<PAGE>
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, 2000
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
--------------- --------------
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 14, 2000 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, 2000 (unaudited) and December 31, 1999 1-2
Unaudited Consolidated Statements of Income (Loss)
for the Nine months ended of September 30, 2000 and of September 30, 1999 3
Unaudited Consolidated Statements of Comprehensive Income (Loss)
for the Nine months ended of September 30, 2000 and of September 30, 1999 4
Unaudited Consolidated Statements of Stockholder's Equity for the
Nine months ended September 30, 2000 5
Unaudited Consolidated Statements of Cash Flows for the Nine months
ended September 30, 2000 and September 30, 1999 6-7
Notes to Consolidated Financial Statements 8-19
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 20-27
Item 3. Quantitative and Qualitative Disclosure About Market Risk 27
Part II OTHER INFORMATION 28-31
Item 1. Legal Proceedings
Item 3. Defaults Upon Senior Securities
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
(Unaudited) (Audited)
(Dollars in thousands, except share data)
Assets
<S> <C> <C>
Current assets
Cash $ 3,217 $ 2,331
Marketable securities - 33,369
Receivables, net
Trade 42,048 46,225
Tenants 14,688 15,082
Other 5,247 7,299
Fuel and supplies 3,115 2,693
Prepaid expenses 5,203 5,607
Other current assets 7,301 96
--------- ---------
Total current assets 80,819 112,702
--------- ---------
Property, plant and equipment, net of accumulated
depreciation and amortization 221,605 234,912
--------- ---------
Other assets
Receivables, other 5,313 25,713
Receivables, tenants 7,353 14,229
Investments 2,925 2,925
Unamortized financing costs 2,896 3,071
Other 9,233 9,562
Insurance claim receivable 8,366 8,366
Receivables from non-consolidated affiliates 25,649 25,406
--------- ---------
Total other assets 61,735 89,272
--------- ---------
$ 364,159 $ 436,886
========= =========
</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,
2000 1999
------------ ------------
(Unaudited) (Audited)
(Dollars in thousands, except share data)
Liabilities and Stockholder's Equity
<S> <C> <C>
Current liabilities:
Debt obligations $ 289,686 $ 268,294
Accounts payable 42,985 55,084
Payroll taxes payable 3,381 3,589
Accrued expenses 26,700 24,603
Payments in excess of billings 4,799 4,145
--------- ---------
Total current liabilities 367,551 355,715
--------- ---------
Debt obligations, net of current maturities - 49,750
--------- ---------
Payables to non-consolidated affiliates 11,343 9,782
--------- ---------
Other long-term liabilities 12,506 12,369
--------- ---------
Commitments and Contingencies
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 (deficit) (28,434) 11,543
Accumulated other comprehensive income (loss) 62 (3,404)
--------- ---------
Total stockholder's equity (deficit) (27,241) 9,270
--------- ---------
$ 364,159 $ 436,886
========= =========
</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,
------------------------------------- -------------------------------------
2000 1999 2000 1999
restated restated
----------------- ------------------ ----------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenue
Operating $ 73,277 $ 76,258 $ 223,261 $ 227,559
Rental income 2,671 5,409 7,855 23,966
Other 2,484 4,599 10,724 13,831
Revenue from non-consolidated affiliates - 85 89 94
--------- --------- --------- ---------
Total revenues 78,432 86,351 241,929 265,450
--------- --------- --------- ---------
Operating expenses
Terminal 26,575 25,788 78,623 75,250
General and administrative 14,473 23,837 45,562 55,710
Equipment maintenance 7,346 8,171 24,079 25,713
Insurance and safety 2,280 1,815 6,097 4,416
Vessel 10,148 9,468 29,969 28,856
Transportation 14,274 14,381 44,308 43,287
Depreciation and amortization 7,227 7,444 21,578 21,384
Operating taxes and licenses 379 192 1,275 426
Charges from non-consolidated affiliates 79 138 304 417
--------- --------- --------- ---------
Total operating expenses 82,781 91,234 251,795 255,459
--------- --------- --------- ---------
Income (loss) from operations (4,349) (4,883) (9,866) 9,991
--------- --------- --------- ---------
Interest expense, net 8,540 7,005 22,879 20,526
--------- --------- --------- ---------
Other income (expense)
Gain on sale of property and equipment 266 11 252 14
Loss on sale of investment (5,872) - (5,872) -
Loss on disposition of purchase option - - (8,000) -
Dividends received - - 5,567 3,062
Realized foreign exchange gain (loss) 2,325 - 2,344 (21)
Other non-operating (1,220) - (1,220) -
--------- --------- --------- ---------
Total other income (expense) (4,501) 11 (6,929) 3,055
--------- --------- --------- ---------
Net (loss) $ (17,390) $ (11,877) $ (39,674) $ (7,480)
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
restated restated
---------------- ---------------- ---------------- ----------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net (loss) $ (17,390) $ (11,877) $ (39,674) $ (7,480)
--------- --------- --------- ---------
Other comprehensive income (loss):
Foreign exchange translation adjustments 2,770 (137) 3,466 108
Less: reclassification adjustment for
foreign exchange gain (2,344) - (2,344) -
Changes in market value on marketable securities - (1,130) (5,520) (5,786)
Add: reclassification adjustment for loss on sale
of investment 5,872 - 5,872 -
--------- --------- --------- ---------
Total other comprehensive income (loss) 6,298 (1,267) 1,474 (5,678)
--------- --------- --------- ---------
Total other comprehensive (loss) $ (11,092) $ (13,144) $ (38,200) $ (13,158)
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Common Accumulated Total
Stock Common Additional Retained Other Stockholder's
Number of Stock Paid-in Earnings Comprehensive Equity
Shares Amount Capital (Deficit) Income (Loss) (Deficit)
---------- -------- ---------- --------- ------------- ------------
(Dollars in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 100 $ - $ 1,131 $ 11,543 $ (3,404) $ 9,270
Net (loss) (39,674) (39,674)
Foreign exchange adjustments 3,466 3,466
Dividends paid (303) (303)
---- ---- ------- -------- -------- ---------
Balance,
September 30, 2000 (unaudited) 100 $ - $ 1,131 $ (28,434) $ 62 $ (27,241)
==== ==== ======= ========= ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------
2000 1999
restated
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Cash flows from operating activities
Net (loss) $ (39,674) $ (7,480)
Adjustments to reconcile net (loss) to net
cash (used in) provided by operating activities
Depreciation and amortization 21,578 21,384
Allowance for doubtful accounts (346) 13,325
Loss on sale of investment 5,872 -
Foreign exchange (gain) (2,344) -
(Gain) on sale of property and equipment (252) (14)
Loss on disposition of purchase option 8,000 -
Amortization of gain on sale/leaseback (59) -
Change in assets and liabilities
(Increase) decrease in assets
Trade receivables 3,848 (6,165)
Tenants receivables 7,270 4,518
Fuel and supplies (422) (263)
Prepaid expenses 404 (2,127)
Other current assets (7,205) (1,256)
Other assets 260 (225)
Insurance claim receivable - (5,277)
Increase (decrease) in liabilities
Accounts payable (12,099) (6,892)
Payroll taxes payable (208) (611)
Accrued expenses 2,096 (10,315)
Payments in excess of billings 654 586
Other noncurrent liabilities 196 1,403
--------- --------
Net cash (used in) provided by operating activities (12,431) 591
--------- --------
Cash flow from investing activities
Proceeds from sale of investment 41,920 -
Proceeds from sale of property and equipment 1,105 484
Purchases of marketable securities (10,010) (9,303)
Purchases and construction of property, plant and equipment (8,699) (5,065)
Capitalized overhaul costs - (257)
Decrease (increase) in other receivables 15,126 5,119
Decrease (increase) in receivables from non-consolidated affiliates (243) 1,092
(Decrease) increase in payables to non-consolidated affiliates 1,561 (4,086)
--------- --------
Net cash (used in) provided by investing activities 40,760 (12,016)
--------- --------
</TABLE>
6
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------
2000 1999
restated
----------------- -----------------
(Dollars in thousands)
<S> <C> <C>
Cash flow from financing activities
Financing costs (181) -
Proceeds from debt obligations 32,163 25,194
Payments on debt obligations (59,122) (9,433)
Dividends paid (303) (5,718)
-------- --------
Net cash (used in) provided by financing activities (27,443) 10,043
-------- --------
Net increase (decrease) in cash 886 (1,382)
Cash, at beginning of year 2,331 4,826
-------- --------
Cash, at end of period $ 3,217 $ 3,444
======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for interest, net of amounts capitalized $ 25,818 $ 23,533
======== ========
Non-cash investing and financing activities
Change in market value of marketable securities $ (4,413) $ (5,786)
Unrealized foreign exchange gain 946 108
</TABLE>
See accompanying notes to consolidated financial statements.
