UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1999
------------------
OR
<TABLE>
<S> <C>
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
--------------- --------------
</TABLE>
Commission file number 333-52599
THE HOLT GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 23-2932358
(State or other jurisdiction of (IRS Employer
Incorporation or organization Identification No.)
101 SOUTH KING STREET, GLOUCESTER CITY NEW JERSEY 08030
(Address of principal executive offices) (Zip Code)
(856) 742-3000
(Registrant's telephone number, including area code)
NOT APPLICABLE
Former name, former address and former fiscal year,
if changed since last report)
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[ ]
The total number of shares of common stock, par value $.01 per share,
outstanding as of November 15, 1999 was 100. The Registrant has no other class
of common stock outstanding.
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1999 (unaudited) and December 31, 1998 1-2
Unaudited Consolidated Statements of Income
for the Nine months ended September 30, 1999 and September 30, 1998 3
Unaudited Consolidated Statements of Comprehensive Income (Loss)
for the Nine months ended September 30, 1999 and September 30, 1998 4
Consolidated Statements of Stockholder's Equity for the Year ended
December 31, 1998 and Nine months ended September 30, 1999 (Unaudited) 5
Unaudited Consolidated Statements of Cash Flows for the Nine months
ended September 30, 1999 and September 30, 1998 6
Notes to Consolidated Financial Statements 7-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-19
Part II OTHER INFORMATION 20-21
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited) (Audited)
(Dollars in thousands, except share data)
<S> <C> <C>
Assets
Current assets
Cash $ 3,444 $ 4,821
Marketable securities 29,661 26,143
Receivables
Trade 55,127 57,077
Tenants 43,778 40,296
Other 9,448 13,669
Fuel and supplies 2,601 2,338
Prepaid expenses 20,416 3,428
Other current assets 2,057 3,540
----------- ----------
Total current assets 166,532 151,312
----------- ----------
Property, plant and equipment, net of accumulated
depreciation and amortization 188,222 195,265
----------- ----------
Other Assets
Receivables, other 29,150 29,032
Investments 2,925 2,925
Unamortized financing costs 3,146 3,616
Capitalized overhaul costs, net of amortization 15,239 19,333
Other 9,501 9,344
Receivables from non-consolidated affiliates 24,311 25,403
----------- ----------
Total other assets 84,272 89,653
----------- ----------
$ 439,026 $ 436,230
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited) (Audited)
(Dollars in thousands, except share data)
<S> <C> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Revolving credit facility $ 42,500 $ 37,000
Notes payable, bank 27,554 9,036
Current maturities of long-term debt
Note payable, bank 1,577 1,779
Other 3,373 3,211
Accounts payable 47,830 55,676
Payroll taxes payable 3,822 4,433
Accrued expenses 19,606 30,040
Payments in excess of billings 3,939 3,353
----------- ----------
Total current liabilities 150,201 144,528
----------- ----------
Long-term debt, net of current maturities
Notes payable, banks 1,047 1,164
Notes payable, other 203,984 205,624
----------- ----------
Total long-term debt, net of current maturities 205,031 206,788
----------- ----------
Payables to non-consolidated affiliates 9,893 13,979
----------- ----------
Other long-term liabilities 12,016 11,108
----------- ----------
Stockholder's equity:
Common stock, par value $.01, authorized 1,000
shares, issued and outstanding 100 shares -- --
Additional paid-in capital 1,131 1,131
Retained earnings 68,421 60,685
Accumulated other comprehensive (loss) (7,667) (1,989)
----------- ----------
Total stockholder's equity 61,885 59,827
----------- ----------
$ 439,026 $ 436,230
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
-------- ------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenue
Operating $ 77,438 $ 76,571 $ 232,770 $ 240,941
Rental income 5,409 5,150 23,966 21,266
Other 4,599 2,788 13,831 9,045
Revenue from non-consolidated affiliates 85 4 94 4
-------- -------- -------- --------
Total revenues 87,531 84,513 270,661 271,256
-------- -------- -------- --------
Operating expenses
Terminal 23,775 23,872 67,199 77,123
General and administrative 15,431 12,599 46,392 41,612
Equipment maintenance 13,100 11,391 37,594 35,945
Insurance and safety 2,168 2,023 5,543 4,573
Vessel 9,468 10,929 28,388 34,652
Transportation 14,381 12,930 43,693 42,364
Depreciation and amortization 5,309 3,764 15,445 11,927
Operating taxes and licenses 192 151 426 426
Losses on investment in joint venture - 989 - 3,899
Charges from non-consolidated affiliates 138 152 417 568
-------- -------- -------- --------
Total operating expenses 83,962 78,800 245,097 253,089
-------- -------- -------- --------
Income from operations 3,569 5,713 25,564 18,167
-------- -------- -------- --------
Interest expense, net 6,098 4,947 17,842 14,285
-------- -------- -------- --------
Other income (expense)
Gain on sale of property and equipment 11 - 14 53
Insurance proceeds 2,677 - 2,677 -
Dividends received - - 3,062 5,799
Realized foreign exchange loss - (9) (21) (83)
-------- -------- -------- --------
Total other income 2,688 (9) 5,732 5,769
-------- -------- -------- --------
Net income $ 159 $ 757 $ 13,454 $ 9,651
======== ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
1999 1998 1999 1998
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 159 $ 757 $13,454 $ 9,651
-------- ------- ------- -------
Other comprehensive income (loss):
Foreign exchange translation adjustments (137) (10) 108 294
Changes in market value on marketable securities (1,130) 6,815 (5,786) 1,355
-------- ------- ------- -------
Total other comprehensive (loss) (1,267) 6,805 (5,678) 1,649
-------- ------- ------- -------
Total other comprehensive income (loss) $ (1,108) $ 7,562 $ 7,776 $11,300
======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common Accumulated
Stock Common Additional Other Total
Number of Stock Paid-in Retained Comprehensive Stockholder's
Shares Amount Capital Earnings Income (Loss) Equity
--------- ------ ---------- -------- ------------- -------------
