UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the year ended December 31, 1999
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the transition period
from to
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Commission file number 333-52599
The Holt Group, Inc..
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-2932358
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(State or other jurisdiction of (IRS Employer
Incorporation) Identification No
101 South King Street, Gloucester City New Jersey 08030
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(Address of principal executive offices) (Zip Code)
(856) 742-3000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities pursuant to section 12(g) of the Act: 9 3/4% Senior
Notes due 2006
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(Title of class)
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 [ ] No [X].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 405 of this chapter) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X].
The total number of shares of common stock, par value $.01 per share,
outstanding as of August 4, 2000 was 100. The Registrant has no other class of
common stock outstanding.
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THE HOLT GROUP, INC.
INDEX TO ANNUAL REPORT ON FROM 10-K
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PART I
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Item 1. Business 3
Item 2. Properties 11
Item 3. Legal Proceedings 14
Item 4. Submission Of Matters To A Vote Of Security Holders 16
PART II
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Item 5. Market For The Company's Common Equity And Related
Stockholder Matters 17
Item 6. Selected Financial Data 17
Item 7. Management's Discussion And Analysis Of Results Of Operations And Financial
Condition 20
Item 7A. Quantitative And Qualitative Disclosure About Market Risk 31
Item 8. Financial Statements And Supplementary Data 32
Item 9. Changes In And Disagreements With Accountants On Accounting And Financial
Disclosure 33
PART III
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Item 10. Directors And Executive Officers Of The Company 33
Item 11. Executive Compensation 34
Item 12. Security Ownership Of Certain Beneficial Owners And Management 36
Item 13. Certain Relationships And Related Transactions 36
PART IV
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Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K 41
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PART I
Item 1 Business
Forward-Looking Statements
When used in this Annual Report on Form 10-K 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.
General
As used in this Form 10-K, unless otherwise expressly stated or the context
otherwise requires, (i) the "Registrant" or the "Company" refers to The Holt
Group, Inc.; (ii) "Holt" refers to the following direct and indirect wholly
owned subsidiaries of the Company (the "Holt Subsidiaries"): Holt Hauling and
Warehousing System, Inc., Holt Cargo Systems, Inc., The Riverfront Development
Corporation, Murphy Marine Services, Inc., Wilmington Stevedores, Inc. (a
wholly-owned subsidiary of Murphy Marine Services, Inc.) San Juan International
Terminals, Inc. and New-Port Stevedores, Inc., formerly SJIT, Inc. and; (iii)
"NPR" refers to the following direct and indirect wholly owned subsidiaries of
the Company: NPR Holding Corporation, NPR-Navieras Receivables, Inc. and NPR,
Inc.; and (iv) the "Company" refers to the consolidated entity consisting of the
Company, Holt and NPR.
Overview Of Operations
At the Packer Avenue Marine Terminal (the "Packer Avenue Facility"), Holt offers
a variety of cargo services, including stevedoring (the loading and unloading of
ships); warehousing (the storage of cargo), and inland trucking. At the
Gloucester Marine Terminal ("Gloucester Facility"), Holt leases port facilities
to third -party stevedores, warehousemen and other lessees (the
"Lessee-Operators"), which provide all stevedoring and warehousing services.
Through these facilities, a customer is able to move inbound cargo from an
arriving ship to its final destination via rail or truck and outbound cargo from
the customer's location to its final destination via rail, truck or ship. When a
ship docks at the Gloucester Facility or the Packer Avenue Facility, Holt, or in
the case of the Gloucester Facility, the Lessee-Operators, provide services to
(i) unload cargo from the ship, (ii) move cargo into a warehouse, (iii) store
cargo in refrigerated or dry warehouses, (iv) load cargo onto another ship, or
onto a truck or train for transportation to its final destination, and (v)
transport cargo on an owned or leased truck. During January 2000, a company
owned by the sons of the Company's principal stockholder, two of whom are
directors of the Company, acquired certain of the Lessee-Operators.
Holt operates as a contract stevedore and provides stevedoring services for a
majority of the cargo handled at the Port of Wilmington (the "Wilmington
Facility"). In 1998, San Juan International Terminals, Inc. started operations
under a sub-lease from NPR for approximately twenty-five acres (the "San Juan
Facility") at the Puerto Nuevo Marine Terminal in Puerto Rico. San Juan
International Terminals, Inc.'s primary business activity is stevedoring. During
1999, the Company and the Lessee-Operators loaded
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and/or discharged an aggregate of 966 ships and approximately 6.85 million tons
of ocean-going cargo at the Gloucester Facility, the Packer Avenue Facility, the
Wilmington Facility and the San Juan Facility, collectively, (the "Holt
Facilities").
Through NPR, which commenced operations through its predecessor in 1974 and was
acquired by the Company on November 20, 1997, the Company is a leading operator
of cargo ships in the U.S.-Puerto Rico market under the trade name "Navieras."
NPR provides containerized cargo transportation and related services between the
continental United States, Puerto Rico, and the Caribbean.
Stevedoring
A stevedore contracts with an owner of or an agent for a ship for the purpose of
loading or unloading the ship's cargo. A stevedore employs longshoremen to load
and unload cargoes to or from barges or oceangoing vessels. In addition to these
traditional stevedoring services, Holt and the Lessee-Operators provide
value-added services such as the supervision, equipment and machinery necessary
for conducting cargo handling operations at terminals, and typically provide
most of the portside services the shipping lines require. These portside
services include vessel berthing and line handling, preparing of cargo stowage
plans, documenting cargo and providing other data processing services, weighing
cargoes, providing for security for the cargo, assisting government agencies
such as the United States Customs Service and the Department of Agriculture, and
receiving and delivering the cargo at and from the marine terminal, and
packaging and repackaging of cargo. Additional services for containerized cargo
include parking, storing and maintaining inventory of containers and chassis,
moving containers throughout the terminal, maintaining and repairing containers
and chassis, and stuffing (loading individual containers) and stripping
(unloading individual containers) cargo.
The principal types of cargo that are handled at the Holt Facilities are as
follows:
o Containerized Cargo Containerized cargo comprised approximately 46% of
aggregate tonnage handled by Holt and the Lessee-Operators at the Holt
Facilities during 1999. A container is a standardized metal box capable of
carrying up to 32 tons of cargo and is conducive to intermodal handling
(shipment by rail, truck and ship). Containers can hold a wide variety of
cargo from computers to food stuffs. Containers are unloaded by
shore-cranes with a specially designed spreader lifting mechanism and then
moved to a storage or marshaling area by straddle carriers, large forklifts
or top loaders. Alternatively, the container may be placed directly on a
wheeled chassis and then moved by a truck operator to the storage or
marshaling area.
o Breakbulk or Unitized Cargo Breakbulk cargo, sometimes referred to as
unitized cargo, comprised approximately 44% of aggregate tonnage handled by
Holt and the Lessee-Operators at the Holt Facilities during 1999. Breakbulk
cargo is typically boxed, bagged, or palletized and utilizes equipment
(shore-based cranes, forklifts, etc.) owned or leased by the stevedore.
Breakbulk ships also typically have on-board booms or cranes (one per
hatch) which may be utilized to access the hold. Fruit, steel and wood
constitute the majority of breakbulk cargo handled at the Holt Facilities.
o Other Cargo Two other types of cargo handled by Holt are bulk and
roll-on/roll-off cargo. Bulk cargoes typically are not in any containers,
and such cargo can be either dry (such as grain, fertilizer and iron ore)
or wet (such as petroleum products, chemicals and liquid food products).
Roll-on/roll-off cargoes (such as automobiles, trucks and farm equipment)
are driven under their own power on board specialized vessels. These other
cargoes comprised approximately 10% of aggregate tonnage handled by Holt
and the Lessee-Operators at the Holt Facilities during 1999.
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Warehousing
Holt and the Lessee-Operators operate 22 warehouses with approximately 2.4
million square feet of warehouse space, which includes approximately 1.1 million
square feet of refrigerated warehouse space, representing the most refrigerated
warehouse space of any marine terminal operation in the United States. The
warehousing facilities operated by Holt and the Lessee-Operators at the Packer
Avenue Facility and the Gloucester Facility provide customers with additional
services. A shipper directing cargo to one of these facilities, if it so
desires, can have the vessel unloaded, the containers (in the case of
containerized cargo) unstuffed and the cargo stored until it is ready to be
delivered to its final destination. At that point, the cargo can be shipped to
its final destination by Holt or the Lessee-Operators by rail, motor freight
line or Holt's own fleet of trucks.
The utilization of the Cargo Tracking System ("CTS") makes the warehousing
capabilities at the Packer Avenue and Gloucester Facilities more efficient and
effective. CTS enables Holt, the Lessee-Operators and the shipper to track
specific cargo from the ship to the warehouse and beyond. This system is
especially effective with breakbulk cargo, such as pallets of fruit, which
commonly pass through these facilities. In 1999 Holt began providing Internet
access for cargo data to its customers and will continue this development.
Inland Transportation
Holt's utilizes a fleet of 15 tractors and 100 trailers, augmented by
approximately 85 owner-operators, to transport freight between the Holt
Facilities and inland points in the United States. Holt maintains a centralized
dispatch and customer service operation located at the Packer Avenue Facility to
schedule pickup and delivery of customer freight. The operations center features
a fully integrated computerized dispatch and customer service network. Customer
service representatives solicit and accept freight, quote freight rates and
serve as the primary contact with customers. Holt intends to utilize the
flexibility of adding and removing owner-operators from its driver work force to
address driver and equipment needs in the future. Owner-operators receive a flat
rate per trip to cover equipment costs, fuel and maintenance. Holt has
implemented fuel surcharges to the extent possible on freight bills to cover the
cost of increased fuel for trucking customers. These charges lessen the impact
of the fuel increases but do not eliminate them.
Facility Leasing
Substantially all of the Gloucester Facility is leased to Lessee-Operators who
in turn provide services to their customers. The Lessee-Operators include
container and breakbulk stevedores, warehouse service companies, equipment
rental companies, fruit importers and service companies and a home products
manufacturing company. The Company also provides courtesy offices to the United
States Customs Service and the United States Department of Agriculture.
Container-Shipping
NPR owns five vessels, three of which currently are in operation and one of
which can be made available to be rotated into service to minimize service
disruptions when an operating vessel is in need of maintenance or repairs. All
five are Jones Act vessels.
The vessels operated by NPR carry primarily containerized cargo in standard size
containers, employing 20-foot, 40-foot, 40HC, refrigerated and 45-foot marine
containers. Two of NPR's vessels have been modified in order to accommodate
53-foot "big box" marine containers. For ocean-going transportation, these
containers can be placed both inside the cargo hold and on the deck of a
container ship, and for land transportation are placed on chassis and pulled by
conventional tractors, or on rail cars in single or double stacks. NPR offers
service two times per week between San Juan, Puerto Rico and the United States
via the port of Jacksonville, Florida and weekly service between San Juan and
the port of Philadelphia, Pennsylvania. These two ports of entry provide
efficient gateways to major commercial areas throughout
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the United States and Canada. Through charter arrangements, NPR provides service
two times a week between San Juan and the Dominican Republic and also, through a
slot charter arrangement (i.e. the use of space on another carrier's vessel),
services the Caribbean island of Trinidad and the United States Virgin Islands.
In addition, NPR has developed and enhanced a sophisticated, efficient
intermodal network which permits NPR to offer daily in-land transportation to
and from the ports of Jacksonville, and Philadelphia via high speed rail and
truck connections throughout the United States. Furthermore, as an operator of
ocean-going vessels, which have sailing times that are generally faster and more
predictable than barges, NPR provides its customers with the convenience of
on-time scheduled departures at all ports served.
Customers
Holt's wide range of services coupled with its willingness to anticipate
customer needs and develop services and facilities to accommodate those needs,
has helped Holt to develop strong, long-term customer relationships. In 1999,
Holt's top 15 customers accounted for $54.9 million, or 55.1%, of total
revenues. Holt estimates that it has provided these top 15 customers with
services for between two and 25 years. No customer accounted for more than 10%
of Holt's total revenue for the years ended December 31, 1999, 1998 and 1997
other than Columbus Line, Inc., which accounted for 10.5% of such revenue for
the year ended December 31, 1997. Holt obtains new stevedoring business by
negotiating liner service contracts with shippers (importers and exporters of
goods) or attracting spot-market vessels.
Holt typically enters into one to five year contracts with its customers, with
cancellation clauses varying from 30 to 180 days. These contracts also typically
contain provisions with respect to the specific services to be provided, the
volume of and pricing for such services and minimum productivity levels to be
achieved by the Company.
NPR has a diversified customer base consisting of both United States-based and
Puerto Rico-based shippers of a variety of goods. Typical shipments to Puerto
Rico include furniture, consumer goods, refrigerated and other food products,
toys, and apparel. Typical shipments from Puerto Rico include health products,
electronics, shoes and scrap aluminum. The Company intends to continue NPR's
efforts both to increase business with existing customers and add new customers.
NPR's top 15 customers accounted for 23.1% of total revenues in 1999. No
customer accounted for more than 10% of NPR's total revenues in 1999. NPR
maintains a diversified customer base of over 2,500 companies, including several
Fortune 500 companies.
NPR has time volume agreements ("TVAs") or fixed rate contracts covering the
majority of its business. TVAs or fixed rate contracts generally specify service
standards and provide customers with competitive rates in exchange for
guaranteed minimum quantities during a specified time period. A TVA or fixed
rate contract typically runs for a term of at least one year and provides for
penalties to shippers in the event that the volume commitments of the TVA or
contract are not met. In 1999, a majority of NPR's revenues were from customers
who were party to one or more TVAs or fixed rate contracts.
Management Information Systems and Technology
Holt and the Lessee-Operators utilize automated information systems, including
CTS, which facilitate the movement of cargo to and from the Holt Facilities and
increase the efficiency of the operations at those facilities, through contracts
with SLS Services, Inc. ("SLS"). CTS is owned by SLS and made available to the
Company. See "Certain Relationships and Related Transactions".
CTS utilizes a special bar-coding technology which provides customers with an
innovative tracking system for their cargo. The system is especially effective
when the cargo is unitized or characterized by contents of different weights,
moisture content, or other unique characteristics. The system utilizes bar-code
technology and a radio frequency environment linked through fiber optics
directly to a computer. The
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entire logistic process for cargo, beginning with ship discharging, then sorting
and segregation, and eventually all movements of the cargo to transit sheds,
warehouses or trucks, is captured in real time and reported to the various cargo
receivers immediately.
CTS allows Holt and the Lessee-Operators to sort cargo by customer type, grade
and destination. Prior to shipment each pallet of cargo is assigned a bar code
on board the vessel. While the cargo is in transit, CTS receives the vessel's
hold layout and location of specific goods, making it easier to implement an
efficient stevedoring plan. Upon arrival, forklift operators scan these bar
codes to determine where the pallets should be stored in the warehouse. CTS not
only allows Holt and the Lessee-Operators to expedite the stevedoring process
but also to optimize the allocation of warehouse space, thus reducing labor and
storage costs. For the customer, CTS provides a process of pre-sorting
inventory. Thus, when trucks arrive for cargo pick-up, the loading and delivery
processes are streamlined, thereby reducing costs.
In addition, a state-of-the-art container computer system is utilized to control
container cargo and equipment movements throughout the Holt Facilities. The main
components of this system include: computerized gate and yard operations, usage
of radio frequency computer terminals to track containers and chassis movements,
on-line inventory and activity reporting to customers, vessel planning and
stowage linked to gate and yard movements for containers, use of the latest
electronic data interchange technology to exchange shipping manifest and
information regarding container movement, booking, and stowage plans with the
container lines, and a direct link to the United States Customs Automated
Manifest System to facilitate cargo releases.
The Company has outsourced the development of a comprehensive logistics
management system to be used by the NPR transportation group. The new system
will interface with the existing NPR systems, including booking and vessel
activity, maintain routes and rating information, control the flow of equipment
to and from NPR ports of operation to locations throughout the country,
designate the optimal routing and select the best suppliers. It will also manage
the payment of these services. The system is also designed to support third
party logistics services to customers other than NPR. The system will utilize
technologies including Interactive Voice Response, EDI, automatic faxing, and
the internet. The system is planned to be deployed and operational in the latter
half of 2000. The Company expects to realize substantial savings when the system
is implemented.
Sales and Marketing
Holt's sales and marketing efforts address customer desires and employ a great
deal of personal contact. Holt's sales and marketing personnel convey the
Company's ability and desire to provide cost effective, high quality cargo
handling and transport services. Holt's sales and marketing team is supplemented
by marketing services provided by SLS. See "Certain Relationships and Related
Transactions" Holt has always provided significant resources for domestic and
foreign travel in order to bring its services, facilities and family ethics
direct to the customer.