7
<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" or
the "Company") are engaged in container-shipping, stevedoring, trucking,
warehousing and distribution services and the rental of real estate and
equipment in the North and South Atlantic trade routes.
The consolidated financial statements include Holt's wholly owned subsidiaries,
Holt Hauling and Warehousing System, Inc. ("HWC"), Holt Cargo Systems, Inc.
("HCS"), The Riverfront Development Corporation ("RFD"), Murphy Marine Services,
Inc. and subsidiary ("MMS"), San Juan International Terminals, Inc. ("SAN"),
New-Port Stevedores, Inc. formerly known as SJIT, Inc. ("SJIT"), Borinquen
Maintenance, Inc. ("BOR") and NPR Holdings Corporation and subsidiaries, NPR,
Inc., NPR-Navieras Receivables, Inc., and NPR S.A., Inc. , collectively, ("NPR")
and a combined affiliate, Emerald Equipment Leasing, Inc. ("Emerald").
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, 2000 are not
necessarily indicative of financial results that may be expected for the full
year ended December 31, 2000. These unaudited consolidated financial statements
should be read in conjunction with the consolidated historical financial
statements and notes thereto included in Holt's Form 10-K filed with the SEC on
August 4, 2000.
Going Concern
The accompanying consolidated financial statements of the Company have been
prepared on the basis that it will continue as a going concern, which
contemplates the realization of assets and liquidation of liabilities, except as
otherwise disclosed, in the normal course of business. However, as a result of
the Company's losses from operations and working capital deficiencies, such
realization of assets and liquidation of liabilities is subject to significant
uncertainties.
The Company's ability to continue as a going concern is dependent upon the
successful restructuring of certain of its obligations, the ability to generate
sufficient cash from operations, the sale of non-core assets, and the
satisfactory resolution of certain commitments and contingencies. The
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amount and classification of liabilities.
In order to address its liquidity needs, the Company has retained professional
advisors to assist in developing and implementing its financial restructuring
plan along with cashflow projections. In addition, as discussed in Note 4, the
Company executed two amendments to its Revolving Credit Agreement. The first
amendment, executed on January 21, 2000, resulted in making available to the
Company $10.0 million in the form a second term loan for working capital
purposes. The second amendment executed on July 14, 2000, provides that the
Company makes certain mandatory payments of its obligations under the Revolving
Credit Agreement and extends the maturity date of the term loans and the
revolving credit facility to June 30, 2001. The second amendment also resulted
in, among other things, a revision of financial covenants and a waiver of all
defaults under the Revolving Credit Agreement, as amended, existing on the date
of execution of the second amendment.
8
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
1. Business and Basis of Presentation - (Continued)
As of September 30, 2000, the Company was in default with certain covenant
provisions with respect to its industrial revenue bonds, its indenture for the
senior unsecured notes and other equipment and bank loan agreements and intends
to request waivers of its financial covenant defaults and a revision of its
financial covenants. The Company cannot give any assurances that its lenders
will agree to the Company's requests. Unless the Company is able to revise its
financial covenants, the Company believes that it will be unable to comply with
such financial covenants at each measurement date throughout the period ending
September 30, 2001. (see Note 4)
Recent Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 137, which amended the
effective date of SFAS No. 133 - Accounting for Derivative Instruments and
Hedging Activities, was issued in September 1999. SFAS No. 138, which also
amended SFAS No. 133, was issued in September 2000. The Company is required to
adopt SFAS No. 133 by January 1, 2001. This statement establishes accounting and
reporting standards requiring that all derivative instruments are recorded on
the balance sheet as either an asset or a liability, measured at its fair value.
The statement requires that changes in the derivative's fair value are
recognized currently in earnings unless specific hedge accounting criteria are
met and such hedge accounting treatment is elected. The Company does not
currently use derivative financial instruments and does not expect the adoption
of Statement No. 137 and 138 to have a material impact on the Company's
financial position, results of operations or cash flows.
In December 1999, the SEC issued Staff Accounting Bulletin 101 (SAB 101) -
Revenue Recognition in Financial Statements, as amended, which summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. This bulletin
specifies that revenue should not be recognized until it is realized or
realizable and earned. The Company is required to adopt SAB 101 in the fourth
quarter of 2000, and its adoption is not expected to have an impact on the
Company's financial position, results of operations, earnings per share or cash
flows.
Reclassifications
Certain amounts in the December 31, 1999 and September 30, 1999 financial
statements have been reclassified to conform to the September 30, 2000
presentation.
2. Combination of Emerald Equipment Leasing
During April 2000, the Company became aware of the accounting impact of the
existence of certain Company guarantees of the indebtedness of related companies
which had not been previously considered in the preparation of its financial
statements for the nine months ended September 30, 1999. The existence of those
guarantees resulted in covenant defaults under certain Company debt agreements.
As a result of these defaults, $205.0 million of indebtedness under the
defaulted agreements should have been presented in the Company's September 30,
1999 balance sheet as current liabilities rather than long-term liabilities.
The assets, liabilities and results of operations of Emerald Equipment Leasing,
Inc., a related party Special-purpose Entity, should have been consolidated into
the Company's financial statements, which would have resulted in $37.5 million
additional total assets and $42.2 million additional total liabilities at
September 30, 1999 and would have reduced net income and comprehensive income by
$1.5 million as compared to the amounts previously presented.
9
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
3. Marketable Securities Available for Sale
During August 2000, the Company sold its entire interest in Atlantic Container
Line AB ("ACL") for $41.9 million, net of a margin loan of $2.4 million, and
realized a loss of approximately $5.9 million on the sale of the ACL stock.
In accordance with the provisions of its term loan agreement with its foreign
bank and the second amendment to the Revolving Credit Agreement, proceeds from
the sale of the ACL stock were used to repay its foreign term loan and to repay
a portion of its revolving credit facility (see Note 4).
Dividends received for the nine months ended September 30, 2000 and for year
ended December 31, 1999 were $5,567 and $3,062, respectively.
4. Debt Obligations
At September 30, 2000 and December 31, 1999, the Company's debt obligations
consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
--------------- --------------
2000 1999
------ ------
<S> <C> <C>
Revolving credit facility under the Revolving Credit Agreement,
due on June 30, 2001 with interest payable monthly at prime plus 1.25%,
collateralized by the vessels, assignment of insurance claims regarding
Hurricane Georges, capital stock of NPR Holding Corporation and Subsidiaries
and all trade and tenant
receivable balances. $28,993 $42,500
Term loan under the Revolving Credit Agreement, due the earlier of the
finalization of the insurance claim regarding Hurricane Georges or June 30,
2001 with interest payable monthly at prime plus 1.25% collateralized by the
vessels, assignment of insurance claims regarding Hurricane Georges, capital
stock of NPR Holding Corporation and Subsidiaries and all trade and tenant
receivable balances. 14,412 17,250
Term loan under the Revolving Credit Agreement, due the earlier of the
finalization of the insurance claim regarding Hurricane Georges or June 30,
2001 with interest payable monthly at prime plus 1.25% collateralized by the
vessels, assignment of insurance claims regarding Hurricane Georges, capital
stock of NPR Holding Corporation and Subsidiaries and all trade and tenant
receivable balances. 8,355 ---0---
Senior unsecured notes due in January 2006 with
interest at 9.75% payable semiannually. 140,000 140,000
Term loan payable to a foreign bank, due December 30, 2000 with interest payable
quarterly at LIBOR plus 2.50%, collateralized
by investments in marketable securities. (See Note 3) ---0--- 9,994
</TABLE>
10
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
4. Debt Obligations - (Continued)
<TABLE>
<CAPTION>
September 30, December 31,
--------------- --------------
2000 1999
--------------- --------------
<S> <C> <C>
Equipment financing payable in monthly installments aggregating $1.4 million,
including interest. The weighted average interest rate at September 30, 2000
was 7.81% collateralized by certain equipment. 39,003 48,691
Construction mortgage payable in monthly installments of $33 including interest
at 6%; final payment of $2,952 including interest, is due in March, 2012. 4,734 4,895
Demand note payable in monthly installments of $19 plus interest
at 1.25% over prime. The note is due December 31, 2000. 969 1,206
Line of credit currently due with interest payable
monthly at prime plus 1.0% 900 900
Term loan payable in monthly installments of $16 plus interest at prime. 516 656
Term loan payable in monthly installments of $16 plus interest at prime. 516 656
Term loan payable in monthly installments of $1.1 including
interest at 11%. 38 46
Bonds payable 51,250 51,250
------ ------
Total debt obligations 289,686 318,044
Less current debt obligations 289,686 268,294
------- -------
Net long-term debt obligations $---0--- $49,750
======== =======
</TABLE>
Bonds Payable
1997 Fixed Rate Series K - $27,250
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 - $10,000
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 - $9,000
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.