(Dollars in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 100 - 631 55,147 16,951 72,729
Net income 10,559 10,559
Gain on sale of equipment to company
owned by relatives of Holt's
stockholder 500 500
Foreign exchange adjustments 275 275
Change in market value of marketable
securities (19,215) (19,215)
Dividends paid (5,021) (5,021)
------- ----- ------ -------- -------- --------
Balance, December 31, 1998 100 - 1,131 60,685 (1,989) 59,827
Net income from January 1, 1999 to
September 30, 1999 (unaudited) 13,454 13,454
Foreign exchange adjustments
(unaudited) 108 108
Change in market value of marketable
securities (unaudited) (5,786) (5,786)
Dividends paid (5,718) (5,718)
------- ----- ------ -------- -------- --------
Balance, September 30, 1999 (unaudited) 100 $ - $1,131 $ 68,421 $ (7,667) $ 61,885
======= ===== ====== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1999 1998
-------- -------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 13,454 $ 9,651
Adjustments to reconcile net income to net
cash (used in) provided by operating activities
Depreciation and amortization 15,445 11,927
Gain on sale of property & equipment (14) (53)
Allowance for doubtful accounts 5,326 1,494
Change in assets and liabilities
(Increase) decrease in assets
Trade receivables (3,375) (15,226)
Tenants receivables (3,482) 5,394
Fuel and supplies (262) (238)
Prepaid expenses (16,989) 1,113
Other current assets 1,484 (179)
Other assets (224) (2,782)
Increase (decrease) in liabilities
Accounts payable (7,848) 32,395
Payroll taxes payable (612) 1,003
Accrued expenses (10,434) (17,357)
Payments in excess of billings 586 (87)
Other noncurrent liabilities 907 (921)
-------- -------
Net cash (used in) provided by operating activities (6,038) 26,134
-------- -------
Cash flow from investing activities
Proceeds from sale of property & equipment 484 4,554
Purchases of marketable securities (9,303) (5,224)
Purchases and construction of property, plant and equipment (3,984) (17,059)
Capitalized overhaul costs (256) (13,329)
Decrease (increase) in other receivables 4,104 (18,496)
Decrease (increase) in receivables from non-consolidated affiliates 1,092 (1,527)
(Decrease) increase in payables to non-consolidated affiliates (4,086) 2,007
Increase in goodwill (1,222)
-------- -------
Net cash (used in) investing activities (11,949) (50,296)
-------- -------
Cash flow from financing activities
Contribution of capital 500
Net proceeds (payments on) term notes 24,016 (10,100)
Proceeds of long-term debt 2,048 144,560
Payments on long-term debt (3,736) (108,157)
Dividends paid (5,718) (4,922)
-------- -------
Net cash provided by financing activities 16,610 21,881
-------- -------
Net increase (decrease) in cash (1,377) (2,281)
Cash, at beginning of year 4,821 8,005
-------- -------
Cash, at end of period $ 3,444 $ 5,724
======== =======
Supplemental disclosures of cash flow information
Cash paid during the year for interest, net of amounts capitalized $ 22,516 $ 5,934
======== =======
Non-cash investing and financing activities
Change in market value of marketable securities $ (5,786) $ (5,460)
Unrealized foreign exchange gain 108 304
Gain on sale of property and equipment to company
owned by relatives of Holt's stockholder - 500
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(1) BUSINESS AND BASIS OF PRESENTATION
The Holt Group, Inc. and its subsidiaries (collectively referred to as "Holt")
are engaged in stevedoring, trucking, warehousing and distribution services;
rental of real estate and equipment in the Delaware Valley area, and
container-shipping and chartering of vessels.
The consolidated financial statements include Holt's wholly owned subsidiaries,
Holt Hauling and Warehousing System, Inc. (HHW), Holt Cargo Systems, Inc. (HCS),
The Riverfront Development Corporation (RFD), Murphy Marine Services, Inc. (MMS)
and subsidiary (Wilmington Stevedores, Inc.), San Juan International Terminals,
Inc. (SAN), SJIT, Inc. (SJIT) and NPR Holdings Corporation and subsidiaries
(NPR, Inc., NPR-Navieras Receivables, Inc., and NPR S.A., Inc. collectively,
NPR).
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of the
management of Holt, all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of operating results have been included in the
statements.
Operating results for the nine month period ended September 30, 1999 are not
necessarily indicative of financial results that may be expected for the full
year ended December 31, 1999. These unaudited consolidated financial statements
should be read in conjunction with the consolidated historical financial
statements and notes thereto included in Holt's Prospectus filed with the SEC on
June 18, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board in June 1998. SFAS 133, as amended by SFAS 137, is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet and measurement
of those instruments at fair value. If certain conditions are met, a derivative
may be designated specifically as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm commitment
referred to as a fair value hedge, (b) a hedge of the exposure to variability in
cash flows of a forecasted transaction (a cash flow hedge), or (c) a hedge of
the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a forecasted
transaction. Holt does not currently use derivative financial instruments and
does not expect the adoption of Statement No. 133 to have a material impact on
its financial statements.
RECLASSIFICATIONS
Certain amounts in the September 30, 1998 financial statements have been
reclassified to conform to the September 30, 1999 presentation.
7
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(2) MARKETABLE SECURITIES AVAILABLE FOR SALE
In April 1997, RFD purchased 1,096 shares (subsequently converted into 2,192
shares as a result of a 2-for-1 stock split) of common stock, representing 16.9%
of the outstanding shares of Atlantic Container Line AB (ACL), a publicly traded
foreign corporation, at a cost of $23.5 million for cash and a $8.5 million note
payable to a foreign bank. The note is due in December 1999 and bears interest
at the London Inter-Bank Offered Rate (LIBOR) plus 2.25%. Holt has recently
executed a commitment letter with the foreign bank providing for an extension of
the maturity date of the note to December, 2000.
