SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. - 20549
_________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended July 4, 2003
Commission File No. 0-12588
_________________________
SALIENT 3 COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2280922
(State of Incorporation) (IRS Employer
Identification No.)
P.O. Box 1498, Reading, Pennsylvania 19603
(Mailing address of principal executive offices) (Zip Code)
(610) 856-5500
______________________________________________________________________________
(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
---- ----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes NO X
---- ----
Class A Class B
------- -------
Number of shares of each class of
common stock outstanding as of
July 4, 2003 (excluding 2,770,476
Class A treasury shares): 5,953,011 261,813
--------- -------
SALIENT 3 COMMUNICATIONS, INC.
INDEX
Part I. Financial Information
Item 1.
Statements of Net Assets in Liquidation
at July 4, 2003 (unaudited) and January 3, 2003
Statements of Changes in Net Assets in Liquidation
for the six months ended July 4, 2003
and June 28, 2002 (unaudited)
Notes to Financial Statements
Item 2.
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Certifications
Exhibits
Part I. Financial Information
Salient 3 Communications, Inc.
Statements of Net Assets in Liquidation
July 4, 2003 (Unaudited) and January 3, 2003
(000's except for share and per share information)
July 4, January 3,
2003 2003
------- ----------
ASSETS
Cash and cash equivalents $ 17,886 $ 10,280
Investments in liquidation 1,823 3,183
Income tax refunds receivable - 890
Other assets 7 2,068
------ ------
Total Assets 19,716 16,421
------ ------
LIABILITIES
Accrued and other liabilities $ 9,123 $ 10,133
Income taxes 3,445 -
------ ------
Total Liabilities 12,568 10,133
------ ------
Net assets in liquidation $ 7,148 $ 6,288
====== ======
Number of common shares outstanding 6,214,824 6,214,824
========= =========
Net assets in liquidation
per outstanding share $ 1.15 $ 1.01
==== ====
The accompanying notes are an integral part of these financial statements.
Salient 3 Communications, Inc.
Statements of Changes In Net Assets In Liquidation
Six Months Ended July 4, 2003 and June 28, 2002
(Unaudited)
(000's)
Six Months Six Months
Ended Ended
July 4, 2003 June 28, 2002
------------ -------------
Net assets in liquidation, beginning of period $ 6,288 $ 8,984
----- -----
Changes in estimated liquidation values
of assets and liabilities:
Investments in liquidation 337 (350)
Other assets 203 512
Accrued and other liabilities 421 490
Income tax refunds receivable (101) (211)
----- -----
Net changes in estimated liquidation values 860 441
----- -----
Liquidating distributions to stockholders - -
----- -----
Net assets in liquidation, end of period $ 7,148 $ 9,425
===== =====
Supplemental Cash Information:
Changes in cash and cash equivalents
Net proceeds from sales of subsidiaries 1,697 43
Cash receipts for other assets 2,264 1,019
Payment of accrued liabilities (589) (1,905)
Income tax refunds (payments) 4,234 (16)
----- -----
Net changes in cash and cash equivalents $ 7,606 $ (859)
===== =====
The accompanying notes are an integral part of these financial statements.
SALIENT 3 COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
July 4, 2003
(UNAUDITED)
(000'S EXCEPT FOR SHARE AND PER SHARE INFORMATION)
1. GENERAL
The interim financial information furnished herein reflects all adjustments
which are, in the opinion of management, necessary for a fair presentation of
such financial information for the interim periods. Such adjustments are of a
normal recurring nature. The accompanying financial statements are presented
in accordance with the requirements of Form 10-Q and consequently do not
include all of the disclosures normally required by generally accepted
accounting principles or those normally made in the Company's annual Form 10-K
filing. Accordingly, the reader of this Form 10-Q should refer to the
Company's annual report on Form 10-K for the year ended January 3, 2003 for
further information.
2. PLAN OF DISSOLUTION AND LIQUIDATION AND BASIS OF ACCOUNTING
On April 17, 2000, the Board of Directors of Salient 3 Communications, Inc.