11
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
4. Debt Obligations - (Continued)
1992 Fixed Rate Series J - $5,000
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.
Debt Covenants and Other Matters
On January 21, 2000, the Revolving Credit Agreement was amended to make
available to the Company $10.0 million in the form of a second term loan. This
first amendment provides that the second term loan mature on September 30, 2000.
The first amendment provides that the revolving credit facility, the letter of
credit issued under the Revolving Credit Agreement and the first and second term
loans are collateralized by first mortgages on the Company's vessels, assignment
of insurance claims regarding Hurricane Georges, capital stock of NPR Holding
Corporation and Subsidiaries and all trade and tenant receivable balances. The
first amendment also requires the total amount of the loans outstanding to be
guaranteed by the Company's non-consolidated affiliated companies and requires
the Company's principal stockholder to guarantee $10.0 million of the loans
outstanding. The loans have been further collateralized by junior liens on
certain of the Company's and its non-consolidated affiliated companies' assets.
On July 14, 2000, the Company executed a second amendment to its Revolving
Credit Agreement which extends the maturity date of the revolving credit
facility and the term loans to June 30, 2001 provided that the Company makes
certain mandatory repayments on various dates through June 30, 2001. The
mandatory repayments shall reduce on a prorata basis the revolving credit
facility and the term loans. The amendment provides that interest shall be
payable on a monthly basis at prime plus 1.25% on all amounts outstanding and
further provides for, among other things, a revision of financial covenants and
a waiver of all defaults existing under the Revolving Credit Agreement on the
date of execution of the second amendment.
As of September 30, 2000, the Company was in default with certain provisions of
its loan agreements related to its industrial revenue bonds, the indenture for
the senior unsecured notes and other equipment financing and bank loan
agreements where certain of the Company's subsidiaries are either primary
obligors or obligated as guarantor.
As a result of these defaults and because the bondholders, trustees and banks
have the right to accelerate the Company's indebtedness to each of them, all of
the Company's long-term debt obligations have been reclassified as a current
liability.
The prime rate noted in certain loan agreements at September 30, 2000 and
December 31, 1999 was 9.50% and 8.50%, respectively.
Substantially all assets are pledged as collateral for the Company's
indebtedness.
5. Commitments and Contingencies and Other Matters
Commitments
At September 30, 2000 and December 31, 1999, Holt was contingently liable for
outstanding standby letters of credit in the amount of $1,325 and $6,325,
respectively. See "National Union Fire Insurance Company" discussed below.
12
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
5. Commitments and Contingencies and Other Matters - (Continued)
The Company is presently involved in pending or threatened litigation arising in
the normal course of business as discussed below. While the outcome of this
litigation is uncertain at this time, the Company has recorded a liability for
the amounts for which it believes it is likely to incur with respect to each
matter.
Withdrawal Liability
Holt relocated NPR's northeastern port of call from Elizabeth, New Jersey to
Philadelphia, Pennsylvania, a move designed to consolidate operations. As a
result of the move, the Company has been advised by counsel that it could
trigger a future withdrawal liability that could approximate $12.8 million
however, the Company has several options to mitigate this potential claim.
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 NPR 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.
To date, the Company has received $8.0 million from its insurance carrier and
has recorded an insurance claim receivable of $8.4 million at September 30, 2000
and December 31, 1999, which represents direct incremental costs incurred in
connection with insurable incidents for which the Company expects to be
reimbursed by the insurance carrier.
On January 14, 2000, the Company filed a complaint against its insurance carrier
seeking recovery under its insurance policy for damages in the total amount of
the policy, $42.5 million, suffered as a result of the hurricane. The suit was
filed in the United States District Court for the District of New Jersey. On
March 7, 2000, the carrier filed its answer, which included its affirmative
defenses, a counterclaim for declaratory judgement asserting that the Company
has not satisfied all of its obligations under the insurance policy and a
request that the case be removed to the Federal Court in Puerto Rico. While the
defendant has filed a motion to remove the case to Puerto Rico, no hearing to
determine the motion has been set by the Judge and discovery in this matter is
continuing.
Contingencies
Philadelphia Regional Port Authority
The Company and Astro Holdings, Inc., a related party ("the Plaintiffs") filed a
complaint on May 31, 1996 with the Federal Maritime Commission ("FMC") against
the Philadelphia Regional Port Authority ("PRPA"), the Port of Philadelphia and
Camden ("PPC"), and Pasha Auto Warehousing Inc. ("Pasha") (collectively, the
"Defendants"), alleging violations of Section 10 of the Shipping Act of 1984 and
Sections 16 and 17 of the Shipping Act of 1916 generally, by engaging in unjust
and unreasonable practices, discrimination and unreasonable refusals to deal
with and giving unreasonable preferences to others to the detriment of the
Plaintiffs .
PRPA filed a counterclaim alleging that the Plaintiffs breached its obligations
under the PRPA lease by operating the Packer Avenue Facility in a manner
intended to benefit the Plaintiffs' other facilities, refusing to operate the
Packer Avenue Facility so as to maximize its use, failing to market the Packer
Avenue Facility in a first class manner and soliciting container business for
the Gloucester Facility to the detriment of the Packer Avenue Facility.
The Plaintiffs have requested the FMC to issue an order commanding the
Defendants to cease and desist from the aforesaid violations, to establish and
put in force such practices as the FMC determines to be reasonable and to pay
damages to the Plaintiffs by way of reparation.
13
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
5. Commitments and Contingencies and Other Matters - (Continued)
A settlement agreement was entered resolving all claims by and between the
Plaintiffs and the DRPA and PPC. As part of the same settlement agreement, the
Plaintiffs agreed that they would withdraw their claim against PRPA for monetary
damages. The settlement agreement further resolved all other claims except the
Plaintiffs' 10(d)(1) conspiracy claim against PRPA and Pasha; and the Company's
10(a)(2) claim against Pasha that the Pasha leases are void ab initio because
they were never filed with the FMC. PRPA and Pasha filed motions for summary
judgement as to the aforementioned unresolved claims. The motions were denied,
and PRPA filed a motion requesting the judge to clarify his order denying the
motions. The judge has ruled that no further clarification is necessary. Before
resolving the merits of the Plaintiffs' claim, the judge will determine whether
the FMC has jurisdiction over Pasha.
Sea Land
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 million 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 crane, 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.
The parties are currently involved in discovery. A pretrial conference which had
been originally scheduled for November 1, 2000 has been cancelled by the court
with no new date being set. The Company believes that it is adequately insured
for the claims raised by the plaintiffs and intends to vigorously defend the
claims asserted.
Port of New Orleans
NPR is a defendant in a law suit originally filed in State Court in Louisiana
which was removed at NPR's request to Federal District Court (Board of
Commissioners of the Port of New Orleans v. NPR, Inc.) Plaintiff seeks to
enforce a Cancellation Agreement by which NPR was allowed to terminate, in 1996,
its terminal lease at the Port of New Orleans in return for annual installment
payments of one-half of the annual rental amounts originally due under the
lease. The payments under the Cancellation Agreement total $4,075 of which $311
has been paid by NPR. The delinquent amounts sought by the plaintiffs to be paid
as stated in their complaint is $1.8 million.
At NPR's request the Federal District Court judge in New Orleans referred the
dispute to the Federal Maritime Commission to determine whether the Cancellation
Agreement violated, as claimed by NPR, any provisions of the Shipping Act. On
March 16, 2000, an Administrative Law judge ruled that the circumstances under
which the Cancellation Agreement was entered into did not give rise to
violations of the Shipping Act and remanded the matter to the Federal District
Court for determination of whether the Cancellation Agreement can be nullified
under Louisiana law, if it was, in fact, induced by misrepresentation, as
claimed by NPR.
On September 21, 2000, the District Court granted summary judgment in favor of
the Board of Commissioners for $1,869 plus costs and interest based upon annual
lease cancellation payments of $623 each due December 31 for the years 1997,
1998 and 1999. NPR filed a motion for reconsideration of the Court's
determination which was denied on November 8, 2000. NPR is appealing the matter
to the Fifth Circuit.