During June 1998, RFD purchased options to buy approximately 1.5 million shares
(11.1%) of ACL stock at a cost of $5.2 million. These options were scheduled to
expire in March of 1999. Prior to the expiration dates of these options, RFD
entered into new option agreements for the 1.5 million shares and paid
approximately $9.3 million for the new options, which are now scheduled to
expire on December 1, 1999 and have an exercise price of 50.50 NOK per share
(approximately $6.40 per share as of the filing date of this form 10Q). Holt
expects to negotiate for an extension of the term of the options to June 1,
2000.
Marketable securities available-for-sale and other cost investments were as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------------------------------------- ---------------------------------------
Unrealized Unrealized
Holding Holding
Cost (Loss) Total Cost Gain (Loss) Total
-------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock - ACL $ 23,509 $ (69) $ 23,440 $ 23,509 $ 2,069 $ 25,578
Options - ACL 14,505 (8,297) 6,208 5,201 (4,649) 552
Other 13 13 13 - 13
-------- --------- -------- -------- --------- --------
Total $ 38,027 $ (8,366) $ 29,661 $ 28,723 $ (2,580) $ 26,143
======== ========= ======== ======== ========= ========
</TABLE>
Dividends declared for the nine months ended September 30, 1999 and the year
ended December 31, 1998 were $3,062 and $5,799, respectively, and are included
in Other Income in the accompanying Consolidated Statements of Income.
It is Holt's intent to dividend to Holt's sole stockholder the ACL shares and
options it owns subject to all indebtedness related to the shares and options
and also subject to receiving all necessary governmental and third party
consents for ultimate distribution. As of September 30, 1999, such indebtedness
amounted to $31.1 million, of which $10.3 million was payable to a bank and
$20.8 million was payable to other subsidiaries of Holt. In conjunction with the
proposed distribution, Holt's sole shareholder would assume such indebtedness
and agree to repay the portion payable to Holt ($20.8 million) prior to June 30,
2000. In the event the dividend is not declared, Holt intends to otherwise
liquidate the ACL stock and options.
8
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(3) THE REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Revolving Credit Facility $42,500 $ 37,000
Notes payable, banks 30,178 11,979
Senior Notes 140,000 140,000
Bonds payable
1997 Fixed Rate Series K 27,250 27,250
1992 Fixed Rate Series G 10,000 10,000
1992 Fixed Rate Series H 9,000 9,000
1992 Fixed Rate Series J 5,000 5,000
Construction mortgage payable 4,943 4,896
Equipment financing 11,164 12,689
------ ------
280,035 257,814
------- -------
Less current maturities:
Revolving Credit Facility 42,500 37,000
Notes payable, banks 29,131 10,815
Equipment and construction notes payable 3,373 3,211
----- -----
$205,031 $206,788
======== ========
</TABLE>
REVOLVING CREDIT FACILITY AND NOTES PAYABLE, BANKS
At September 30, 1999 and December 31, 1998, revolving credit facility and notes
payable, banks, consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Revolving credit facility due in November 1999 with interest
payable monthly at prime plus 3/4%, secured by the vessels. $42,500 $37,000
Term loan due the earlier of the finalization of the insurance claim
regarding Hurricane Georges or December 31, 1999 with interest
payable monthly at prime plus 3/4% secured by accounts receivable. 17,250 -
Term loan due December 1999 with interest payable quarterly at
LIBOR plus 2.25%, secured by investments in
marketable securities. 10,304 9,036
Payable in monthly installments of $19 plus interest at 1.25% over
prime. The final payment of $1,186 is due in December 1999. 1,244 1,419
Payable in monthly installments of $28 plus interest at prime. 687 750
Payable in monthly installments of $16 plus interest at prime. 672 750
Payable in monthly installments of $.5 including interest at 11%. 21 24
------- -------
$72,678 $48,979
======= =======
</TABLE>
9
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
SENIOR NOTES
Senior Notes of $140,000 are due in January 2006. The notes bear interest at
9.75% with interest payable semiannually.
BONDS PAYABLE
1997 Fixed Rate Series K
The bonds mature March 1, 2027 and bear interest at an effective rate of 7.8%,
payable semi-annually. These bonds redeemed and replaced the 1986 fixed rate
series D and E bonds.
1992 Fixed Rate Series G
The bonds mature at various dates through December 15, 2015, and bear interest
at 8.4%, payable semi-annually. The bond indenture requires annual principal
payments into a sinking fund beginning December 15, 2006 through 2015.
1992 Fixed Rate Series H
The bonds mature at various dates through December 15, 2017, and bear interest
at 8.6%, payable semi-annually. The bond indenture requires annual principal
payments into a sinking fund beginning December 15, 2008 through 2017.
1992 Fixed Rate Series J
The bonds mature at various dates through November 1, 2023, and bear interest at
8.5%, payable semi-annually. The bond indenture requires annual principal
payments into a sinking fund beginning November 1, 2004 through 2023.
CONSTRUCTION MORTGAGE PAYABLE
The mortgage is payable in monthly installments of $33 including interest at 6%;
final payment of $2,952 including interest, is due in March, 2012.
EQUIPMENT FINANCING
The equipment obligations are payable in monthly installments aggregating $264
plus interest. Interest rates at September 30, 1999 and December 31, 1998 ranged
from 6.66% to 10.28%.
10
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(4) NON-GUARANTOR SUBSIDIARY
Holt's wholly owned subsidiary, RFD, is not a guarantor on the Senior Notes (See
Note 3). The guarantor subsidiaries are wholly owned and provide full, complete,
unconditional, joint and several guarantees on the notes. Additionally, Holt's
parent, HGI has no operations or assets other than its investment in
subsidiaries. Accordingly, Holt has not presented separate financial statements
and other disclosures concerning the subsidiary guarantors as management has
determined that such information is not material to investors.
