<PAGE> 1
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 SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8549
FOXMEYER HEALTH CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 25-1425889
- -------------------------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1220 Senlac Drive, Carrollton, Texas 75006
- -------------------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 972-446-4800
-------------------
Indicate by check mark whether the registrant (1) had 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. Yes X No .
--- ---
Number of shares of Common Stock outstanding as of November 11, 1996:
13,805,988
- ----------
<PAGE> 2
PART 1. FINANCIAL INFORMATION
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
(In thousands, except per share amounts) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 4,432 $ 2,221
OPERATING COSTS
Selling, general and administrative expenses 6,364 5,091
Depreciation and amortization 592 117
- -----------------------------------------------------------------------------------------------------
(2,524) (2,987)
Other income (expense) (2,658) 7,370
- -----------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (5,182) 4,383
FINANCING COSTS
Interest income 483 638
Interest expense 1,450 1,451
- -----------------------------------------------------------------------------------------------------
Financing costs, net 967 813
- -----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE NATIONAL STEEL CORPORATION,
EQUITY IN INCOME (LOSS) OF AFFILIATES, INCOME TAX BENEFIT (PROVISION) AND
MINORITY INTEREST (6,149) 3,570
National Steel Corporation net preferred income 2,406 917
Equity in income (loss) of affiliates (784) 609
- -----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT (PROVISION)
AND MINORITY INTEREST (4,527) 5,096
Income tax benefit (provision) (7) 1,632
- -----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST (4,534) 6,728
Minority interest in results of operations of consolidated subsidiaries (225) (429)
- -----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS (4,759) 6,299
DISCONTINUED OPERATIONS:
Income from operations -- 1,207
Loss on sale of discontinued operations (366) --
- -----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (5,125) 7,506
Preferred stock dividends 3,080 5,382
- -----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ (8,205) $ 2,124
- -----------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Income (loss) from continuing operations $ (0.51) $ 0.05
Income (loss) from discontinued operations (0.02) 0.07
- -----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE $ (0.53) $ 0.12
- -----------------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 15,356 17,202
=====================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 3
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended September 30,
------------------------------
(In thousands, except per share amounts) 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 8,502 $ 3,980
OPERATING COSTS
Selling, general and administrative expenses 11,683 9,303
Depreciation and amortization 1,081 260
- ---------------------------------------------------------------------------------------------------------
(4,262) (5,583)
Other income (expense) (1,818) 16,438
- ---------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (6,080) 10,855
FINANCING COSTS
Interest income 843 1,630
Interest expense 3,567 2,843
- ---------------------------------------------------------------------------------------------------------
Financing costs, net 2,724 1,213
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE NATIONAL STEEL CORPORATION,
EQUITY IN LOSS OF AFFILIATES, INCOME TAX BENEFIT (PROVISION) AND
MINORITY INTEREST (8,804) 9,642
National Steel Corporation net preferred income 4,825 1,840
Equity in loss of affiliates (2,387) (631)
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT (PROVISION)
AND MINORITY INTEREST (6,366) 10,851
Income tax benefit (provision) (29,586) 2,851
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST (35,952) 13,702
Minority interest in results of operations of consolidated subsidiaries (1,010) (1,064)
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS (36,962) 12,638
DISCONTINUED OPERATIONS:
Income (loss) from operations (17,467) 1,069
Loss on sale of discontinued operations (239,048) --
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) (293,477) 13,707
Preferred stock dividends 7,160 10,605
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $(300,637) $ 3,102
- ---------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK:
Income (loss) from continuing operations $ (2.73) $ 0.12
Income (loss) from discontinued operations (15.89) 0.06
- ---------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE $ (18.62) $ 0.18
- ---------------------------------------------------------------------------------------------------------
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 16,142 16,959
=========================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
(In thousands of dollars) 1996 1996
- ----------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 6,203 $ 26,987
Receivables - net 4,917 291,750
Inventories -- 632,269
Net assets held for sale 7,989 16,527
Other current assets 19,392 43,632
- ----------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 38,501 1,011,165
INVESTMENT IN NATIONAL STEEL CORPORATION 49,034 44,099
INVESTMENTS IN AFFILIATES 37,750 49,602
PROPERTY, PLANT AND EQUIPMENT 25,116 216,604
Less: allowances for depreciation and amortization 1,342 73,749
- ----------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 23,774 142,855
OTHER ASSETS
Goodwill - net 7,201 207,935
Intangible assets - net 2,582 12,554
Deferred tax asset, net of valuation allowance -- 79,676
Miscellaneous assets 6,983 29,184
- ----------------------------------------------------------------------------------
16,766 329,349
- ----------------------------------------------------------------------------------
TOTAL ASSETS $ 165,825 $1,577,070
==================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
(In thousands of dollars) 1996 1996
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,786 $ 610,579
Accrued liabilities 8,563 51,475