14
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
5. Commitments and Contingencies and Other Matters - (Continued)
National Union Fire Insurance Company
On February 15, 2000, National Union Fire Insurance Company of Pittsburgh,
Pennsylvania ("National Union") filed before a panel of arbitrators in New York
(the "Panel") a formal claim for $21.9 million against the Company. The amount
claimed by National Union is allegedly due under various indemnification
agreements entered into between the Company and National Union and related to
the Company's workmen's compensation program for the period February 1, 1989
through December 17, 1996. In its statement of the case, National Union claims
that the Company is obligated to pay National Union for unpaid loss
reimbursements, additional fees, indemnification of certain assessments made
against National Union by the Department of Labor and additional cash reserves
to cover future payments to be made by National Union. The suit also seeks the
posting of additional security by the Company for certain of the years wherein
National Union provided workmen's compensation coverage. The arbitration hearing
for this matter has been scheduled for the week of February 26, 2001.
On July 13, 2000, the Company was ordered by the Panel to increase the amount of
collateral to secure any potential liability it may have to National Union in
the form of letters of credit by $6.8 million for a total of $11.8 million. The
Panel also permitted National Union to present and to be paid the original
letter of credit posted as collateral in the amount of $5.0 million which
National Union has done. The Company has not yet posted the remaining $6.8
million letter of credit as required by the Panel and may be unable to do so.
National Union has filed a petition in Federal Court to confirm the arbitrators'
award and a hearing date of December 1, 2000 has been set by the Court to hear
the matter.
The Company continues to have settlement discussions with National Union. The
Company is analyzing the claim and is preparing to defend it vigorously.
City of Gloucester
The Company along with other related parties are named as defendants in a
lawsuit which was filed by the City of Gloucester ("the City") on February 14,
2000. The City alleges that the Company is in default under a loan agreement
entered into between the Company and the City and seeks payment of the remaining
balance outstanding of $4.8 million, plus accrued interest and attorney fees.
The City also alleges that the Company and a related party are in violation of a
Redeveloper's Agreement and certain leases for property currently occupied by
the Company and seeks to terminate the lease and recover for the rent remaining
to be paid under the leases as well as for damages for breach of contract.
The City has filed a motion for summary judgment for payment of the balance of
the note. Oral argument and reargument has been heard on the motion. The Court
has declined to rule on the motion until the Company has been provided with an
opportunity to take discovery. The Company has tendered what it believes to be
the late charges due under the loan agreement and has also tendered an
additional sum to be held in the City's Attorney's trust account, which sum
represents the difference between the City's calculated late charges and the
Company's calculated late charges. In addition, all principal and interest
payments due under the loan agreement are current as measured under the payment
schedule under the original loan agreement. Additional argument will be heard on
the motion for summary judgment on December 15, 2000.
The Company is analyzing the claim and is preparing to defend it vigorously but
is unable to determine the outcome or to reasonably estimate the amount of loss,
if any, with respect to this matter at this time.
15
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
5. Commitments and Contingencies and Other Matters - (Continued)
Other
The Company is also presently party to litigation arising in the ordinary course
of business, substantially all of which involves claims for personal injury and
property damage. The Company believes that the recovery for any of these claims
would be covered by insurance and would not have a material adverse effect on
the Company's consolidated financial position or results of operations.
Guarantees
A governmental authority owns a building located on Holt's Gloucester Marine
Terminal which was financed through the issuance of tax-exempt bonds. The
building has been leased to a Holt related party. Holt has guaranteed the
tenant's lease payments aggregating $18,500 through April 2024. The guarantee is
secured by a mortgage lien on the Gloucester Marine Terminal which is
subordinate to the senior mortgage debt and on a parity with the remaining
mortgage debt.
A governmental authority has issued $7.0 million of its Revenue Bonds for the
benefit of one of the non-consolidated affiliates, all of which were outstanding
at September 30, 2000. The bonds are secured by a mortgage on the
non-consolidated affiliate's interest on the property financed by the bonds. The
bonds bear an interest rate of 9.05% and mature on December 1, 2019. Repayment
of bond indebtedness is guaranteed by Holt and the non-consolidated affiliates.
The guarantee is secured by a mortgage granted by Holt and one of the
non-consolidated affiliates on their respective interests in the Gloucester
Facility.
A governmental authority has issued $6.1 million of its Refunding Bonds for the
benefit of one of the non-consolidated affiliates all of which were outstanding
at September 30, 2000. The bonds bear an interest rate of 8.95% and mature on
December 15, 2018. Repayment of bond indebtedness is guaranteed by Holt and the
non-consolidated affiliates. The bonds and the guarantee are secured by a
mortgage granted by Holt and the non-consolidated affiliate on their respective
interests in the Gloucester Facility.
As of September 30, 2000, the Company is in default with certain financial
covenants for each of the above discussed bond transactions as a result of which
the lessee and the non-consolidated affiliates are in default under the lease
and loan agreements, respectively. As a result of these covenant defaults, the
trustee under the tax-exempt
16
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
5. Commitments and Contingencies and Other Matters - (Continued)
bonds and for each of these bond transactions has the right to accelerate the
Company's guarantee obligation. The Company intends to request waivers of its
financial covenant defaults, but there can be no assurance that these waivers
can be obtained.
The Company has guaranteed various equipment loans entered into by Express
Equipment Rental, a Holt related party ("Express") with various financial
institutions. The equipment purchased by Express with the proceeds of these
loans is being leased to the Company. The loans bear interest at varying rates
ranging from 8.21% to 10.28% and mature at various dates through 2004. The terms
of the leases for this equipment provide that, among other things, the lease
payments are sufficient to repay the amounts outstanding under the loan
agreements. The amount of loans outstanding on September 30, 2000 is $3.7
million.
Vessel Financings
Certain of the Company's subsidiaries have guaranteed obligations of Christian
Holdings (Luxembourg) S.A. ("CHL") in connection with its ownership of two
modern refrigerated cargo vessels (the "Vessels"). CHL owns these Vessels in an
equal partnership with a German shipping company. These Vessels call from time
to time at the Company's terminals carrying palletized perishable products from
various points of origin throughout the world. In relation to the above, Holt
Cargo Systems, Inc. guaranteed a loan made between Commerzbank and CHL in the
original amount of $2,760. The bank has indicated that it is willing to extend
the maturity date of the loan from January 31, 2000 to September 30, 2001. CHL
is currently in the process of completing these negotiations. The balance of the
loan on September 30, 2000 was $830.
In August of 1996, National Maatschip Krediet an Nuiverd, ("NMKM"), a Belgian
bank, made two loans to CHL, each in the amount of $13,650 for the purposes of
refinancing the Vessels. In February 1997, Gimvindus, n.v., a Belgian economic
development agency, also made two loans to CHL, each in the equivalent U.S.
dollar value of $983 also for the purpose of refinancing the Vessels. Vessel
mortgages were granted to each lending institution to secure the loans. The
Company has guaranteed the loans made by Gimvindus and jointly with its partner
has guaranteed $1,729 of each of the loans made by NMKM.
6. Non-Consolidated Affiliate Transactions
Holt transacts business with companies which are 100% or majority owned by
Holt's stockholder. These transactions include providing advances to and from
those affiliated companies. These advances do not bear interest.
Holt also provided services and goods to these companies which include
stevedoring services, rental of warehouse space and building and equipment
repairs. At September 30, 2000 and December 31, 1999, $25,649 and $25,406,
respectively, was due to Holt in connection with net advances made and services
performed on behalf of certain non-consolidated affiliates. At September 30,
2000 and December 31, 1999, $11,343 and $9,782 was due to certain
non-consolidated affiliates in connection with net advances and services
received. Revenue for these services totaled $89 and $94 for the nine months
ended September 30, 2000 and 1999, respectively. These companies provided
services to Holt which included rental of warehouse space, building and
equipment repairs and management services. Expenses for these services totaled
$304 and $417 for the nine months ended September 30, 2000 and 1999,
respectively.
17
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
7. Other Related Party Transactions
Leases
For the nine months ended September 30, 2000 and 1999, Holt leased property and
equipment from a Holt related party under a non-cancelable lease which expires
December 30, 2000 and which is renewable through 2040 pursuant to four 10-year
renewal options. Rental expense under this lease totaled $1,907 and $2,048 for
the nine months ended September 30, 2000 and 1999, respectively.
Account Receivable - Trade
At September 30, 2000 and December 31, 1999, Account Receivable, Trade includes
$6.4 and $3.3 million, net of reserves of $5.0 million, due from a Holt related
party as of September 30, 2000 and December 31, 1999, respectively..
Corporate Services
Holt has an agreement to purchase general and administrative support services
from SLS Services, Inc. ("SLS"). SLS is controlled by certain directors of Holt
who are relatives of Holt's sole shareholder. Expense for these services totaled
$7,243 and $7,064 for the nine months ended September 30, 2000 and 1999,
respectively. In the normal course of business, Holt performs services for SLS.
