EXHIBIT 99.1
RISK FACTORS
In addition to the other information included in this Form 10-Q, you should
be aware of the following risk factors in connection with our business and
ownership of shares of our common stock. We also caution that this Form 10-Q
contains forward-looking statements. The words "believes," "should be,"
"anticipates," "plans," "expects," "intends" and "estimates," and similar
expressions identify these forward-looking statements. Although we believe that
our expectations reflected in these forward-looking statements are based on
reasonable assumptions, our assumptions may not prove to be correct. Because our
assumptions and expectations are subject to risks and uncertainties, actual
results may differ materially from the expectations expressed by these
forward-looking statements. Important factors that could cause actual results to
differ materially from our expectations regarding our financial condition and
reflected in our forward-looking statements include the following risk factors.
See "Forward Looking Statements" included elsewhere in this Form 10-K.
There are significant uncertainties relating to our bankruptcy proceeding.
Our future results are dependent upon the successful confirmation and
implementation of a plan or plans of reorganization. We have not yet submitted
such a plan or plans to the Bankruptcy Court for approval and cannot make any
assurances that we will be able to obtain any such approval in a timely manner.
When proposed, our plan or plans of reorganization may not receive the requisite
acceptance by creditors and other parties in interest and may not be confirmed
by the Bankruptcy Court. In addition, due to the nature of the reorganization
process, actions may be taken by creditors or other parties in interest that may
have the effect of preventing or unduly delaying confirmation of a plan of
reorganization in connection with the chapter 11 cases. Our ability to obtain
financing to fund our operations and our relations with our customers and
suppliers may be harmed by protracted bankruptcy proceedings. Further, we cannot
predict the ultimate amount of our liabilities that will be subject to a plan of
reorganization.
Other negative consequences that could arise as a result of the bankruptcy
proceedings include:
- making us more vulnerable to a continued downturn in our industry or a
downturn in the economy in general;
- limiting our flexibility in planning for, or reacting to, changes in our
businesses and the industries in which we operate;
- the incurrence of significant costs associated with the reorganization;
- impacts on our relationship with suppliers and customers, including loss
of confidence in our ability to fulfill contractual obligations due to
financial uncertainty;
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- placing us at a competitive disadvantage compared to our competitors;
- limiting our ability to borrow additional funds; and
- negatively impacting our ability to attract, retain and compensate key
executives and to retain employees generally.
Once a plan or plans of reorganization is finalized, approved and
implemented, our operating results may be adversely affected by the possible
reluctance of prospective lenders, customers and suppliers to do business with a
company that recently emerged from bankruptcy proceedings.
Uncertainty with respect to treatment of our liabilities could negatively
affect our operations.
As of the filing of the chapter 11 cases, in general all pending litigation
against us has been stayed and no party may take any action to realize on our
pre-petition claims except pursuant to further order of the Bankruptcy Court. In
addition, we may reject pre-petition executory contracts and unexpired lease
obligations, and parties affected by these rejections may file claims with the
Bankruptcy Court. While we anticipate substantially all liabilities as of the
petition date will be dealt with in accordance with the ultimate plan or plans
of reorganization which will be proposed and voted on in accordance with the
provisions of the Bankruptcy Code, there can be no assurance that all the
liabilities will be handled in this manner. In addition, additional liabilities
subject to the bankruptcy proceedings may arise in the future as a result of the
rejection of executory contracts and/or unexpired leases, and from the
determination of the Bankruptcy Court (or agreement by parties in interest) of
allowed claims for contingencies and other disputed amounts. Conversely, the
assumption of executory contracts and unexpired leases may convert liabilities
shown as subject to compromise to post-petition liabilities. Due to the
uncertain nature of many of the potential claims, we are unable to project the
magnitude of such claims with any degree of certainty.
Our status as a debtor-in-possession under chapter 11 of the Bankruptcy Code
raises "going concern" questions.