Holt focuses on developing long term relationships with customers in certain
product niches including perishable products, wood products, steel products and
containerized cargoes by providing specialized services. For example, each of
the warehouses that the Company uses to store frozen imported meat has an
integrated USDA Meat Inspection Department inspection room and resident
inspector. In addition, the Company actively participates in trade organizations
of its niche customers' industries, including the Produce Marketing Association
of America, the International Hardwood Producers Association, the Meat Importers
Council of America, the International Refrigerated Warehouse Association and the
National Industrial Transportation League.
NPR's sales and marketing function is led by sales professionals who market NPR
to shippers as a customer-oriented provider of value-priced premium and
dependable service. NPR targets major shippers with high value cargo and high
volume, repetitive shipments. The Company believes that price, speed of service
and reliability are important determinants in marketing its services. The
Company believes that
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NPR has developed a reputation among shippers in the United States-Puerto Rico
market as a reliable provider of high quality and responsive service. The
reliability of NPR's vessels is particularly important to its customers who
depend on their efficient operation and the effective management of logistical
complexities to deliver cargo in a timely and safe manner. The Company believes
that NPR's commitment to high quality customer service and support is an
important factor in maintaining relationships with major customers which enables
it to market the best available rates as well as obtain timely information
regarding its customers' future vessel requirements.
Competition
Holt competes in two separate arenas: (i) inter-port competition and (ii)
intra-port competition. Holt believes the United States ports of Boston, New
York (including Northern New Jersey), Baltimore and Norfolk as well as the
Canadian ports of Saint John and Halifax are Holt's main inter-port competitors.
Inter-port competition is based upon the following factors: (i) price; (ii)
destination of the cargo; (iii) access to other modes of transportation such as
rail and trucks; (iv) geographic location; (v) facilities to accommodate
specific types of cargoes; (vi) quality of service; and (vii) quality of labor
relations. In Wilmington and San Juan, Holt competes against several stevedoring
companies. In the Philadelphia port, the Gloucester and Packer Avenue Facilities
compete against governmental and privately owned facilities. Intra-port
competition is based upon the following factors: (i) adequacy of terminal
facilities; (ii) quality of service; (iii) presence of value-added services; and
(iv) price.
NPR currently competes with four carriers moving freight between the United
States and Puerto Rico. The current operators in the Puerto Rico trade are CSX
Lines (formerly Sealand Services), Crowley American Transport, Inc. ("Crowley"),
Sea Star Line, LLC ("Sea Star") and Trailer Bridge, Inc ("Trailer Bridge"). Of
these operators, NPR, CSX Lines and Sea Star operate high-speed container
vessels while Crowley and Trailer Bridge operate towed, low-speed barges. As of
November 1998, Sea Star began operating one high-speed container vessel and
several flatdeck container barges. In May of 1999, Sea Star replaced their
remaining barges with a second high speed vessel. Competition is based upon the
following factors: (i) price; (ii) timeliness of delivery; (iii) quality of
service; and (iv) locations of ports within the United States.
Employee and Labor Relations
The stevedoring and terminal operator industries are dominated by two large
unions (the International Longshore Worker's Union ("ILWU") on the west coast,
and the ILA in the remaining United States ports). Master labor agreements are
negotiated by the unions not only with the stevedores and marine terminal
operators, but also with steamship lines and steamship agencies. In recent
years, management has negotiated for the introduction of new technology and the
modification of work rules to improve the efficiency of operations.
Holt Cargo has relationships with four unions: (i) the ILA with a contract
expiring September 30, 2001; (ii) the International Association of Machinists
(the "IAM" or the "Machinists") with a contract expiring September 30, 2000;
(iii) the Teamsters with contracts expiring March 31, 2003 and December 31,
2000; and (iv) the Security Officers and Police Guard Union with a contract
expiring January 31, 2001. At the Packer Avenue Facility, Holt Cargo employs the
ILA for its stevedoring operations and the IAM for maintenance and repair
operations. At the Gloucester Facility, the Lessee-Operators employ Teamsters
for unloading the ships and warehousing the cargo. Holt presently believes that
Holt Cargo and the Lessee-Operators have satisfactory relations with their
unions.
In addition, Murphy Marine and Wilmington Stevedores are members of the PMTA and
are covered by the PMTA contract with the ILA. Stevedoring operations at the
Puerto Neuvo Marine Terminal are conducted under several contracts with certain
ILA local unions.
Holt's employee workforce engages in (i) stevedoring, (ii) trucking, (iii)
warehousing, (iv) mechanical repairs to material handling equipment and (v)
routine maintenance and repair of the Gloucester Facility
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and the Packer Avenue Facility. Stevedoring operations are performed by ILA
union longshoremen and non-union supervisory personnel. Longshoremen are hired
on an as-needed basis, and depending upon the number of vessels being loaded or
unloaded at any time. Approximately 28.5% of NPR's permanent employees are
represented by labor unions, including five unions related to shipboard
operations and two unions related to land operations. At sea, NPR employs: (i)
Masters, Mates & Pilots ("MMP") with a contract expiring June 30, 2002; (ii)
Marine Engineers Beneficial Association ("MEBA"), with contracts expiring June
15, 2002; (iii) Seafarers International Union (SIU) with a contract expiring
June 15, 2001; and (iv) two radio officer unions, the American Radio Association
and Radio Officers Union, both with contracts which expire on June 30, 2002. On
land, NPR employs: (i) the ILA with a contract expiring September 30, 2001 and
(ii) the Office and Professional Employees International Union ("OPEIU") (the
clerical workers' union) with a contract expiring August 31, 2000. The Company
is currently in the process of renegotiating the OPEIU contract. NPR regards its
relations with its unions as satisfactory.
At December 31, 1999, NPR had 302 employees engaged in sales, transportation
logistics, equipment management, administrative support and customer service of
which 78 are union. In addition, NPR employs 168 union shipboard employees.
Longshoremen are hired on an as-needed basis, and depending upon the number of
vessels being loaded or unloaded at any one time, NPR may employ up to 230
longshoremen.
Government Regulation
Holt is subject to regulation by various federal and state agencies, including
the Surface Transportation Board, the Federal Maritime Commission, the United
States Coast Guard and various similar federal and state agencies. These
regulatory authorities have broad powers, generally governing activities such as
authority to engage in motor carrier operations, operational safety, tariff
filings of freight rates, and financial reporting. In addition, the Company's
drivers, including owner-operators, also must comply with the safety and fitness
regulations promulgated by the Department of Transportation, including those
relating to drug testing and hours of service.
The Company's marine operations are conducted in the United States domestic and
foreign trade. A set of federal laws known as the Jones Act requires that only
United States built, owned and crewed vessels move freight in the domestic trade
between ports in the United States, including the noncontiguous areas of Puerto
Rico, Alaska, Hawaii and Guam. These marine operations are subject to regulation
by various federal agencies, including the Surface Transportation Board, the
successor agency to the Interstate Commerce Commission, MARAD and the United
States Coast Guard. The marine operations in the United States foreign trade
are, in addition, subject to regulation by the Federal Maritime Commission.
These regulatory authorities have broad powers governing activities such as
operational safety, tariff filings of freight rates, certain mergers,
consolidations and acquisitions, contraband and financial reporting. Management
believes that its operations are in material compliance with current maritime
laws and regulations, but there can be no assurance that current regulatory
requirements will not change.
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,
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which covers over 65 properties in the Camden/Gloucester City area, was listed
on EPA's National Priorities List ("NPL") on June 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.
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.
Employees
At December 31, 1999, the Company employed 504 people on a full-time basis and
77 people on a part-time basis. Collective bargaining agreements cover 317 of
the Company's employees. The Company considers its employee relations to be
good.
10
<PAGE>
Item 2 Properties
Overview of Port Facilities
Holt's marine terminal operations are conducted at the Holt Facilities, which
are located on the Delaware River, a key waterway for commerce on the East Coast
of the United States and in San Juan, Puerto Rico. Holt's port operations along
the Delaware River are centrally located within the largest consumption market
in the United States. Same-day delivery can be achieved within a 250 mile
radius, which includes points as far west as Pittsburgh, Pennsylvania, as far
north as Syracuse, New York, and as far south as Norfolk, Virginia. This access
is extremely important to perishable goods importers who look to rush their
product to market in fresh condition. Shippers of non-perishable goods also find
the Holt Facilities attractive because of their accessibility to the United
States interstate highway system and to major railroads. For example, the Packer
Avenue Facility has direct access to three major Class I railroads (Norfolk
Southern, CSX and CP Rail), which makes rail shipment cost effective to shippers
throughout North America, including Toronto and Montreal, Canada.
The Puerto Nuevo Terminal in San Juan, Puerto Rico is the hub for all cargo
handled by NPR and San Juan International Terminals, Inc.. Cargo received from
and destined to the United States mainland and the Caribbean islands passes
through this facility en route to its final destination. At Puerto Nuevo, NPR
controls 115 acres, or approximately 60% of the waterfront container terminal
facilities available to these cargo operations. At the terminal, NPR's
facilities include approximately 3,300 feet of deep water berthing area, office
space, gate, maintenance and storage facilities and two cranes. One of the
cranes is under long-term lease through 2018 and one is owned by NPR. San Juan
is the only deep water port on the favored north coast of Puerto Rico.
NPR's terminal in Jacksonville, Florida, known as the Blount Island Terminal, is
leased through 2005 and consists of approximately 42 acres. NPR is entitled to
use approximately 5,500 feet of deep water berthing space and has preferential
berthing and use of three cranes on four days of each week. Fees for dockage,
wharfage and cranes are charged on a per load basis. The facility also includes
facilities for maintenance, storage of cargo, office space and a computerized
gate.
Below is a description of each of the Company's Facilities:
The Gloucester Facility
The Gloucester Facility, which is owned by Holt, consists of approximately 150
acres and features approximately 4,200 lineal feet of berth space, 18 warehouses
with approximately one million square feet of dry space, approximately one
million square feet of refrigerated space and two container cranes. The majority
of the warehouses have been constructed within the last seven to nine years.
Several of the warehouses are insulated and have heating capability. The
refrigerated warehouses are located directly adjacent to five deep water berths
and provide for the quick and efficient unloading of refrigerated cargo directly
from vessels to the warehouse. There are also approximately 60 acres of open
ground suitable for storing containers, chassis and break-bulk cargoes which do
not need to be stored indoors. The two container cranes facilitate the loading
and unloading of vessels and have the capability of traveling along two thousand
feet of crane rail directly at the wharf. Overhead cranes with lifting
capability of up to 25 tons are located within several of the dry warehouses.
The Gloucester Facility has direct access to CSX Transportation and Norfolk
Southern Corporation railroads and is also in close proximity to major
interstate highways, facilitating the movement of cargoes to and from the
Gloucester Facility. Substantially all of the Gloucester Facility is leased to
Lessee-Operators who in turn provide service to their customers.
Two of the Lessee-Operators conduct stevedoring operations for containerized
cargoes and for breakbulk cargo such as steel, wood, and fruit products and
provide long term and temporary warehouse storage at the
11
<PAGE>
Gloucester Facility.
Certain of the other Lessee-Operators do not provide stevedoring or warehousing
services. For example, one of the Lessee-Operators at the Gloucester Facility
performs maintenance repair services for forklifts, tractors, chassis,
containers and other types of material handling equipment under a year-to-year
lease. Another Lessee-Operator manufactures wood products for the home building
industry. This manufacturer leases three buildings totaling approximately
200,000 square feet under a lease expiring in 2001. Certain fruit shipping
customers which utilize the Gloucester Facility also rent office space on a
short-term basis from the Company during the fruit import season. The Company
also provides courtesy offices to the United States Department of Agriculture
and United States Customs Service at the Gloucester Facility. These agencies
provide necessary services to the customers at the Gloucester Facility.
In order to accommodate customers using the Gloucester Facility, the facility
includes a two-story office building comprising approximately 10,000 square feet
and a maintenance and repair shop comprising approximately 41,000 square feet
where repairs are made to customers' chassis and containers as well as the
material handling equipment used by the Lessee-Operators.
The Packer Avenue Facility
The Packer Avenue Facility, located in Philadelphia, Pennsylvania, is leased by
Astro Holdings, Inc. ("AHI") from the Philadelphia Regional Port Authority (the
"PRPA") pursuant to a lease (the "PRPA Lease") and is subleased by Holt from AHI
under a long term sublease (the "Sublease") which commenced in 1991 and expires
in 2000. The terms of the PRPA Lease and the Sublease are renewable until 2040
through four 10-year renewal options, the last two of which are exercisable
provided that Holt completes certain required capital improvements. See "Certain
Relationships and Related Transactions" The Packer Avenue Facility comprises
approximately 106 acres and features approximately 3,800 lineal feet of deep
water frontage, three dry warehouses with approximately 278,000 square feet of
storage space, and one refrigerated warehouse with approximately 168,000 square
feet of storage space. Five cranes at the Packer Avenue Facility are leased by
Holt from AHI, including four cranes which are leased by AHI from the PRPA under
the PRPA Lease. The cranes have the capability of traveling up to 2,500 feet
along the wharf providing direct shipside loading and unloading. The Packer
Avenue Facility also has approximately 15,000 square feet of office space to
service customers using the facility. The Packer Avenue Facility is located
directly adjacent to Ameriport, an intermodal yard serving three Class I
railroads (Norfolk Southern, CSX and CP Rail) and within one half mile of major
interstate highways.
The Wilmington Facility
The Wilmington Facility, which is owned by an agency of the State of Delaware,
occupies approximately 80 acres, featuring approximately 2,700 lineal feet of
deep water frontage, four dry warehouses, a bulk orange juice facility, one bulk
crane and one 90 ton Whirley crane. The Wilmington Facility is an open terminal
that is available to the Company as well as other stevedoring companies.
The San Juan Facility
The San Juan Facility subleased from NPR comprises 25 acres of the Puerto Nuevo
Marine Terminal in San Juan, Puerto Rico. This Facility includes approximately
1,000 lineal feet of deep water berth space and a computerized container gate
that operates in real time. It is equipped with two modern CMI container gantry
cranes, one Gottwald Mobile Harbor Crane and other container handling equipment
as well as yard tractors.
NPR Facilities
NPR is headquartered in Edison, New Jersey in a one-story leased building of
approximately 65,000 square feet. Currently, 89 administrative employees work at
this facility and approximately 50% of the facility is
12
<PAGE>
utilized by NPR. The headquarters' lease expires in February 2001. As of January
1, 2000, 50,000 square feet has been subleased to MetLife Insurance Company
through the remaining life of the lease. NPR's San Juan, Puerto Rico terminal is
leased pursuant to multiple agreements with the Puerto Rico Ports Authority with
total acreage of approximately 110 acres, including both preferential use
berthing areas (20 acres for vessels) and exclusive use acreage (90 acres), with
terms expiring from 2018 to 2021, including all renewal options. A parking lot
is leased through 2005. A portion of this facility is sub-leased to San Juan
International Terminals, Inc.
NPR's approximately 42-acre terminal in Jacksonville, Florida, known as the
Blount Island Terminal, is leased through year 2005. NPR is entitled to use
approximately 5,500 feet of deep water berthing space and has preferential
berthing and use of three cranes on four days of each week.
NPR leases an additional approximately 13,000 square feet of administrative
office space for 31 employees in San Juan, Puerto Rico under a lease which
expires in April 2002, including a renewal option. Four small sales and
administrative offices are leased in Chicago, Miami, metropolitan Atlanta and
Washington, D.C. under leases with terms expiring from 2000 to 2001. NPR also
leases an approximately 20,000 square feet fully integrated, computerized
customer service center, located in a modern office building in Tampa, Florida,
housing 56 employees, under a lease which expires in February 2003.
The Company believes that its facility space is adequate to meet its operational
requirements.
13
<PAGE>
Item 3 Legal Proceedings
Philadelphia Regional Port Authority
The Company and Astro Holdings, Inc. (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 it would withdraw their claim against PRPA for monetary
damages. The settlement agreement further resolved all other claims except:
Plaintiffs' 10(d)(1) conspiracy claim against PRPA and Pasha; and Plaintiffs'
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 $50,000,000 to compensate
them for damages to their property and business arising out of defendants'
alleged negligence and NPR's breach of contract.
In their lawsuit, the plaintiffs claim that during Hurricane Georges, NPR's
cranes, two of which are leased from Sea-Land, broke from their securing
arrangements and struck plaintiffs' cranes because defendants failed to properly
prepare for the Hurricane. Furthermore, the plaintiffs claim that since NPR is
obligated, under its lease with Sea-Land for the cranes, to indemnify Sea-Land
for all losses incurred by Sea-Land in any way relating to possession and use of
the 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 and a pretrial conference has
been scheduled for November 1, 2000. 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
14
<PAGE>
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. The Company is unable to determine the outcome or to reasonably
estimate the amount of loss, if any, with respect to this matter at this time.