At September 30, 2000 and December 31, 1999, Receivables tenants includes $825
and $931, respectively, due from SLS.
Other Receivables
At September 30, 2000 and December 31, 1999, "Other Noncurrent Receivables"
included $3,857 and $4,913, respectively, due from SLS and other companies owned
by shareholders of SLS.
Agreements
During 1998, the Company entered into an Option to Purchase and Development
Agreement with Delaware Avenue Enterprises, Inc. (DEL), a related party.
Pursuant to the agreement, the Company paid $8.0 million to DEL to acquire an
option to purchase 11.5 acres of property located on the Delaware River in
Philadelphia (the "Premises") for a price equal to 120% of any sum expended by
DEL to improve and develop the Premises for use by the Company in its future
operations.
In connection with the agreement, the Company loaned to DEL $10 million in 1998
and an additional $4.0 million in 1999 in exchange for promissory notes,
collectively, (the "Notes"). The Notes had an interest at 1% over the prime rate
and matured on the earlier of December 31, 2013 or the date on which the Company
was to exercise its option and purchase the Premises. The Notes were secured by
a mortgage and security agreement on the Premises and a contiguous 28-acre site.
The Notes are included in "Noncurrent Receivables Other" in the accompanying
balance sheet.
On July 14, 2000, DEL borrowed $14.0 million which was used to repay the Notes.
The Company used the repayment proceeds to pay interest on its senior unsecured
notes, repay debt on its Revolving Credit Agreement and used the remainder for
general working capital purposes. In conjunction with the transaction, the
Company terminated its $8.0 million Option to Purchase and Development Agreement
with DEL and recorded this charge to earnings in the second quarter of 2000.
18
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
8. Non-Guarantor Subsidiary
RFD and Emerald are not guarantors under the $140.0 million Senior Notes (See
note 3). The subsidiary guarantors which are wholly owned by HGI and provide
joint and several guarantees on the Senior Notes. Additionally, The Holt Group,
Inc. ("HGI") has no operations or assets other than its investment in
subsidiaries. Accordingly, the Company 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, 2000 and September 30, 1999 and for each of the nine month
periods then ended, summarized financial information is as follows:
<TABLE>
<CAPTION>
September 30, 2000
----------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
----------- -------------- ------------------------- -------------- -------------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 5,186 $ 74,635 $ 196 $ 802 $ - $ 80,819
Non-current assets 284,745 387,555 10,613 28,576 (428,149) 283,340
Current liabilities 197,803 139,767 8 29,973 - 367,551
Non-current liabilities 33,197 209,664 274 2,462 (221,748) 23,849
Nine Months Ended September 30, 2000
----------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
----------- -------------- ------------ ------------ -------------- -------------------
Non-Guarantors
Revenue $ - $ 264,913 $ - $ 8,810 $ (31,794) $ 241,929
Operating income (loss) (4,205) (7,809) (59) 2,207 - (9,866)
Net income (loss) (20,848) (20,254) 1,094 334 - (39,674)
September 30, 1999 (restated)
----------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
----------- -------------- ------------------------- -------------- -------------------
Non-Guarantors
Current assets $ 775 $ 108,355 $ 29,647 $ 868 $ (714) $ 138,931
Non-current assets 286,986 295,022 3,925 36,660 (304,132) 318,461
Current liabilities 203,692 140,993 10,547 40,275 (246) 395,261
Non-current liabilities - 98,382 20,790 1,877 (97,731) 23,318
Nine Months Ended September 30, 1999 (restated)
----------------------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
----------- -------------- ------------------------- -------------- -------------------
Non-Guarantors
Revenue $ 27,457 $ 283,180 $ - $ 7,344 $ (52,531) $ 265,450
Operating income (loss) 24,393 11,894 (52) 1,213 (27,457) 9,991
Net income (loss) 10,777 8,337 2,336 (1,473) (27,457) (7,480)
</TABLE>
RFD's current assets consist primarily of marketable securities. 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.
Emerald's long-term assets consist primarily of equipment. Emerald's liabilities
consist primarily of bank debt and advances from two of the subsidiary
guarantors.
19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Restatement of Financial Position and Results of Operation for the Nine Months
Ended September 30, 1999
During April 2000, the Company became aware of the accounting impact of the
existence of certain Company guarantees of the indebtedness of related companies
which had not been previously considered in the preparation of its financial
statements for the nine months ended September 30, 1999. The existence of those
guarantees resulted in covenant defaults under certain Company debt agreements.
As a result of these defaults, $205.0 million of indebtedness under the
defaulted agreements should have been presented in the Company's September 30,
1999 balance sheet as current liabilities rather than long-term liabilities.
The assets, liabilities and results of operations of Emerald Equipment Leasing,
Inc., a related party Special-purpose Entity, should have been consolidated into
the Company's financial statements, which would have resulted in $37.5 million
additional total assets and $42.2 million additional total liabilities at
September 30, 1999 and would have reduced net income and comprehensive income by
$1.5 million as compared to the amounts previously presented. In addition,
revenues, income from operations and net income for the nine months ended
September 30, 1999 have been adjusted to reflect revenue adjustments of $5.2
million, increases in accounts receivable tenant reserves of $8.0 million and a
reversal of $2.7 million of the $8.0 million received by the Company from its
insurance carrier previously recorded as other income for the three months ended
September 30, 1999.
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 Form 10-K filed on August 4, 2000.
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.
20
<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,
--------------------------------------------- --------------------------------------------
restated restated
2000 1999 2000 1999
---------------------- -------------------- ----------------------- -------------------
$ % $ % $ % $ %
------------ ---------- ------------ -------- ------------ ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 73,277 93.4 76,258 88.3 223,261 92.3 227,559 85.7
Rental income 2,671 3.4 5,409 6.3 7,855 3.2 23,966 9.0
Other revenues 2,484 3.2 4,599 5.3 10,724 4.4 13,831 5.2
Revenues from non-consolidated
affiliates - - 85 - 89 - 94 0.0
-------- ------ ------- ------ --------- ------ -------- ------
Total revenues 78,432 100.0 86,351 100.0 241,929 100.0 265,450 100.0
-------- ------ ------- ------ --------- ------ -------- ------
Operating expenses
Terminal 26,575 33.9 25,788 29.9 78,623 32.5 75,250 28.3
General and administrative 14,473 18.5 23,837 27.6 45,562 18.8 55,710 21.0
Equipment maintenance 7,346 9.4 8,171 9.5 24,079 10.0 25,713 9.7
Insurance and safety 2,280 2.9 1,815 2.1 6,097 2.5 4,416 1.7
Vessel 10,148 12.9 9,468 11.0 29,969 12.4 28,856 10.9
Transportation 14,274 18.2 14,381 16.7 44,308 18.3 43,287 16.3
Depreciation and amortization 7,227 9.2 7,444 8.6 21,578 8.9 21,384 8.1
Other operating expenses 458 0.6 330 0.4 1,579 0.7 843 0.3
-------- ------ ------- ------ --------- ------ -------- ------
Total operating expenses 82,781 105.5 91,234 105.7 251,795 104.1 255,459 96.2
-------- ------ ------- ------ --------- ------ -------- ------
Operating income (loss) (4,349) (5.5) (4,883) (5.7) (9,866) (4.1) 9,991 3.8
-------- ------ ------- ------ --------- ------ -------- ------
Interest expense, net 8,540 10.9 7,005 8.1 22,879 9.5 20,526 7.7
Net (loss) $(17,390) (22.2) $(11,877) (13.8) $(39,674) (16.4) $ (7,480) (2.8)
======== ====== ======== ====== ========= ====== ======== ======
Calculation of EBITDA (1):
Operating income (4,349) (5.5) (4,883) (5.7) (9,866) (4.1) 9,991 3.8
Depreciation and amortization 7,227 9.2 7,444 8.6 21,578 8.9 21,384 8.1
-------- ------ ------- ------ --------- ------ -------- ------
EBITDA $ 2,878 3.7 $ 2,561 3.0 $ 11,712 4.8 $ 31,375 11.8
-------- ------ ------- ------ --------- ------ -------- ------
</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 10-Q.
21
<PAGE>
RESULTS OF OPERATIONS
Revenues
Total revenues decreased to $241.9 million, for the nine months ended September
30, 2000 from $265.5 million for the nine months ended September 30, 1999, a
decrease of $23.4 million, or 8.9 %.
Total revenues decreased to $78.4 million, for the three months ending September
30, 2000 from $86.4 million for the three months ending September 30, 1999, a
decrease of $8.0 million, or 9.2%.
Operating revenues decreased to $223.3 million, for the nine months ended
September 30, 2000 from $227.6 million for the nine months ended September 30,
1999, a decrease of $4.3 million, or 1.9%.