Our commencement of chapter 11 cases in the Bankruptcy Court, and other
factors such as our recurring losses, raise substantial doubt as to our ability
to continue as a going-concern. The financial statements contained herein have
been prepared assuming that we will continue as a going-concern with the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. However, as a result of the bankruptcy cases and
circumstances relating to this event, including our leveraged financial
structure and losses from operations, such realization of assets and liquidation
of liabilities and the ability to complete our contracts and process them in an
efficient manner is subject to significant uncertainty. While in chapter 11, we
may sell or otherwise dispose of assets (subject to Bankruptcy Court approval),
and liquidate or settle liabilities for amounts other than those reflected in
the financial statements. Further, a plan or plans of reorganization could
materially change the amounts reported in the financial statements. We have
notified all known claimants of their need to file a proof of claim with the
Bankruptcy Court by the bar date of January 14, 2003. A bar date is the date by
which claims against us must be filed if the claimants wish to participate in
the chapter 11 case as provided for in any ultimate Plan of Reorganization. Our
ability to continue as a going-concern is contingent upon, among other things,
confirmation of a plan or plans of reorganization, future profitable operations
and the ability to generate sufficient cash flow from operations and financing
arrangements to meet ongoing obligations.
Holders of our common stock and debt may lose all or part of their investment.
You may lose all or part of your investment in our common stock. The
Bankruptcy Code requires that all debts be paid in full before stockholders can
receive any recovery in our restructuring unless otherwise agreed by the class
of unsecured creditors. We cannot assure you that our restructuring will
ultimately result in any value for our stockholders. In the event of a
liquidation, we believe that our equity would have no value. Furthermore, we
cannot predict the value of any recovery to the holders of our debt. The holders
of our unsecured debt will likely receive less than the holders of our secured
debt. All of our assets and the assets of a
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majority of our subsidiaries are pledged to secure our debt obligations under
various secured debt facilities. Under applicable law, collateral for secured
claims must be used first to satisfy secured claims.
We have significant working capital needs.
Currently, our working capital needs are being satisfied by cash
accumulated during our bankruptcy. We have the ability to use cash collateral by
order of the Bankruptcy Court through February 15, 2003. Our ability to
continue to use this cash collateral is contingent on our meeting certain
criteria. Failure to meet these criteria will have a material adverse effect on
our financial condition. In order to meet our peak financing needs during the
first quarter of 2003, we will need to refinance existing fleet debt, obtain new
debtor-in-possession financing or increase the capacity of our working capital
facilities or replace such facilities. Recent and continued operating losses,
our bankruptcy, the credit quality of our debt, our status as a
debtor-in-possession under chapter 11 and capital market conditions may
adversely affect our ability to refinance our debt or obtain additional
financing. As a result, we cannot assure you that we will be able to refinance
our existing debt or increase the capacity of our working capital funds. In
addition, no assurances can be given that our existing sources of liquidity will
be adequate to fund our liquidity needs throughout the reorganization process
or, if additional sources of liquidity become necessary during the
reorganization process, that they would be available to us or adequate. Any
liquidity shortages during the reorganization process would likely have a
material adverse effect on our business and financial condition as well as on
our ability to successfully restructure and emerge from bankruptcy.
We have substantial debt and are highly leveraged.
We have a substantial amount of debt outstanding (some of which is subject
to compromise), which could adversely affect our financial health. Our vehicle
fleet is primarily acquired through the issuance of vehicle secured debt, and we
rely heavily on our ability to obtain debt financing to operate our business.
You should read the "Financial Condition" section of "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for a description
of our debt and capital structure. As of March 31, 2002, we had approximately
$3.2 billion of debt outstanding, including approximately $3.0 billion of
vehicle debt and $247.5 million of non-vehicle debt. The Debtors' filing for
chapter 11 represented an Event of Default under each of our financing
facilities. Under bankruptcy law, the Debtors' are not permitted to make
scheduled principal and interest payments with respect to pre-petition debt
unless specifically ordered by the Court.
Depending on the resolution of our bankruptcy proceedings, we could emerge
from bankruptcy highly leveraged with substantial debt service obligations. This
leveraged position could have important consequences for you. For example, our
leverage could:
- limit our ability to obtain additional financing, if needed, for working
capital, capital expenditures, acquisitions, debt service requirements or
other purposes;
- increase our vulnerability to adverse economic and industry conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our debt, thereby reducing funds available for
operations, future business opportunities or other purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- place us at a competitive disadvantage compared to our competitors that
have less debt.
We have liens on all of our revenue-earning and non-revenue-earning assets.
The presence of these liens will limit our ability to raise additional
incremental senior secured financing in the future.
We are subject to material restrictions on the conduct of our business.
We are operating most of our business as debtors-in-possession pursuant to
the Bankruptcy Code. Under applicable bankruptcy law, during the pendency of the
chapter 11 cases, we will be required to obtain the
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approval of the Bankruptcy Court prior to engaging in any transaction outside
the ordinary course of business. In connection with any such approval, creditors
and other parties in interest may raise objections to such approval and may
appear and be heard at any hearing with respect to any such approval.