(the Company) adopted a Plan of Dissolution and Liquidation (the Plan). Under
the Plan, the Company will be liquidated by (i) the sale of its non-cash
assets, (ii) the payment of or providing for all of its claims, obligations
and expenses, (iii) the pro rata distribution of assets, primarily cash, to
the stockholders, and (iv) if required, the distribution of assets to one or
more liquidating trusts established for the benefit of the stockholders. The
Plan was approved by stockholders on July 21, 2000.
On August 11, 2000, the Company filed a Certificate of Dissolution with the
State of Delaware. Under Delaware law, the Company will continue to exist for
a period of three years for the purpose of winding up its affairs. The Board
of Directors and officers of the Company will continue to oversee the
liquidation and dissolution.
The Company adopted the liquidation basis of accounting for the second quarter
of 2000. Under the liquidation basis of accounting, assets are stated at
their estimated net realizable values and liabilities are stated at their
anticipated settlement amounts.
The valuation of assets and liabilities at their estimated net realizable
values and anticipated settlement amounts necessarily requires many estimates
and assumptions and there are substantial uncertainties in carrying out the
provisions of the Plan. The actual value of any liquidating distributions
will depend upon a variety of factors including, but not limited to, (i) the
actual proceeds from the sale of the Company's subsidiaries and other assets,
(ii) the ultimate settlement amounts of its liabilities and obligations,
including indemnifications provided in connection with subsidiary sale
transactions, (iii) actual costs incurred in connection with carrying out the
Plan, including administrative costs during the liquidation period, and (iv)
the actual timing of distributions. Liquidating distributions of $12.00 per
share, $2.00 per share and $.50 per share were paid on September 8, 2000,
December 14, 2001 and December 30, 2002, respectively, to holders of Class A
(non-voting) and Class B (voting) common stock. On July 17, 2003, the Company
announced that its Board of Directors had declared a liquidating distribution
of $1.00 per share, payable August 8, 2003.
The valuations presented in the Statements of Net Assets in Liquidation
represent estimates, based on present facts and circumstances, of the net
realizable values of assets and the anticipated settlement amounts for
liabilities, including the costs associated with carrying out the provisions
of the Plan, based on the assumptions set forth in the accompanying notes.
The actual values and costs are expected to differ from the amounts shown
herein and could be higher or lower than the amounts recorded. Such
differences may be material. Accordingly, it is not possible to predict with
certainty the aggregate net values ultimately distributable to stockholders
and no assurance can be given that the amount to be received in liquidation
will equal or exceed the price or prices at which the Class A common stock has
generally traded or is expected to trade in the future.
In the Statements of Changes in Net Assets in Liquidation, the amounts
reported for changes in estimated liquidation values of assets and liabilities
represent (i) differences between actual and estimated proceeds on the sales
of assets, (ii) differences between actual and estimated settlements made on
outstanding obligations, and (iii) changes in management estimates of values
for unsold assets and outstanding liabilities.
3. INVESTMENTS IN LIQUIDATION
Investments in liquidation include the estimated net realizable values of
subsidiary sale proceeds collectible after July 4, 2003 and January 3, 2003,
less related unpaid costs of the sales.
On July 25, 2000, the Company completed the sale of its subsidiary, SAFCO
Technologies, Inc. (SAFCO), to Agilent Technologies, Inc. (Agilent) for an
adjusted cash price of $121,426. Proceeds of $1,500 were held in an escrow
account to cover a potential obligation of the Company that was not finalized
with Agilent. Management estimated that the cost of settling this obligation
would be approximately $300. On June 17, 2003, the obligation was settled for
$324, including settlement costs, and the remaining escrow balance of $1,205,
including earned interest, was paid to the Company.
On July 26, 2000, the Company completed the sale of its subsidiary, GAI-
Tronics Corporation (GTC), to Hubbell Incorporated (Hubbell) for an adjusted
cash price of $36,246. The Company provided certain indemnifications through
July 2001 under the representations and warranties sections of the purchase
agreement. During the third quarter of 2001, Hubbell submitted notification
of an indemnification claim. There has been no activity since the
notification of the potential claim was submitted, and the Company believes
that if the claim is pursued, it will not have a material effect on the net
assets in liquidation. The Company has purchased certain insurance to
minimize its exposure on some, but not all, of the areas for which they are
indemnifying Hubbell.