As of September 30, 1999 and September 30, 1998 and for each of the nine month
periods then ended, summarized financial information is as follows:
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Eliminations Consolidated
-------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets $ 775 $ 136,110 $ 29,647 $ - $ 166,532
Non-current assets 286,986 187,984 3,925 (206,401) 272,494
Current liabilities 63,692 75,962 10,547 - 150,201
Non-current liabilities 140,000 66,150 20,790 - 226,940
<CAPTION>
Nine Months Ended September 30, 1999
------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Eliminations Consolidated
-------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 30,135 $ 288,391 $ - $ (47,865) $ 270,661
Operating income (loss) 27,070 28,681 (52) (30,135) 25,564
Net income 13,454 27,799 2,336 (30,135) 13,454
<CAPTION>
September 30, 1998
------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Eliminations Consolidated
-------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets $ 5,421 $ 108,470 $ 30,795 $ - $ 144,686
Non-current assets 234,319 282,954 3,926 (250,236) 270,963
Current liabilities 21,972 84,631 9,430 - 116,033
Non-current liabilities 140,000 161,164 15,510 (79,714) 236,960
<CAPTION>
Nine Months Ended September 30, 1998
------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Eliminations Consolidated
-------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 22,947 $ 288,740 $ - $ (40,431) $ 271,256
Operating income 20,184 20,989 (59) (22,947) 18,167
Net income 10,151 17,756 5,191 (23,447) 9,651
</TABLE>
RFD's current assets consist primarily of marketable securities (See Note 2).
RFD's liabilities consist of bank debt and advances from two of the subsidiary
guarantors. RFD's net income is a result of dividends received, net of expenses.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the Company's
Consolidated Financial Statements and the accompanying notes thereto included in
Item 1 of this Quarterly Report, and the financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Prospectus filed on June 18, 1999.
Effective January 1, 1998, all of Holt's wholly owned subsidiaries file a
consolidated federal return and, for certain state income taxes, subchapter S
corporation tax returns as provided by the Internal Revenue Code.
Income of subchapter S corporations is reportable by the stockholders on their
individual tax returns. Accordingly, no provision for federal or state income
taxes has been reflected in the accompanying financial statements for the
subchapter S corporations, which earned substantially all of the consolidated
income for each year.
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-Q the words or phrases "will
likely result," "are expected to," "will continue," "is anticipated,"
"estimate," "projected," or similar expressions are intended to identify
"forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including but not limited to general economic and business
conditions, dependence on debt financing, competition, changes in foreign
political, social and economic conditions, customer preferences and various
other matters, many of which are beyond the Company's control. Such factors,
which are discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations, could affect the Company's financial
performance and could cause the Company's actual results for future periods to
differ materially from any opinion or statements expressed herein with respect
to future periods. As a result, the Company wishes to caution readers not to
place undue reliance on any such forward looking statements, which speak only as
of the date made.
12
<PAGE>
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth, for the periods indicated, the Company's actual
operating results in thousands of dollars and as a percentage of total revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------- ----------------------------------------
1999 1998 1999 1998
----------------- ---------------- ----------------- -----------------
$ % $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $77,438 88.5 76,571 90.6 232,770 86.1 240,941 88.8
Rental income 5,409 6.2 5,150 6.1 23,966 8.9 21,266 7.8
Other revenues 4,599 5.3 2,788 3.3 13,831 5.1 9,045 3.3
Revenues from non-consolidated
affiliates 85 - 4 - 94 - 4 0.0
------- ---- ------- ---- -------- ---- -------- ----
Total revenues 87,531 100.0 84,513 100.0 270,661 100.0 271,256 100.0
------- ---- ------- ---- -------- ---- -------- ----
Operating expenses
Terminal 23,775 27.2 23,872 28.2 67,199 24.8 77,123 28.4
General and administrative 15,431 17.6 12,599 14.9 46,392 17.1 41,612 15.3
Equipment maintenance 13,100 15.0 11,391 13.5 37,594 13.9 35,945 13.3
Insurance and safety 2,168 2.5 2,023 2.4 5,543 2.0 4,573 1.7
Vessel 9,468 10.8 10,929 12.9 28,388 10.5 34,652 12.8
Transportation 14,381 16.4 12,930 15.3 43,693 16.1 42,364 15.6
Depreciation and amortization 5,309 6.1 3,764 4.5 15,445 5.7 11,927 4.4
Allowances for losses on
advances to joint venture - - 989 1.2 - - 3,899 1.4
Other operating expenses 330 0.4 303 0.4 843 0.3 994 0.4
------- ---- ------- ---- -------- ---- -------- ----
Total operating expenses 83,962 95.9 78,800 93.2 245,097 90.6 253,089 93.3
------- ---- ------- ---- -------- ---- -------- ----
Operating income $ 3,569 4.1 $ 5,713 6.8 $ 25,564 9.4 $ 18,167 6.7
------- ---- ------- ---- -------- ---- -------- ----
Net income $ 159 0.2 $ 757 0.9 $ 13,454 5.0 $ 9,651 3.6
======= ==== ======= ==== ======== ==== ======== ====
Calculation of EBITDA (1):
Operating income 3,569 5,713 25,564 18,167
Depreciation and amortization 5,309 3,764 15,445 11,927
Allowances for losses on
advances to joint venture - 989 - 3,899
------- ---- ------- ---- -------- ---- -------- ----
EBITDA 8,878 10.1 10,466 12.4 41,009 15.2 33,993 12.5
</TABLE>
(1) The term EBITDA as used herein represents operating income plus
depreciation and amortization, adjusted to exclude certain non-recurring
revenues and expenses. EBITDA has been presented because the Company
believes it is commonly used in this or a similar format by investors to
analyze and compare operating performance and to determine a company's
ability to service and/or incur debt. However, EBITDA should not be
considered in isolation or as a substitute for net income, cash flow from
operations or any other measure of income or cash flow that is prepared in
accordance with generally accepted accounting principles, or as a measure
of a company's profitability or liquidity. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
financial statements of the Company and the related notes thereto included
elsewhere in this Form 10Q.
13
<PAGE>
RESULTS OF OPERATIONS
REVENUES
Total revenues decreased to $270.7 million, for the nine months ended September
30, 1999 from $271.3 million for the nine months ended September 30, 1998, a
decrease of $0.6 million, or 0.2%.
