credit facility with LGE
which provides for borrowings of up to $45.0 million. As of April 19, 1999,
the company amended this facility to provide that no demand for repayment
could be made under the facility, absent a default, prior to August 31, 1999.
The first such borrowing occurred in May 1998, and as of July 3, 1999, $30.0
million was outstanding under the facility. The facility is secured by a
second lien on certain of the company's assets, including its VSB technology,
and is subject to certain terms and conditions.
In April 1997, the company entered into a sale-leaseback transaction
whereby the company sold and leased back manufacturing equipment in its
Melrose Park, Illinois, plant and in its Reynosa and Juarez, Mexico,
facilities. The company's payment obligations, along with certain other items
under the lease agreement, were fully guaranteed by LGE. In July 1998, LGE
made payment under the guarantees of the lease in the amount of $90.1 million
under a negotiated settlement with the lessor.
During the third quarter of 1998, the company's existing Citicorp credit
facility (initially composed of a $45.0 million amortizing term loan and a
$65.0 million revolving credit line) was amended and restated. The amended
Citibank credit facility provides for up to $125.0 million of revolving loans,
subject to borrowing base restrictions. On April 19, 1999, the company entered
into a Second Amendment and Waiver to the Amended and Restated Credit
Agreement extending the maturity date of the $125.0 million facility to the
earlier of (a) the company filing for a prepackaged plan of reorganization or
(b) August 31, 1999. See Note Eight for additional discussion of the amended
credit facility.
On March 31, 1999, the company entered into a Commitment Letter (the
"Commitment") with Citicorp North America, Inc. pursuant to which Citicorp
North America, Inc. agreed to provide up to $150.0 million of debtor-in-
possession financing during the pendency of the company's bankruptcy
proceeding and agreed to provide a new three-year $150.0 million credit
facility following completion of the company's bankruptcy proceeding, subject
in each case to borrowing base restrictions. The new facilities will be
secured by certain of the company's assets, including inventory, receivables,
fixed assets and intellectual property, and will be subject to other terms and
conditions. The Commitment is subject to the completion of definitive
documentation and other conditions and provides for interest on borrowings
based on specified margins above LIBOR or the prime rate.
The new credit facilities will be in addition to the $60.0 million post-
restructuring credit support to be provided by LGE to the company pursuant to
the terms of the restructuring agreement between the parties.
On March 29, 1999, the company was advised by LGE that LGE had received
Korean regulatory approval to permit LGE to consummate the transactions set
forth in the restructuring agreement between the company and LGE, including
authorization for LGE to provide the company with $60.0 million of post-
restructuring credit support (as discussed above), on the terms and conditions
of the restructuring agreement.
The company did not make the April 1, 1999 sinking fund ($5.8 million) and
interest ($3.2 million) payments on its subordinated debentures due 2011. The
company's failure to make such payments on April 1, subject to grace periods
(if any) provided in the indenture, constituted a default under the indenture
relating to the subordinated debentures. It is the company's intention to
restructure this debt by converting it to a $50.0 million long-term issue.
13
<PAGE>
The lenders under the Citicorp credit facility waived the cross default
under the credit facility related to the company's failure to make the
payments on the subordinated debentures. In addition, LGE waived the cross
default under the Note Agreement between LGE and the company and certain
related security documents related to the company's failure to make the
payments on the subordinated debentures.
On March 31, 1999, the company, LGE and an ad hoc committee of holders of
the company's 6 1/4 percent Convertible Subordinated Debentures due 2011
reached an agreement with respect to the terms of the company's proposed
prepackaged plan of reorganization. The ad hoc committee is comprised of
Loomis Sayles & Company, Mariner Investment Group and Caspian Capital
Partners, L.L.P. (the "Debenture Committee"). The members of the Debenture
Committee have represented to the company that they collectively hold or
control over 50 percent of the outstanding principal amount of the
subordinated debentures.
The company, LGE and the Debenture Committee have agreed to the terms of
the proposed restructuring of the subordinated debentures. The parties have
agreed, among other things, that under the prepackaged plan, if approved,
holders of the subordinated debentures will receive a pro rata distribution of
$50.0 million of new 8.19 percent senior debentures of the company due 2009.