On December 29, 2000, the Company completed the sale of XEL Communications,
Inc. (XEL) to a company controlled by XEL's president for $4,900, in the form
of a promissory note bearing interest payable monthly at 8%, with the
principal due after 24 months. In connection with the sale, the Company
loaned XEL $359 under a working capital line of credit that expired on March
31, 2001. The working capital loan, plus interest at 5% per annum, was due
December 29, 2002. If XEL was resold to another party prior to December 30,
2002, the Company would receive full payment on the promissory note and
working capital loan and 70% of all proceeds in excess of $5,000. If XEL was
resold after December 29, 2002 but prior to December 30, 2003, the Company
would receive 50% of all proceeds in excess of $5,000. If there was a default
in payment of the principal or interest on the promissory note, the Company
had the right to retake control of XEL. The note and working capital loan
were together valued at $1,900 in the Statements of Net Assets in Liquidation
at December 28, 2001, based on the estimated realization values of XEL's
assets.
Effective April 1, 2002, the Company entered into an amendment agreement with
the buyer of XEL to modify the promissory note and working capital loan held
in connection with the sale of XEL. The modified note and loan have reduced
principal amounts aggregating $1,900 at inception. The amendment agreement
provided for 15 monthly payments of $102, including interest of 8%, with a
balloon payment for the balance outstanding of $500 at July 31, 2003. If XEL
is resold prior to December 28, 2003, the Company would receive 50% of all
proceeds in excess of $1,900. The amendment agreement allowed the Company to
begin receiving monthly payments on the principal balance and to obtain a tax
benefit in 2002 for the reduction in face value of the note. At July 4, 2003,
the aggregate unpaid balance of the note and loan was $598. A valuation
reserve provided in previous periods was eliminated as of July 4, 2003, and
the note was paid in full on July 31, 2003.
The sale of XEL excluded the building it occupies in Aurora, Colorado. On
December 26, 2002, the Company sold this building to an unrelated third party
for $200 in cash and a six-month note for $1,225. On June 30, 2003, the
maturity date of the note was extended to August 10, 2003 and the note was
paid in full on July 29, 2003. The note bore interest, payable quarterly, at
5% per annum and was secured by the building. The value of the building, net
of sale and related costs, had been reported at $3,363 in the Statement of Net
Assets in Liquidation at December 28, 2001. Due to the unfavorable real
estate market, the estimated realizable value of the building was reduced by
$1,992 in the third quarter of 2002. This change resulted in an estimated
additional tax benefit of $641, reduced the estimated liability for settlement
of LSAR's (see note 7) by $203 and reduced the net assets in liquidation by
$1,148, or $.18 per share.
4. OTHER ASSETS
On June 30, 2003, the Company received a net payment of $1,669 in full
settlement of a note receivable from the 1998 sale of Resource Consultants,
Inc. (RCI), a former subsidiary, and in settlement of an obligation of the
Company to RCI in connection with the sale of RCI. The estimated value of the
note was included in other assets in the Statements of Net Assets in
Liquidation for periods prior to the settlement.
5. INCOME TAXES
All income tax accounts reflect the liquidation basis of accounting. The
estimated amounts of income tax refunds receivable reflect federal and state
income taxes, at statutory rates, which would become refundable if the assets
are realized and liabilities settled at the amounts shown, net of amounts
accrued for potential liabilities for adjustments of transactions reported on
prior year tax returns. The estimated tax refunds at January 3, 2003
primarily result from anticipated carrybacks of tax losses that arise from tax
deductible costs of carrying out the plan of liquidation and settling other
accrued liabilities. The estimates are subject to significant variation if,
among other things, the actual values of assets sold vary from current
estimates, the amounts or timing of settlement of liabilities differ from
current estimates, or there are potential adjustments related to the sales and
other transactions.
6. ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities include estimates of costs to be incurred in
carrying out the Plan, provisions for known liabilities and provisions for
certain claims and other obligations at July 4, 2003. The accrued costs
include salaries and related expenses of officers and employees assigned to
effect the sales and carry out the Plan and legal and accounting fees expected
to be incurred during the period of liquidation. Accrued liabilities also
include the estimated future distributions to holders of limited stock
appreciation rights.