Accordingly, although we may sell assets and settle liabilities, including for
amounts other than those reflected on our financial statements, with the
approval of the Bankruptcy Court, there can be no assurance that the Court will
approve any sales or settlements that we propose. The Bankruptcy Court also has
authority to oversee and exert control over our ordinary course operations.
In addition, to the extent we enter into debtor-in-possession financing
arrangements in the future, it is likely that such financing will contain
material restrictions on our operations. These restrictions will likely limit
our ability to, among other things, incur debt, create liens, pay dividends,
make investments, sell assets, repurchase capital stock, pledge assets, or enter
into affiliate transactions. Any such restrictions may limit our ability to
respond to changing business conditions and may prevent us from engaging in
transactions which we might otherwise consider beneficial.
We have experienced losses, which may continue in future periods.
We have experienced net losses of $245.6 million for the quarter ended
March 31, 2002. In addition, for the first nine months of 2002, we anticipate
that our net loss will approximate $329.6 million before the recognition of
goodwill impairments. We can not assure you that we will be able to generate net
income in the future. Continued losses, and the resulting impact on operating
cash flow, would adversely affect our financial condition, our ability to obtain
financing and the market price of our common stock.
We primarily use one surety provider.
In the normal course of business we are required to post performance and
surety bonds as financial guarantees of our performance with airports,
self-regulatory authorities and insurance companies. Substantially all of our
surety bonding is provided by one surety. Because of our financial performance
and a difficult surety market we have provided to our surety a security interest
in certain of our assets and cash collateral. Although we currently have an
agreement with our surety to issue bonds on our behalf through 2002,
substantially all of our surety bonds expire in 2002, and we are negotiating
with our surety provider with respect to our 2003 surety bonding needs. There is
no assurance that our surety provider will provide us with adequate surety
bonding coverage during 2003 or beyond. The loss of our ability to obtain surety
bonds would have an adverse effect on our business and financial condition.
We are self-insured in certain domestic locations.
Certain of our domestic operating subsidiaries are self-insured for
property, auto liability and general liability. In 2001, we raised the risk we
retain for auto and general liability from up to $1.0 million to up to $5.0
million. There is no guarantee we will be able to renew or continue property
liability insurance at current deductible levels. Additionally, state insurance
regulatory authorities, on a periodic basis, review our self-insurance status,
which includes but is not limited to, a review of our financial condition. Due
to our Chapter 11 filing and our financial condition we cannot assure you that
we will be able to maintain or renew our self-insurance status and as such, we
may be required to obtain third party insurance at higher costs or we may be
precluded from operating in certain locations.
Competition in the automotive rental industry has and may continue to impact
our prices and/or market share.
We operate in a highly competitive industry. We believe that price is one
of the primary competitive factors in the automotive rental industry,
particularly in the leisure market. From time to time, we or our competitors,
some of which have access to substantial capital, may attempt to compete
aggressively by lowering rental prices. To the extent that we lower prices to
attempt to enhance or retain market share, we may adversely impact our operating
margins. Conversely, if we opt not to match competitors' price reductions we may
lose market share, resulting in decreased volume and revenue.
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Our business is seasonal.
Our business, and particularly the leisure travel market, is highly
seasonal. Our third quarter, which includes the peak summer travel months, has
historically been the strongest quarter of the year. During the peak season, we
increase our rental fleet and workforce to accommodate increased rental
activity. As a result, any occurrence that disrupts travel patterns during the
summer period could result in a significant decrease in customer volume. The
first and fourth quarters for our operations are generally the weakest because
there is limited leisure travel and a greater potential for weather conditions,
either adverse or unseasonable, to impact our business. Moreover, many of our
operating expenses including rent, general insurance and administrative
personnel, remain fixed throughout the year and cannot be reduced during periods
of decreased rental demand. As a result, we cannot assure you that we will have
the ability to conduct our operations efficiently or profitably at all times
during a year.
A decrease in air travel would significantly impact our business.
In 2002, we expect our Alamo and National on-airport and near-airport
locations generated approximately ninety percent of our total revenue from total
domestic operations. We also expect to generate a significant portion of our
revenue from Alamo and National locations on-airport or near-airport in 2003. We
were significantly adversely affected by the decrease in air travel following
September 11, 2001. A sustained material decrease in airline passenger traffic
would significantly reduce our customer volume and significantly impact our
business. Events that could reduce airline passenger traffic include a general
economic downturn, labor unrest, airline bankruptcies and consolidations,
substantially higher air fares, adverse weather conditions, the outbreak of war,
high-profile crimes against tourists and further incidents of terrorism.