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 Company is
analyzing the claim and is preparing to defend it vigorously.
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.
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.
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 $4.9 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 Company and other defendants have filed an answer to the City and intend to
vigorously defend this suit. The Company is unable to determine the outcome or
to reasonably estimate the amount of loss, if any, with respect to this matter
at this time.
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.
15
<PAGE>
Item 4 Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1999.
16
<PAGE>
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters
Thomas J. Holt, Sr., the Company's Chairman, President and Chief Executive
Officer, owns 100% of the outstanding common stock of the Company. Other than
the common stock, no other class of capital stock of the Company is authorized.
The business address of the sole stockholder is 101 South King Street,
Gloucester City, New Jersey 08030.
Item 6 Selected Financial Data
The following table sets forth the selected consolidated financial and operating
data of the Company as of and for each of the five years ended December 31, 1999
which have been derived in part from the audited consolidated financial
statements of the Company and the notes thereto included elsewhere herein.
The selected consolidated financial and operating data as of and for the years
ended December 31, 1996 and 1995 are also audited and not included elsewhere
herein.
The data presented below should be read in conjunction with the historical
consolidated financial statements of the Company and the related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein.
17
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1999 1998 (4) 1997 1996 1995
--------- --------- --------- -------- --------
Dollars in thousands
RESTATED
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1):
Revenues $ 346,714 $ 370,476 $ 118,998 $ 73,076 $ 69,350
Operating expenses:
Terminal 83,040 95,103 30,431 24,125 19,753
General and administrative 92,118 55,726 26,112 8,865 9,591
Equipment maintenance 53,656 50,258 15,796 10,720 9,470
Insurance and safety 9,665 6,493 2,998 4,797 4,291
Vessel 39,110 45,761 5,815 - -
Transportation 57,905 58,048 9,346 2,917 2,857
Depreciation and amortization 26,864 23,598 8,652 4,025 4,375
Losses on investment in joint venture - 9,016 - - -
Other operating expenses 1,120 1,293 1,434 1,868 3,840
--------- --------- --------- -------- --------
Total operating expenses 363,478 345,296 100,584 57,317 54,177
--------- --------- --------- -------- --------
Operating income (loss) (16,764) 25,180 18,414 15,759 15,173
Interest expense, net 27,605 22,171 9,211 8,154 7,875
Other (income) expense (3,046) (5,777) (1,552) (694) (19)
--------- --------- --------- -------- --------
Net income (loss) $ (41,323) $ 8,786 $ 10,755 $ 8,299 $ 7,317
========= ========= ========= ======== ========
BALANCE SHEET DATA (END OF PERIOD) (1):
Fixed assets, net $220,132 $236,953 $194,427 $90,056 $87,013
Total assets 436,886 480,422 382,378 172,479 164,754
Total debt 318,044 304,002 213,433 99,203 97,159
Long-Term debt 49,750 - 191,666 63,303 91,671
Stockholder's equity 9,270 57,689 72,729 49,422 44,172
OTHER DATA (1):
Ratio of earnings to fixed charges (2) - 1.2x 1.6x 1.7x 1.7x
EBITDA (3) 10,100 57,794 27,066 19,784 19,548
EBITDA margin (3) 2.9% 15.6% 22.7% 27.1% 28.2%
Cash flows provided by (used in)
operating activities (19) 18,170 24,533 17,205 (2,810)
Cash flows used in investing
activities (11,157) (72,004) (87,614) (16,365) (3,249)
Cash flows provided by (used in)
financing activities 8,681 50,642 67,918 (1,419) 6,426
Capital expenditures 6,311 33,622 9,674 6,936 6,034
Number of ship calls 966 823 689 706 481
Tonnage of cargo handled 6,838,553 5,980,290 5,456,721 5,048,135 3,099,226
</TABLE>
(1) Includes NPR from November 20, 1997, the date of its acquisition by the
Company. Also includes Riverfront, which is not a Guarantor, and which owns
the ACL Shares. At December 31, 1999, 1998 and 1997 Riverfront had total
assets of $37.3 million, $30.0 million and $44.1 million, respectively. At
December 31, 1999, 1998 and 1997, Riverfront had stockholder's equity of
$6.2 million, $5.7 million and $20.0 million, respectively, (including
unrealized holding losses (gains) on marketable securities of $3.4 million,
$2.6 million and $16.6 million, respectively). For years ended December 31,
1999, 1998 and 1997, Riverfront had dividends from marketable securities of
$3.1 million, $5.8 million and $1.6 million, respectively, (which is not
included in revenues) and net income of $2.1 million, $4.8 million and $1.0
million (which is not included in operating income). As of the end of and
for all other periods presented (i.e. 1995-1996), Riverfront had no
material amount of assets, stockholder's equity, revenues or net income.
(2) For purposes of this computation, fixed charges consist of interest
expense, amortization of deferred financing costs and one-third of rental
expenses, representing an approximation of that portion of rental expenses
attributable to interest. Earnings consist of income before income taxes,
extraordinary items and cumulative effect of changes in accounting
principles, plus fixed charges. For the year ended December 31, 1999,
earnings were inadequate to cover fixed charges.
18
<PAGE>
(3) 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
historical financial statements of the Company and the related notes
thereto included elsewhere herein.
(4) See Note 3 to the consolidated financial statements regarding restatement of
the 1998 financial statements.
19
<PAGE>
Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Restatement of Financial Position and Results of Operation for the Year Ended
December 31, 1998
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 year ended December 31, 1998. The existence of those
guarantees resulted in covenant defaults under certain Company debt agreements.
As a result of these defaults, $206.8 million of indebtedness under the
defaulted agreements should have been presented in the Company's December 31,
1998 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 $44.7 million
additional total assets and $46.8 million additional total liabilities at
December 31, 1998 and would have reduced net income and comprehensive income by
$1.8 million as compared to the amounts previously presented.
Upon becoming aware of the accounting significance of the guarantees, the
Company's Board of Directors requested counsel for the Company to inquire into
the circumstances which resulted in the subject guarantees not being considered
by the Company in the preparation of its financial statements. The assessment of
the circumstances by counsel for the Company, which was based on interviews of
designated current members of the Company's management team and certain others,
supported the evaluation by the Company's independent auditors that they could
continue to rely on the integrity of the designated current members of the
Company's management team. In June 2000, the Company elected its current chief
financial officer to fill the vacancy left by the Company's last full-time chief
financial officer who resigned in September 1999. The Company has also
undertaken remedial measures to improve internal controls and procedures to
ensure the integrity of its financial reporting.
Overview
The Company offers a broad range of services, including stevedoring, warehousing
and inland trucking of cargo. The Company also leases port facilities to the
Lessee-Operators at the Gloucester Facility on the basis of a fixed lease
charge. Through their operations, the Company and its Lessee-Operators handle
various types of cargoes, including refrigerated perishables, wood, steel,
automobiles and containerized cargo. Stevedoring and warehousing services are
billed on a per container basis for containerized cargo and a per weight or per
unit basis for breakbulk cargo. The Company's stevedoring services, which are
charged for each movement of cargo, consist of the loading or unloading of a
ship and may include pick-up of cargo from or delivery of cargo to, a
destination in the marine terminal. Fees for the Company's warehousing services,
which consist of the handling and storage of cargo, are based on a handling
charge (both in and out of the warehouse) and a storage charge. The Company's
trucking services are billed on either a tonnage or a per load basis. The
Company also receives revenues from ancillary activities, such as the
maintenance and repair of customer equipment.
In November 1997, the Company entered the marine transportation business through
the acquisition of NPR, whose predecessor was formed in 1974 by the Puerto Rico
Government in recognition of the vital importance of maritime transportation to
the economic development of Puerto Rico. When NPR's predecessor commenced
operations, it had a virtual monopoly over the United States to Puerto Rico
container trade. Over time, however, the reemergence of competition,
bureaucratic management and periodic turnover in political administrations
negatively affected its competitive position and operating performance. In
November 1992, the Puerto Rico Government began publicly evaluating the merits
of liquidating or divesting its interest in the shipping business. Uncertainty
surrounding the Puerto Rico Government's intentions and the possibility of
liquidation provided competitors with the opportunity to increase their market
shares. In March 1995, an investor group, including certain members of NPR
management, purchased NPR's business from the Puerto Rico Government in the
Privatization.
20
<PAGE>
Since the acquisition of NPR, the Company management has implemented various
programs to improve its operating performance. Company management has reduced
operating costs by (i) decreasing vessel expenses by reducing the number of
vessels in operation from five to three and reducing the number of ports of call
in the United States from five to two, (ii) consolidating customer service
activities into one service center located in Tampa, Florida, (iii) trimming
other corporate overhead by reducing headcount from 676 in March 1998 to 302 at
December 31, 1999, (iv) reducing intermodal transportation costs through the
commitment of high cargo volumes to railroads and trucking companies, (v)
reducing advertising costs and (vi) eliminating excess container capacity. The
Company provides service two times per week between San Juan, Puerto Rico and
the United States via the port of Jacksonville, Florida and weekly service
between San Juan and the port of Philadelphia, Pennsylvania. In addition,
through charter arrangements, NPR provides service two times a week between San
Juan and the Dominican Republic and, through a slot charter arrangement, also
services the Caribbean island of Trinidad and the United States Virgin Islands.
The Company's ocean revenues are realized primarily through its northbound and
southbound ocean freight operations. In general, the Company bases its pricing
on (i) direction of the cargo (i.e. northbound or southbound), (ii) type of
commodity transported, (iii) destination of the transported cargo and (iv)
market conditions. In addition, a majority of the cargo transported by the
Company in 1999 was subject to TVA's or fixed rate contracts which provide the
Company's customers with rates which are lower than the Company's "any quantity"
tariff rates, so long as the customer agrees to ship a minimum quantity of cargo
over a specified time period. The Company also generates other revenues through
demurrage billings in San Juan (penalties assessed against customers for holding
equipment beyond the contracted period).
In 1998, the Company established a new subsidiary to provide third party
stevedoring and other marine terminal services at the Puerto Nuevo Marine
Terminal in San Juan, Puerto Rico There was not a significant amount of third
party stevedoring business conducted during 1998, however, the third party
stevedoring business has grown significantly during 1999 and through the present
time.
The Company's major operating expense categories are as follows: (i) terminal;
(ii) general and administrative; (iii) equipment maintenance; (iv)
insurance/safety; (v) vessel and (vi) transportation.
The Company's terminal expenses consist primarily of labor charges related to
stevedoring and warehousing as well as expenses associated with the Company's
land-based operations, including facilities and equipment maintenance and
repairs, warehousing, etc. General and administrative expenses are comprised,
for the most part, of corporate overhead. The Company's equipment maintenance
expenses are routine expenses which include the rental and maintenance of the
Company's forklifts, cranes, truck, tractors, trailers, etc. The insurance/
safety expense provides for the Company's cost of insurance and claims
filed against it. Finally, the Company's transportation expense is comprised of
the costs associated with the Company's trucking operations as well as expenses
associated with the in-land movement of cargo off-site via rail or truck,
including labor, fuel, maintenance and other expenses associated with its own
fleet and fees paid to owner operators.
21
<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>
Year Ended December 31,
------------------------------------------------------------------
1999 1998 (2) 1997
--------------------- ------------------- -------------------
$ % $ % $ %
--------- ------- -------- ------- -------- -------
RESTATED
<S> <C> <C> <C> <C> <C> <C>
Operating revenues 301,344 86.9 328,586 88.7 92,326 77.7
Rental income 26,577 7.7 30,423 8.2 24,007 20.2
Other revenues 18,694 5.4 11,426 3.1 2,610 2.2
Revenues from non-consolidated
affiliates 99 - 41 - 55 -
--------- ------- -------- ------- -------- -------
Total revenues 346,714 100.0 370,476 100.0 118,998 100.0
--------- ------- -------- ------- -------- -------
Operating expenses
Terminal 83,040 24.0 95,103 25.7 30,431 25.6
General and administrative 92,118 26.6 55,726 15.0 26,112 21.9
Equipment maintenance 53,656 15.5 50,258 13.6 15,796 13.3
Insurance and safety 9,665 2.8 6,493 1.8 2,998 2.5
Vessel 39,110 11.3 45,761 12.4 5,815 4.9
Transportation 57,905 16.7 58,048 15.7 9,346 7.9
Depreciation and amortization 26,864 7.7 23,598 6.4 8,652 7.3
Allowances for losses on
advances to joint venture - - 9,016 2.4 - -
Other operating expenses 1,120 0.3 1,293 0.3 1,434 1.2
--------- ------- -------- ------- -------- -------
Total operating expenses 363,478 104.8 345,296 93.2 100,584 84.5
--------- ------- -------- ------- -------- -------
Operating income (loss) $ (16,764) (4.8) $ 25,180 6.8 $ 18,414 15.5
--------- ------- -------- ------- -------- -------
Net income (loss) $ (41,323) (11.9) $ 8,786 2.4 $ 10,755 9.0
========= ======= ======== ======= ======== =======
Calculation of EBITDA (1):
Operating income (loss) (16,764) 25,180 18,414
Depreciation and amortization 26,864 23,598 8,652
Allowances for losses on
advances to joint venture - 9,016 -
--------- ------- -------- ------- -------- -------
EBITDA 10,100 2.9 57,794 15.6 27,066 22.7
</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-K.
(2) See Note 3 to the consolidated financial statements regarding restatement
of the 1998 financial statements.
22
<PAGE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Revenues
Total revenues decreased to $346.7 million, for the year ended December 31, 1999
from $370.5 million for the year ended December 31, 1998, a decrease of $23.8
million, or 6.4%.
Operating revenues decreased to $301.3 million, for the year ended December 31,
1999 from $328.6 million for the year ended December 31, 1998, a decrease of
$27.2 million, or 8.3%.
The decrease in operating revenues was partially due to a decrease in ocean
revenue of approximately $15.8 million. On an overall basis, the number of
containers carried in 1999 was 3,821 lower than a year ago and the rate per
container was also lower. Southbound activity accounted for 72% of the volume
variance or 2,760 containers and 86% of the revenue variance. Northbound volumes
were down 1,544 containers and revenues were down $2.1 million. InterIsland
revenues and volume were both positive compared to 1998. The trade continues to
be under competitive rate pressure. Southbound rates decreased $71 per unit from
1998; however, northbound rates experienced a slight increase of $5 per unit.
This competitive pressure is expected to continue to impact the Company's
revenues in 2000.
Operating revenues were further adversely affected by a $16.3 million decrease
in stevedoring revenue at the Packer Avenue Facility for the year ended December
31, 1999 as a result of reduced vessel calls and containers handled. The
decreases in operating revenues were partially offset by increased third party
stevedoring revenues of $3.1 million from the Company's newly established
subsidiary San Juan Internationals Inc. as well as an increase of $0.6 million
of revenue at the Port of Wilmington. Trucking revenues for the year ended
December 31, 1999 increased slightly by $1.2 million as compared to year ended
December 31, 1998.
Rental income decreased to $26.8 million for the year ended December, 31, 1999
from $30.4 million for the year ended December 31, 1998, a decrease of $3.8
million, or 12.6 %. The decrease was 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 for the year 2000 due to the revisions of the
lease contracts with the Lessee-Operators.
Other revenue increased to $18.7 million for the year ended December 31, 1999
from $11.4 million for the year ended December 31, 1998, an increase of $7.3
million, or 63.6 %. The increase was primarily attributable to an increase in
third party billings for demurrage of $7.5 million offset by a decrease in third
party stevedoring of $1.9 million.
Terminal Expenses
Terminal expenses decreased to $83.0 million for the year ended December 31,
1999 from $95.1 million for the year ended December 31, 1998, a decrease of
$12.1 million, or 12.7%.
The decrease in terminal expense is primarily attributable to reduced container
vessel calls at the Packer Avenue Facility as well as a reduction in total
containers handled by NPR. This decrease is also attributable to improved
efficiencies at the Packer Avenue and San Juan Facilities for the handling of
containers.
Terminal reductions above were offset by increases of $2.7 million for salary
and benefits attributable to increased container volume at the Company's
Wilmington and San Juan Facilities. During the fourth quarter of 1999, the
Company revised certain of its estimates relating to the extra expense component
of its insurance claim arising out of Hurricane Georges. The change in estimate
resulted in a $3.5 million charge to terminal operations.
General and Administrative Expenses
General and administrative expenses increased to $92.1million for the year ended
December 31, 1999 from $55.7 million for the year ended December 31, 1998, an
increase of $36.4 million, or 65.3%.