The actual costs incurred could vary significantly from the related accrued
expenses due to uncertainty related to the length of time required to complete
the Plan and the outcome of certain contingencies.
7. OPTIONS AND WARRANTS
In connection with adoption of the Plan, the Board of Directors authorized
conversion of all outstanding restricted stock and unexercised stock options
into Limited Stock Appreciation Rights (LSAR's). In addition, all warrant
holders were given the opportunity to convert their warrants into LSAR's.
These rights entitle the holder to receive cash payments for each share equal
to the difference between the aggregate per share liquidating distribution
payable to stockholders upon liquidation and the per share exercise price
applicable to each converted option or warrant. In August, 2000, 1,097,200
options and 705,555 warrants were converted into LSAR's. Holders of LSAR's
were paid $1,866, $1,639 and $519 in connection with the liquidating
distributions on September 8, 2000, December 14, 2001 and December 30, 2002,
respectively. The estimated remaining liability for settlement of the LSAR's
at July 4, 2003 is $1,238 and is included in accrued and other liabilities in
the Statements of Net Assets in Liquidation.
8. CONTINGENCIES
Before distributing assets to its stockholders, the Company is required by
Delaware law to make provision for all known claims and obligations and any
unasserted claims that are reasonably likely to arise after the certificate of
dissolution became effective. The accrual for asserted claims and other
obligations represents management's judgment as to the estimated amounts
required to settle such claims and obligations. Ultimate settlement amounts
for such claims are expected to differ from estimates recorded at July 4,
2003. Accordingly, it is not possible to predict with certainty the amount
required for such claims. However, management believes that the outcome will
not have a material adverse effect on the Company's net assets in liquidation.
9. LIQUIDATING TRUST
On July 17, 2003, the Company announced that its Board of Directors had
declared a liquidating distribution of $1.00 per share, payable August 8,
2003. The Board also authorized the transfer of all of the Company's
remaining assets and liabilities to a liquidating trust, following payment of
the liquidating distribution on August 8, 2003. Stockholders of record as of
August 8, 2003 will receive a beneficial interest in the liquidating trust,
equal to their pro-rata ownership interest in the Company. The purpose of the
liquidating trust is to dispose of the then remaining assets of the Company,
satisfy all outstanding liabilities and distribute any remaining assets to the
beneficial owners of the liquidating trust.
Any distribution of the assets from the liquidating trust will be subject to
the prior satisfaction of the liabilities transferred to the liquidating
trust. Accordingly, there can be no assurance of the amount or timing of
distributions from the liquidating trust, if any. The satisfaction of these
liabilities, as well as any liabilities that may result from any future
material claims against the liquidating trust and the administrative expenses
incurred by the liquidating trust could reduce or eliminate distributions from
the liquidating trust.
Under Delaware law, the Company will cease to exist as a legal entity on
August 11, 2003, the third anniversary of the filing of the Company's
Certificate of Dissolution. Upon transfer of its remaining assets and
liabilities to the liquidating trust, the Company will close its stock
transfer books and discontinue recording transfers and sales of shares of its
common stock. It will also request that its common stock immediately cease
trading on the OTC Bulletin Board. The Company also expects to file a Form 15
with the Securities and Exchange Commission to terminate the registration of
its common stock under the Securities Exchange Act of 1934 and cease filing
periodic reports.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(000's except for share and per share information)
Introduction
On April 17, 2000, the Company's Board of Directors adopted a Plan of
Dissolution and Liquidation ("the Plan"). Under the Plan, the Company will be
liquidated by (i) the sale of its non-cash assets, (ii) the payment of or
providing for all of its claims, obligations and expenses, (iii) the pro rata
distribution of assets, primarily cash, to the stockholders, and (iv) if
required, the distribution of assets to one or more liquidating trusts
established for the benefit of the stockholders. The Plan was approved by
stockholders on July 21, 2000.
On August 11, 2000, the Company filed a Certificate of Dissolution with the
State of Delaware. Under Delaware law, the Company will continue to exist for
a period of three years for the purpose of winding up its affairs. The Board
of Directors and officers of the Company will continue to oversee the
liquidation and dissolution.