The Debenture Committee has agreed to support confirmation of the company's
prepackaged plan, and has agreed to forbear from enforcement of any defaults
that might occur with respect to the subordinated debentures until the
prepackaged plan is confirmed. However, the obligations of the members of the
Debenture Committee terminate if, among other circumstances, the prepackaged
plan has not been filed with the Bankruptcy Court on or before September 15,
1999, or the prepackaged plan has not been confirmed by the Bankruptcy Court
on or before December 31, 1999. The agreement also contains other customary
provisions.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
Certain statements in this Quarterly Report on Form 10-Q, such as those
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 successfully implement the operational restructuring and achieve
the business plan projections and financial results of the company 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; LGE's ability to obtain required approvals of the Republic of Korea
for additional financing, if any, that LGE may desire to extend to the
company; 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; 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 confirm
the prepackaged plan. Given these uncertainties, stockholders and debtholders
are cautioned not to place undue reliance on any forward-looking statements
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 or referred to
herein or to reflect future events or developments.
Readiness for the Year 2000
The company is employing a combination of internal resources and outside
consultants to coordinate and implement its Year 2000 Readiness initiatives.
The company has established a company-wide Year 2000 Task Force, led by the
company's technology group, with representation from its major business
segments, to evaluate and address Year 2000 issues. The Year 2000 Task Force's
responsibilities include, without limitation, (i) conducting an evaluation of
the company's computer-based systems, facilities and products (and those of
dealers, vendors and other third parties with which the company does business)
to determine their Year 2000 Readiness,
14
<PAGE>
(ii) coordinating the replacement and/or upgrade of non-compliant systems, as
necessary, (iii) promoting the company-wide awareness of Year 2000 issues
through education and training, and (iv) developing and overseeing the
implementation of all of the company's other Year 2000 Readiness initiatives.
The company has completed its evaluation of its computer-based systems,
facilities and products to determine whether they are "Year 2000 Ready". The
company believes that its material non-information technology systems will be
Year 2000 Ready prior to January 1, 2000. The company believes that most of
its currently manufactured products are Year 2000 Ready. The company has sent
Year 2000 Readiness questionnaires to its existing key vendors and suppliers
to assess the Year 2000 Readiness of their systems and products. The responses
to these questionnaires have indicated that the company's vendors or suppliers
are addressing their Year 2000 issues and expect to be Year 2000 Ready by
January 1, 2000. While the company is working to achieve Year 2000 Readiness,
there can be no assurance that it will successfully achieve all of its goals.
At this time, and based on the company's current implementation plan, the
company does not believe that its Year 2000 related issues will have a
material adverse effect on the company's business. Although no contingency
plan has been deemed to be necessary at this time, the company has a
continuing process of evaluating the need for various contingency plans as a
precautionary measure.
Included within the company's Year 2000 Readiness initiatives are plans to
ensure the company's financial, sales and distribution application software
("FS&D Applications") are Year 2000 Ready. The FS&D Applications include the
primary software employed in the company's general ledger, accounts payable
and disbursement, accounts receivable and collection, purchasing, billing,
inventory management and sales activities. As a part of the company's Year
2000 readiness initiatives the company has recently implemented new FS&D
Applications which are Year 2000 Ready. The estimated total cost of
implementing the new FS&D Applications is $6.8 million, of which $3.3 million
will be incurred in fiscal 1999.
In connection with the company's proposed operational restructuring, the
company plans to discontinue substantially all of its manufacturing operations
and to outsource substantially all components and products. The company
believes its other exposure to Year 2000 risks are related to the ability of
its vendors to provide the company with Year 2000 Ready components and
products and to assure that such vendors otherwise are Year 2000 Ready so that
they are able to provide the company with components and products in a timely
manner. The company has requested and has, to date, received from most of its
suppliers, assurance of their Year 2000 Readiness. The company is aware,
however, that Year 2000 issues may exist with respect to vendors with which it
has or will have a material relationship.
Prior to 1998, the company spent in the aggregate approximately $1.8
million on software and hardware upgrades and replacements and approximately
$0.2 million on other costs (i.e., labor, consulting fees and other expenses)
in connection with Year 2000 Readiness. The company spent a total of $2.5
million in 1998 (approximately $0.8 million for software and hardware upgrades
and approximately $1.7 million for other costs) for this project. The company
has estimated it will spend $4.6 million in 1999 (approximately $1.0 million
for software and hardware upgrades and approximately $3.6 million for outside
consulting assistance and other costs) with respect to Year 2000 readiness.