Increases in fuel costs or reduced fuel supplies could harm our business.
We could be adversely affected by significant increases in fuel prices,
limitations on fuel supplies and the imposition of mandatory allocations or
rationing of fuel. In particular, increased fuel costs could result in increased
airline ticket prices to consumers, which could have an adverse effect on
business and leisure travel and tourism, resulting in a significant decrease in
customer volume for our businesses.
Changes in manufacturers' repurchase programs may affect our business.
During the year ended December 2001, we operated a combined fleet of
approximately 310,000 owned and leased vehicles. As of December 31, 2001
approximately 81% of our fleet was covered by a vehicle manufacturer repurchase
program or leased and not subject to residual value risk. Under these
manufacturers' repurchase programs, we agree to purchase a minimum number of
vehicles directly from franchised dealers of the manufacturer at a specified
price. The manufacturer, in turn, agrees to buy those vehicles back from us at a
future date at a price that is based upon the capitalized cost of the vehicles
less an agreed upon depreciation factor and, in certain cases, an adjustment for
damage and/or excess mileage. Repurchase programs limit our risk of a decline in
the residual value of our fleet and enable us to fix our depreciation expense in
advance. Vehicle depreciation is the largest component of our cost of
operations. We could have difficulty managing costs relating to the acquisition
and disposition of our vehicles if manufacturers reduce the availability of
repurchase programs or related incentives, or reduce the number of vehicles
available to vehicle rental companies through repurchase programs.
We currently obtain a substantial portion of our financing in reliance on
repurchase programs. A significant adverse change in our financial condition or
our relationship with investment grade vehicle manufacturers would make
obtaining needed vehicle-secured debt financing on favorable terms significantly
more difficult.
In addition, the timing of the receipt or disposition of vehicles from
automobile manufacturers can significantly impact our business and results of
operations. We incur greater expense when we receive vehicles too early from
manufacturers or when manufacturers are unable to receive returned vehicles on a
timely basis. Separately, we incur greater expense when we undertake steps to
reduce our fleet size as a result of weak market volumes. The nature of the
costs incurred during a fleet reduction primarily include, but are not
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limited to, accelerated depreciation charges and turn-in charges imposed under
the terms of our manufacturer repurchase agreements for vehicles returned ahead
of schedule.
Some of our rental fleet is subject to residual value risk upon disposition.
As of December 31, 2001, we were subject to residual value risk on
approximately 19% of our fleet, which were not covered by manufacturers' or
other repurchase programs. Residual value risk is the risk that a vehicle's
market value at the time it is sold will be less than its depreciated value. The
residual value of non-program vehicles depends on factors including the general
level of pricing in the automotive industry for both new and used vehicles.
Prices for used vehicles generally decrease if the automotive manufacturers
increase the retail sales incentives they offer on new vehicles. Because it is
difficult to predict the impact or timing of future manufacturer incentive
programs, used vehicle demand and other factors that influence used vehicle
resale values, we may not be able to manage effectively the residual value risk
on our non-program vehicles which would increase our costs associated with using
non-program vehicles in our rental fleet.
Cost of our rental fleet may increase.
During the last few years, the average price of new cars has increased. In
December 2000, we entered into a new agreement with General Motors under which
the average price of new cars increased. The effect on us of these price
increases has been softened by periodic manufacturers' sales incentive programs
that tend to lower the average cost of vehicles. We anticipate that new vehicle
prices will continue to increase, but we cannot assure you that the
manufacturers' sales incentive programs will remain available to keep our costs
down, nor can we assure you that we will be able to control our rental fleet
costs or selection, or to pass on any increases in vehicle cost to our
customers. The cost of our rental fleet is also impacted by the relative mix of
short-term vehicles, vehicles held up to seven months, versus the mix of
long-term vehicles, vehicles held up to twelve months. We expect the relative
proportion of long-term vehicles to short-term vehicles to increase, thereby
increasing our operating costs as long-term vehicles are costlier on a net after
incentives basis than short-term vehicles.
We depend on General Motors as our principal vehicle rental fleet supplier.