Deferred income taxes -- 43,917
Long-term debt due within one year 15,381 28,793
- ----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 25,730 734,764
LONG-TERM DEBT 18,532 403,831
OTHER LONG-TERM LIABILITIES 39,959 38,646
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 10,723 10,074
REDEEMABLE PREFERRED STOCK 178,676 187,292
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $5.00 par value; authorized 50,000,000 shares; issued -
13,805,988 shares at September 30, 1996 and 24,188,084
shares at March 31, 1996 69,030 120,940
Capital in excess of par value 118,486 209,613
Minimum pension liability (64,634) (64,634)
Net unrealized holding loss on marketable securities (329) (17)
Retained earnings (deficit) (230,348) 70,431
- ----------------------------------------------------------------------------------------------------
(107,795) 336,333
Less: cost of common stock held in treasury - 7,520,882 shares at
March 31, 1996 -- 133,870
- ----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (107,795) 202,463
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 165,825 $ 1,577,070
====================================================================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
September 30,
---------------------------
(In thousands of dollars) 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(293,477) $ 13,707
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES:
Minority interest in results of operations of consolidated subsidiaries 1,010 1,064
Equity in loss of affiliates 2,387 631
Depreciation and amortization 1,081 260
Net preferred income from National Steel Corporation (4,825) (1,840)
Loss (gain) on investments 112 (5,154)
Other non-cash (credits) or charges 2,242 (11,381)
Deferred income tax provision (benefit) 29,579 (2,146)
Depreciation and amortization, provisions for losses on accounts
receivable and other items related to discontinued operations 10,392 18,291
Loss on sale of discontinued operations 239,048 --
Cash provided (used) by working capital items, net of acquisitions:
Receivables 19,508 39,433
Inventories 26,018 (147,290)
Other assets (3,882) (3,068)
Accounts payable and accrued liabilities (6,496) 73,997
Proceeds from accounts receivable financing program 75,000 --
Other (587) 1,387
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 97,110 (22,109)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Reduction in cash from reclassification to discontinued operations or
change to equity method of accounting (24,366) (9,108)
Purchase of property, plant and equipment (32,762) (24,826)
Purchase of investments (6,227) (77,760)
Proceeds from the sale of investments 56,107 16,257
Acquisitions, net of cash acquired -- (4,609)
Other 1,327 82
- ----------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (5,921) (99,964)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities 447,492 671,080
Repayments under revolving credit facilities (326,883) (568,080)
Proceeds from issuance of long-term debt 14,520 21,696
Debt repayments (211,995) (1,833)
Loan origination fees (8,278) (285)
Purchase of treasury stock (16,726) --
Purchase of preferred stock (8,256) --
Dividends paid on redeemable preferred stock (1,851) (2,090)
Dividends paid to minority interests (1,675) (1,032)
Exercise of stock options 1,679 1,639
- ----------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (111,973) 121,095
- ----------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND SHORT-TERM INVESTMENTS (20,784) (978)
Cash and short-term investments, beginning of period 26,987 35,232
- ----------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS, END OF PERIOD $ 6,203 $ 34,254
====================================================================================================
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 7
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
FoxMeyer Health Corporation (the "Corporation") is a holding company with
subsidiaries that are primarily engaged in the operation of hotels and office
buildings, the operation of a medical claims processor and investing in other
corporations and partnerships.
The preparation of the consolidated 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, and
the disclosure of contingent assets and liabilities, at the dates of the
financial statements and the reported amounts of revenues and expenses during
such reporting periods. Actual results could differ from these estimates.
Certain previously reported amounts have been reclassified to conform to
current year presentations.
The accompanying condensed consolidated balance sheet of the Corporation as of
September 30, 1996, the condensed consolidated statements of operations for the
three and six months ended September 30, 1996 and 1995, and the condensed
consolidated statements of cash flows for the six months ended September 30,
1996 and 1995 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited consolidated financial
statements, and include all adjustments necessary for the fair presentation of
financial position, results of operations and cash flows. Such adjustments,
except for those related to the Corporation's discontinued operations, were of
a normal recurring nature. The results of operations for the three and six
months ended September 30, 1996 are not necessarily indicative of the results
that may be expected for the entire year. The condensed consolidated balance
sheet as of March 31, 1996 was derived from audited financial statements but
does not include all disclosures required by generally accepted accounting
principles. Additional information is contained in the Corporation's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended March 31, 1996, and should be read in conjunction with this
quarterly report.
NOTE 2 - NET INCOME (LOSS) PER SHARE OF COMMON STOCK
Net income (loss) per share is based on income (loss) after preferred stock
dividend requirements and the weighted average number of shares of common stock
outstanding during the period after giving effect to stock options considered
to be dilutive common stock equivalents. Fully diluted net income per share is
not presented as it is substantially the same as primary earnings per share or
is anti-dilutive, as applicable.