The financial statements are presented on the liquidation basis of accounting.
Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their
anticipated settlement amounts.
The valuation of assets and liabilities at their estimated net realizable
values and anticipated settlement amounts necessarily requires many estimates
and assumptions and there are substantial uncertainties in carrying out the
provisions of the Plan. The actual value of any liquidating distributions
will depend upon a variety of factors including, but not limited to, (i) the
actual proceeds from the sale of the Company's subsidiaries and other assets,
(ii) the ultimate settlement amounts of its liabilities and obligations,
including indemnifications provided in connection with subsidiary sale
transactions, (iii) actual costs incurred in connection with carrying out the
Plan, including administrative costs during the liquidation period, and (iv)
the actual timing of distributions. Liquidating distributions of $12.00 per
share, $2.00 per share and $.50 per share were paid on September 8, 2000,
December 14, 2001 and December 30, 2002, respectively, to holders of Class A
(non-voting) and Class B (voting) common stock.
Sale of Assets
On July 25, 2000, the Company completed the sale of its subsidiary, SAFCO
Technologies, Inc. (SAFCO), to Agilent Technologies, Inc. (Agilent) for an
adjusted cash price of $121,426. Proceeds of $1,500 were held in an escrow
account to cover a potential obligation that was not finalized with Agilent.
Management estimated that the cost of settling this obligation would be
approximately $300. On June 17, 2003, the obligation was settled for $324,
including settlement costs, and the remaining escrow balance of $1,205,
including earned interest, was paid to the Company.
On July 26, 2000, the Company completed the sale of its subsidiary, GAI-
Tronics Corporation (GTC), to Hubbell Incorporated (Hubbell) for an adjusted
cash price of $36,246. The Company provided certain indemnifications through
July 2001 under the representations and warranties sections of the purchase
agreement. During the third quarter of 2001, Hubbell submitted notification
of an indemnification claim. There has been no activity since the
notification of the potential claim was submitted, and the Company believes
that if the claim is pursued, it will not have a material effect on the net
assets in liquidation. The Company has purchased certain insurance to
minimize its exposure on some, but not all, of the areas for which they are
indemnifying Hubbell.
On December 29, 2000, the Company completed the sale of XEL Communications,
Inc. (XEL) to a company controlled by XEL's president for $4,900, in the form
of a promissory note bearing interest payable monthly at 8%, with the
principal due after 24 months. In connection with the sale, the Company
loaned XEL $359 under a working capital line of credit that expired on March
31, 2001. The working capital loan, plus interest at 5% per annum, was due
December 29, 2002. If XEL was resold to another party prior to December 30,
2002, the Company would receive full payment on the note and working capital
loan and 70% of all proceeds in excess of $5,000. If XEL was resold after
December 29, 2002 but prior to December 30, 2003, the Company would receive
50% of all proceeds in excess of $5,000. If there was a default in payment of
the principal or interest on the promissory note, the Company had the right to
retake control of XEL. The note and working capital loan were together valued
at $1,900 in the Statements of Net Assets in Liquidation at December 28, 2001,
based on the estimated realization values of XEL's assets.
Effective April 1, 2002, the Company entered into an amendment agreement with
the buyer of XEL to modify the promissory note and working capital loan held
in connection with the sale of XEL. The modified note and loan have reduced
principal amounts aggregating $1,900 at inception. The amendment agreement
provided for 15 monthly payments of $102, including interest of 8%, with a
balloon payment for the balance outstanding of $500 at July 31, 2003. If XEL
is resold prior to December 28, 2003, the Company would receive 50% of all
proceeds in excess of $1,900. The amendment agreement allowed the Company to
begin receiving monthly payments on the principal balance and to obtain a tax
benefit in 2002 for the reduction in face value of the note. At July 4, 2003,
the aggregate unpaid balance of the note and loan is $598. A valuation
reserve provided in previous periods was eliminated as of July 4, 2003, and
the note was paid in full on July 31, 2003.