General Motors, through its franchised dealers, is our principal supplier
of rental fleet vehicles. The number of vehicles we purchase varies from year to
year. In model year 2001, we purchased approximately 64% of our aggregate
domestic rental fleet from General Motors. In model year 2002, we may purchase a
lesser amount of our domestic rental fleet from General Motors. The supply
agreement with General Motors requires us to purchase a minimum number of units
spanning all the General Motors brands. In return, General Motors has agreed to
provide certain incentives as well as a minimum number of vehicles. Shifting
significant portions of our fleet purchases to other manufacturers would require
significant lead-time. Separately, General Motors's inability to supply us with
the planned number and type of vehicles in a timely manner could result in our
fleet being inadequate in size or in the types of vehicles available to us to
meet customers' demands, thereby resulting in a loss of revenue. In addition, if
General Motors is not able to offer competitive terms and conditions and we are
not able to purchase sufficient quantities of vehicles from other automobile
manufacturers on competitive terms and conditions, then we may be forced to
purchase vehicles at higher prices or on otherwise less favorable terms. Such a
situation could adversely affect us through increased vehicle acquisition and
depreciation costs that we are not able to offset sufficiently through rental
rate increases passed through to our customers.
We rely on asset-backed financing to purchase vehicles.
We have relied and will continue to rely on asset-backed financing to
purchase vehicles. As of March 31, 2002, we had outstanding approximately
$3.0 billion of asset-backed indebtedness relative to our fleet. If our access
to asset-backed financing were reduced, we cannot be sure that we would be able
to obtain replacement financing on favorable terms. As a result, any disruption
in the market for asset-backed securities or in our ability to access that
market could adversely affect our liquidity and our ability to purchase vehicles
for our fleet. Our chapter 11 filing has made it more difficult and costly to
access this market and
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there can be no assurance we will be able to obtain the necessary financing to
purchase vehicles. You should also read the "Financial Condition" section under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a description of our asset-backed financing programs.
An increase in interest rates could reduce our profitability
A portion of our debt accrues interest at floating interest rates. We use
interest rate derivative transactions to manage the impact of interest rate
changes on our variable rate debt. These derivative transactions consist of
interest rate caps. Although fixed or capped interest rate debt was 100% of our
total debt outstanding as of March 31, 2002, a substantial increase in interest
rates up to the strike price of our caps would significantly increase our cost
of indebtedness.
Problems may arise as a result of consolidation of our brands.
Our competitors have made objections to airport authorities and filed legal
challenges with the U.S. Bankruptcy Court and Federal courts, arguing that we
should not be able to bid for or maintain concession agreements under which we
operate both of our brands, Alamo and National, under a single concession
agreement. To date, however, the U.S. Bankruptcy Court has rejected their
arguments and on appeals the United States District Court has held they
lacked standing to raise objections. This ruling is now on appeal to the United
States Circuit Court of Appeals. A critical component of our restructuring plan
is to achieve cost savings by consolidating airport operations. Should airports
or the courts agree with our competitors' position it could significantly affect
our ability to execute this strategy.
We may have clean-up costs and liabilities relating to storage and handling of
petroleum and other materials.
Our domestic and international service facilities use tanks to store
petroleum products such as gasoline, diesel fuel, motor oil and waste oil and
also handle other materials that may under certain circumstances harm human
health or the environment. At many of these locations, one or more tanks
containing such materials are located underground. We cannot assure you that
these tanks or related systems or other materials will not result in soil or
groundwater contamination. In addition, historical operations, including
activities relating to automobile and bus maintenance, at some of our currently
and formerly owned or operated properties, have resulted in releases into soil
or groundwater. Any such contamination, release or spill, depending on factors
such as the material involved, quantity and environmental setting, and impacts
on third parties, could result in significant remediation expenditures, claims,
liabilities, and interruptions to our operations.
Our former Parent has engaged in certain transactions that are under review by
the IRS and may have a materially adverse effect on our financial condition,
results of operations and cash flows.
Our former Parent has engaged in certain transactions that are of a type
that the Internal Revenue Service has indicated it intends to challenge. During
the time we were part of our former Parent's consolidated Federal Income Tax
Return. Generally, the transactions relate to accelerations of certain future
projected tax deductions. We understand that these transactions are currently
under review by the Internal Revenue Service. An unfavorable settlement or
adverse resolution of these matters by our former Parent, or a decision by the
Internal Revenue Service to pursue ANC, could have a materially adverse effect
on our financial condition, results of operations and cash flows.