NOTE 3 - TRANSACTIONS IN SUBSIDIARY COMMON STOCK
On August 14, 1996, the Board of Directors of the Corporation approved a plan
to divest the Corporation's drug distribution subsidiary, FoxMeyer Drug
Company, which was the primary operating unit of the Corporation. The
Corporation has, therefore, treated the subsidiary and its parent, FoxMeyer
Corporation ("FoxMeyer"), as a discontinued operation as of the measurement
date of June 30, 1996. The Corporation signed a definitive agreement to sell
FoxMeyer on August 19, 1996. However, on August 27, 1996, FoxMeyer and most of
its subsidiaries filed for protection under Chapter 11 of the United States
Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware and
the previous agreement to sell FoxMeyer was terminated. Subsequently, under the
supervision of the Bankruptcy Court, FoxMeyer's assets were sold on November 8,
1996 to McKesson Corp. pursuant to Section 363 of the U.S. Bankruptcy Code. The
Corporation received no proceeds from the sale. The Corporation recognized a
loss from discontinued operations of FoxMeyer for the three months ended June
30, 1996, the measurement date, of $17.5 million, net of taxes. In addition,
the Corporation recognized a loss of $252.7 million
6
<PAGE> 8
from the write-off of its investment in FoxMeyer. Prior year results of
operations have been reclassified to reflect FoxMeyer as a discontinued
operation. Revenues included in results of discontinued operations prior to the
measurement date of June 30, 1996 were $1,427.1 million in the current year and
$1,320.5 million and $2,598.7 million for the three and six months ended
September 30, 1995, respectively. The income (loss) from discontinued
operations is net of applicable income tax benefit of $4.6 million in 1996 and
an income tax provision of $0.5 million and $0.9 million for the three and six
months ended September 30, 1995.
The Corporation wrote off the remaining book value of its investment in Ben
Franklin Retail Stores, Inc. ("Ben Franklin") of approximately $2.0 million at
June 30, 1996. The write-off resulted from the Chapter 11 bankruptcy filing by
Ben Franklin on July 26, 1996. As a result of the write-off of this investment,
the Corporation will no longer account for Ben Franklin on an equity basis.
NOTE 4 - OTHER DISCONTINUED OPERATIONS
In July 1995, the Corporation adopted a plan to dispose of certain of its
managed care and information services operations. On August 2, 1996, the
pharmacy benefit management operations were sold for $30.5 million with an
additional $2.5 million due in one year. The additional payment may increase to
a maximum of $5.0 million based on certain criteria. The transaction resulted
in a gain on discontinued operations of approximately $13.8 million in the
quarter ended September 30, 1996. This sale completed the dispositions
announced in July 1995.
NOTE 5 - LONG-TERM DEBT
On August 2, 1996, the Corporation retired its $15.0 million revolving credit
facility. In connection with a $20.0 million secured loan (the "Hamilton
Facility"), the lender has waived certain covenant violations until November
25, 1996, at which time the Corporation expects the Hamilton Facility will be
amended. As a result, the $14.9 million balance outstanding under the Hamilton
Facility at September 30, 1996, has been classified as "Long-term debt due
within one year".
During the quarter ended June 30, 1996, certain subsidiaries of the Corporation
borrowed an additional $14.5 million, before repayments, in connection with the
purchase or refinancing of real estate in limited partnerships controlled by
the Corporation. The additional borrowings are non-recourse and secured solely
by the underlying real estate.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
The following supplemental cash flow information is provided for interest and
income taxes paid and for noncash transactions (in thousands of dollars):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Six months ended
September 30,
-----------------
1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Interest paid $16,967 $15,013
Income taxes paid 15 100
Noncash transactions:
Payment of dividends in kind on preferred stock 4,354 7,964
Payment of dividend in common stock of Ben Franklin -- 29,775
- ----------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 9
NOTE 7 - FEDERAL INCOME TAXES
As a result of the plan to divest FoxMeyer, the Corporation reviewed its
valuation allowance on the deferred tax assets available to the Corporation.
Without the projected taxable income from FoxMeyer, the Corporation has
determined that an additional valuation allowance of $29.9 million was needed
at June 30, 1996.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Corporation has retained responsibility for certain potential environmental
liabilities attributable to former operating units and as a result is subject
to federal, state or local environmental laws, rules and regulations. The laws
generally impose joint and several liability on present and former owners and
operators, transporters and generators for remediation of contaminated
properties regardless of fault. The Corporation and its subsidiaries have
received various claims and demands from governmental agencies relating to
investigations and remedial actions to address environmental clean-up costs
and, in some instances, have been designated as a potentially responsible party
by the Environmental Protection Agency.
The Corporation's reserves for potential environmental assessments or
remediation activities, penalties, or fines, that may be imposed for
non-compliance with such laws or regulations, have not changed materially since
March 31, 1996. The Corporation's estimates of these costs are based on
currently available facts, existing technologies, presently enacted laws and
regulations, and the professional judgment of consultants and counsel.
The amounts of reserves for environmental liabilities are difficult to estimate
due to such factors as the unknown extent of remedial actions that may be
required and, in the case of sites not owned by the Corporation, the unknown
extent of the Corporation's probable liability in proportion to the probable
liability of other parties. Moreover, the Corporation may have environmental
liabilities that the Corporation cannot, in its judgment, estimate at this time
and losses attributable to remediation costs may arise at other sites. The
Corporation cannot now estimate the additional cost and expenses it may incur
for such environmental liabilities. Management recognizes additional work may
have to be performed to ascertain the ultimate liability for such sites, and
further information could ultimately change management's current assessment of
the adequacy of its environmental liabilities. Any changes in the estimated
liability might have a material impact on the financial condition and results
of operations of the Corporation.
