No Go for Air, Auto and News on Other Financially Challenged U.S. Companies for June 17

The items below are taken from the Credit Manager’s Weekly Summary of Financially Challenged Companies. A full issue contains information on more than 200 companies. Please visit the insideARM bookstore for information on subscribing to the Summary.

Aloha Airlines has seen the U.S. Bankruptcy Court reject the company’s request to issue bonuses of as much as $600,000 to two top executives. The bonuses were proposed by the bankruptcy trustee in hopes of creating an incentive for the CEO and CFO to get a higher price for the airline’s assets. The company is hoping to receive at least $26 million for the assets in question.

Coffee Holding Co. Inc., a Brooklyn, N.Y. producer of private-label coffees for stores, reported a second quarter net loss of $2 million, on a 28% sales increase–to $18.2 million. This compares with net income of $339,000 for the same period in 2007.

Congoleum Corp. has seen the U.S. Bankruptcy Court issue a ruling that the twelfth plan of reorganization is not legally confirmable. The court ordered the bankrupt firm to show cause why its Chapter 11 case should not be dismissed or converted to a Chapter 7 liquidation. A 6/26 hearing has been scheduled on the matter.

Continental Airlines, which recently announced it would reduce its workforce by 3,000 employees, is cutting service between Austin, Texas and Cleveland, while also eliminating service between Dulles International Airport in two of its hub cities beginning in September. The cutbacks will result in a significant decline in domestic capacity.

Delta Air Lines Inc., the Atlanta, carrier which three months ago announced plans to reduce its workforce by 2,000 jobs (3%), has seen 4,000 employees participate in its voluntary severance program.

Esmark Inc., a Wheeling, W.V. steel manufacturer, has adopted a “poison pill”. With steel manufacturing firms, OAO Severstal of Russia and Essar Steel Holdings Ltd. of India interested in purchasing Esmark, the poison pill was adopted and would take effect when a shareholder acquires more than 15% of the company’s stock. OAO is offering $670 million while Essar is valuing Esmark’s stock at $750 million. Both companies would also assume $400 million in Esmark debt.

Fleetwood Enterprises Inc., a Riverside, Calif. maker of recreational vehicles and manufactured housing, laid off more than 300 workers last week at its Indiana recreational vehicle plant as well as facilities in Pennsylvania and California. The company cited weak consumer demand.

Ford Motor Co., which has been adversely affected by the U.S. recession (U.S. auto sales declined 8% during the first five months of the year), has advised union officials that it needs to further reduce its workforce. The firm, which is cutting back on its production of trucks and SUVs while simultaneously accelerating its introduction of small cars from Europe and South America, is trying to further reduce its 54,000 UAW workforce. Over the past three years, Ford has reduced its hourly workforce by nearly 40,000 employees throughout North America.

Lehman Brothers Holdings Inc., one of the biggest investment banks in the nation, reported a second quarter net loss of $2.8 billion. This compares with income of nearly $1.3 billion for the same period one year earlier. After writing-downs and investment losses the company reported negative revenue of $668 million. This compares with revenue of $5.5 billion one year earlier. The company did say however that its liquidity pool jumped more than 30% from the first quarter–to $45 billion.

Mannatech Inc., the Coppell, Texas, firm which makes nutritional supplements and which has been in the midst of a shareholder lawsuit, has reached agreement on settling the suit. Shareholders filed the suit against current and former officers of the company shortly after a newspaper article questioned the legitimacy of Mannatech’s business practices. The company sells its products through independent associates both domestically and internationally.

McClatchy Co., the Sacramento, Calif., company and third largest newspaper firm in the nation, is cutting its workforce by as many as 1,400 employees in hopes of saving the firm $70 million annually. The newspaper giant saw its revenue decline 15% in May as advertising sales dropped 17%.

MKE, the free weekly publication owned by the Milwaukee Journal Sentinel, will cease production on 7/10. Adversely affected by the weakened advertising climate, MKE will also cease its online publication, MKEonline. The Milwaukee Journal Sentinel is a unit of Journal Communications Inc.