Operating revenues decreased to $232.8 million, for the nine months ended
September 30, 1999 from $240.9 million for the nine months ended September 30,
1998, a decrease of $8.1 million, or 3.4%.
The decrease in operating revenues was partially due a decrease in ocean revenue
of approximately $5.6 million. While southbound volume for the nine month period
ended September 30, 1999 increased by approximately 1,100 containers over the
comparable period for 1998, the average revenue per unit decreased approximately
3% resulting in a reduction in southbound revenue. The Company experienced both
a decrease in northbound volume of approximately 1,600 containers and a slight
decrease in revenue per unit of 0.6% for the nine months ended September 30,
1999 compared to the comparable period for 1998 which resulted in a reduction in
northbound revenue. While interisland revenue per unit increased approximately
4.3%, interisland volume decreased by 381 containers resulting in a net decrease
in interisland revenue for the for the nine months ended September 30, 1999
compared to the nine months ended September 30, 1998. The Company continues to
experience competitive rate pressure. While volume increased slightly for the
three months ended September 30, 1999 compared to the same period 1998, the
trend in revenue per container continued to decrease. This competitive pressure
is expected to continue to impact NPR's revenues for the foreseeable future.
Operating revenues were further adversely affected by a $6.3 million decrease in
stevedoring revenue for the nine month period ended September 30, 1999 as a
result of reduced vessel calls and containers handled at Packer Avenue Marine
Terminal (PAMT).
Decreases in operating revenues were partially offset by increased third party
stevedoring revenues of $1.9 million from the Company's newly established
subsidiary San Juan Internationals Inc. as well as an increase of $0.9 million
of revenue at the Port of Wilmington. Trucking revenues for the nine month
period ended September 30, 1999 increased slightly by $0.9 million as compared
to the nine month period ended September 30, 1998.
Rental income increased to $24.0 million for the nine months ended September 30,
1999 from $21.3 million for the nine months ended September 30, 1998, an
increase of $2.7 million, or 12.7%. The increase was due to increased leasing
revenues from the Lessee-Operators at the Gloucester Facility associated with
increased tonnage of cargo handled.
Other revenue increased to $13.8 million for the nine months ended September 30,
1999 from $9.0 million for the nine months ended September 30, 1998, an increase
of $4.8 million, or 52.9%. The increase was primarily attributable to an
increase in third party billings for demurrage of $6.5 million offset by a
decrease in third party stevedoring by NPR of $2.1 million.
For the three months ended September 30, 1999, total revenues increased to $87.5
million from $84.5 million for the three months ending September 30, 1998, a
increase of $3.0 million, or 3.6%. These increases were due to increases in
third party billings for demurrage of $1.9 million as well as increased third
party stevedoring revenues of $1 million.
TERMINAL EXPENSES
Terminal expenses decreased to $67.2 million for the nine months ended September
30, 1999 from $77.1 million for the nine months ended September 30, 1998, a
decrease of $9.9 million, or 21.2%.
This decrease is partially attributable to improved efficiencies at the Packer
Avenue and San Juan terminals for the handling of NPR containers. The decrease
in terminal expense is also attributable to reduced container vessel calls at
the PAMT as well as a reduction in total containers handled by NPR.
Terminal expenses essentially remained unchanged decreasing to $23.8 million for
the three months ended September 30, 1999 from $23.9 million for the three
months ended September 30, 1998. However, on a quarterly basis, decreases in
terminal expenses at the Company's PAMT as a result of reduced vessel calls
14
<PAGE>
for the quarter ended September 30, 1999 were offset by an increase in terminal
operations at the San Juan terminal since the Company had less activity in
anticipation of and as a result of Hurricane Georges which occurred at the end
of the quarter ended September 30, 1998. The Company also experienced an
increase in terminal expenses at its operations in the Port of Wilmington due to
increased activity for the quarter ended September 30, 1999 over the comparable
period for 1998.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased to $46.4 million for the nine
months ended September 30, 1999 from $41.6 million for the nine months ended
September 30, 1998, an increase of $4.8 million, or 11.5%.
General and administrative expenses increased to $15.4 million for the three
months ended September 30, 1999 from $12.6 million for the three months ended
September 30, 1998, an increase of $2.8 million, or 22.5%.
The increases in the nine months ended September 30, 1999 resulted from a one
time charge for severance payments of $0.9 million, an increase of $2.1 million
in professional fees associated with reorganization of certain administrative
and accounting activities and the registration of the Company's Senior Notes. A
further increase of $0.3 million was attributable to start-up costs associated
with the formation of two subsidiaries (SAN and SJIT) in San Juan, Puerto Rico
for the purpose of expanding the Company's third party stevedoring.
These increases were partially offset by a headcount reduction of $4.2 million
consisting of a decrease in salaries, wages and benefits of $3.9 million and
other related expenses of $0.3 million.
During the third quarter of 1999, the Company increased its provision for bad
debts by $2.4 million for certain of its accounts receivable. In addition,
during the nine month period ending September 30, 1998, the provision for bad
debts was decreased by $2.5 million to reflect collection of certain accounts
receivable balances which had been previously provided for.
EQUIPMENT MAINTENANCE EXPENSE
Equipment maintenance expenses increased to $37.6 million for the nine months
ended September 30, 1999 from $35.9 million for the nine months ended September
30, 1998, an increase of $1.7 million, or 4.6%.
Equipment maintenance expenses increased to $13.1 million for the three months
ended September 30, 1999 from $11.4 million for the three months ended September
30, 1998, a decrease of $1.7 million, or 15.0%.
These increases are a result certain leases which commenced during the third
quarter of 1999 for equipment being utilized at the Company's Packer Avenue
terminal as well as its facilities in San Juan, Puerto Rico. Additional
increases were attributable to maintenance performed on Company's container
cranes during the third quarter of 1999.
INSURANCE AND SAFETY EXPENSES
Insurance and safety expenses increased to $5.5 million for the nine months
ended September 30, 1999, from $4.6 million for the nine months ended September
30, 1998, an increase of $0.9 million, or 21.2%.