The Corporation and certain of its current and former officers and directors
have been named as defendants in a series of purported class actions that have
been filed since August 1996 and consolidated in federal court in the Northern
District of Texas, Dallas Division. These actions purport to be brought on
behalf of purchasers of the Corporation's common stock and the Series A and
cumulative preferred stock during the period July 19, 1995 through August 27,
1996. Plaintiffs assert violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and seek unspecified money damages.
Specifically, the complaints allege that the defendants made materially false
and misleading statements and failed to disclose material information
concerning a variety of matters, including but not limited to the terms of
contracts with major customers, the Corporation's inventory management and
order processing systems, and the automated warehouse at Washington Court
House, Ohio; and that the Corporation's financial statements were false and
misleading. Motions concerning the designation of a lead plaintiff pursuant to
the Private Securities Litigation Reform Act of 1995 have been filed but have
not yet been adjudicated. The Corporation intends to vigorously defend these
lawsuits.
The Corporation and certain officers also have been named as defendants in an
action in Texas State Court which purports to be brought on behalf of all
holders of the Corporation's common stock during the period from October 30,
1995 to July 1, 1996, and which seeks unspecified money damages. Plaintiff
asserts claims of common law fraud and negligent misrepresentation, based on
allegations that she was induced not to sell her shares by supposed
misrepresentations and omissions that are substantially the same as those
alleged in the federal actions described above. The Corporation intends to
vigorously defend the lawsuit.
8
<PAGE> 10
There are various other pending claims and lawsuits arising out of the normal
conduct of the Corporation. In the opinion of management, the ultimate outcome
of these claims and lawsuits will not have a material effect on the consolidated
financial condition or results of operations of the Corporation.
NOTE 9 - CAPITAL STOCK
During the period from July 3, 1996 to September 10, 1996, the Corporation
purchased 562,000 shares of common stock under a previously announced stock
buyback program, 1,000,000 shares under a stock buy-back program announced in
July 1996 and 1,404,800 shares under a 2,000,000 share repurchase program
approved in August 1996. The 2,966,800 shares were purchased at a cost of $16.7
million. These shares along with the 7,415,296 shares of common stock
repurchased and not reissued from prior periods were cancelled with a
corresponding reduction in common stock and capital in excess of par value of
$148.7 million.
The Corporation also purchased during the period from August 1996 through
October 1996 70,700 shares of its $5.00 cumulative convertible preferred stock
for $2.4 million. These purchases have reduced the number of shares which must
be redeemed by January 15, 1997 under this issue's sinking fund requirements to
9,831 shares. In addition, the Corporation purchased 317,000 shares of its
$4.20 cumulative exchangeable Series A preferred stock at a cost of $6.0
million during September 1996.
NOTE 10 - SUBSEQUENT EVENT
On October 7, 1996, the Corporation announced that it had sold special warrants
that allowed holders to acquire all the shares of FoxMeyer Canada Inc.
("FoxMeyer Canada") that the Corporation owned or could acquire through
exercise of its options. The net proceeds from the sale were $30.1 million,
excluding an additional $7.4 million held back (the "Hold-Back") pending
approval of a prospectus of FoxMeyer Canada filed in connection with the
special warrant sale. Should approval of the prospectus by Canadian regulatory
authorities not be received by January 31, 1997, the Hold-Back will be
forfeited. Management believes such approval will be obtained.
The Corporation's interest in FoxMeyer Canada was received as a dividend from
FoxMeyer on June 19, 1996. The Corporation agreed with the official committee
of unsecured creditors in FoxMeyer's Chapter 11 case (the "Committee") to
escrow all but $5.0 million of the net proceeds and the Hold-Back for a period
of 90 days from October 28, 1996. Once held in escrow for 90 days the
Corporation may request payment of all such amounts upon a 45-day notice to
FoxMeyer and the Committee, during which time the Committee and FoxMeyer have
the right to seek an injunction prohibiting such payment. The Corporation will
recognize a gain of approximately $33.9 million in the third quarter of fiscal
1997 assuming the Corporation receives the funds held in escrow and the
Hold-Back. In the accompanying statements, the equity investment in FoxMeyer
Canada at September 30, 1996 of $3.6 million is shown in assets held for sale.
On October 11, 1996, the Corporation sold its ownership in certain real estate
limited partnerships for $8.7 million, which consisted of $7.0 million in cash
and a 75-day note for $1.7 million. The note is secured by a pledge of interests
that were transferred. The net assets of these properties at September 30, 1996,
have been shown as assets held for sale. The net assets consist of the
following:
<TABLE>
<S> <C>
Current assets $ 865
Property and equipment 5,473
Other assets 6,719
Current liabilities (682)
Long-term debt (8,012)
-----------
Net assets held for sale $ 4,363
===========
</TABLE>
9
<PAGE> 11
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
FoxMeyer Health Corporation and its subsidiaries (the "Corporation") are
principally engaged in the operation of hotels and office buildings,
principally in the Washington D.C. area; the operation of a medical claims
processor, US Health Data Interchange ("USHDI"); and making investments in
other corporations or partnerships.
On August 14, 1996, the Corporation's Board of Directors approved a plan to
divest FoxMeyer Corporation ("FoxMeyer"). FoxMeyer's operating loss to the
measurement date of June 30, 1996 of $17.5 million is shown as a loss from
discontinued operations. The Corporation has also recorded a $252.7 million
loss on the sale of discontinued operations from the write-off of its
investment in FoxMeyer. Although a tentative sale was announced on August 19,
1996, that sale was terminated when FoxMeyer and most of its subsidiaries filed
for protection under Chapter 11 of the U.S. Bankruptcy Code on August 27, 1996.