The sale of XEL excluded the building it occupies in Aurora, Colorado. On
December 26, 2002 the Company sold this building to an unrelated third party
for $200 in cash and a six-month note for $1,225. On June 30, 2003, the
maturity date of the note was extended to August 10, 2003 and the note was
paid in full on July 29, 2003. The note bore interest, payable quarterly, at
5% per annum and was secured by the building. The value of the building, net
of sale and related costs, had been reported at $3,363 in the Statement of Net
Assets in Liquidation at December 28, 2001. Due to the unfavorable real
estate market, the estimated realizable value of the building was reduced by
$1,992 in the third quarter of 2002. This change resulted in an estimated
additional tax benefit of $641, reduced the estimated liability for settlement
of LSAR's by $203 and reduced the net assets in liquidation by $1,148, or $.18
per share.
On June 30, 2003, the Company received a net payment of $1,669 in full
settlement of a note receivable from the 1998 sale of Resource Consultants,
Inc. (RCI), a former subsidiary, and in settlement of an obligation of the
Company to RCI in connection with the sale of RCI. The estimated value of the
note was included in other assets in the Statements of Net Assets in
Liquidation for periods prior to the settlement.
On April 3, 2002, the Company completed the sale of its undeveloped land near
Reading, PA for $651 in cash. The estimated value of the land was included in
other assets in the Statements of Net Assets in Liquidation for periods prior
to the sale.
Financial Condition
Pursuant to the Plan, after payment or provision for payment of the Company's
indebtedness and other obligations, the cash proceeds of any asset sales,
together with other available cash, will be distributed from time to time pro
rata to the holders of the common stock. The record dates with respect to
each distribution will be selected by the Board of Directors. Liquidating
distributions of $74,582 or $12.00 per share, $12,430 or $2.00 per share and
$3,107 or $.50 per share were paid on September 8, 2000, December 14, 2001 and
December 30, 2002, respectively. On July 17, 2003, the Company announced that
its Board of Directors had declared a liquidating distribution of $1.00 per
share, payable August 8, 2003.
Before distributing assets to its stockholders, the Company is required by
Delaware law to make provision for all known claims and obligations and any
unasserted claims that are reasonably likely to arise after the certificate of
dissolution became effective. The accrual for asserted claims and other
obligations included in accrued and other liabilities represents management's
judgment as to the estimated amounts required to settle such claims, should
they arise and should they have merit. Ultimate settlement amounts for such
claims are expected to differ from estimates recorded as of July 4, 2003.
Accordingly, it is not possible to predict with certainty the amount required
for such claims.
The reported value of net assets in liquidation is subject to adjustment as
estimated values of assets and liabilities are reevaluated each period and as
assets are sold or liabilities are settled for amounts different from
estimates reported in previous periods.
Liquidity and Capital Resources
On July 4, 2003, the Company had cash and cash equivalents of $17,886. The
future cash needs of the Company will be dependent on the continuing
implementation of the Plan. The Company believes that its cash and cash
equivalents, its collection of deferred payments on sales of subsidiaries and
its conversion of other assets to cash will be sufficient to fund its working
capital requirements through the completion of the Plan.
The Company estimates that its total capital expenditures during the
liquidation period will be insignificant.
Under Delaware law, the Company will cease to exist as a legal entity on
August 11, 2003, the third anniversary of the filing of the Company's
Certificate of Dissolution. On July 17, 2003, the Company announced that its
Board of Directors had declared a liquidating distribution of $1.00 per share,
payable August 8, 2003. The Board also authorized the transfer of all of the
Company's remaining assets and liabilities to a liquidating trust, following
payment of the liquidating distribution on August 8, 2003. Stockholders of
record as of August 8, 2003 will receive a beneficial interest in the
liquidating trust, equal to their pro-rata ownership interest in the Company.
The purpose of the liquidating trust is to dispose of the then remaining
assets of the Company, satisfy all outstanding liabilities and distribute any
remaining assets to the beneficial owners of the liquidating trust. The
Trustees of the liquidating trust will determine the amount and timing of such
distributions.
Other
In connection with the adoption of the Plan, the Board of Directors authorized
conversion of all outstanding restricted stock and unexercised stock options
into Limited Stock Appreciation Rights (LSAR's). In addition, all warrant
holders were given the opportunity to convert their warrants into LSAR's.