This increase was attributable to increased coverage for new equipment, which
was acquired to replace older equipment and increased costs for certain of the
insurance coverage carried by the Company.
Insurance and safety expenses were $2.2 million and $2.0 million for the three
months ended September 30, 1999 and September 30, 1998, respectively.
VESSEL EXPENSES
Vessel expenses decreased to $28.4 million for the nine months ended September
30, 1999 from $34.7 million for the nine months ended September 30, 1998, a
decrease of $6.3 million, or 18.1%.
Vessel expenses decreased to $9.5 million for the three months ended September
30, 1999 from $10.9 million for the three months ended September 30, 1998, a
decrease of $1.4 million, or 13.4%.
15
<PAGE>
These decreases were primarily attributable to the change from a 2-2 rotation
(Jacksonville twice a week and Philadelphia twice a week) to a 3-1 rotation
(Jacksonville three times a week and Philadelphia once a week) in the Company's
vessel operations as well as taking one vessel out of service during the slow
season.
TRANSPORTATION EXPENSES
Transportation expenses increased to $43.7 million for the nine months ended
September 30, 1999 from $42.4 million for the nine months ended September 30,
1998, an increase of $1.3 million, or 3.1%.
Transportation expenses increased to $14.4 million for the three months ended
September 30, 1999 from $12.9 million for the three months ended September 30,
1998, a increase of $1.5 million, or 11.2%.
These increases are primarily attributable to the revision of Hurricane Georges
provisions totaling $0.5 million which were recorded during the third quarter of
1998 and as a result of increased trucking volume during 1999.
DEPRECIATION AND AMORTIZATION EXPENSES
Depreciation and amortization expenses increased to $15.4 million for the nine
months ended September 30, 1999 from $11.9 million for the nine months ended
September 30, 1998, an increase of $3.5 million, or 29.5%.
Depreciation and amortization expenses increased to $5.3 million for the three
months ended September 30, 1999 from $3.8 million for the three months ended
September 30, 1998, an increase of $1.5 million, or 41.0%.
These increases were primarily attributable to amortization of dry-docking costs
incurred in the latter part of 1998.
ALLOWANCE FOR LOSSES ON JOINT VENTURE
No allowance for losses on joint venture was incurred for the nine months ended
September 30, 1999 whereas $3.9 million of such expenses were incurred for the
nine months ended September 30, 1998. This allowance had been established to
provide for losses arising out of advances made to fund TNX operations which
were wound down by the end of 1998.
INTEREST EXPENSE
Interest expense increased to $17.8 million for the nine months ended September
30, 1999 from $14.3 million for the nine months ended September 30, 1998, an
increase of $3.5 million, or 24.9 %.
Interest expense increased to $6.1 million for the three months ended September
30, 1999 from $4.9 million for the three months ended September 30, 1998, an
increase of $1.2 million, or 23.3%.
During the first quarter of 1999, the Company had increased borrowings of $17.3
million to fund expenses incurred as a result of Hurricane Georges. The Company
also increased its borrowings under its revolving credit by $5.5 million during
the first quarter of 1999.
Further increases occurred as result a 50 basis point increase in the prime rate
of interest during the third quarter of 1999.
OTHER INCOME
Other income was approximately $5.7 million for the nine months ended September
30, 1999 and 1998, respectively.
Other income increased to $2.7 million for the three months ended September 30,
1999 from the comparable period in 1998.
The increase was due as a result of the reallocation of a portion of the
insurance advance of $8.0 million received by the Company against its claim for
damages from Hurricane Georges to the business interruption component of the
claim.
16
<PAGE>
NET INCOME
Net Income increased to $13.5 million for the nine months ended September 30,
1999 from $9.7 million for the nine months ended September 30, 1998, an increase
of $3.8 million, or 39.4%.
Net income decreased to $0.2 million for the three months ended September 30,
1999 from $0.8 million for the three months ended September 30, 1998, an
decrease of $0.6 million, or 79.0%.
The changes in net income was attributable to the changes in revenues and
expenses as discussed above.
EBITDA
EBITDA increased to $41.0 million for the nine months ended September 30, 1999
from $34.0 million for the nine months ended September 30, 1998, an increase of
$7.0 million, or 20.6 %.
EBITDA decreased to $8.9 million for the three months ended September 30, 1999
from $10.5 million for the three months ended September 30, 1998, an decrease of
$1.6 million, or 15.2%.
The changes in EBITDA was attributable to the changes in revenues and expenses
as discussed above.
SEASONALITY
Holt handles a variety of cargoes throughout the year ranging from refrigerated
meat and produce to steel and wood products. Holt believes that this diversified
mix of cargoes has reduced the effects of seasonality associated with specific
types of cargoes.
Although NPR historically realized a seasonal impact on its revenues during
December (due to Christmas) and May (due to Mother's Day), this seasonal impact
has diminished significantly over the past two years. The Company believes that
this decrease is attributable partially to greater use of Time Volume Agreements
(TVAs) and fixed rate contracts in NPR's trade, which reduces the fluctuation in
cargo volumes throughout the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs relate primarily to payment of principal and
interest on outstanding indebtedness, including interest payments on the Senior
Notes, the funding of capital expenditures and the funding of distributions to
the Company's sole shareholder primarily to pay income taxes.
For the nine months ended September 30, 1999, net cash from operating, investing
and financing activities was sufficient for the Company to satisfy all debt
service requirements and to make the necessary capital acquisitions and
improvements excluding the Company's additional investment in marketable
securities.
Net cash flow used in operating activities was $6.0 million. In addition to net
income of $13.5 million and non cash charges of $20.8 million. Funds used in
operating activities included $14.4 million representing the deferral of extra
expenses incurred to operate as a result of Hurricane Georges. These
expenditures are included in the claim submitted by the Company to its insurance
carrier (See discussions at Recent Developments).
Additional funds also used in operating activities included a $18.2 million
reduction in accounts payable and accrued expenses. Increases in trade and
tenant accounts receivable of $6.9 million further decreased funds available
from operating activities.