On November 8, 1996, the U.S. Bankruptcy Court approved a sale of the principal
assets of FoxMeyer Corporation and its subsidiaries to McKesson Corp. The
Corporation will not receive any proceeds from the sale to McKesson Corp. nor
does it expect to receive any proceeds from FoxMeyer's liquidation (see Note 3
to the condensed consolidated financial statements).
On July 26, 1996, Ben Franklin Retail Stores, Inc. ("Ben Franklin") filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a result, the
Corporation wrote off its remaining investment of $2.0 million in Ben Franklin
and will no longer account for Ben Franklin on an equity basis.
On August 2, 1996, the Corporation sold its pharmacy benefit management
operations which had been accounted for as a discontinued operation since July
1995. The Corporation received $30.5 million in cash plus a note for $2.5
million. The note may increase in value to $5.0 million based on certain
occurrences. The Corporation recognized a gain on sale of discontinued
operations of approximately $13.8 million.
On October 7, 1996, the Corporation announced that it had sold special warrants
which allowed holders to acquire all the shares of FoxMeyer Canada Inc.
("FoxMeyer Canada") that the Corporation owned or could acquire through
exercise of its options. The net proceeds from the sale were $30.1 million,
excluding an additional $7.4 million held back (the "Hold-Back") pending
approval of a prospectus of FoxMeyer Canada filed in connection with the
special warrant sale. Should approval of the prospectus by Canadian regulatory
authorities not be received by January 31, 1997, the Hold-Back will be
forfeited. Management believes such approval will be obtained.
The Corporation's interest in FoxMeyer Canada was received as a dividend from
FoxMeyer on June 19, 1996. The Corporation agreed with the official committee
of unsecured creditors in FoxMeyer's Chapter 11 case (the "Committee") to
escrow all but $5.0 million of the net proceeds and the Hold-Back for a period
of 90 days from October 28, 1996. Once held in escrow for 90 days the
Corporation may request payment of all such amounts upon a 45-day notice to
FoxMeyer and the Committee, during which time the Committee and FoxMeyer have
the right to seek an injunction prohibiting such payment. The Corporation will
recognize a gain of approximately $33.9 million in the third quarter of fiscal
1997 assuming the Corporation receives the funds held in escrow and the
Hold-Back
On October 11, 1996, the Corporation sold certain of its real estate limited
partnership interests for $8.7 million. The Corporation received $7.0 million
in cash and a 75-day note for the remainder.
10
<PAGE> 12
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE AND SIX MONTHS
ENDED SEPTEMBER 30, 1995
OPERATING INCOME (LOSS)
Revenues, primarily from real estate operations, increased to $4.4 million and
$8.5 million for the three and six months ended September 30, 1996,
respectively, as compared to $2.2 million and $4.0 million for the three and
six months ended September 30, 1995. The increase is primarily the result of
the increase in hotel revenues including an increase related to the addition of
a new hotel management agreement and the reclassification of a hotel held for
sale to operating status in the fourth quarter of fiscal 1996.
Operating costs increased to $7.0 million and $12.8 million for the current
three and six month periods as compared to $5.2 million and $9.6 million for
the prior periods. The increase is also due primarily to increases in operating
expenses at the Corporation's real estate operations.
For the three months ended September 30, 1996, other income (expense) decreased
$10.0 million from the same period in the prior fiscal year, due principally to
a non-recurring gain recognized in the prior year from the settlement of
certain issues related to the fiscal 1992 sale of The Permian Corporation and
to a decrease in gains on trading securities. Other income (expense) decreased
$18.3 million for the six months ended September 30, 1996 as compared to the
six months ended September 30, 1995. The decrease was principally due to the
non-recurring gain recognized in the prior year related to the sale of The
Permian Corporation, the write-off of the Corporation's investment in Ben
Franklin in the current year and to a decrease in gains on trading securities
as compared to the prior year.
NET FINANCING COSTS
For the three months ended September 30, 1996, net financing costs increased
$0.2 million as compared to the same period in the prior year as a result of
interest income declining due to reduced investments in notes receivable in the
real estate operations. Net financing costs increased $1.5 million for the six
months ended September 30, 1996 as compared to the six months ended September
30, 1995. Interest income decreased approximately $0.8 million primarily due to
reduced investments in notes receivable in the real estate operations. Interest
expense increased $0.7 million as a result of increased real estate borrowings
and additional funds borrowed to acquire the Corporation's interest in Hamilton
Morgan L.L.C. ("Hamilton Morgan"). This was partially offset by the payoff of
the Corporation's revolving credit facility in August 1996.
NATIONAL STEEL CORPORATION
The net preferred income for National Steel Corporation ("NSC") was $2.4
million and $4.8 million for the three and six months ended September 30, 1996,
respectively, as compared to $0.9 million and $1.8 million for the same periods
in the prior year. The increase for both periods was primarily due to the
reduction in the actuarially determined expenses related to the Weirton pension
obligation in the current year.