If our spin-off is determined to be taxable, our shareholders could be
required to pay tax on any shares they received in the spin-off and we could
be adversely affected by any resulting corporate tax liability.
In connection with the spin-off our former Parent, AutoNation, received a
private letter ruling from the IRS to the effect that, among other things, the
spin-off qualified as a tax-free distribution to AutoNation stockholders and to
AutoNation. Whether a spin-off qualifies as tax-free depends in part upon the
reasons for the spin-off and satisfaction of numerous other fact-based
requirements. The IRS private letter ruling is based upon various factual
representations made by AutoNation and us. If any of those factual
representations were incorrect or incomplete in a material respect, or if the
facts upon which the letter ruling is based are materially different from the
facts at the time of the spin-off, the spin-off could become taxable to
AutoNation stockholders, AutoNation, or both.
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If the spin-off fails to qualify as a tax-free distribution for U.S.
federal income tax purposes, AutoNation stockholders who received shares of ANC
Rental common stock in the spin-off would be treated as if they had received a
taxable distribution in an amount equal to the fair market value of ANC Rental
common stock received. The amount of the taxable distribution would be taxed as
a dividend.
If the spin-off fails to qualify as a tax-free distribution for U.S.
federal income tax purposes, then, in general, a corporate income tax would also
be payable by the consolidated group of corporations of which AutoNation is the
common parent. Even if the spin-off qualifies as a tax-free distribution to
AutoNation stockholders, a corporate income tax would also be payable if, during
the four-year period beginning two years before the spin-off, one or more
persons acquires a 50% or greater interest in AutoNation or us as part of a plan
or series of related transactions that included the spin-off. Corporate tax, if
any, would be paid on the excess, if any, as of the date of the spin-off of (1)
the fair market value of the ANC Rental common stock distributed to AutoNation's
stockholders, minus (2) AutoNation's adjusted tax basis in the ANC Rental common
stock distributed. We have entered into a tax sharing agreement with AutoNation
in connection with the spin-off regarding the allocation, and in some
circumstances sharing, of that potential corporate income tax liability. If the
spin-off fails to qualify as a tax-free distribution or either we or AutoNation
experience a prohibited 50% or greater acquisition, we might have to pay the
resulting corporate income tax.
To minimize this and other risks, we agreed with AutoNation to refrain from
engaging in specified transactions unless we received AutoNation's prior consent
or we received:
- a ruling from the IRS to the effect that the proposed transaction will
not result in the spin-off being taxable to AutoNation or its
stockholders; or
- an opinion of counsel recognized as an expert in federal income tax
matters and designated by AutoNation to the same effect and is
satisfactory to AutoNation in its absolute discretion.
Transactions that may be affected by these restrictions relating to an
acquisition of a 50% or greater interest and other restrictions required to
preserve the tax-free nature of the spin-off include, among others:
- a liquidation;
- a merger or consolidation with, or acquisition by, another company;
- issuance and redemption of shares of our common stock;
- the sale of equity or the exercise of stock options; notwithstanding the
foregoing, we have the right to issue up to 39,483,472 shares of our
common stock of the same class of common stock we had outstanding on the
date of the spin-off.
- the sale, distribution or other disposition of assets in a manner that
would adversely effect the tax consequences of the spin-off; and
- the discontinuation of a material business.
Other transactions could also jeopardize the tax-free nature of the
spin-off.
The market for our common stock is currently not liquid.
Our common stock was delisted from NASDAQ in November 2001. As a result, a
liquid public market for our common stock does not exist, which may make it
difficult for you to sell our common stock. Our common stock is traded on the
NASD OTC Bulletin Board Market. There may be very limited demand for our common
stock.
The market price of our common stock may fluctuate significantly due to a
number of factors, some of which may be beyond our control, including:
- the development of our restructuring plan and our ability to emerge from
Chapter 11;
- the failure of our business profile to fit the investment objectives of
stockholders, thereby limiting demand and causing some of them to sell
our shares;
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- the potential absence of securities analysts covering our company and
distributing research and investment recommendations about our company;
- changes in earnings estimates by securities analysts or our ability to
meet those estimates;
- the operating results and stock price performance of other comparable
companies;
- overall stock market fluctuations; and
- economic conditions generally.
In particular, the realization of any of the risks described in these "Risk
Factors" could have a significant and adverse impact on the market price of our
common stock. In addition, the stock market in general has in the recent period
experienced volatility that has often been unrelated or disproportionate to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the trading price of our common stock, regardless of our
actual operating performance.
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