Net cash used in investing activities for the nine months ended September 30,
1999 was $12.0 million of which $9.3 million was attributable to the purchase of
options to acquire 1.5 million shares of Atlantic Container Line AB stock, and
$4.0 million was used to fund capital expenditures. The options expire in
December 1999; however, the Company expects to negotiate for an extension of the
term of the options to June 2000.
Net cash provided by financing activities for the nine months ended September
30, 1999 was $16.6 million. The Company borrowed $17.3 million to fund expenses
incurred as a result of Hurricane Georges. The Company also increased its
borrowings under its revolving credit facility by $5.5 million and increased its
borrowings from a foreign bank by $1.3 under a credit facility collateralized by
the ACL stock owned by the Company. The Company
17
<PAGE>
incurred borrowings of $1.2 million for new equipment and repaid $3.7 million of
other bank and equipment notes for the nine months ended September 30, 1999.
The Company also distributed to its sole stockholder a dividend of $5.7 million
during the nine months ended September 30, 1999 a portion of which was used by
the stockholder to repay a $5.0 million note receivable to the Company.
An additional source of liquidity for the Company is its Revolving Credit
Facility. Financing available under the Revolving Credit Facility consists of a
$50 million revolver under which approximately $6.4 million in letters of credit
and approximately $42.5 million of borrowings were outstanding at September 30,
1999. On February 25, 1999 the Revolving Credit Facility was amended to provide
for an additional $17.3 million in the form of a term loan as an advance against
insurance proceeds expected to be collected by the Company for damages caused by
Hurricane Georges (See discussion at Recent Developments).
As of September 30, 1999, the Company had outstanding $280.0 million of
consolidated indebtedness, consisting of (i) $140.0 million principal amount of
the Senior Notes and (ii) $140.0 million of senior secured indebtedness.
The Company's mandatory debt service requirements for maturities of the
Revolving Credit Facility and long-term debt for the years ending September 30,
2000, 2001 and 2002 are $75.0 million, $3.2 million and $2.9 million,
respectively. The Company has exercised its option to extend the maturity date
of the Revolving Credit Facility (having an outstanding balance of $42.5 million
at September 30, 1999) to November 2000.
The Company recently executed a commitment letter issued by its bank wherein the
bank has committed to use its reasonable best efforts to arrange for an
extension of the maturity date of the $17.3 million term loan to December 31,
2002. The Company also recently executed a commitment letter with its foreign
bank to extend the term of the credit facility secured by the ACL stock to
December 30, 2000.
As substantially all of the Company's operating income is generated by its
subsidiaries, the Company is dependent on dividends and other distributions from
its subsidiaries to generate the funds necessary to meet its obligations. The
ability of the subsidiaries to pay dividends to the Company is subject to, among
other things, the terms of the Revolving Credit Facility and Other Indebtedness
and Financings to which they are subject. Certain of the Other Indebtedness and
Financings restrict distributions from the Issuer's subsidiaries to the Issuer
to a percentage of cumulative net income, subject to certain adjustments.
The Company's aggregate capital expenditures for the nine months ended September
30, 1999 and for the year ended December 31, 1998 and were $4.0 million and
$19.1 million, respectively. The Company's capital spending in each period
related principally to the construction of certain improvements and purchase of
material handling equipment at Gloucester, Packer Avenue and San Juan facilities
as well as the acquisition of rolling stock used in its vessel operations.
RECENT DEVELOPMENTS
Hurricane Georges. The Company's operations in San Juan, Puerto Rico have been
affected by Hurricane Georges which struck the island during September 1998.
Although certain of its buildings and cranes located at Puerto Nuevo suffered
damages, NPR was able to continue to conduct business since two of the high
speed cranes used by the Company were not damaged. Additionally, NPR's fleet of
vessels did not incur any damage. The Company has submitted a claim to its
property insurance carrier for recovery of the replacement cost of the equipment
and buildings which were damaged, business interruption and extra expense. The
net book value of the damaged equipment and buildings are carried on the
Company's books at a de minimis value since these assets have been fully
depreciated for accounting purposes.
The Company has submitted a claim to its insurance carrier for $42.5 million and
believes that substantially all of the damages are covered by its insurance
policy. The Company's insurer has paid to the Company $8.0 million against its
claim, but has refused to settle the claim in a manner acceptable to the
Company. As a result, the Company has met with counsel for purposes of
determining whether to institute litigation against the insurer in the event the
claim is not satisfactorily settled. Although the Company believes it will
recover the full amount of its claim, there can be no assurance in this regard
or that the inability to recover any material portion would not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
18
<PAGE>
IMPACT OF YEAR 2000 ON THE COMPANY'S SYSTEMS
Many computer systems were not designed to handle dates beyond the year 1999,
and, therefore, computer hardware and software will need to be modified prior to
the year 2000 in order to remain functional. The Company has determined whether
its computer systems are Year 2000 compliant and is replacing or upgrading those
computer systems that are not.
The Company has two major data centers, NPR in Edison, New Jersey and Holt in
Gloucester City, New Jersey. NPR has an IBM mainframe, two local area networks
and 13 remote site locations. Holt has three IBM AS/400s, one local area
network, 10 remote site locations and three RF site locations.
The Company's systems software is principally supplied by IBM. The operating
systems for the IBM mainframe and the IBM AS/400s are already Year 2000
compliant. Other system software used by the Company is supplied by Computer
Associates, Microsoft, and Novell. All of these software systems are represented
to be Year 2000 compliant by these software vendors. A detailed plan and impact
analysis was conducted by the Company to determine the extent of Year 2000
implications on the Company's mainframe and AS/400 computer systems with respect
to business applications developed and maintained by the Company. The Company is
utilizing existing staff and outside resources to fix and test all such business
applications. Business software supplied by third parties used by the Company is
represented to be Year 2000 compliant by the vendors of the software.