EQUITY IN INCOME (LOSS) OF AFFILIATES
For the three months ended September 30, 1996, the equity in loss of affiliates
was $0.8 million as compared to income of $0.6 million for the prior year
period. The decrease was due to the losses from the equity investment in
Phar-Mor, Inc. ("Phar-Mor"), which investment was not acquired until September
1995, and to the change from the equity method of accounting for Ben
Franklin in the prior year to the cost basis (see Note 3 to the condensed
consolidated financial statements concerning the write-off of the investment in
Ben Franklin). The equity in loss of affiliates was $2.4 million for the six
months ended September 30, 1996 as compared to $0.6 million for the six months
ended September 30, 1995. The increase in the loss resulted from higher losses
in FoxMeyer Canada during the current period as compared to the prior year (see
Overview above concerning the sale
11
<PAGE> 13
of FoxMeyer Canada) and the losses from Phar-Mor for the six months ended
September 30, 1996. The increased loss in the current year was partially
offset by increased income from equity investments in real estate and the
change from the equity method of accounting for Ben Franklin in the prior year
to the cost basis.
INCOME TAXES
The Corporation recorded an income tax expense of $29.6 million for the six
months ended September 30, 1996. The expense reflects the increase in the
deferred tax asset valuation allowance as a result of the loss of FoxMeyer's
future estimated operating earnings. The prior year benefits of $1.6 million
and $2.9 million for the three and six months ended September 30, 1995, were
primarily a result of reductions in the deferred tax valuation allowance.
MINORITY INTEREST IN RESULTS OF OPERATIONS OF CONSOLIDATED SUBSIDIARIES
The minority interest in the results of operations of consolidated subsidiaries
was $0.2 million and $1.0 million for the three and six months ended September
30, 1996, respectively, as compared to $0.4 million and $1.1 million for the
same periods in the prior fiscal year. The decrease in the minority interest
for the three month period is primarily related to losses associated with
Hamilton Morgan's minority interest. For the six month period, the decrease
associated with Hamilton Morgan was partially offset by the increase in the
minority interest from higher operating results of the real estate operations.
DISCONTINUED OPERATIONS
The loss from discontinued operations was $17.5 million for the six months
ended September 30, 1996, which represented the operating loss of FoxMeyer up
to the measurement date of June 30, 1996. The prior year income of $1.2 million
and $1.1 million for the three and six months ended September 30, 1995
represent FoxMeyer's earnings in the prior year adjusted for intercompany
transactions. The loss on sale of discontinued operations primarily represents
the loss from the write-off of FoxMeyer of $252.7 million less the gain from
the sale of the pharmacy benefit management operations of $13.8 million.
PREFERRED STOCK DIVIDENDS
Preferred stock dividends were $3.1 million and $7.2 million for the three and
six months ended September 30, 1996, respectively, compared to $5.4 million
and $10.6 million for the three and six months ended September 30, 1995. The
decrease for both periods is due to fewer outstanding preferred shares in the
current periods as compared to the prior year and to lower dividends on the
Series A redeemable preferred stock. The dividend on the Series A preferred
stock is paid in kind, and the amount of the dividend is based on the current
market price of the preferred stock on the ex-dividend date. The current market
price of the Series A preferred stock has decreased since the prior year
resulting in lower dividend expense.
LIQUIDITY AND CAPITAL RESOURCES
As of November 1, 1996, the Corporation had cash and short-term investments of
approximately $12.4 million, excluding cash and short-term investments in real
estate limited partnerships and $26.1 million held in escrow resulting from the
sale of FoxMeyer Canada. In addition, the Corporation had borrowed $14.9
million under a secured loan (the "Hamilton Facility").
The Corporation's mandatory cash requirements include the funding of monthly
operating activities, benefit obligations, and cash outlays attributable to
environmental liabilities of previously-owned businesses, the amounts and
timing of which are uncertain. A principal payment of $2.5 million is required
in September 1997 under the Hamilton Facility. As described in Note 5 to the
condensed consolidated financial statements, the Corporation may also be
required to reduce or retire the Hamilton Facility prior to its maturity. Other
cash requirements include cash dividend payments on the Series A preferred
stock and dividend payments on the Corporation's redeemable convertible
12
<PAGE> 14
preferred stock and mandatory sinking fund payments thereon. The Corporation
also expects to spend an increasing amount of funds on litigation expenses.
The Corporation will rely on cash on hand, the FoxMeyer Canada escrow to the
extent released, the sale of real estate and other investments and any excess
cash from its real estate operations to meet its future obligations.
The Corporation received a dividend from FoxMeyer on June 19, 1996, consisting
of assets unrelated to FoxMeyer's core distribution business, including assets
of FoxMeyer's pharmacy benefit management operations; USHDI; FoxMeyer's
investment in Phar-Mor, FoxMeyer Canada and other marketable securities; and
FoxMeyer's forgiveness of a $31.3 million loan to the Corporation.
As a result of FoxMeyer's bankruptcy filing, the unsecured creditors of
FoxMeyer are expected to contest the dividend payment and demand return of the
assets or their fair market value. Because of this potential demand, it may be
difficult in some cases for the Corporation to liquidate the assets received as
part of the dividend. Should the unsecured creditors pursue and prevail in
challenging the dividend payment, the Corporation's financial position would be
materially impaired. The Corporation believes that the dividend was lawful and
shall contest vigorously any such claim.
The Corporation will continue liquidating its assets in order to meet its cash
needs. Because there can be no assurance as to the value of these assets or the
ability of the Corporation to timely liquidate these investments when funds are
needed, the Corporation's future ability to meet its ongoing expenses is not
assured.