Operating revenues decreased to $73.3 million, for the three months ended
September 30, 2000 from $76.3 million for the three months ended September 30,
1999, a decrease of $3.0 million, or 3.9%.
The decrease in operating revenues for the third quarter ended September 30,
2000 was due to a $4.2 million decrease in volume at the Company's Packer Avenue
Facility primarily due to lower volumes of steel cargo. These decreases were
partially offset by an increase of $2.7 million increase in volume at the
Company's San Juan Facility. The Company's operating revenues at the Port of
Wilmington were flat for the third quarter ending September 30, 2000.
Additional decreases in operating revenues were the result of a $1.7 million
decrease in ocean revenues. Southbound load volume for the three month period
ended September 30, 2000 decreased by approximately 8.8% over the comparable
period for 1999, which resulted in a $3.4 million decrease in southbound
revenue. The average southbound revenue per unit increased slightly by 1.7%. The
Company experienced a slight increase in northbound volume of approximately 0.5%
and an increase in revenue per unit of 10.5% for the three months ended
September 30, 2000 compared to the comparable period for 1999 which resulted in
a $1.2 million increase in northbound revenue. Inter-island volume for the three
month period ended September 30, 2000 increased by approximately 32.6% over the
comparable period for 1999, which resulted in a $0.5 million increase in
inter-island revenue. Average inter-island revenue per unit decreased slightly
by 5.0%. The Company continues to experience competitive pressure in rates which
is expected to continue to impact the Company's revenues for the foreseeable
future.
Rental income decreased to $7.9 million for the nine months ended September 30,
2000 from $24.0 million for the nine months ended September 30, 1999, a decrease
of $16.1 million, or 67.2%.
Rental income decreased to $2.7 million for the three months ended September 30,
2000 from $5.4 million for the three months ended September 30, 1999, a decrease
of $2.7 million, or 50.6%.
The three and nine months decreases were primarily due to revisions of the lease
contracts with the Lessee-Operators at the Gloucester Facility which went into
effect on October 1, 1999. Tenant revenue is currently being realized at an
annualized rate of $9.0 million per year through September 30, 2004 due to the
revisions of the lease contracts with the Lessee-Operators.
Other revenue decreased to $10.7 million for the nine months ended September 30,
2000 from $13.8 million for the nine months ended September 30, 1999, a decrease
of $3.1 million, or 22.5%.
Other revenue decreased to $2.5 million for the three months ended September 30,
2000 from $4.6 million for the three months ended September 30, 1999, a decrease
of $2.1 million, or 46.0%.
The three and nine month decreases were primarily due to decreases in demurrage
revenues resulting from the decreases in southbound load volume.
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Operating Expenses
Operating expenses decreased to $251.8 million for the nine months ended
September 30, 2000 from $255.5 million for the nine months ended September 30,
1999, a decrease of $3.7 million, or 1.4%.
Operating expenses decreased to $82.8 million for the three months ended
September 30, 2000 from $91.2 million for the three months ended September 30,
1999, a decrease of $8.4 million, or 9.3%.
Increases in operating expenses was partially attributable to terminal increases
of $1.8 million for salary and benefits for resulting from increased volume at
the Company's San Juan Facility for the three months ending September 30, 2000
over the comparable period for 1999.
General and administrative expenses for the three months ended September 30,
2000 decreased by $9.4 primarily as a result of $8.0 million of tenant
receivable reserves which were charged to operations during the third quarter of
1999. The Company's provision for bad debts for the also decreased by $1.1
during the three months ended September 30, 2000. These decreases were partially
offset by an increase of $1.0 for professional fees related to the Company's
financial restructuring plan.
The remaining operating expenses were flat for the three months ended September
30, 2000 over the comparable period for 1999.
Interest Expense
Interest expense increased to $8.5 million for the three months ended September
30, 2000 from $7.0 million for the three months ended September 30, 1999, an
increase of $1.5 million, or 21.9 %.
Interest expense increased to $22.9 million for the nine months ended September
30, 2000 from $20.5 million for the nine months ended September 30, 1999, an
increase of $2.4 million, or 11.5%.
The three and nine month increases were primarily due to a $1.2 million
amendment fee which was recognized in connection with the second amendment to
the Revolving Credit Agreement which was executed during quarter ended September
30, 2000.
On January 21, 2000, the Company borrowed $10.0 million in the form of a second
term loan for working capital purposes which resulted in additional interest
expense of $0.7 million during the nine months ended September 30, 2000. Further
increases occurred as result of a 100 basis point increase in the prime rate of
interest during the nine months ended September 30, 2000 compared to the nine
months ended September 30, 1999.
Other income and (expense)
Other income and (expense) decreased by ($4.5) million to ($4.5) million for the
three months ended September 30, 2000.
Other income and (expense) decreased to ($6.9) million for the nine months ended
September 30, 2000 from $3.1 million for the nine months ended September 30,
1999, a decrease of $10.0.
During the third quarter of 2000, the Company sold its interest in Atlantic
Container Line AB ("ACL") realizing a loss of $5.9 million which was partially
offset by foreign exchange gains of $2.3 million which were realized in
connection with the repayment of the Company's foreign term loan which was
collateralized by the ACL investment. Other decreases included $0.5 million for
severance and reorganizational costs.
For the nine months ended September 30, 2000 and as discussed in Note 7 of the
consolidated financial statements, the Company recognized an $8.0 million loss
during the second quarter of 2000 in connection with the termination of its
Option to Purchase and Development Agreement.
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Net (loss)
Net (loss) decreased to ($17.3) million for the three months ended September 30,
2000 from $(11.9) million for the three months ended September 30, 1999, a
decrease of $5.4 million.
Net (loss) decreased to ($39.7) million for the nine months ended September 30,
2000 from ($7.4) million for the three months ended September 30, 1999, a
decrease of $33.3 million.
The changes in net income was attributable to the changes in revenues and
expenses as discussed above.
EBITDA
EBITDA increased to $2.9 million for the three months ended September 30, 2000
from $2.6 million for the three months ended September 30, 1999, an increase of
$0.3 million.
EBITDA decreased to $11.7 million for the nine months ended September 30, 2000
from $31.4 million for the nine months ended September 30, 1999, a decrease of
$19.7 million.
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
Debt Service
Historically, net cash from operating, investing and financing activities have
been sufficient for the Company to satisfy its debt requirements and to make
necessary capital acquisition and improvements to its properties. However,
during the fourth quarter of 1999, the Company experienced cash flow shortages
and as a result, the Company entered into the first amendment of its Revolving
Credit Agreement on January 21, 2000. The first amendment resulted in making
available to the Company $10.0 million in the form of a second term loan for
working capital purposes. In addition, the first amendment extended the December
31, 1999 maturity date of the first term loan in the amount of $17.3 million,
made under the Revolving Credit Agreement to June 30, 2000.
On July 14, 2000, the Company entered into a second amendment to its Revolving
Credit Agreement. The second amendment extends the maturity date of the
revolving credit facility and the term loans to June 30, 2001, provided that the
Company makes certain mandatory repayments on various dates through June 30,
2001. The second amendment provides that interest shall be payable on a monthly
basis at prime plus 1.25% on all amounts outstanding and further provides for,
among other things, a revision of financial covenants and a waiver of all
defaults under the Revolving Credit Agreement existing on the date of the
amendment.
The Company's continues to incur net losses and its ability to continue as a
going concern is dependent upon the successful restructuring of certain of its
obligations, the ability to generate sufficient cash from operations, the sale
of non-core assets, and the satisfactory resolution of certain commitments and
contingencies. To date, the Company has made required debt service and vendor
payments.
As of September 30, 2000, the Company was in default of certain provisions of
its loan agreements related to its industrial revenue bonds, its indenture for
the senior unsecured notes and other equipment financing and bank loan
agreements where certain of the Company's subsidiaries are either primary
obligors or obligated as guarantor. The Company remains in default under the
remainder of its debt obligations as of the date of filing this Form 10-Q.
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In addition to developing and implementing its financial plan, the Company has
requested from its industrial revenue bondholders and intends to request from
its senior unsecured note holders and other equipment and bank lenders, as
necessary, waivers of its covenant defaults. The Company cannot give any
assurances that its lenders will agree to the Company's requests. Unless the
Company is able to restructure it financial covenants, the Company believes that
it will be unable to comply with such financial covenants throughout the fiscal
year ending September 30, 2001. In the event the company's lenders seek to
enforce their rights under their respective loan agreements and accelerate their
indebtedness and the Company is unable to generate sufficient funds in exchange
for the liquidation of certain assets, then the Company's financial position and
ability to continue its operations would be materially adversely affected.