23
<PAGE>
During 1999, the Company increased its reserve for certain of its trade and
other accounts receivable by $17.2 million of which $4.0 million resulted from
additional provisions due to increased demurrage revenues discussed above.
During the fourth quarter of 1999, the Company established a $17.0 million
reserve for certain of its receivables due from the Lessee-Operators.
The increase also resulted from a one time charge for severance payments of $1.5
million, an increase of $2.9 million in professional fees associated with
reorganization of certain administrative and accounting activities and the
registration of the Company's Senior Notes. A further increase of $0.8 million
was attributable to start-up costs associated with the formation of two
subsidiaries (SAN and SJIT) in San Juan, Puerto Rico for the purpose of
expanding the Company's third party stevedoring.
These increases were partially offset by a headcount reduction of $4.7 million
consisting of a decrease in salaries, wages and benefits of $4.5 million and
other related expenses of $0.2 million.
Equipment Maintenance Expense
Equipment maintenance expenses increased to $53.7 million for the year ended
December 31, 1999 from $50.3 million for the year ended December 31, 1998, an
increase of $3.4 million, or 6.8%.
These increases are as a result of certain leases which commenced during the
third quarter of 1999 for equipment being utilized at the Company's Packer
Avenue and San Juan Facilities. Additional increases were attributable to above
normal maintenance performed on Company's container cranes during the third and
fourth quarters of 1999.
These increases were partially offset by a $3.0 million reduction in container
and chassis maintenance due to an overall reduction in the Company's equipment
fleet and container volume for the year ended December 31, 1999.
Insurance and Safety Expenses
Insurance and safety expenses increased to $9.7 million for the year ended
December 31, 1999, from $6.5 million for the year ended December 31, 1998, an
increase of $3.2 million, or 48.9%.
This increase was partially attributable to increased coverage for new
equipment, which was acquired to replace older equipment and increased costs for
certain of the insurance coverage carried by the Company.
During the fourth quarter, the Company provided $1.4 million to increase its
reserve for certain of its claims regarding workmens compensation insurance.
Vessel Expenses
Vessel expenses decreased to $39.1 million for the year ended December 31, 1999
from $45.8 million for the year ended December 31, 1998, a decrease of $6.7
million, or 14.5%.
These decreases were primarily attributable to the change from a 2-2 rotation
(Jacksonville twice a week and Philadelphia twice a week) to a 3-1 rotation
(Jacksonville two times a week and Philadelphia once a week) in the Company's
vessel operations as well as taking one vessel out of service during the slow
season.
Transportation Expenses
Transportation expenses decreased to $57.9 million for the year ended December
31, 1999 from $58.1 million for the year ended December 31, 1998, a decrease of
$0.2 million, or 0.2%.
The Company experienced a decrease of $2.0 million attributable to the reduction
in the number of containers shipped to and from Puerto Rico. This decrease was
offset by an increase of $1.2 million in
24
<PAGE>
expense attributable to an increase in trucking activity conducted at the Packer
Avenue Facility.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased to $26.9 million for the year
ended December 31, 1999 from $23.6 million for the year ended December 31, 1998,
an increase of $3.3 million, or 13.8%.
These increases were attributable to $2.6 million for amortization of
dry-docking costs incurred in the latter part of 1998 as well as an $0.8 million
increase for depreciation of container and chassis equipment acquired during
1998.
Allowance for Losses on Joint Venture
No allowance for losses on joint venture was incurred for the year ended
December 31, 1999 whereas $9.0 million of such expenses were incurred for the
year ended December 31, 1998. This allowance had been established to provide for
losses arising out of advances made to fund TNX operations which were wound down
by the end of 1998.
Interest Expense
Interest expense increased to $27.6 million for the year ended December 31, 1999
from $22.2 million for the year ended December 31, 1998, an increase of $5.4
million, or 24.5%.
During the first quarter of 1999, the Company had increased borrowings of $17.3
million to fund extra expenses incurred as a result of Hurricane Georges. The
Company also increased its borrowings under its revolving credit by $5.5 million
during the first quarter of 1999 and by $19.0 during the third and fourth
quarters of 1998. In addition the Company borrowed $28.0 million during 1998 to
fund the purchase of container and chassis equipment.
Further increases occurred as result a 75 basis point increase in the prime rate
of interest during the third and fourth quarters of 1999.
Other Income
Other income decreased to $3.0 million for the year ended December 31, 1999 from
$5.8 million for the year ended December 31, 1998, a decrease of $2.8 million.
The decrease was due to the lesser amount of dividends received by the Company
during 1999 from its investment in marketable securities.
Net Income (Loss)
Net income (loss) decreased to ($41.3) million for the year ended December 31,
1999 from $8.8 million for the year ended December 31, 1998, a decrease of $50.1
million.
The changes in net income was attributable to the changes in revenues and
expenses as discussed above.
EBITDA
EBITDA decreased to $10.1 million for the year ended December 31, 1999 from
$57.8 million for the year ended December 31, 1998, an decrease of $47.7
million.
The changes in EBITDA was attributable to the changes in revenues and expenses
as discussed above.
25
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues
Revenues increased to $370.5 million, in 1998 from $119.0 million in 1997, an
increase of $251.5 million, or 211.3%. This increase was attributable primarily
to the inclusion of $261.5 million of ocean freight revenue in 1998 compared to
ocean freight revenues of $31.4 million in 1997, an increase of $230.1 million.
This increase was due to the acquisition of NPR on November 20, 1997. Total
loads from ocean freight operations in 1998 were 124,549 compared to 121,759
loads for 1997, an increase of 2,790 loads, or 2.3%. The increase in loads was
offset by lower revenue per unit due to rate pressure in the US-Puerto Rico
trade routes. This competitive rate pressure is expected to continue to impact
NPR's revenues for the foreseeable future. Trucking revenues increased to $4.6
million in 1998 from $3.3 million in 1997 an increase of $1.3 million, or 39.4%.
This increase was due to freight originating on NPR vessels. Warehousing
revenues increased to $15.2 million in 1998 compared to 11.9 million in 1997 an
increase of $3.3 million, or 27.7%. This increase was due to freight originating
on NPR vessels. Stevedoring revenue increased to $44.9 million in 1998 from
$44.5 million in 1997 an increase of $0.4 million, or 0.9%. This increase was
due to increased vessel calls.
Rental income increased to $30.4 million for 1998 from $24.0 million in 1997, an
increase of $6.4 million, or 26.7%. This $6.4 million increase was due to
increased leasing revenues from the Lessee-Operators at the Gloucester Facility
associated with increased tonnage of cargo handled due to the more efficient
intra-terminal handling system for refrigerated cargo combined with the
continued roll-out of the CTS bar-coding system as well as increased storage and
handling capacity due to additional facility space which was placed in service
during the second quarter of 1997.
The remaining increase of $9.9 million was due primarily to the inclusion of
third party stevedoring revenues at the San Juan terminal due to the acquisition
of NPR, which accounted for $8.8 million. The balance of the increase in 1998
from 1997 of $1.1 million was due to increased maintenance and repair revenues.
Terminal Expenses
Terminal expenses increased to $95.1 million for 1998 from $30.4 million for
1997, an increase of $64.7 million, or 212.5%. Terminal expenses as percentage
of revenues were 25.7% for 1998 compared to 25.5% for 1997. This increase was
primarily attributable to $57.9 million of expenses associated with NPR's
Jacksonville, San Juan, and Philadelphia terminal operations. The remaining $6.8
million increase was due to the transfer of stevedoring costs from the Port of
Elizabeth to the Packer Avenue facility which resulted from changing ports of
call. Other than increased expenses associated with the operations of NPR,
terminal expenses were unchanged for 1998 and 1997.
General and Administrative Expenses
General and administrative expenses increased to $55.7 million for 1998 from
$26.1 million for 1997, an increase of $29.6 million, or 113.4%. General and
administrative expenses as a percentage of revenues were 15.0% for 1998 compared
to 21.9% for 1997. This increase was attributable primarily to the inclusion of
$26.0 million of general and administrative expenses related to the operations
of NPR. The remaining $3.6 million increase represents increases in professional
fees associated with this purchase.
Equipment Maintenance Expenses
Equipment maintenance expenses increased to $50.2 million for 1998 from $15.8
million for 1997, an increase of $34.4 million, or 217.7%. Equipment maintenance
expenses as a percentage of revenues were 13.6% for 1998 compared to 13.3% for
1997. This increase was primarily attributable to $30.6 million of expenses
associated with NPR's Jacksonville and San Juan terminal operations. The
remaining $3.8 million increase was due to the transfer of equipment rental
costs from the Port of Elizabeth to the Packer Avenue facility which resulted
from changing ports of call. Other than increased expenses associated with the
acquisition of NPR, equipment maintenance expenses were unchanged for 1998 and
1997.
26
<PAGE>
Insurance and Safety Expenses
Insurance and safety expenses increased to $6.5 million for 1998 from $3.0
million for 1997, an increase of $3.5 million, or 116.7%. Insurance and safety
expenses as a percentage of revenues were 1.8% for 1998 compared to 2.5% for
1997. This increase was attributable partly to the inclusion of $1.1 million of
insurance and safety expenses related to the operations of NPR. The remaining
$2.4 million increase was due to increased coverage for additional facilities
constructed in late 1997 as well as new equipment which was purchased to replace
older equipment.
Vessel
Vessel expense increased to $45.8 million for 1998 from $5.8 million for 1997,
an increase of $40.0 million, or 789.7%. Vessel expenses as a percentage of
revenues were 12.4% for 1998 compared to 4.9% for 1997. This increase was
totally related to NPR.
Transportation Expenses
Transportation expenses increased to $58.0 million for 1998 from $9.3 million
for 1997, an increase of $48.7 million, or 523.7%. Transportation expenses as a
percentage of revenues were 15.6% for 1998 compared to 7.9% for 1997. This
increase was attributable to expenses associated with NPR's inter-modal
operations. In order to remain competitive within the industry, NPR has absorbed
a significant amount of inter-modal expenses which had historically been passed
through and paid for by NPR'S customers. This practice is expected to continue.
Other than increased expenses associated with the operations of NPR,
transportation expenses were unchanged for 1998 and 1997.
Depreciation and Amortization Expenses
Depreciation and amortization expenses increased to $23.6 million for 1998 from
$8.7 million for 1997, an increase of $14.9 million, or 172.7%. Depreciation and
amortization expenses as a percentage of revenues were 6.45% for 1998 compared
to 7.3% for 1997. This increase was attributable to vessel depreciation of $8.0
million and equipment depreciation of $7.0 million associated with the
acquisition of NPR.
Losses on Investment in Joint Venture
Losses on investment in joint venture totaled $9.0 million for 1998 and was
wholly attributable to reserves established to provide for a 100% provision of
advances to fund TNX operations which have been completely wound down by the end
of 1998. The magnitude of this loss was primarily due to the downturn of the
Brazilian economy in the fourth quarter of 1998, which led to overcapacity of
vessel tonnage in the trade lanes where TNX operates and competitive rate
pressure.
Other Operating Expenses
Other operating expenses, which consist of operating taxes and licenses, traffic
and sales expenses and charges from Non-consolidated Affiliates, decreased to
$1.3 million for 1998 from $1.4 million for 1997, a decrease of $0.1 million, or
0.7%. Other operating expenses as a percentage of revenues were 0.3% for 1998
and 1.2% for 1997.
Net Income
Net income decreased to $8.8 million for 1998 from $10.8 million for 1997, a
decrease of $2.0 million, or 18.5%. Net income as a percentage of revenues was
2.4% for 1998 compared to 9.0% for 1997. The decrease in net income was
attributable to competitive pricing pressures, which have reduced revenue per
load, and has caused Holt to absorb a significant portion of its transportation
costs. Additionally, for 1998, Holt reserved $9.0 million for advances to fund
TNX operations as noted above. Dividend income totaling $5.8 million partially
offset the reductions described above.
EBITDA
EBITDA increased to $57.8 million for 1998 from $27.1 million for 1997, an
increase of $30.7 million, or 113.3%. EBITDA as a percentage of revenues was
18.8% for 1998 compared to 22.7% for 1997. The increase in EBITDA was
attributable to the changes in revenues and expenses as discussed above.
27
<PAGE>
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 the
fourth quarter (due to Christmas) and May (due to Mother's Day), this seasonal
impact has diminished significantly over the past two years.
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.
In February 2000, in order to determine and meet its liquidity requirements
through June 30, 2001, the Company engaged outside professional advisors to
assist in the development and implementation of a financial plan which consists
of cash flow projections and a cost reduction plan. The initial cash flow
projections have been developed with the anticipation of the liquidation of
certain non-operating assets and the settlement of the Company's insurance claim
with respect to Hurricane Georges. Based on these cash flow projections and
assuming satisfactory outcome of these two factors, the Company anticipates
being able to make all scheduled debt service and vendor payments through the
period ended June 30, 2001. The Company has commenced with its outside
professional advisors the development of a cost reduction plan which will
include, among other things, an organizational restructuring. Upon completion of
the cost reduction plan, the Company will recast its cash flow projections to
give effect to those costs savings the Company is able to identify.
As of December 31, 1999, the Company was in default of certain provisions of its
Revolving Credit Agreement, 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. Currently, except with
respect to its obligations under the Revolving Credit Agreement, the Company
remains in default under the remainder of its debt obligations.
In addition to developing and implementing its financial plan, the Company
intends to request from its industrial revenue bondholders, 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
28
<PAGE>
ended June 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.
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 Company
continues to incur net losses and in addition, will record a charge of $8.0
million to earnings in the second quarter of 2000 resulting from the termination
of the Company's Option to Purchase and Development Agreement in conjunction
with the repayment of loans by DEL discussed below. Liquidity may be further
adversely affected by the an increase in the Company's estimate of its potential
withdrawal liability resulting from the relocation of NPR's northeastern port of
call from Elizabeth, New Jersey to Philadelphia, Pennsylvania.
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
Item 13 "Certain Relationships and Related Transactions") of which $2.0 million
was used to permanently reduce 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 will be used to fund working
capital requirements.
As of December 31, 1999, the Company had outstanding $318.0 million of
consolidated indebtedness, consisting of (i) $140.0 million principal amount of
the Senior Notes and (ii) $178.0 million of senior secured indebtedness. As of
December 31, 1999, the Company is in default with certain provisions of the
Revolving Credit Agreement and 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. Except with respect to
the revolving credit facility and the term loan, at December 31, 1999, the
Company remains in default under its debt obligations at December 31, 1999. As
a result of these defaults and because the banks, bondholders and trustees have
the right to accelerate the Company's indebtedness to each of them,
respectively, $10.0 million of the Company's total obligations which is due
prior to December 8, 2000 in accordance with the second amendment of and under
the Revolving Credit Agreement and the remainder of the Company's long-term debt
obligations have been reclassified as a current liability. The consolidated
financial statements of the Company indicated that, at December 31, 1999,
current liabilities exceeded current assets by $243.0 million.
As a result of the above conditions, the Company's independent auditors issued
a going concern opinion.
Cashflows
For the year ended December 31, 1999, net cash from operating, investing and
financing activities was sufficient for the Company to satisfy all debt service
requirements and to make the necessary capital acquisitions and improvements.
Cash used by the Company in operating activities was approximately breakeven.
While the Company reported a net loss for the year of $41.3 million, included in
this loss were non-cash charges (income) from depreciation of $26.9 million; an
increase in allowance for doubtful accounts totaling $26.5 million; and other
non-operating income items totaling ($2.2) million. Funds used in operating
activities included an increase of $5.4 million for the deferral of extra
expenses incurred primarily during the first half of the year 1999 as a result
of Hurricane Georges. These expenditures are included in the revised claim
submitted by the Company to its insurance carrier (see Item 3 "Legal
Proceedings").
Additional funds used in operating activities included a net reduction in
accounts payable and accrued expenses of $4.6 million. Increases in trade and
tenant accounts receivable of $1.4 further caused a reduction in cash available
from operating activities. Sources of funds from operating activities included
an $1.4 million increase in other noncurrent liabilities.
Net cash used in investing activities for the year was $11.2 million of which
$9.0 was attributable to the purchase of options to acquire 1.5 million shares
of Atlantic Container Lines AB stock; expenditures for property and equipment
for $6.3 million; payments to non-consolidated affiliates of $4.2 million. These
expenditures were partially offset by a decrease in other receivables of $8.2
million.
Net cash provided by financing activities was $8.7 million. The Company borrowed
$17.3 million to fund extra expenses incurred as a result of Hurricane Georges.
The Company increased its borrowings under its revolving credit facility by $5.5
million during the 1999 year. The Company also increased its borrowings from a
foreign bank by $1.0 million under a facility collateralized by the ACL stock
owned by the
29
<PAGE>
Company and from an unrelated bank by $1.0. The Company incurred borrowings of
$1.5 million for new equipment and repaid $12.1 million of other bank and
equipment notes for the year.