OTHER
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125 ("SFAS 125") "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities", which is
effective for transfers of assets and extinguishments of liabilities occurring
after December 31, 1996. The Corporation does not believe there will be any
material effect on its financial position or the results of operations from the
adoption of SFAS 125.
13
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The registrant and certain of its current and former officers and
directors have been named as defendants in a series of purported class
actions that have been filed since August 1996 and consolidated in federal
court in the Northern District of Texas, Dallas Division. These actions
purport to be brought on behalf of purchasers of the registrant's common,
preferred Series A and cumulative preferred stock during the period July
19, 1995 through August 27, 1996. Plaintiffs assert violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934, and seek
unspecified money damages. Specifically, the complaints allege that the
defendants made materially false and misleading statements and failed to
disclose material information concerning a variety of matters, including
but not limited to the terms of contracts with major customers and the
registrant's inventory management and order processing systems, and the
automated warehouse at Washington Court House, Ohio; and that the
registrant's financial statements were false and misleading. Motions
concerning the designation of a lead plaintiff pursuant to the Private
Securities Litigation Reform Act of 1995 have been filed but have not yet
been adjudicated. The registrant intends to vigorously defend these
lawsuits.
The registrant and Messrs. Butler and Estrin also have been named as
defendants in an action in Texas State Court which purports to be brought
on behalf of all holders of the registrant's common stock during the
period from October 30, 1995 to July 1, 1996, and which seeks unspecified
money damages. Plaintiff asserts claims of common law fraud and negligent
misrepresentation, based on allegations that she was induced not to sell
her shares by supposed misrepresentations and omissions that are
substantially the same as those alleged in the federal actions described
above. The registrant intends to vigorously defend the lawsuit.
With respect to the matters reported in the Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996, the following
additional information is provided:
NATIONAL STEEL CORPORATION ("NSC") SITES:
Swissvale Site. With reference to the matter involving the Swissvale Site
located at Swissvale, Pennsylvania, previously reported in the
registrant's 1996 Form 10-K, on June 28, 1996, the Court approved a
Consent Decree among the plaintiff, third-party plaintiffs and third-party
defendants, including NSC, which resolves the third-party litigation.
Under the terms of the Consent Decree, NSC agreed to pay the third-party
plaintiffs the sum of $10,000.
Buckeye Reclamation Site. With reference to the matter involving the
Buckeye Site located at Bridgeport, Ohio, previously reported in the
registrant's 1996 Form 10-K, on June 27, 1996, NSC entered into a
Settlement Agreement with Consolidation Coal Company, Allegheny Ludlum
Corporation, USX Corporation, Beazer East, Inc., SKF USA, Inc., Ashland,
Inc., Aristech Chemical Corporation and the Pullman Company which resolves
the litigation brought by Consolidation Coal Company with respect to the
Buckeye Site. Under the terms of the settlement, NSC has agreed to pay
2.8% of the response costs associated with the Buckeye Site. Due to
negotiations between the EPA and the PRP steering committee to reduce the
scope of the remedy at the site, the cost for the Phase One remedial
action is anticipated by the PRP steering committee to be between $15
million to $20 million. The Settlement Agreement is contingent upon the
Court's approval.
Weirton Steel Site. With respect to the Weirton Steel Site described in
the registrant's Form 10-K for the fiscal year ended March 31, 1996,
Weirton Steel Corporation has rejected NSC's offer of settlement to cap
NSC's liability for the Brown's Island emergency lagoon at $480,000, and
is seeking $210,000 in reimbursement for remediation costs expended at the
site to date. In addition, the United States
14
<PAGE> 16
Environmental Protection Agency ("EPA") has issued an administrative
unilateral order under the Resource Conservation and Recovery Act
("RCRA"), requiring Weirton Steel Corporation to undertake certain
investigative activities with regard to clean-up of possible environmental
contamination on Weirton Steel property. Weirton Steel Corporation has
informed NSC that the Mainland Coke Plant, Brown's Island, and the Avenue
H Disposal Site are likely to be included within the areas of
investigation required by EPA and that Weirton Steel Corporation considers
these areas to be within the scope of certain indemnity provisions of the
Assignment and Assumption Agreement between Weirton Steel and NSC. At this
time, the Registrant is unable to determine if activities resulting from
EPA's unilateral order to Weirton Steel will result in an indemnity
obligation on the part of the registrant.
Tex-Tin Site. On or about August 12, 1996, Amoco Chemical Company
("Amoco") filed a cost recovery and contribution civil suit pursuant to
sections 107 and 113(f) of the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended ("CERCLA") in the
United States District Court for the Southern District of Texas. Plaintiff
Amoco has been involved in investigations of the contamination at the
former Tex-Tin Superfund Site in Texas City, Galveston County, Texas,
pursuant to an Administrative Order and Consent ("AOC") entered into with
the EPA. Plaintiff alleges that NSC is one of approximately 100 defendants
jointly and severally liable under CERCLA ss. 107 for plaintiff's costs of
those investigations and future response costs. Amoco has spent
approximately $9 million pursuant to the AOC at the Tex-Tin Superfund
Site. Based upon EPA's interim volumetric waste in list, NSC's allocated
.0258% share of waste ranks it 74th among the potential PRPs at the Site.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
(b) Reports on Form 8-K
The registrant filed the following Current Reports on Form 8-K
during the three months ended September 30, 1996.