These rights entitle the holder to receive cash payments for each share equal
to the difference between the aggregate per share liquidating distribution
payable to stockholders upon liquidation and the per share exercise price
applicable to each converted option or warrant. In August, 2000, 1,097,200
options and 705,555 warrants were converted into LSAR's. Holders of LSAR's
were paid $1,866, $1,639 and $519 in connection with the liquidating
distributions on September 8, 2000, December 14, 2001 and December 30, 2002,
respectively. The estimated remaining liability for settlement of the LSAR's
at July 4, 2003 is $1,238 and is included in accrued and other liabilities in
the Statements of Net Assets in Liquidation.
Forward-Looking Statements
This Form 10-Q contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company,
including statements regarding the timing and outcome of the sale of the
Company's assets, its dissolution and liquidation and the expected
distributions therefrom. Such statements are only predictions and involve
risks and uncertainties, and actual events or performance may differ
materially from that expressed in any such forward-looking statements.
Potential risks and uncertainties include, without limitation: ultimate values
realizable for unsold assets, adjustments to subsidiary sale prices,
collection of deferred payments on sales of assets, post-closing
indemnification obligations relating to subsidiary sales, costs and expenses
relating to the dissolution, including income taxes, and the nature and amount
of any unknown contingent liabilities. Further information on factors that
could affect the Company's future financial performance can be found in the
Company's other filings with the Securities and Exchange Commission. Words
such as "estimates", "anticipated", "yields", "should generate", "appears",
"viewed", "could", "would position", "expected", "does not expect" and "should
allow" indicate the presence of forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's only financial instruments with market risk exposure are short-
term cash investments which total $17,962 at July 4, 2003. Based on this
balance, a change of one percent in the interest rate would cause a change in
interest income for the year of approximately $180. This interest amount,
less a related tax effect, would have no effect on the net assets in
liquidation per outstanding share since interest income on cash investments is
not accrued in the Statements of Net Assets in Liquidation.
These financial instruments are non-trading (not entered into for trading
purposes) and carry interest at a market rate. The Company's objective in
maintaining these variable rate investments is the flexibility obtained in
having cash available for payment of accrued liabilities and distributions to
stockholders without penalties.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures that is
designed to ensure that information required to be disclosed by the Company in
this Form 10-Q, and in other reports required to be filed under the Securities
Exchange Act of 1934, is recorded, processed, summarized and reported within
the time periods specified in the rules and forms for such filings.
Management of the Company, under the direction of the Company's Chief
Executive Officer and Chief Financial Officer, have reviewed and evaluated the
effectiveness of the Company's disclosure controls and procedures within 90
days prior to the date of this report. Based on that review and evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that
the disclosure controls and procedures are effective in providing them with
material information relating to the Company as required to be disclosed in
the Company's periodic filings under the Exchange Act.
(b) Changes in Internal Controls
There were no significant changes in the Company's internal controls, or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(b) Reports on Form 8-K
None
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.
Salient 3 Communications, Inc.
/s/Paul H. Snyder
-----------------
Paul H. Snyder
Senior Vice President and
Chief Financial Officer
Date: August 7, 2003
CERTIFICATIONS
I, Timothy S. Cobb, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salient 3
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
quarterly report; *
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of the Company's board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for the
Company's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: August 7, 2003
/s/ Timothy S. Cobb
-------------------
Timothy S. Cobb
Chairman, President and
Chief Executive Officer
* In lieu of income statements and balance sheets, the Company's Form 10-Q
includes statements of net assets in liquidation and statements of changes in
net assets in liquidation. The certifications made herein should be construed
accordingly.
____________________________________________
I, Paul H. Snyder, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Salient 3
Communications, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
quarterly report; *
4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:
a. designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee
of the Company's board of directors (or persons performing the equivalent
function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for the
Company's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: August 7, 2003
/s/ Paul H. Snyder
------------------
Paul H. Snyder
Senior Vice President and
Chief Financial Officer
* In lieu of income statements and balance sheets, the Company's Form 10-Q
includes statements of net assets in liquidation and statements of changes in
net assets in liquidation. The certifications made herein should be construed
accordingly.