Net cash provided by financing activities was reduced by a distribution to its
sole stockholder of a dividend of $5.7 during the year ended December 31, 1999,
which was used by the stockholder to repay a $5.0 note receivable to the
Company.
Commitments and Contingencies
On June 30, 2000, the Company entered into an Employment Agreement whereby an
employee of the Company will be paid $0.930 million over an eighteen month
period commencing July 15, 2000.
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 fully mitigate this potential claim, it has
accrued its estimate of the maximum exposure at this time.
Legal Proceedings
As discussed under Item 3, 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 prepared a thorough Year 2000 preparation plan that included
replacement and upgrading certain of its systems. Year 2000 was monitored by a
coordinated team of systems and operational personnel company wide with teams in
place at all terminal locations and operational centers. No major service
interruption to the company's operation was experienced as a result of the year
2000 change over.
The cost of remediation and upgrading both internally developed systems and
vendor-supplied systems was approximately $1.5 million.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal and state environmental
laws and regulations, including but not limited to, the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), which creates
liability on the part of the owner or operator of a facility for the
investigation and remediation of hazardous substances, as well as creating the
authority and funding for unilateral response action by the United States
Environmental Protection Agency ("EPA"). In addition, portions of the Gloucester
Facility are part of a multi-property action pursuant to CERCLA to address
historic contamination via radioactive material. Holt has voluntarily entered
into a consent order with the EPA requiring the performance of certain
investigative measures and the proposal of certain remedial measures in
connection with the Gloucester Facility. The Company has conducted recent
environmental assessments at each of its facilities and believes it is in
material compliance with all environmental laws and does not anticipate material
expenditures for environmental compliance in the foreseeable future.
30
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board in June 1998. SFAS 133, as amended by SFAS 137, is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet and measurement
of those instruments at fair value. If certain conditions are met, a derivative
may be designated specifically as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm commitment
referred to as a fair value hedge, (b) a hedge of the exposure to variability in
cash flows of a forecasted transaction (a cash flow hedge), or (c) a hedge of
the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a forecasted
transaction. Holt does not currently use derivative financial instruments and
does not expect the adoption of Statement No. 133 to have a material impact on
its financial statements.
Item 7A. Quantitative And Qualitative Disclosure About Market Risk
The Company does not use derivative financial instruments to manage interest
rate risk. At December 31, 1999, the Company had $70.0 million of floating-rate
debt outstanding. A 1% increase in interest rates would increase annual interest
expense by approximately $700,000. The Company's exposure to currency exchange
risk has beenimmaterial through December 31, 1999.
31
<PAGE>
Item 8 Financial Statements
See financial statements commencing on F-1
32
<PAGE>
Item 9 Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10 Directors And Executive Officers of the Registrant
The following table sets fourth certain information regarding the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Thomas J. Holt 63 Chairman, President and Chief Executive Officer
Lorraine Robins 70 Executive Vice President and Director
John A. Evans 53 General Counsel, Vice President and Corporate Secretary
Leo A. Holt 35 Director
Michael J. Holt 25 Director
William J. Streich 53 Chief Financial Officer
The key employees of NPR are as follows:
Thomas J. Holt, Jr. 36 President and Chief Executive Officer
David N. Whene 41 Senior Vice President of Operations
Carl R. Fox 47 Executive Vice President of Strategic Planning and
Administration
</TABLE>
Thomas J. Holt, Sr. has been Chairman, President and Chief Executive Officer of
the Company since its capitalization in October 1997. He is the son of the
founder of the Holt business. He has been actively involved with Holt for over
44 years and has served as an executive officer and director of each of the Holt
Subsidiaries since 1965. He is a member of the Philadelphia District Export
Council, World Trade Association of Philadelphia, Inc., Pacific Maritime
Association and Imported Products Association. Mr. Holt is the father of Thomas
J. Holt, Jr., Leo A. Holt and Michael J. Holt, each a director of the Company.
Lorraine Robins has been Executive Vice President and a director of the Company
since its capitalization in October 1997. She has worked for Holt for the last
36 years and has served as Executive Vice President of each of the Holt
Subsidiaries since 1983. She is a member of the World Trade Association of
Philadelphia, Inc., and received the "Woman of the Year" award for outstanding
achievement from the Women's International Trade Association.
John A. Evans has been General Counsel and Corporate Secretary of the Company
since its capitalization in October 1997 and Vice President since January 1998.
He has worked for Holt for 26 years and has served as Corporate Secretary and
General Counsel since 1983. He is both an attorney and a certified public
accountant. He is a member of the American Institute of Certified Public
Accountants, New Jersey Bar Association, Pennsylvania Bar Association and the
American Bar Association.
Leo A. Holt has been a director of the Company since its capitalization in
October 1997. He is a director, executive officer and shareholder of AHI and SLS
and has been involved in the stevedoring, marine terminal and warehousing
business for over 14 years. He is a trustee with the Philadelphia Seaman's
Church
33
<PAGE>
Institute, a member of both the World Trade Association of Philadelphia
and the Produce Marketing Association. He is the son of Thomas J. Holt, Sr.,
Chairman, President and Chief Executive Officer of the Company and the brother
of Thomas J. Holt, Jr., and Michael J. Holt, each a director of the Company.
Michael J. Holt has been a director of the Company since its capitalization in
October 1997. He is a director, executive officer and shareholder of AHI and SLS
and has been involved with the stevedoring, marine terminal and warehousing
business for over three years. He is the son of Thomas J. Holt, Sr., Chairman,
President and Chief Executive Officer of the Company and the brother of Thomas
J. Holt, Jr., and Leo A. Holt, each a director of the Company.
William J. Streich was elected by the Company's Board of Directors during June,
2000. Mr. Streich is a graduate of Temple University and spent seven years in
public accounting with Arthur Andersen & Company in Philadelphia. From his
public practice, he has been involved in the financial management of
manufacturing, construction and real estate development companies. His
activities in those companies included developing platforms for growth and
organization, financing and restructuring. Most recently, Mr. Streich was
involved in the development of an international commodities trading exchange for
the internet.
Thomas J. Holt, Jr. has been the President and Chief Executive Officer of NPR,
Inc. since February 1, 1999. Prior thereto, he served as a director, executive
officer and shareholder of AHI and SLS and has been involved in the stevedoring,
marine terminal and warehousing business for over 15 years. He is a member of
the Philadelphia Maritime Society and the World Trade Association of
Philadelphia. He is the son of Thomas J. Holt, Sr., Chairman, President and
Chief Executive Officer of the Company and the brother of Leo A. Holt and
Michael J. Holt, each a director of the Company.
David N. Whene has served as Senior Vice President of Operations, Navieras,
since October 1, 1998. Prior to that, he served as Senior Vice President of
Operations for Blue Star Line, N.A., Ltd. from October 1986 to April 1998. Mr.
Whene has worked in various management positions in stevedoring and shipping
companies since 1979.
Carl R. Fox has been Executive Vice President of Business Planning and
Administration of NPR, Inc. since May 1995. He has 22 years experience in the
maritime industry. In this position at NPR he is involved in directing the
strategic planning initiative focusing on development of short and long-term
strategy; and the management of Information Technology, Human Resources,
Administrative Services, and Reengineering. In addition, he has worked in a
number of Financial and Planning positions at Crowley and USL.
Item 11. Executive Compensation
Compensation Committee Interlocks and Insider Participation
Prior to the capitalization of the Company in October 1997, the Company did not
pay any compensation to its executive officers. In 1996, decisions concerning
compensation of executive officers were made by the Board of Directors of Holt,
consisting, at that time, of Thomas J. Holt, Sr., Lorraine Robins and Bernard
Gelman.
Director Compensation
Directors of the Company are not currently compensated for their services as
such. The Company reimburses directors for their expenses incurred in connection
with their activities as directors. In the future, the Company may elect to
compensate directors for their services as directors.
34
<PAGE>
Executive Compensation
The Company was capitalized in October 1997 and accordingly, paid no
compensation during the years ended December 31, 1995, 1996 and 1997. Prior to
April of 1998, all of the Company's executive officers were compensated by Holt.
The following table sets forth, with respect to services rendered during 1996,
1997 and 1998, the total compensation paid by Holt to or for the account of the
Company's Chief Executive Officer and the Company's three other executive
officers (the "Named Executive Officers"). None of the Named Executive Officers
is a party to an employment agreement with the Company. The named Executive
Officers also provide services to, and receive additional compensation from
certain of the Non-consolidated Affiliates. See "Certain Relationships and
Related Transactions."
<TABLE>
<CAPTION>
Annual Compensation
------------------- All Other
Name and Principal Position Year Salary($) Bonus($) Compensation(1)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas J. Holt, Sr. 1999 $331,500 $-0- $ 549
Chairman of the Board, President 1998 301,436 -0- 1,259
and Chief Executive Officer 1997 254,782 -0- 2,906
Lorraine Robins 1999 $153,000 $-0- $ 1,746
Executive Vice President 1998 131,700 -0- 573
1997 98,530 -0- 1,626
Bernard Gelman (2) 1999 $160,500 $-0- $53,854
Vice President, Chief Financial 1998 185,100 -0- 665
Officer and Treasurer 1997 116,252 -0- 2,013
John A. Evans 1999 $218,280 $-0- $ 213
General Counsel and Secretary 1998 186,766 -0- 639
1997 110,450 -0- 1,596
---------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts indicated for 1999 include $17,833 a month effective October 1,
1999 for consulting fees to Mr. Gelman. 1999 amounts also include
compensation relating to group life insurance premiums in the following
amounts. Mr. Holt, $549; Ms. Robins, $1,746; Mr. Gelman, $354; and Mr.
Evans, $213. Amounts indicated for 1998 include employer 401(k)
contribution in the following amounts: Mr. Holt, $1,013; Ms. Robins, $327;
Mr. Gelman, $419; and Mr. Evans, $393. Also includes $246 in group life
insurance premiums for each Named Executive Officer.
(2) Mr. Gelman resigned from the Company in September of 1999.
35
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Thomas J. Holt, Sr., the Company's Chairman, President and Chief Executive
Officer, owns 100% of the outstanding common stock of the Company. Other than
the common stock, no other class of capital stock of the Company is authorized.
The business address of the sole stockholder is 101 South King Street,
Gloucester City, New Jersey 08030.
Item 13. Certain Relationships and Related Transactions
The Company and each of its subsidiaries (the "S Corp. Businesses") are
corporations subject to taxation under Subchapter S of the Code. As a result,
the net taxable income of each S Corp. Business must be included in the taxable
income of its shareholders as the S Corp. Businesses are not subject to tax at
the corporate level with respect to such income. The S Corp. Businesses had
historically made earnings distributions to their shareholders in amounts equal
to or greater than the amount of the shareholders' Federal and State income tax
liabilities arising from the S Corp. Business' status as S Corporations (other
than NPR, Murphy Marine and Wilmington Stevedores, which became S corporations
effective in January 1998). The amount of these distributions were $5.7 million,
$5.0 million and $4.5 million for 1999, 1998 and 1997, respectively.
Significant assets utilized by the Company, including the lease for the Packer
Avenue Facility and the ownership of the management information systems used in
Holt's operations, including CTS, are held by AHI and SLS, receptively, both of
which are controlled by Leo A. Holt and Michael J. Holt, each of whom is a
director of the Company and a son of Thomas J. Holt, Sr., the Chairman,
President and Chief Executive Officer of the Company. AHI subleases the Packer
Avenue Facility (which includes four container cranes) and leases two additional
cranes to the Company one of which is located at the Packer Avenue Facility.
Pursuant to the PRPA Lease, which expires in 2040 (including all renewal
options), the PRPA leases the Packer Avenue Facility to AHI and has granted to
AHI rights to develop certain undeveloped additional waterfront property. Under
the Sublease between AHI and Holt, Holt pays AHI the rental payable by AHI to
the PRPA plus fifteen percent of that amount (See Item 2 - "Properties"). Rental
expenses and fees paid by Holt to AHI amounted to $2.7 million for the year
ended December 31, 1999 and $3.0 million for the years ended December 31, 1998
and 1997, respectively. See Note 14 of "Notes to Consolidated Financial
Statements" of the Company.
Pursuant to agreements between the Company and SLS, SLS provides the Company
with services relating to accounting, billing, management information
processing, insurance risk analysis and coverage and marketing. These agreements
are negotiated on a yearly basis to reflect the services provided All logistics
and management information services provided to the Company's customers,
including CTS and the Container Computer System, and certain of the Company's
sales and marketing activities, are provided by SLS on behalf of the Company. As
compensation for these services, the Company either pays SLS a percentage of the
Company `s gross revenue on a monthly basis or is billed a fixed contract rate.
Fees paid by the Company to SLS for these services amounted to $9.3 million,
$6.5 million and $4.5 million for the years ended December 31, 1999, 1998 and
1997, respectively. See Note 14 of "Notes to Consolidated Financial Statements"
of the Company. In addition, certain other companies which are majority owned by
Thomas J. Holt, Sr. (the "Non-consolidated Affiliates") provide to or procure
from the Company various assets and services, including warehouse space,
building and equipment maintenance and stevedoring services.
Holt and the Non-consolidated Affiliates provide services and goods to each
other. Holt provides to the Non-consolidated Affiliates stevedoring services,
rental of warehouse space and building and equipment repair services. In 1999,
1998 and 1997, Holt received a total of $99,000 $41,000 and $55,000,
respectively, for these services. The Non-consolidated Affiliates provide Holt
with rental of warehouse space, building and equipment repairs, management
services and the sale of ice. For 1999, 1998 and 1997 Holt paid the
Non-consolidated Affiliates $0.6 million, $1.0 million and $1.2 million for
these services and goods, respectively.
36
<PAGE>
Holt and the Non-consolidated Affiliates historically have made advances to each
other for working capital purposes and have accrued amounts payable to each
other arising out of the sale of services and goods. The outstanding advances
and payables by the Non-consolidated Affiliates to Holt at December 31, 1999,
1998 and 1997 were $25.4 million, $25.4 million and $21.3 million, respectively.
None of these advances bears interest. The outstanding advances and payables by
Holt to the Non-consolidated Affiliates at December 31, 1999, 1998 and 1997 were
$9.8 million, $14.0 million and $12.2 million, respectively. See Note 13 of
"Notes to Consolidated Financial Statements" of the Company.
In February and April 1998, the Company loaned a total of $5 million to Thomas
J. Holt, Sr., the Company's Chairman, President and Chief Executive Officer.
Interest on the loan was 1% over the prime rate and was repaid during June 1999.
In January 1998, the Company sold to AHI for $5 million certain refrigeration
equipment which the Company no longer needed in its operations. Of the total
purchase price, $3.1 million was paid through December 31, 1999.
Holt has entered into an Option to Purchase and Development Agreement with
Delaware Avenue Enterprises, Inc. ("DEL"), a company of which the majority is
owned and operated by Leo A. Holt and Michael J. Holt, directors of the Company.
Pursuant to the agreement, Holt paid $8 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. The option expires on December 31, 2013. In connection
with the agreement, DEL issued to the Company a $10 million promissory note
during 1998 and a $4.0 million promissory note during 1999, collectively, ("the
Notes"). The Notes bear interest at 1% over the prime rate and mature on the
earlier of December 31, 2013 or the date on which Holt exercises its option and
purchases the Premises. The note is secured by a mortgage and security agreement
on the Premises and a contiguous 28-acre site.
On July 14, 2000, DEL borrowed $14.0 million which was used to repay the Notes.
In conjunction with the transaction, the Company terminated its $8.0 Option to
Purchase and Development Agreement with DEL and will record this charge as of
June 30, 2000. See Note 14 of "Notes to the Consolidated Financial Statements"
of the Company.
The Company performs stevedoring services at the Packer Avenue Facility for
Dockside Refrigerated Warehouse of Philadelphia, Inc. ("DWP"). Leo A. Holt and
Michael J. Holt, each a director of the Company and sons of Thomas J. Holt Sr.,
control DWP.
In January 2000, DAE acquired the Lessee-Operators who conduct marine terminal
activities at the Gloucester Facility which they lease from the Company. In
conjunction with the acquisition, the Company agreed to accept a promissory note
in exchange for the Lessee-Operator receivables arising on or before December
31, 1999 and outstanding as of April 3, 2000. The amount of the promissory note
is $38.2 million, bears interest of 2% per annum and is payable in monthly
installments of not less than $750,000, including interest.
Description of Certain Commitments and Contingencies
Certain Operating Leases
Equipment Financing -- Emerald Equipment Leasing, Inc.