This amount includes the cost of implementing the new FS&D Applications
discussed above. Most of the costs incurred by the company in addressing Year
2000 Readiness are expected to be expensed as incurred, in compliance with
generally accepted accounting principles. The company continues to evaluate
the estimated costs associated with its Year 2000 Readiness efforts. While the
Year 2000 transition efforts may involve costs in addition to those currently
budgeted or anticipated to be budgeted, at this time, the company has not yet
determined the full costs of the modifications that may be necessary to
address all Year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During the three months ended July 3, 1999, no reportable events or
material developments occurred regarding the legal proceedings of the company.
Item 2. Changes in Securities
(b) None
Item 3. Defaults Upon Senior Securities
The company did not make the April 1, 1999 sinking fund ($5.8 million) and
interest ($3.2 million) payments on its subordinated debentures due 2011. The
company's failure to make such payments on April 1, subject to grace periods
(if any) provided in the indenture, constitutes a default under the indenture
relating to the subordinated debentures.
The lenders under the Citicorp credit facility waived the cross default
under the credit facility related to the company's failure to make the
payments on the subordinated debentures. In addition, LGE waived the cross
default under the Note Agreement between LGE and the company and certain
related security documents related to the company's failure to make the
payments on the subordinated debentures.
On March 31, 1999, the company, LGE and an ad hoc committee of holders of
the company's 6 1/4 percent Convertible Subordinated Debentures due 2011
reached an agreement with respect to the terms of the company's proposed
prepackaged plan of reorganization. The ad hoc committee is comprised of
Loomis Sayles & Company, Mariner Investment Group and Caspian Capital
Partners, L.L.P. (the "Debenture Committee"). The members of the Debenture
Committee have represented to the company that they collectively hold or
control over 50 percent of the outstanding principal amount of the
subordinated debentures.
The company, LGE and the Debenture Committee have agreed to the terms of
the proposed restructuring of the subordinated debentures. The parties have
agreed, among other things, that under the prepackaged plan, if approved,
holders of the subordinated debentures will receive a pro rata distribution of
$50.0 million of new 8.19 percent senior debentures of the company due 2009.
The Debenture Committee has agreed to support confirmation of the company's
prepackaged plan, and has agreed to forbear from enforcement of any defaults
that might occur with respect to the subordinated debentures until the
prepackaged plan is confirmed. However, the obligations of the members of the
Debenture Committee terminate if, among other circumstances, the prepackaged
plan has not been filed with the Bankruptcy Court on or before September 15,
1999, or the prepackaged plan has not been confirmed by the Bankruptcy Court
on or before December 31, 1999. The agreement also contains other customary
provisions.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On July 15, 1999, the company's Registration Statement on Form S-4, which
contains information relating to the company's proposed financial and
operational restructuring plans along with information regarding a pre-
packaged plan of reorganization, was declared effective by the Securities and
Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
(27) Financial Data Schedule for the six months ended July 3, 1999
16
<PAGE>
(b) Reports on Form 8-K:
On May 3, 1999, the company filed a Form 8-K reporting under Item 5 (i)
the acquisition by LGE of 26,095,200 shares of common stock of the company
from LGE's affiliate, LGE Semicon Co., Ltd.; (ii) the demand for repayment
received by LGE of the Company's $30.0 million demand loan note payable to
Credit Agricole and the payment of the note by LGE; and (iii) the company
entering into a Second Amendment and Waiver to the Amended and Restated
Credit Agreement dated as of June 29, 1998, extending the maturity date of
the facility to the earlier of the bankruptcy filing by the company or
August 31, 1999.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10-Q Period Ended July 3, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-03-1999
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 142
<ALLOWANCES> 21
<INVENTORY> 105
<CURRENT-ASSETS> 248
<PP&E> 629
<DEPRECIATION> 583
<TOTAL-ASSETS> 318
<CURRENT-LIABILITIES> 620
<BONDS> 0
0
0
<COMMON> 68
<OTHER-SE> (478)
<TOTAL-LIABILITY-AND-EQUITY> 318
<SALES> 368
<TOTAL-REVENUES> 368
<CGS> 330
<TOTAL-COSTS> 330
<OTHER-EXPENSES> 59
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> (44)
<INCOME-TAX> 2
<INCOME-CONTINUING> (46)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46)
<EPS-BASIC> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