Form 8-K dated August 19, 1996, announcing that FoxMeyer
Corporation had entered into a stock sale agreement with FM
Acquisition Corporation to sell FoxMeyer Drug Company and
certain other subsidiaries of FoxMeyer Corporation to FM
Acquisition Corporation.
Form 8-K dated August 27, 1996, announcing that FoxMeyer
Corporation, FoxMeyer Drug Company and certain other
subsidiaries of these companies had filed for protection
under Chapter 11 of the U.S. Bankruptcy Code. In addition,
the stock sale agreement with FM Acquisition Corporation
was terminated.
In addition, the following Current Report on Form 8-K was filed
after the end of the quarter but prior to the filing of this
Form 10-Q:
Form 8-K dated October 3, 1996, announcing the signing of
an asset purchase agreement with McKesson Corp. for
substantially all the assets of the companies in the
Chapter 11 bankruptcy proceedings. In addition, it
announced the sale of special warrants to acquire shares of
FoxMeyer Canada Inc. owned by the registrant for Cdn. $50.4
million. Each special warrant is convertible into one share
of common stock of FoxMeyer Canada Inc. owned by the
registrant, or subject to an option held by the registrant.
15
<PAGE> 17
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.
FOXMEYER HEALTH CORPORATION
By: /s/ Edward L. Massman
------------------------------------
Edward L. Massman
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
Date: November 14, 1996
16
<PAGE> 18
INDEX TO EXHIBITS
(a) Exhibits
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
<PAGE> 1
EXHIBIT 11
FOXMEYER HEALTH CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(In thousands, except per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
For the three months ended For the six months ended
September 30, September 30,
-------------------------- ------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY
INCOME (LOSS) FROM CONTINUING OPERATIONS
Income (loss) from continuing operations $ (4,759) $ 6,299 $ (36,962) $ 12,638
Deduct dividends on preferred shares 3,080 5,382 7,160 10,605
---------- ---------- ---------- ----------
Income (loss) from continuing operations applicable to
stockholders $ (7,839) $ 917 $ (44,122) $ 2,033
========== ========== ========== ==========
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Income (loss) from discontinued operations $ (366) $ 1,207 $ (256,515) $ 1,069
========== ========== ========== ==========
SHARES
Weighted average number of common shares outstanding 15,356 17,202 16,142 16,959
========== ========== ========== ==========
Income (loss) from continuing operations $ (0.51) $ 0.05 $ (2.73) $ 0.12
Income (loss) from discontinued operations (0.02) 0.07 (15.89) 0.06
---------- ---------- ---------- ----------
Net income (loss) $ (0.53) $ 0.12 $ (18.62) $ 0.18
========== ========== ========== ==========
ASSUMING FULL DILUTION
INCOME (LOSS) FROM CONTINUING OPERATIONS
Income (loss) from continuing operations $ (4,759) $ 6,299 $ (36,962) $ 12,638
Dividends on non-convertible preferred shares 2,235 4,337 5,389 8,515
Dividends on convertible preferred shares (conversion of
preferred shares would be anti-dilutive) 845 1,045 1,771 2,090
---------- ---------- ---------- ----------
Income (loss) from continuing operations applicable
to common stockholders $ (7,839) $ 917 $ (44,122) $ 2,033
========== ========== ========== ==========
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Income (loss) from discontinued operations $ (366) $ 1,207 $ (256,515) $ 1,069
========== ========== ========== ==========
SHARES
Weighted average number of common shares outstanding 15,356 17,202 16,142 16,959
Conversion of preferred stock (anti-dilutive) -- -- -- --
Additional dilutive effect of outstanding options (as
determined by the treasury stock method) -- 38 1 268
---------- ---------- ---------- ----------
Weighted average number of common shares outstanding as
adjusted 15,356 17,240 16,143 17,227
========== ========== ========== ==========
Income (loss) from continuing operations $ (0.51) $ 0.05 $ (2.73) $ 0.12
Income (loss) from discontinued operations (0.02) 0.07 (15.89) 0.06
---------- ---------- ---------- ----------
Net income (loss)** $ (0.53) $ 0.12 $ (18.62) $ 0.18
========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
** This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,203
<SECURITIES> 18,393
<RECEIVABLES> 6,261
<ALLOWANCES> 1,344
<INVENTORY> 0
<CURRENT-ASSETS> 38,501
<PP&E> 25,116
<DEPRECIATION> 1,342
<TOTAL-ASSETS> 165,825
<CURRENT-LIABILITIES> 25,730
<BONDS> 18,532
178,676
0
<COMMON> 69,030
<OTHER-SE> (176,825)
<TOTAL-LIABILITY-AND-EQUITY> 165,825
<SALES> 8,502
<TOTAL-REVENUES> 8,502
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 401
<INTEREST-EXPENSE> 3,567
<INCOME-PRETAX> (6,366)
<INCOME-TAX> 29,586
<INCOME-CONTINUING> (36,962)
<DISCONTINUED> (256,515)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (293,477)
<EPS-PRIMARY> (18.62)
<EPS-DILUTED> (18.62)
</TABLE>