On November 20, 1997, NPR sold certain of its assets consisting of containers,
gensets and chassis (the "Emerald Equipment"), to Emerald Equipment Leasing,
Inc. ("Emerald") for a purchase price of $35 million. The Emerald Equipment was
then leased back to NPR and to Holt Cargo (collectively, the "Lessees"),
pursuant to an Equipment Lease Agreement dated as of November 20, 1997 (the
"Equipment Lease"). Under the Equipment Lease, the Lessees are obligated to make
monthly payments to Emerald in
37
<PAGE>
the amount of approximately $738,000 per month for a term of 60 months. The
Equipment Lease also provides that the Lessees may terminate the Equipment Lease
effective as of the fourth anniversary of the Equipment Lease commencement date,
provided that no default of the Lessees exists thereunder and provided that the
Lessees make a lease termination payment to Emerald in the amount of $2.8
million. The Equipment Lease and payments have been assigned to MBC Leasing
Corp. ("MBC"), which financed Emerald's acquisition of the Emerald Equipment
pursuant to a Loan and Security Agreement dated as of November 20, 1997 (the
"MBC Credit Agreement"), in the maximum principal amount of up to $35.0 million
(the "Equipment Loan"). The Lessees' obligations under the Equipment Lease are
guaranteed by the Company and each of its subsidiaries other than the Lessees,
(the "Lease Guarantors") pursuant to a Lease Guaranty Agreement dated as of
November 20, 1997 (the "Lease Guaranty"), which Lease Guaranty is also assigned
to MBC as additional collateral.
Of the $35.0 million available under the MBC Credit Agreement, $24.0 million was
advanced on November 20, 1997 and an additional $11 million was advanced through
October 31, 1998. A majority of the outstanding capital stock of Emerald is
owned by certain employees of SLS (who are not executive officers or directors
of SLS).
The Equipment Lease payments were calculated to provide for full pass-through
amortization of the amounts outstanding under the Equipment Loan as though it
had been fully advanced. The initial advance of the Equipment Loan will bear
interest at an annual rate of 9.25%. Subsequent advances will bear interest at a
rate per annum equal to the interest rate for five year Treasury constant
maturities plus 332 basis points. The entire outstanding principal balance of
the Equipment Loan is due and payable on November 20, 2002.
The MBC Credit Agreement contains customary covenants, including limitations on
(i) the incurrence of additional indebtedness, (ii) the creation of liens, (iii)
making restricted payments, including the payments of dividends, (iv) making
investments, (v) engaging in mergers, consolidations and asset sales, and (vi)
engaging in loans, investments and other transactions with affiliated parties.
Similar limitations are imposed on the Lessees and the Lease Guarantors in the
Equipment Lease and the Lease Guaranty. In addition, the Lease Guarantors, on a
consolidated basis, are required to comply with certain financial covenants
including without limitation, (i) a ratio of indebtedness to tangible net worth,
(ii) an interest coverage ratio, and (iii) minimum tangible net worth, in each
case, as specified in the Lease Guaranty.
On July 30, 1998, Emerald entered into a Master Interim and Permanent Loan and
Security Agreement ("Loan Agreement") with BTM Capital Corporation, which
provided for a loan up to $16.9 million to Emerald by BTM for the purpose of
purchasing 53 foot containers and chassis. On December 30, 1998, Emerald
executed an amendment providing for a permanent loan of $14.8 million,
representing the final purchase price of the containers and chassis. The note
bears interest at 6.68% per year and further provides that the loan shall be
repaid in 84 consecutive equal installments of $220 commencing on February 1,
1999. Subsequent to the purchase of the equipment, Emerald has entered into a
lease agreement for 60 months with Holt for the equipment. Repayment of the loan
is guaranteed by the Company. The guarantor is subject to certain financial
covenants, including a restriction of the payment of dividends, minimum net
worth test and a consolidated coverage ratio test. Because the Company has not
been able to make effective use of equipment due to market conditions. Emerald
is looking to either sell or lease the equipment to other parties.
Obligations Guaranteed by the Company
DRW Bonds
One of the Lessee-Operators financed its development of a refrigerated warehouse
located at the Gloucester Facility through the issuance by the CCIA of $18.5
million of its Lease Revenue Bonds (Dockside Refrigerated Warehouses, Inc.
Project), Series 1994 (the "CCIA-DRW Bonds"). The CCIA-DRW Bonds bear interest
at a rate of 8.4% per annum and mature on April 1, 2024. The CCIA-DRW Bonds are
secured
38
<PAGE>
by a mortgage granted by CCIA on the warehouse and its leasehold interests in
the real property on which the warehouse is located. In addition, Holt Hauling
and one of the Non-consolidated Affiliates granted a mortgage in their interest
in the Gloucester Facility to secure repayment of the CCIA-DRW Bonds, which is
guaranteed by Holt Hauling and the Non-consolidated Affiliates.
PAID Bonds
The Philadelphia Authority for Industrial Development issued $7.0 million of its
Revenue Bonds (Refrigerated Enterprises, Inc. Project) Series of 1992 (the "PAID
Bonds") for the benefit of one of the Non-consolidated Affiliates. The PAID
Bonds are secured by a mortgage on the Non-consolidated Affiliate's interest in
the property financed with the PAID Bonds. Interest accrues at a rate of 9.05%
per annum (8.75% following an "Exemption Event" as defined therein). The PAID
Bonds have a maturity date of December 1, 2019. Repayment of the PAID Bonds is
guaranteed by Holt and the other Non-consolidated Affiliates, and such
guarantees are secured by a mortgage granted by Holt Hauling and one of the
Non-consolidated Affiliates on their respective interests in the Gloucester
Facility. The guarantors are subject to financial covenants including a minimum
net worth test, a debt to tangible net worth test and an interest coverage ratio
test. The Guaranty also contains restrictions on certain mergers, acquisitions
and sales of assets, incurrence of additional indebtedness and the making of
guarantees, the payment of dividends, the repurchase of stock, the making of
loans to shareholders and the granting of liens. The documents contain customary
events of default consistent with those contained in the NJEDA and CCIA Bond
documents.
NJEDA Bonds
The NJEDA issued $6.1 million in Economic Development Refunding Bonds (777
Pattison Avenue Inc. 1988 and 1989 Projects), 1992 Refunding Series, which bear
interest at 8.95% and mature on December 15, 2018 (8.65% following an "Exemption
Event" (as defined therein)). The proceeds from the sale of these Bonds were
loaned to one of the Non-combined Affiliates in order to make certain capital
improvements at the Gloucester Facility. Repayment of the bond indebtedness is
guaranteed by Holt and the other Non-consolidated Affiliates. The Bonds are
secured by a mortgage on the Gloucester Facility.
Equipment Loans
Holt Cargo Systems, Inc. and Holt Hauling and Warehousing System, Inc. have
guaranteed various equipment loans entered into by Express Equipment Rental
("Express"), a company owned by family members of Holt's stockholder who are
also directors of Holt 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 December 31, 1999 is $4.7 million.
Vessel Financings
Certain of the Company's subsidiaries have guaranteed obligations of Christian
Holdings (Luxembourg) S.A. "CHL" in connection to its ownership of two modern
refrigerated cargo vessels. CHL owns these vessels in an equal partnership with
a German shipping company. These vessels call 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. executed a
guarantee in August of 1996 to Commerzbank AG of Hamburg, Germany in an amount
of $1,130,000 against a loan Commerzbank made to CHL. The loan, which matures on
March 31, 2001, bears interest at 8.0%, payable quarterly.
In August of 1996, two Belgian credit institutions granted mortgages and loans
to CHL for the refinancing of the two modern refrigerated cargo vessels. First
mortgages on each vessel were granted by National Maatschip Kreditet an Nuiverd
"NMKN", a Belgian bank. Fifteen percent of the mortgage amount has been
39
<PAGE>
guaranteed by Holt Hauling & Warehousing jointly and severally with CHL's equal
partner in the vessels in an amount of $1,729,000 for each vessel. The thirteen
year mortgages bear interest at the Belgian Interbank Offer Rate plus a factor
and amortize equally over the term. The mortgages mature in August of 2009.
Holt Cargo Systems, Inc. guaranteed a loan made to CHL in Belgian Francs with an
equivalent US dollar value of $1,965,768 by Gimvindus, n.v. a Belgian economic
development agency belonging to the Province of Flanders. These loans bear
interest at 7% per annum and mature on August 31, 2004.
40
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents Filed as a Part of This Report
(1) Financial Statements
The financial statements required to be filed as part of this Annual Report on
Form 10-K are listed below with their location in this report.
The Holt Group, Inc. and Subsidiaries:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Comprehensive Income (Loss)
for the years ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1999, 1998 and 1997 F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-8
Notes to Consolidated Financial Statements F-10
</TABLE>
(2) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts
All other schedules have been omitted because they are not applicable, not
required, or the required information is included in the Financial Statements or
the notes thereto.
(3) Exhibits
Documents incorporated by reference:
*3.1 Certificate of Incorporation of the Company.
*3.2 By-laws of the Company.
*3.3 Certificate of Incorporation of Holt Cargo Systems, Inc.
*3.4 By-laws of Holt Cargo Systems, Inc.
*3.5 Articles of Incorporation of Holt Hauling and Warehousing Systems, Inc.
*3.6 By-laws of Holt Hauling and Warehousing Systems, Inc.
*3.7 Certificate of Incorporation of Murphy Marine Services, Inc.
*3.8 By-laws of Murphy Marine Services, Inc.
*3.9 Certificate of Incorporation of Wilmington Stevedores, Inc.
*3.10 By-laws of Wilmington Stevedores, Inc.
*3.11 Certificate of Formation of NPR, Inc.
41
<PAGE>
*3.12 By-laws of NPR, Inc.
*3.13 Certificate of Incorporation of NPR-Navieras Receivables, Inc.
*3.14 By-laws of NPR-Navieras Receivables, Inc.
*3.15 Certificate of Incorporation of NPR Holding Corporation.
*3.16 By-laws of NPR Holding Corporation.
*3.17 Certificate of Incorporation of NPR S.A., Inc.
*3.18 By-laws of NPR S.A., Inc.
*3.19 Certificate of Incorporation of San Juan International Terminals, Inc.
*3.20 By-laws of San Juan International Terminals, Inc.
*3.21 Certificate of Incorporation of SJIT, Inc.
*3.22 By-laws of SJIT, Inc.
*4 Indenture, dated January 21, 1998, among the Company, the Guarantors and
The Bank of New York.
*5 Opinion of Pepper Hamilton LLP.
*10.1 Purchase Agreement, dated January 14, 1998, among the Company, the
Guarantors and Donaldson, Lufkin & Jenrette.
*10.2 Exchange Registration Rights Agreement, dated January 21, 1998, among
the Company, its subsidiaries and Donaldson, Lufkin & Jenrette
Securities Corporation.
*10.3 Stock Purchase Agreement, dated September 25, 1997, among the Company
and the selling shareholders of NPR Holding Corporation signatory
thereto.
*10.4 Securities Purchase Agreement, dated November 20, 1997, between the
Company and HS Funding, Inc.
*10.5 Securities Purchase Agreement, dated November 18, 1997, among the
Company and the persons listed and the signature pages attached thereto.
*10.6 Shareholders Agreement, dated November 20, 1997, among the Shareholders
signatory thereto.
*10.7 Agreement, dated August 6, 1997, between Transroll Navagacao S.A. and
NPR Holding Corporation.
*10.8 First Amendment to Joint Venture Agreement dated November 20, 1997.
*10.9 NPR 1997 Phantom Stock Plan.
*10.10 Settlement Agreement, dated April __, 1997, among The New York Shipping
Association - International Longshoreman's Association Pension Trust
Fund, Puerto Rico Maritime Shipping Authority, Government Development
Bank for Puerto Rico and NPR, Inc.
*10.11 Payment Agreement, dated April __, 1997, among Government Development
Bank for Puerto Rico, Puerto Rico Maritime Shipping Authority, NPR,
Inc., and NPR Holding Corporation.
*10.12 United States Pension Services, Inc. 401(k) Plan and Trust.
*10.13 Loan Agreement, dated January 3, 1984, between the City of Gloucester
City, New Jersey and Holt Hauling and Warehousing System, Inc.
*10.14 First Amendment to Loan Agreement, dated January 3, 1984, dated March
31, 1991, between the City of Gloucester City, New Jersey and Holt
Hauling and Warehousing System, Inc.
*10.15 Loan Agreement, dated August 3, 1984, between the City of Gloucester
City, New Jersey and Holt Hauling and Warehousing System, Inc.
*10.16 First Amendment to Loan Agreement, dated August 3, 1984, dated March 31,
1991, between Holt Hauling and Warehousing System, Inc. and the City of
Gloucester City, New Jersey.
*10.17 Second Amendment to Loan Agreements, dated January 3, 1984, and August
3, 1984, dated August 1, 1996.
*10.18 Multi Currency Secured Revolving Credit Facility dated April 16, 1997,
between The Riverfront Development Corporation and Finansbanken ASA.
*10.19 Amendment No. 1 to Multi Currency Secured Revolving Credit Facility
dated April 16, 1997, dated April 23, 1997, between The Riverfront
Development Corporation and Finansbanken ASA.
*10.20 Equipment Lease Agreement, dated November 18, 1997, between Emerald
Equipment Leasing, Inc., NPR, Inc. and Holt Cargo Systems, Inc.
*10.21 Lease Guaranty Agreement, dated November 20, 1997, by the Company, Holt
Hauling and Warehousing System, Inc., Wilmington Stevedores, Inc.,
Murphy Marine Services, Inc., The Riverfront Development Corporation,
NPR-Navieras Receivables, Inc., and NPR S.A., Ind., for the benefit of
Emerald Equipment Leasing, Inc. with respect to various duties and
obligations of NPR, Inc. and Holt Cargo Systems, Inc.
42
<PAGE>
*10.22 Amended and Restated Lease and Operating Agreement, dated December 30,
1990, between Philadelphia Regional Port Authority and Holt Cargo
Systems, Inc. for Packer Avenue Marine Terminal.
*10.23 Sublease, dated June 14, 1991, between Astro Holdings, Inc. and Holt
Cargo Systems, Inc.
*10.24 Assignment of Lease, dated June 14, 1991, between Holt Cargo Systems,
Inc. and Astro Holdings, Inc.
*10.25 Loan and Security Agreement, dated August 8, 1989, between Holt Cargo
Systems, Inc. and Bank Leumi Le-Israel B.M.
*10.26 Modification of Loan and Security Agreement, dated November 13, 1992,
between Holt Cargo Systems, Inc. and Bank Leumi Le-Israel B.M. and
Second Modification of Loan and Security Agreement, dated December 31,
1992.
*10.27 Third Modification of Loan and Security Agreement, dated July 1, 1995,
between Holt Cargo Systems, Inc. and PNC Bank, National Association
(successor in interest to Bank Leumi Le-Israel B.M.).
*10.28 Loan Agreement, dated July 20, 1995, among Holt Cargo Systems, Inc.,
Holt Hauling and Warehousing Systems, Inc., Broadway Equipment Leasing
Corp., Refrigerated Distribution Center, Inc., Triple Seven Ice, Inc.,
Holt Cargo Systems of California, Inc., The Riverfront Development
Corporation, 777 Pattison Avenue, Inc., Holt Warehousing Company, Marine
Information Technology, Inc., B.H. Sobelman & Co., Inc., T.and L.
Leasing Corp., CRT, Inc., Refrigerated Enterprises, Inc., Oregon Avenue
Enterprises, Incorporated, Pattison Avenue Warehousing Corp., Murphy
Marine Services, Inc., Dockside International Fish Co., Inc., Wilmington
Stevedores, Inc. and Meridian Bank.
*10.29 Container Lease Purchase Agreement, dated June 5, 1996, between NPR,
Inc. and Interpool Limited, and Membership and Equipment Lease Agreement
dated April 1, 1996 between Interpool Limited and NPR, Inc.
*10.30 Credit Agreement, dated November 20, 1997, between the Company and
CoreStates Bank, N.A.
*10.31 Business Loan Agreement, dated March 13, 1997, between Holt Hauling and
Warehousing System, Inc. and Wilmington Savings Fund Society, FSB.
*10.32 Series G Loan Agreement, dated January 2, 1992, between Holt Hauling and
Warehousing System, Inc. and the New Jersey Economic Development
Authority.
*10.33 Series H Loan Agreement, dated January 2, 1992, between Holt Hauling and
Warehousing System, Inc. and the New Jersey Economic Development
Authority.
*10.34 Series G Mortgage and Security Agreement, dated as of January 2, 1992,
between Holt Hauling and Warehousing System, Inc. and Mellon Bank, N.A.
*10.35 Series H Mortgage and Security Agreement, dated January 2, 1992, between
Holt Hauling and Warehousing System, Inc. and Mellon Bank, N.A.