As part of its plan to increase its liquidity, during July 2000, the Company
received proceeds of $14.0 million on outstanding promissory notes with DEL (see
Note 7 to the consolidated financial statements) of which $2.0 million was used
to permanently reduce the amount due under the Company's revolving credit
facility and $6.8 million was used to pay interest due on the Company's senior
notes. The remaining proceeds of $5.2 million were used to fund working capital
requirements.
During August 2000, the Company sold its entire interest in Atlantic Container
Line AB ("ACL") for $41.9 million, net of a margin loan of $2.4 million. In
accordance with the provisions of its term loan agreement with its foreign bank
and the second amendment to the Revolving Credit Agreement, proceeds from the
sale of the ACL stock were used to fully repay its foreign term loan and to
repay a portion of its revolving credit facility.
As of September 30, 2000, the Company had outstanding $289.7 million of
consolidated indebtedness, consisting of (i) $140.0 million principal amount of
the Senior Notes and (ii) $149.7 million of senior secured indebtedness.
Cash Flows
For the nine months ended September 30, 2000, 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.
Cash used in operating activities was $12.4 million. While the Company reported
a net loss for the nine months ended September 30, 2000, of $39.7 million,
included in this loss were non-cash charges from depreciation of $21.6 million
as well a $8.0 million non-cash charge for the loss disposition on the Company's
Option to Purchase and Development Agreement. Other non-cash charges included a
$5.9 million loss on the sale of the Company's investment in ACL which was
partially offset by foreign exchange gains of $2.3 million which were realized
in connection with the repayment of the Company's foreign term loan which was
collateralized by the ACL investment. Funds provided by operating activities
included a decrease of $11.1 million for payments received for trade and tenant
receivables.
Funds used in operating activities included $5.0 payment to National Union (see
Note 5 to the consolidated financial statements) as well as a net reduction in
accounts payable and accrued expenses of $10.0 million.
Net cash provided by investing activities was $40.8 which was primarily
attributable to proceeds of $41.9 million from the sale of ACL as well as $14.0
million received from DEL for repayment of long-term notes receivable. Cash used
in investing activities included $8.7 million for vessel dry docking costs and
acquisition of property and equipment and $10.0 million to exercise 1.5 million
ACL purchase options during second quarter of 2000.
Net cash used in financing activities was $27.4 million. On January 21, 2000,
the Revolving Credit Agreement was amended to make available to the Company
$10.0 million in the form of a second term loan. In addition, the Company also
increased its borrowings under its foreign term loan by $8.9 million in
connection with the exercise of ACL purchase options. The Company reduced its
revolving credit facility by $13.5 million, incurred borrowings of $0.6 million
for new equipment and repaid $33.1 million of other bank and equipment notes for
the nine months ended September 30, 2000.
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Commitments and Contingencies
Holt relocated NPR's northeastern port of call from Elizabeth, New Jersey to
Philadelphia, Pennsylvania, a move designed to consolidate operations. As a
result of the move, the Company has been advised by counsel that it could
trigger a withdrawal liability that could approximate $12.8 million. While the
Company has several options to mitigate this potential claim, it has accrued a
liability for an amount which it believes it is likely to incur with respect to
this matter.
Legal Proceedings
As discussed under Part 2 Item 1, the Company is party to various legal
proceedings which if adversely decided, would have a material adverse effect on
the Company's financial position.
IMPACT OF YEAR 2000 ON THE COMPANY'S SYSTEMS
The Company did not experience any material interruptions of business as a
result of the Year 2000 computer problem.
ENVIRONMENTAL MATTERS
Holt's operations are also subject to various federal, state and local
environmental laws and regulations, promulgated by the Environmental Protection
Agency and similar state regulatory agencies. These regulations govern the
management of hazardous wastes, discharge of pollutants into the air, surface
and underground waters, and the disposal of certain substances. The Company is
not aware of any material water or land fuel spills or hazardous substance
contamination on its properties and believes that its operations are in material
compliance with current environmental laws and regulations.
Portions of the Gloucester Facility, including the Armstrong Buildings are
considered to be within a broad geographic area which was designated by the EPA
for investigation and possible remediation under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"). This area,
which covers over 65 properties in the Camden/Gloucester City area, was listed
on EPA's National Priorities List ("NPL") on September 17, 1996, thereby
invoking eligibility for investigation and remediation utilizing the federal
"Superfund." Superfund activity is necessitated by the discovery, in 1981, that
the Camden/Gloucester area contains levels of gamma radiation and radon/thorium
decay products attributable to pre-1940 manufacturing activities of the former
Wellsbach Company. The current Armstrong Building was part of the former
manufacturing facility.
Other than the small portion of the building occupied by office space, the
building is primarily empty and unused. Future plans contemplate demolition of
the building. In order to assess the need for special demolition requirements in
light of ongoing EPA activity, in September 1997
Pursuant to an Administrative Order on Consent with the EPA, Holt completed a
Remedial Investigation/Feasibility Study ("RI/FS"), addressing the Armstrong
Building and has performed a comparative analysis of remedial alternatives base
line assessment. In connection with the RI/FS, Holt has performed recent
sampling and preliminary cost estimate analyses which indicate that it could
cost up to approximately $974,000 to address contaminated areas. The EPA has
verbally agreed to perform the remediation. The EPA continues to sample,
independently, various outside soil areas, in addition to its ongoing activities
in other portions of the NPL site area.
NPR's operations are subject to various federal, state and local environmental
laws and regulations, promulgated by the Environmental Protection Agency and
similar state regulatory agencies. These regulations govern the management of
hazardous wastes, discharge of pollutants into the air, surface and underground
waters, and the disposal of certain substances. Management is not aware of any
material water or land fuel spills or hazardous substance contamination on its
properties and believes that its operations are in material compliance with
current environmental laws and regulations.
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In connection with NPR's acquisition of its business in March 1995, NPR agreed
to assume responsibility for the administration of certain asbestos-related tort
claims against the Puerto Rico Government and the payment of the first $2
million of such claims. The Puerto Rico Government has retained liability for
claims above the $2 million level. Currently, the number of filed asbestosis
claims is approximately 1,549. A majority of the claims have been filed as
independent actions in the United States District Court for the Northern
District of Ohio.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 137, which amended the
effective date of SFAS No. 133 - Accounting for Derivative Instruments and
Hedging Activities, was issued in September 1999. SFAS No. 138, which also
amended SFAS No. 133, was issued in September 2000. The Company is required to
adopt SFAS No. 133 by January 1, 2001. This statement establishes accounting and
reporting standards requiring that all derivative instruments are recorded on
the balance sheet as either an asset or a liability, measured at its fair value.
The statement requires that changes in the derivative's fair value are
recognized currently in earnings unless specific hedge accounting criteria are
met and such hedge accounting treatment is elected. The Company does not
currently use derivative financial instruments and does not expect the adoption
of Statement No. 137 and 138 to have a material impact on the Company's
financial position, results of operations or cash flows.
In December 1999, the SEC issued Staff Accounting Bulletin 101 (SAB 101) -
Revenue Recognition in Financial Statements, as amended, which summarizes
certain of the SEC staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. This bulletin
specifies that revenue should not be recognized until it is realized or
realizable and earned. The Company is required to adopt SAB 101 in the fourth
quarter of 2000, and its adoption is not expected to have an impact on the
Company's financial position, results of operations, earnings per share or cash
flows.
Item 3 Quantitative and Qualitative Disclosure About Market Risk
The Company does not use derivative financial instruments to manage interest
rate risk. At September 30, 2000, the Company had $54.8 million of floating-rate
debt outstanding. A 1% increase in interest rates would increase annual interest
expense by approximately $548,000. The Company's exposure to currency exchange
risk has been immaterial through September 30, 2000.
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PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
Philadelphia Regional Port Authority
The Company and Astro Holdings, Inc., a related party ("the Plaintiffs") filed a
complaint on May 31, 1996 with the Federal Maritime Commission ("FMC") against
the Philadelphia Regional Port Authority ("PRPA"), the Port of Philadelphia and
Camden ("PPC"), and Pasha Auto Warehousing Inc. ("Pasha") (collectively, the
"Defendants"), alleging violations of Section 10 of the Shipping Act of 1984 and
Sections 16 and 17 of the Shipping Act of 1916 generally, by engaging in unjust
and unreasonable practices, discrimination and unreasonable refusals to deal
with and giving unreasonable preferences to others to the detriment of the
Plaintiffs .