The Company's Year 2000 readiness plan includes the scanning, testing and
modification or upgrade (where necessary) of approximately 20,000 programs and
files used throughout the Company's operations. The Company has purchased
additional computers and conversion tools to be used in connection with the
testing and upgrading of existing systems and has hired additional programmers
to assist with the Year 2000 project. The Company is in the process of
completing its final testing for all required upgrades and expects such testing
to be completed by November 30, 1999. The cost of the Company's Year 2000
readiness project was approximately $1.2 million which has been incurred through
September 30, 1999.
In the event the Company does not achieve Year 2000 compliance by January 1,
2000, the resulting misrepresentation of date calculation in the Company's
computer systems could result in interruption in the Company's business, loss of
customers, inability to properly process or account for payments from customers
or payments to vendors and personnel, and claims for damages arising out of the
foregoing, any or all of which could have a material adverse effect on the
Company's financial condition and results of operations. The Company considers
this scenario to be unlikely as its Year 2000 compliance methodology includes
testing of the Company developed software and the vendor supplied software in a
Year 2000 environment and is proceeding on a schedule which would result in
completion of all required upgrades by December 1, 1999.
While the Company has contacted its key business partners and inquired as to the
status of their Year 2000 compliance, the Company has not received responses
indicating an expectation of achieving Year 2000 compliance from all of them.
The Company has no control over the systems and services used by third parties
with which it interfaces, and accordingly, there can be no assurance that all
key business partners will successfully resolve all of their Year 2000
compliance issues. Although the Company cannot predict with accuracy the actual
adverse consequences if key business partners do not achieve Year 2000
compliance, it is possible that such non-compliance could result in an
interruption in the Company's business which could have a material adverse
effect on the Company's financial condition and results of operations.
Contingency plans are being developed to ensure critical operations continue
uninterrupted in the event the Company or key business partners fail to resolve
their respective Year 2000 issues in a timely manner. Such plans will be
developed by December 1, 1999 and will be in place prior to the end of the year.
The Company will identify and prioritize the potential risks and will coordinate
this plan with all its departments. The contingency plan will include the close
monitoring of service performance in Year 2000 and, if needed, the replacement
of automated information transference with manual documents and the development
of conversion systems of key interfaces should key business partners, with which
the Company exchanges data, fail to comply on time.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal and state environmental
laws and regulations, including but not limited to, the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), which creates
liability on the part of the owner or operator of a facility for the
investigation and remediation of hazardous substances, as well as creating the
authority and funding for unilateral response action by the United States
Environmental Protection Agency ("EPA"). In addition, portions of the Gloucester
Facility are part of a multi-property action pursuant to CERCLA to address
historic contamination via radioactive material. Holt has voluntarily entered
into a consent order with the EPA requiring the performance of certain
investigative measures and the proposal of certain remedial measures in
connection with the Gloucester Facility. The Company has conducted recent
environmental assessments at each of its facilities and believes it is in
material compliance with all environmental laws and does not anticipate material
expenditures for environmental compliance in the foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board in June 1998. SFAS 133, as amended by SFAS 137, is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet and measurement
of those instruments at fair value. If certain conditions are met, a derivative
may be designated specifically as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm commitment
referred to as a fair value hedge, (b) a hedge of the exposure to variability in
cash flows of a forecasted transaction (a cash flow hedge), or (c) a hedge of
the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a forecasted
transaction. Holt does not currently use derivative financial instruments and
does not expect the adoption of Statement No. 133 to have a material impact on
its financial statements.
20
<PAGE>
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
NPR and the Company are also defendants in a lawsuit filed in May 1999, in the
United States District Court for the District of Puerto Rico (Sea-Land Service,
Inc., Piercrane, Inc. v. NPR (Navieras) Inc. et al., No. 99-1420). The
plaintiffs seek damages in an amount not less than $50,000,000 to compensate
them for damages to their property and business arising out of defendants'
alleged negligence and NPR's breach of contract.
In their lawsuit, the plaintiffs claim that during Hurricane Georges, NPR's
cranes, two of which are leased from Sea-Land, broke from their securing
arrangements and struck plaintiffs' cranes because defendants failed to properly
prepare for the Hurricane. Furthermore, the plaintiffs claim that since NPR is
obligated, under its lease with Sea-Land for the cranes, to indemnify Sea-Land
for all losses incurred by Sea-Land in any way relating to possession and use of
the cranes, NPR's failure to hold Sea-Land harmless for the losses it suffered
as a result of the leased cranes striking plaintiffs' cranes, constitutes a
breach of contract under the lease. Although the Company believes that any
liability of NPR and the Company in connection with the lawsuit is covered by
insurance, there can be no assurance in that regard or that the resolution of
this lawsuit will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Item 2. Changes in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information:
On August 2, 1999, the Company consummated the exchange of all of its
outstanding 9 3/4% Senior Notes due 2006 ("Old Notes") for its 9 3/4% Senior
Notes due 2006 registered under the Securities Act of 1933, as amended ("New
Notes"), pursuant to the terms of the Exchange Offer set forth in the Company's
Registration Statement. All of the Old Notes were tendered in exchange for the
New Notes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
Number of Exhibit
- -------- ---------------
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended September 30,
1999.
21
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE HOLT GROUP, INC
(Registrant)
DATE: November 15, 1999 BY:
--------------------------------------
Thomas J. Holt, Sr.
Chief Executive Officer (the principal
executive and financial officer)
DATE: November 15, 1999 BY:
--------------------------------------
John A. Evans
General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE HOLT GROUP, INC. AND SUBSIDIARIES AS
OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,444
<SECURITIES> 29,661
<RECEIVABLES> 122,970
<ALLOWANCES> 14,617
<INVENTORY> 0
<CURRENT-ASSETS> 166,532
<PP&E> 270,806
<DEPRECIATION> (82,584)
<TOTAL-ASSETS> 439,026
<CURRENT-LIABILITIES> 150,201
<BONDS> 51,250
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 439,026
<SALES> 0
<TOTAL-REVENUES> 276,393
<CGS> 0
<TOTAL-COSTS> 245,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,842
<INCOME-PRETAX> 13,454
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,454
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,454
<EPS-BASIC> 134.54
<EPS-DILUTED> 134.54
</TABLE>