*10.36 Series J Loan Agreement, dated June 1, 1995, between Holt Hauling and
Warehousing System, Inc. and the New Jersey Economic Development
Authority.
*10.37 Series J Mortgage and Security Agreement, dated June 1, 1995, between
Holt Hauling and Warehousing System, Inc. and The Bank of New York (NJ).
*10.38 Lease Agreement, dated January 15, 1996, between Holt Hauling and
Warehousing System, Inc. and Camden County Improvement Authority.
*10.39 Mortgage and Security Agreement, dated January 15, 1996, between Holt
Hauling and Warehousing System, Inc., 777 Pattison Ave., Inc. and The
Bank of New York (NJ).
*10.40 Mortgage and Security Agreement, dated May 15, 1992, between Holt
Hauling and Warehousing System, Inc., 777 Pattison Ave., Inc. and
Fidelity Bank, National Association.
*10.41 Memorandum of Installment Sale Agreement, dated May 15, 1992, among
Philadelphia Authority for Industrial Development, Refrigerated
Enterprises, Inc., Holt Hauling and Warehousing System, Inc., B.H.
Sobelman & Co., Inc., Refrigerated Distribution Center, Inc., Oregon
Avenue Enterprises, Incorporated, Holt Cargo System, Inc., The
Riverfront Development Corp., CRT, Inc., Triple Seven Ice, Inc. and 777
Pattison Ave., Inc.
*10.42 Installment Sale Agreement, dated May 15, 1992, among Philadelphia
Authority for Industrial Development, Refrigerated Enterprises, Inc.,
Holt Hauling and Warehousing System, Inc., B.H. Sobelman & Co., Inc.,
Refrigerated Distribution Center, Inc., Oregon Avenue Enterprises,
Incorporated, Holt Cargo Systems, Inc., The Riverfront Development
Corp., CRT, Inc., Triple Seven Ice, Inc., Pattison Avenue Warehousing
Corp., and 777 Pattison Ave., Inc.
43
<PAGE>
*10.43 Series K Loan Agreement, dated February 1, 1997, between New Jersey
Economic Development Authority and Holt Hauling and Warehousing System,
Inc.
*10.44 Series K Mortgage and Security Agreement, dated February 1, 1997, among
Holt Hauling and Warehousing, 777 Pattison Ave., Inc. and New Jersey
Economic Development Authority.
*10.45 Mortgage and Security Agreement, dated March 15, 1994, among Holt
Hauling and Warehousing System, Inc., 777 Pattison Ave., Inc. and The
Bank of New York N.A.
*10.46 Contract of Sale, dated April __, 1994, between Holt Hauling and
Warehousing System, Inc. and Camden County Improvement Authority.
*10.47 First Leasehold Mortgage and Security Agreement, dated June 1, 1997,
between Holt Hauling and Warehousing System, Inc.
*10.48 Loan Agreement, dated March 2, 1992, among 777 Pattison Ave., Inc., Holt
Hauling and Warehousing System, Inc., B.H. Sobelman & Co., Inc.,
Refrigerated Distribution Center, Inc., Oregon Avenue Enterprises,
Incorporated, Holt Cargo Systems, Inc., CRT, Inc., The Riverfront
Development Corp., Triple Seven Ice, Inc., Pattison Avenue Warehousing
Corp. and Refrigerated Enterprises, Inc.
*10.49 Security Agreement, dated January 24, 1997, by Holt Cargo System, Inc.
in favor of Transamerica Business Credit Corporation.
*10.50 Client Services Agreement, dated July 10, 1995, between SLS Services,
Inc. and Wilmington Stevedores, Inc.
*10.51 Client Services Agreement, dated April 1, 1994, between SLS Services,
Inc. and Holt Cargo Systems, Inc.
*10.52 Client Services Agreement, dated April 1, 1994, between SLS Services,
Inc. and Holt Hauling & Warehousing System, Inc.
*10.53 Client Services Agreement, dated July 1, 1994, between SLS Services,
Inc. and Murphy Marine Services, Inc.
*10.54 Client Services Agreement, dated April 1, 1994, between SLS Services,
Inc. and The Riverfront Development Corporation.
*10.55 Amendment No. 1 to Client Services Agreement, dated January __, 1998, by
and among SLS Services, Inc., Holt Cargo Systems, Inc., Holt Hauling &
Warehousing System, Inc., Murphy Marine Services, Inc., The Riverfront
Development Corporation and Wilmington Stevedores, Inc.
*10.56 Option to Purchase and Development Agreement, dated March 27, 1998,
between Delaware Avenue Enterprises, Inc. and Holt Hauling and
Warehousing System, Inc.
*10.57 Promissory Notes dated February 25, 1998, April 2, 1998 and April 29,
1998 by Thomas J. Holt, Sr. in favor of The Holt Group, Inc.
*10.58 Amended and Restated Credit Agreement among the Holt Group, Inc., Holt
Cargo Systems, Inc., Holt Hauling and Warehousing System, Inc., Murphy
Marine Services, Inc., NPR Holding Corporation, NPR, Inc., NPR-Navieras
Receivables, Inc., NPR, S.A., Inc., San Juan International Terminals,
Inc., S.J.I.T., Inc., and Wilmington Stevedores, Inc., and First Union
National Bank, Summit Bank, Wilmington Trust of Pennsylvania and MBC
Leasing Corp. with First Union National Bank as Agent dated February 25,
1999.
------------
* Previously filed.
Exhibits submitted herewith:
10.59 First Amendment To Amended And Restated Credit Agreement among the Holt
Group, Inc., Holt Cargo Systems, Inc., Holt Hauling and Warehousing
System, Inc., Murphy Marine Services, Inc., NPR Holding Corporation,
NPR, Inc., NPR-Navieras Receivables, Inc., NPR, S.A., Inc., San Juan
International Terminals, Inc., S.J.I.T., Inc., and Wilmington
Stevedores, Inc., and First Union National Bank, Summit Bank, Wilmington
Trust of Pennsylvania and MBC Leasing Corp. with First Union National
Bank as Agent dated January 21, 2000.
44
<PAGE>
10.60 Extension of the Term of the Multi Currency Secured Revolving Credit
Facility dated November 5, 1999, between The Riverfront Development
Corporation and Finansbanken ASA.
10.61 Short Term Increase of the Multi Currency Secured Revolving Credit
Facility dated February 29, 2000 between The Riverfront Development
Corporation and Finansbanken ASA.
10.62 Increase of the Multi Currency Secured Revolving Credit Facility dated
April 3, 2000 between The Riverfront Development Corporation and
Finansbanken ASA.
12 Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries of The Holt Group, Inc.
27 Financial Data Schedule.
(b) Reports on Form 10-K
There were no Current Reports on Form 8-K filed during the quarter ended
December 31, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE HOLT GROUP, INC
(Registrant)
DATE: August 4, 2000 BY: /s/ Thomas J. Holt, Sr.
--------------------------------------------
Thomas J. Holt, Sr.
Chief Executive Officer (The
principal executive and financial officer)
DATE: August 4, 2000 BY: /s/ Lorraine Robins
--------------------------------------------
Lorraine Robins
Executive Vice Present and Director
DATE: August 4, 2000 BY: /s/ John A. Evans
--------------------------------------------
John A. Evans
General Counsel
45
<PAGE>
Item 8 Financial Statements
INDEX TO FINANCIAL STATEMENTS
THE HOLT GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Comprehensive Income (Loss)
for the years ended December 31, 1999, 1998 and 1997 F-6
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1999, 1998 and 1997 F-7
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 F-8
Notes to Consolidated Financial Statements F-10
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Stockholder and Directors
The Holt Group, Inc.
Gloucester City, New Jersey
We have audited the accompanying consolidated balance sheets of The Holt Group,
Inc. and subsidiaries and combined affiliate ("Holt" or the "Company") as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, comprehensive income (loss), stockholder's equity and cash flows for
each of the three years in the period ended December 31, 1999. These
consolidated financial statements are the responsibility of Holt's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 3, the financial statements as of and for the year ended
December 31, 1998 have been restated to give effect to the combination of a
related party as a result of a Company guarantee. The existence of this
guarantee caused covenant defaults under the Company's debt agreements which
resulted in the restatement of the Company's debt obligations at December 31,
1998 as current liabilities.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Holt as of
December 31, 1999 and 1998 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 1999
in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, to the
consolidated financial statements, the Company suffered a significant loss from
operations in 1999 and had a significant working capital deficiency as of
December 31, 1999 and is not in compliance with the terms of certain of its loan
covenants. These conditions raise substantial doubt about Holt's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. In addition, as described in Note 11, the Company is a
defendant in a lawsuit which may have a material adverse effect on the Company's
consolidated financial position and results of operations. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
BDO SEIDMAN, LLP
Philadelphia, Pennsylvania
June 6, 2000, except as to Notes 2, 8, 11 and 14 which are as of July 17, 2000
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
(restated)
------------ -----------
(Dollars in thousands)
<S> <C> <C>
Assets
Current assets
Cash $ 2,331 $ 4,826
Marketable securities 33,369 26,143
Receivables, net
Trade 46,225 57,077
Tenants 15,082 40,296
Other 7,299 13,669
Fuel and supplies 2,693 2,338
Prepaid expenses 5,607 4,113
Other current assets 96 586
--------- ---------
Total current assets 112,702 149,048
--------- ---------
Property, plant and equipment, net of accumulated
depreciation and amortization 220,132 236,953
--------- ---------
Other assets
Receivables, other 25,713 30,786
Receivables, tenants 14,229 -
Investments 2,925 2,925
Unamortized financing costs 3,071 3,616
Capitalized overhaul costs, net of amortization 14,780 19,333
Other 9,562 9,344
Insurance claim receivable 8,366 3,014
Receivables from non-consolidated affiliates 25,406 25,403
--------- ---------
Total other assets 104,052 94,421
--------- ---------
$ 436,886 $ 480,422
========= =========
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-3
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
(restated)
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Liabilities and Stockholder's Equity
Current liabilities:
Debt obligations $ 268,294 $ 304,002
Accounts payable 55,084 54,721
Payroll taxes payable 3,589 4,433
Accrued expenses 24,603 30,222
Payments in excess of billings 4,145 3,353
--------- ---------
Total current liabilities 355,715 396,731
Payables to non-consolidated affiliates 9,782 13,979
--------- ---------
Debt obligations, net of current maturities 49,750 -
--------- ---------
Other long-term liabilities 12,369 12,023
--------- ---------
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 11,543 58,547
Accumulated other comprehensive (loss) (3,404) (1,989)
--------- ---------
Total stockholder's equity 9,270 57,689
--------- ---------
$ 436,886 $ 480,422
========= =========
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-4
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
(restated)
--------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Revenue
Operating $ 301,344 $ 328,586 $ 92,326
Rental income 26,577 30,423 24,007
Other 18,694 11,426 2,610
Revenue from non-consolidated affiliates 99 41 55
--------- --------- --------
Total revenues 346,714 370,476 118,998
--------- --------- --------
Operating expenses
Terminal 83,040 95,103 30,431
General and administrative 92,118 55,726 26,112
Equipment maintenance 53,656 50,258 15,796
Insurance and safety 9,665 6,493 2,998
Vessel 39,110 45,761 5,815
Transportation 57,905 58,048 9,346
Depreciation and amortization 26,864 23,598 8,652
Operating taxes and licenses 546 552 227
Losses on investment in joint venture - 9,016 -
Charges from non-consolidated affiliates 574 741 1,207
--------- --------- --------
Total operating expenses 363,478 345,296 100,584
--------- --------- --------
Income (loss) from operations (16,764) 25,180 18,414
Interest expense, net 27,605 22,171 9,211
Other (income)
Gain on sale of property and equipment (4) (72) (7)
Dividends received (3,062) (5,799) (1,595)
Realized foreign exchange loss 20 94 50
--------- --------- --------
Total other (income) (3,046) (5,777) (1,552)
--------- --------- --------
Net income (loss) $ (41,323) $ 8,786 $ 10,755
========= ========= ========
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-5
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
(restated)
--------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Net income (loss) $ (41,323) $ 8,786 $ 10,755
Other comprehensive income (loss):
Foreign exchange translation adjustments 418 275 316
Changes in market value on marketable securities (1,833) (19,215) 16,635
--------- --------- --------
Total other comprehensive income (loss) (1,415) (18,940) 16,951
--------- --------- --------
Total other comprehensive income (loss) $ (42,738) $ (10,154) $ 27,706
========= ========= ========
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-6
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 (RESTATED) AND 1999
<TABLE>
<CAPTION>
Common Accumulated
Stock Common Additional Other Total
Number of Stock Paid-in Retained Comprehensive Stockholder's
Shares Amount Capital Earnings Income Equity
--------- ------- ----------- -------- ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 100 - $ 631 $ 48,873 $ - $ 49,504
Net income 10,755 10,755
Foreign exchange adjustments 316 316
Change in market value of
marketable securities 16,635 16,635
Dividends paid (4,481) (4,481)
--- --- ------- -------- -------- -------
Balance, December 31, 1997 100 - 631 55,147 16,951 72,729
--- --- ------- -------- -------- -------
Beginning accumulated (deficit)
Emerald Equipment Leasing, Inc. (365) (365)
Net income 8,786 8,786
Gain on sale of equipment to
company owned by relatives
of Holt's stockholder 500 500
Foreign exchange adjustments 275 275
Change in market value of
marketable securities (19,215) (19,215)
Dividends paid (5,021) (5,021)
--- --- ------- -------- -------- -------
Balance, December 31, 1998 100 - 1,131 58,547 (1,989) 57,689
--- --- ------- -------- -------- -------
Net (loss) (41,323) (41,323)
Foreign exchange adjustments 418 418
Change in market value of
marketable securities (1,833) (1,833)
Dividends paid (5,681) (5,681)
--- --- ------- -------- -------- -------
Balance, December 31, 1999 100 $ - $ 1,131 $ 11,543 $ (3,404) $ 9,270
=== === ======= ======== ======== =======
</TABLE>
See accopanying summary of accounting policies and
notes to consolidated financial statements.
F-7
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> Year ended December 31,
------------------------------------
1999 1998 1997
(restated)
--------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (41,323) $ 8,786 $ 10,755
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities
Depreciation and amortization 26,864 23,598 8,652
Writedown of capitalized overhaul costs 693
Gain on sale of property & equipment (4) (72) (7)
Reduction of claims liability (1,016)
Periodic pension cost (1,227)
Provision for uncollectible accounts 26,518 (415) -
Change in assets and liabilities
(Increase) decrease in assets
Trade receivables 4,571 (24,052) 20,705
Tenants receivables (6,015) (3,220) (22,809)
Fuel and supplies (355) (137) (68)
Prepaid expenses (1,494) (1,098) (2,779)
Other current assets 491 (3,411) 5,461
Other assets 918 1,317 1,939
Insurance claim receivable (5,352) (3,014) -
Increase (decrease) in liabilities
Accounts payable 1,018 12,424 374
Payroll taxes payable (844) 198 765
Accrued expenses (5,618) 12,088 2,034
Payments in excess of billings 792 (2) (426)
Other noncurrent liabilities 1,364 (4,820) (63)
--------- ------- -------
Net cash (used in) provided by operating activities (19) 18,170 24,533
--------- ------- -------
Cash flow from investing activities
Payment for NPR acquisition, net of cash acquired - (67,105)
Proceeds from sale of property & equipment 487 4,580 7
Purchases of marketable securities (9,059) (4,927) (23,521)
Purchases and construction of property, plant and equipment (6,311) (33,622) (9,674)
Capitalized overhaul costs (280) (20,831) -
Decrease (increase) in other receivables 8,206 (13,631) 10,911
Decrease (increase) in receivables from non-consolidated affiliates (3) (4,141) (149)
(Decrease) increase in payables to non-consolidated affiliates (4,197) 1,790 1,917
Increase in goodwill - (1,222) -
--------- ------- -------
Net cash (used in) investing activities (11,157) (72,004) (87,614)
--------- ------- -------
</TABLE>
F-8
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1999 1998 1997
(restated)
-------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flow from financing activities
Redemption of preferred stock - - (740)
Financing cost incurred (96) (721) (3,994)
Net proceeds (payments on) term notes 25,022 (28,500) (33,940)
Proceeds of long-term debt 1,484 172,630 166,387
Payments on long-term debt (12,048) (88,246) (55,314)
Contribution of capital - 500 -
Dividends paid (5,681) (5,021) (4,481)
-------- --------- ---------
Net cash provided by financing activities 8,681 50,642 67,918
-------- --------- ---------
Net increase (decrease) in cash (2,495) (3,192) 4,837
Cash, at beginning of year 4,826 8,018 3,168
-------- --------- ---------
Cash, at end of period $ 2,331 $ 4,826 $ 8,005
======== ========= =========
Supplemental disclosures of cash flow information
Cash paid during the year for interest, net of amounts capitalized $ 28,047 $ 19,757 $ 8,128
======== ========= =========
Non-cash investing and financing activities
Change in market value of marketable securities $ (1,833) $ (19,215) $ 16,635
Unrealized foreign exchange gain 418 275 316
Gain on sale of property and equipment to company
owned by relatives of Holt's stockholder - 500 -
Acquisition of NPR Holding Corporation
Fair market value of assets acquired $ - $ - $ 179,709
Liabilities assumed - - 110,679
-------- --------- ---------
Cash paid $ - $ - $ 69,030
======== ========= =========
</TABLE>
See accompanying summary of accounting policies and
notes to consolidated financial statements.