PRPA filed a counterclaim alleging that the Plaintiffs breached its obligations
under the PRPA lease by operating the Packer Avenue Facility in a manner
intended to benefit the Plaintiffs' other facilities, refusing to operate the
Packer Avenue Facility so as to maximize its use, failing to market the Packer
Avenue Facility in a first class manner and soliciting container business for
the Gloucester Facility to the detriment of the Packer Avenue Facility.
The Plaintiffs have requested the FMC to issue an order commanding the
Defendants to cease and desist from the aforesaid violations, to establish and
put in force such practices as the FMC determines to be reasonable and to pay
damages to the Plaintiffs by way of reparation.
A settlement agreement was entered resolving all claims by and between the
Plaintiffs and the DRPA and PPC. As part of the same settlement agreement, the
Plaintiffs agreed that they would withdraw their claim against PRPA for monetary
damages. The settlement agreement further resolved all other claims except the
Plaintiffs' 10(d)(1) conspiracy claim against PRPA and Pasha; and the Company's
10(a)(2) claim against Pasha that the Pasha leases are void ab initio because
they were never filed with the FMC. PRPA and Pasha filed motions for summary
judgement as to the aforementioned unresolved claims. The motions were denied,
and PRPA filed a motion requesting the judge to clarify his order denying the
motions. The judge has ruled that no further clarification is necessary. Before
resolving the merits of the Plaintiffs' claim, the judge will determine whether
the FMC has jurisdiction over Pasha.
Sea Land
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 million 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 crane, 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.
The parties are currently involved in discovery. A pretrial conference which had
been originally scheduled for November 1, 2000 has been cancelled by the court
with no new date being set. The Company believes that it is adequately insured
for the claims raised by the plaintiffs and intends to vigorously defend the
claims asserted.
Port of New Orleans
NPR is a defendant in a law suit originally filed in State Court in Louisiana
which was removed at NPR's request to Federal District Court (Board of
Commissioners of the Port of New Orleans v. NPR, Inc.) Plaintiff seeks to
enforce a Cancellation Agreement by which NPR was allowed to terminate, in 1996,
its terminal lease at the Port of New Orleans in return for annual installment
payments of one-half of the annual rental amounts originally due under the
lease. The payments under the Cancellation Agreement total $4,075 of which $311
has been paid by NPR. The delinquent amounts sought by the plaintiffs to be paid
as stated in their complaint is $1.8 million.
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At NPR's request the Federal District Court judge in New Orleans referred the
dispute to the Federal Maritime Commission to determine whether the Cancellation
Agreement violated, as claimed by NPR, any provisions of the Shipping Act. On
March 16, 2000, an Administrative Law judge ruled that the circumstances under
which the Cancellation Agreement was entered into did not give rise to
violations of the Shipping Act and remanded the matter to the Federal District
Court for determination of whether the Cancellation Agreement can be nullified
under Louisiana law, if it was, in fact, induced by misrepresentation, as
claimed by NPR.
On September 21, 2000, the District Court granted summary judgment in favor of
the Board of Commissioners for $1,869 plus costs and interest based upon annual
lease cancellation payments of $623 each due December 31 for the years 1997,
1998 and 1999. NPR filed a motion for reconsideration of the Court's
determination which was denied on November 8, 2000. NPR is appealing the matter
to the Fifth Circuit.
National Union Fire Insurance Company
On February 15, 2000, National Union Fire Insurance Company of Pittsburgh,
Pennsylvania ("National Union") filed before a panel of arbitrators in New York
(the "Panel") a formal claim for $21.9 million against the Company. The amount
claimed by National Union is allegedly due under various indemnification
agreements entered into between the Company and National Union and related to
the Company's workmen's compensation program for the period February 1, 1989
through December 17, 1996. In its statement of the case, National Union claims
that the Company is obligated to pay National Union for unpaid loss
reimbursements, additional fees, indemnification of certain assessments made
against National Union by the Department of Labor and additional cash reserves
to cover future payments to be made by National Union. The suit also seeks the
posting of additional security by the Company for certain of the years wherein
National Union provided workmen's compensation coverage. The arbitration hearing
for this matter has been scheduled for the week of February 26, 2001.
On July 13, 2000, the Company was ordered by the Panel to increase the amount of
collateral to secure any potential liability it may have to National Union in
the form of letters of credit by $6.8 million for a total of $11.8 million. The
Panel also permitted National Union to present and to be paid the original
letter of credit posted as collateral in the amount of $5.0 million which
National Union has done. The Company has not yet posted the remaining $6.8
million letter of credit as required by the Panel and may be unable to do so.
National Union has filed a petition in Federal Court to confirm the arbitrators'
award and a hearing date of December 1, 2000 has been set by the Court to hear
the matter. The Company continues to have settlement discussions with National
Union.
City of Gloucester
The Company along with other related parties are named as defendants in a
lawsuit which was filed by the City of Gloucester ("the City") on February 14,
2000. The City alleges that the Company is in default under a loan agreement
entered into between the Company and the City and seeks payment of the remaining
balance outstanding of $4.8 million, plus accrued interest and attorney fees.
The City also alleges that the Company and a related party are in violation of a
Redeveloper's Agreement and certain leases for property currently occupied by
the Company and seeks to terminate the lease and recover for the rent remaining
to be paid under the leases as well as for damages for breach of contract.
The City has filed a motion for summary judgment for payment of the balance of
the note. Oral argument and reargument has been heard on the motion. The Court
has declined to rule on the motion until the Company has been provided with an
opportunity to take discovery. The Company has tendered what it believes to be
the late charges due under the loan agreement and has also tendered an
additional sum to be held in the City's Attorney's trust account, which sum
represents the difference between the City's calculated late charges and the
Company's calculated late charges. In addition all principal and interest
payments due under the loan agreement are current as measured under the payment
schedule under the original loan agreement. Additional argument will be heard on
the motion for summary judgment on December 15, 2000.
The Company is analyzing the claim and is preparing to defend it vigorously but
is unable to determine the outcome or to reasonably estimate the amount of loss,
if any, with respect to this matter at this time.
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Ocean Spray
On or about March 16, 1999, Ocean Spray filed a complaint alleging that the
Company had acted in a reckless and negligent manner, that it had breached its
contract with Ocean Spray, failed to fulfill its duties as bailee,
misrepresented that its facilities were suitable for storage of Ocean Spray's
product and violated New Jersey's Consumer Fraud Act. The Company's insurer
nominated counsel who actively undertook defense of the claims made by Ocean
Spray. The prayer for relief requested by Ocean Spray in its original complaint
was for damages in excess of $11.0 million which at the time of filing the
complaint were not susceptible to more precise calculation.
Ocean Spray has requested leave to amend its complaint to include Gloucester
Refrigerated Warehouse, Inc., Holt Oversight and Logistics, and other unnamed
corporations as defendants in the matter. Further, the proposed amended
complaint contains additional counts sounding in common law fraud, conspiracy
and conversion whose prayers for relief include, in addition to the amounts
originally requested, punitive damages. A hearing on the most motion is
scheduled for November 17, 2000. The Company is preparing an amended answer to
the complaints.
Discovery in the matter has not been completed. The Company continues to use its
best efforts to negotiate with the insurance carrier to settle the matter which
may include paying Ocean Spray the full claimed amount of its property damage of
approximately $3.85 million and submitting the remainder of their claim for lost
profits to binding mediation. This matter is insured to $10 million.
Item 3. Defaults Upon Senior Securities:
As of September 30, 2000, the Company is in default with certain provisions of
its loan agreements related to its industrial revenue bonds, the indenture for
the senior unsecured notes and other equipment financing and bank loan
agreements where certain of the Company's subsidiaries are either primary
obligors or obligated as guarantor.
The amount of indebtedness in default is $321.5 million which includes corporate
guarantees of $39.6 million.
On July 14, 2000, the Company executed a second amendment to its Revolving
Credit Agreement which provides for, among other things, a revision of financial
covenants and a wavier of all defaults existing under the Revolving Credit
Agreement on the date of execution of the second amendment.
The Company intends to request waivers of its financial covenant defaults and a
revision of its financial covenants. The Company cannot give any assurances that
its lenders will agree to the Company's requests. Unless the Company is able to
revise its financial covenants, the Company believes that it will be unable to
comply with such financial covenants at each measurement date throughout the
period ending September 30, 2001.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit Description
Number of Exhibit
------ -----------
10.63 Second amendment to the Amended and Restated Credit
Agreement dated July 14, 2000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
For the three months ending September 30, 2000, the Company did not file
any reports on Form 8-K.
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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 14, 2000 BY: /s/ Thomas J. Holt Sr.
-----------------------------------
Thomas J. Holt, Sr.
Chief Executive Officer
DATE: November 14, 2000 BY: /s/ William J. Streich
-----------------------------------
William J. Streich
Chief Financial Officer
31