F-9
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Summary of Significant Accounting Policies
Business
The Holt Group, Inc. and its subsidiaries (collectively referred to as "Holt" or
the "Company") are engaged in stevedoring, trucking, warehousing and
distribution services; rental of real estate and equipment in the Delaware
Valley area, and container-shipping.
Principles of Consolidation and Combination and Basis of Presentation
During October 1997, Holt Hauling and Warehousing System, Inc.("HHW"), Holt
Cargo Systems, Inc.("HCS"), The Riverfront Development Corporation ("RFD"),
Murphy Marine Services, Inc. ("MMS") and subsidiary (Wilmington Stevedores,
Inc.), collectively, the Holt Subsidiaries, reorganized their operations. In
order to effectuate the reorganization, on October 31, 1997, the Holt
Subsidiaries sole stockholder contributed 100% of the common stock of the Holt
Subsidiaries to The Holt Group, Inc., which is 100% owned by the same
stockholder. Holt's wholly-owned subsidiaries are included in the accompanying
consolidated financial statements. This reorganization has been reflected
retroactively for all periods presented.
The consolidated financial statements include Holt's wholly owned subsidiaries,
Holt Hauling and Warehousing System, Inc., Holt Cargo Systems, Inc., The
Riverfront Development Corporation , Murphy Marine Services, Inc. and
subsidiary, San Juan International Terminals, Inc. ("SAN"), New-Port Stevedores,
Inc. formerly known as SJIT, Inc. ("SJIT") 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").
All significant intercompany transactions and balances have been eliminated.
Cash and Cash Equivalents
Holt considers highly liquid investments with a maturity of three months or less
at the time of purchase to be cash equivalents.
Marketable Securities
Holt classifies its marketable equity securities as available-for-sale including
its investment in ACL (see Note 5), since the Company does not believe it may
exert significant influence over the investee's financial or operational
activities. Available-for-sale securities are reported at fair market value,
with unrealized gains and losses included in accumulated other comprehensive
income (loss) and accumulated in the stockholder's equity section of the
consolidated balance sheet.
Foreign Currency Translation
Holt translates assets and liabilities at year-end exchange rates and income
statement items using average exchange rates. Translation adjustments are
included in accumulated other comprehensive income (loss) and accumulated in the
stockholder's equity section of the consolidated balance sheet. Losses from
foreign currency transactions are translated using average exchange rates.
Transaction gains and losses which are immaterial are included in results of
operations.
Property, Plant And Equipment And Depreciation And Amortization
Property, plant and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets ranging
from five to fifty years. Costs of construction in
F-10
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Summary of Significant Accounting Policies -- (Continued)
progress are segregated from other property accounts until construction is
completed, at which time depreciation charges commence. Maintenance and repair
costs are charged to operations as incurred, and major renewals and betterments
are capitalized. Leasehold improvements are amortized over the life of the
related assets.
Overhaul Costs
The Company accounts for vessel overhaul costs under the component depreciation
method. Costs incurred while a vessel is in drydock to satisfy the requirements
of various periodic regulatory inspections are capitalized and amortized over
the expected benefit period of approximately three to seven years. Repairs and
maintenance expenditures are expensed as incurred.
Valuation Of Long-Lived Assets
When events and circumstances warrant, the carrying value of long-lived assets
to be held and used is evaluated. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flow from such asset
is less than its carrying value. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair market value of the
long-lived asset. Holt believes that no material impairment existed at December
31, 1999.
Interest On Construction
Interest attributable to construction is capitalized into the cost of each
project on a pro rata basis. Interest capitalized in 1999, 1998 and 1997 was
$162, $1,106 and $650, respectively.
Revenue Recognition
Stevedoring, trucking and distribution services revenue is recognized when
services are provided to customers. Rental revenue is recognized over the term
of each lease. Ocean revenue is recognized based on relative transit time
(amount of days at sea) in each reporting period and related vessel operating
expenses are recognized as incurred.
Amortization Of Financing Costs
Financing costs are amortized using the straight-line method over the terms of
the respective bond issues.
Income Taxes
Effective January 1, 1998, all of the Holt Subsidiaries file a consolidated
federal return and, for certain state income taxes, subchapter S corporation tax
returns.
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.
Deferred income taxes which would apply only to non-subchapter S corporations
prior to January 1, 1998 are insignificant.
F-11
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Summary of Significant Accounting Policies -- (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities," was issued by the Financial
Accounting Standards Board in June 1998. SFAS 133, as amended by SFAS 137, is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. This Statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires recognition of all
derivatives as either assets or liabilities on the balance sheet and measurement
of those instruments at fair value. If certain conditions are met, a derivative
may be designated specifically as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm commitment
referred to as a fair value hedge, (b) a hedge of the exposure to variability in
cash flows of a forecasted transaction (a cash flow hedge), or (c) a hedge of
the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a forecasted
transaction. Holt does not currently use derivative financial instruments and
does not expect the adoption of Statement No. 133 to have a material impact on
its financial statements.
Reclassifications
Certain amounts in the December 31, 1998 and 1997 financial statements have been
reclassified to conform to the 1999 presentation.
2. 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.
The Company has retained professional advisors to assist in developing and
implementing its financial restructuring plan along with cashflow projections
for the 12 months ending June 30, 2001. Based on the Company's current cashflow
projections and assuming the satisfactory outcome of each of the factors
discussed in the second paragraph above, the Company anticipates being able to
make all scheduled debt service and vendor payments.
F-12
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
2. Going Concern - (Continued)
In order to address its liquidity needs and as discussed in Note 8, 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, provided 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.
As of December 31, 1999, the Company is 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
June 30, 2001. (see Note 8)
3. Combination of Emerald Equipment Leasing
The accompanying financial statements for the year ended December 31, 1998 have
been restated to give effect to the combination of Emerald, a company that is
majority owned by employees of SLS Services, Inc. (SLS). SLS is controlled by
certain directors of Holt who are relatives of Holt's sole shareholder. In April
2000, the Company became aware of the accounting impact of the existence of a
Company guarantee of the indebtedness of Emerald which had not been previously
considered in the preparation of its financial statements for the year ended
December 31, 1998. The existence of this guarantee resulted in covenant defaults
under certain Company debt agreements and certain lease commitments as discussed
in Note 11. As a result of these defaults, $207 million of indebtedness,
exclusive of Emerald, under the defaulted agreements should have been presented
in the Company's December 31, 1998 balance sheet as current liabilities rather
than long-term liabilities.
As a result of the existence of the Company guarantee referred to above, the
assets, liabilities and results of operations of Emerald should have been
combined into the Company's financial statements, which resulted in $44.7
million of additional total assets and $46.8 million of additional total
liabilities at December 31, 1998 and reduced net income and comprehensive income
by $1.8 million as compared to the amounts previously presented.
In connection with the acquisition of NPR and as discussed in Note 4 below, Holt
and NPR also entered into a sale/leaseback agreement with Emerald whereby
certain equipment with a net book value of $35 million was sold for $24 million
cash and a $11 million note receivable. The note receivable which was
outstanding at December 31, 1997 was paid in full during November 1998. No gain
or loss was recognized as the sales price was equal to the net carrying value of
the equipment. The agreement provides for monthly rental payments of $738 for 60
months. Holt and NPR have the option to terminate the lease at the end of 48
months by returning the equipment and paying a termination fee of $2.8 million.
Effective January 1, 1998, transactions with Emerald eliminate in the Company's
consolidated statements financial position and results of operations.
F-13
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
4. Acquisition of NPR Holding Corporation
On November 20, 1997, Holt acquired 100% of the outstanding common stock of NPR
Holding Corporation ("NPR") in exchange for $44.0 million cash and $25.0 million
in notes to the selling stockholders. This transaction was accounted for as a
purchase and Holt's consolidated statements of income includes NPR's operations
for the 45 days ended December 31, 1997 and for the years ended December 31,
1999 and 1998 (See Note 11).
5. Marketable Securities Available for Sale
In April 1997, RFD purchased 1,096,000 shares (subsequently converted into
2,192,000 shares as a result of a 2-for-1 stock split) of common stock,
representing 16.9% of the outstanding shares of Atlantic Container Line AB
(ACL), a publicly traded foreign corporation, at a cost of $23.5 million for
cash and a $8.5 million note payable to a foreign bank. The note which is
secured by the ACL shares acquired, is due in December 30, 2000 and bears
interest at the London Inter-Bank Offered Rate (LIBOR) plus 2.25%.
At December 31, 1999, RFD holds options to buy approximately 1.5 million shares
(11.1%) of ACL stock. The cost of the options was approximately $13.7 million.
As discussed below, these options were exercised in full prior to June 1, 2000.
Marketable securities available-for-sale and other cost investments were as
follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------------- -------------------------------
Unrealized Unrealized
Holding Holding
Cost Gain (Loss) Total Cost Gain (Loss) Total
-------- ----------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock - ACL $ 23,509 $ 2,525 $ 26,024 $ 23,509 $ 2,069 $ 25,578
Options - ACL 13,672 (6,928) 6,744 5,201 (4,649) 552
Other 601 - 601 13 - 13
-------- -------- -------- -------- ------- --------
Total $ 37,782 $ (4,413) $ 33,369 $ 28,723 $(2,580) $ 26,143
-------- -------- -------- -------- ------- --------
</TABLE>
Dividends declared for the years ended December 31, 1999, 1998 and 1997 were
$3,062, $5,799 and $1,595 and are included in Other Income in the accompanying
Consolidated Statements of Income.
The Company has a term loan with a foreign bank (see Note 8) which was amended
on April 3, 2000, to provide for an increase from NOK 80.0 million ($9.5
million) to NOK 205.0 million ($24.2 million) for purposes of acquiring
additional ACL shares. The amendment provides that the loan be reduced to NOK
145.0 million ($16.9 million) on June 30, 2000 and that any subsequent pay-down
of the term loan may be reborrowed provided that the outstanding balance of the
loan does not exceed NOK 145.0 million and that the loan to market value of the
ACL shares does not exceed 45%. Using the funds available under the increased
term loan, the Company exercised 1,325,000 of its options during April 2000. The
cost to exercise the options was $8.8 million. During April and May, 2000, the
Company also purchased 450,000 shares of ACL stock and exercised the remaining
200,000 options at a total cost of $5.1 million.The purchase of the ACL stock
and the exercise of the options increased the Company's ownership interest in
ACL from 16.9% to 32.1%.
F-14
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
5. Marketable Securities Available for Sale - (Continued)
On April 28, 2000, ACL paid a dividend to the Company in the amount of NOK 43.1
million ($4.8 million) which was used to reduce the amount of the term loan
outstanding to NOK 127.8 million ($14.3 million).
In accordance with the terms of amended loan, the Company borrowed NOK 17.2
million ($2.0 million) increasing the outstanding balance to NOK 145,000,000
($16.8 million) which is due December 31, 2000.
The Company does not exert significant influence over the financial or
operational activities of ACL and continues to hold the ACL stock as marketable
securities available for sale. The Company will periodically evaluate its
position with respect to this investment.
6. Investments
Technology Company
The investment is in a shipping company which intends to use patented technology
in the design and construction of ocean going vessels. The investment is stated
at its cost of $2,925 and is included in "Investment" in the accompanying
balance sheet.
TNX Joint Venture
Holt owns a 40% interest in a joint venture ("TNX") which provided cargo and
transportation services between certain ports in the United States, San Juan and
South America, and which is accounted for under the equity method.
The joint venture required a capital contribution of $500, which approximated
Holt's share of operating losses as of and for the period ended November 20,
1997, the date of Holt's acquisition of NPR (see note 4).
As a result of operating losses, TNX was wound down and terminated in the fourth
quarter of 1998.
During 1998, Holt advanced $9 million to TNX for working capital. As a result of
the losses from TNX operations and the winding down of operations, Holt fully
reserved these advances at December 31, 1998. Holt did not make any further
advances to the joint venture in 1999.
F-15
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
7. Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------
1999 1998
--------------------------- -------------------------
Estimated Accumulated Accumulated
Useful Depreciation and Depreciation and
Life Cost Amortization Cost Amortization
-------------- -------- ---------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Land - $ 15,905 $ - $ 15,905 $ -
Building 15 to 50 years 32,159 10,808 30,236 9,985
Improvements 5 to 50 years 13,113 5,434 12,750 4,780
Equipment 5 to 20 years 105,963 47,283 105,796 33,347
Vessels 11 to 14 years 98,357 15,545 97,300 15,989
Piers 40 to 50 years 34,971 11,775 34,851 10,913
Construction in
progress - 10,509 15,129 -
-------- ------- -------- -------
$310,977 $90,845 $311,967 $75,014
-------- ------- -------- -------
</TABLE>
Construction in progress at December 31, 1999 and 1998 consists of $4.8 million
of undeveloped land, ongoing construction of certain buildings and various crane
improvements.
There were no material commitments with respect to construction in progress at
December 31, 1999.
F-16
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
8. Debt Obligations
At December 30, 1999 and December 31, 1998 the Company's debt obligations
consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
------- ---------
<S> <C> <C>
Revolving credit facility due on June 30, 2001 with interest
payable monthly at prime plus 3/4%, 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. $ 42,500 $ 37,000
Term loan due the earlier of the finalization of the insurance claim regarding
Hurricane Georges or June 30, 2001 with interest payable monthly at prime
plus 3/4% 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. 17,250 -
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 2.25%, collateralized
by investments in marketable securities. 9,994 9,036
Equipment financing payable in monthly installments aggregating $1.4 million,
including interest. The weighted average interest rate at December 31, 1999
was 7.86% collateralized by certain equipment. 48,691 58,877
Construction mortgage payable in monthly installments of $33 including interest
at 6%; final payment of $2,952 including interest, is due in March, 2012. 4,895 4,896
Demand note payable in monthly installments of $19 plus interest
at 1.25% over prime. The final payment of $1,206 is currently due. 1,206 1,419
Line of credit due October 31, 2000 with interest payable
monthly at prime plus 1.0% 900 -
Term loan payable in monthly installments of $16 plus interest at prime. 656 750
Term loan payable in monthly installments of $16 plus interest at prime. 656 750
Term loan payable in monthly installments of $1.1 including
interest at 11%. 46 24
Bonds payable 51,250 51,250
-------- ------
Total debt obligations 318,044 304,002
Less current debt obligations 268,294 304,002
-------- -------
Net long-term debt obligations $ 49,750 $ -0-
======== ========
</TABLE>
F-17
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
8. Debt Obligations - (Continued)
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.
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
As of December 31, 1999, the Company is in default with certain provisions of
the Revolving Credit Agreement and 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. Except with respect to
the revolving credit facility and the term loan, at December 31, 1999, the
Company remains in default under its debt obligations at December 31, 1999. As a
result of these defaults and because the banks, bondholders and trustees have
the right to accelerate the Company's indebtedness to each of them,
respectively, $10.0 million of the Company's total obligations which is due
prior to December 8, 2000 in accordance with the second amendment of and under
the Revolving Credit Agreement and the remainder of the Company's long-term debt
obligations have been reclassified as a current liability.
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. The
amendment provides that the second term loan mature on June 30, 2000. The
amendment also 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.
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 terms loan to June 30, 2001 provided that the Company make
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 terms loan. 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 wavier of all defaults existing under the Revolving Credit Agreement on the
date of execution of the second amendment.
F-18
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
8. Debt Obligations - (Continued)
The 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.
The prime rate noted in certain loan agreements at December 31, 1999 and 1998
was 8.50% and 7.75% respectively.
Substantially all assets are pledged as collateral for the Company's
indebtedness.
9. Other Long Term Liabilities
At December 31, 1999 and 1998, other long-term liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1999 1998
------- -------
<S> <C> <C>
Deferred rental payments $ 977 $ 622
Reserves for insurance deductible 480 507
Payables to related parties 1,499 915
Reserve for asbestos claims -0- 1,046
Reserve for post retirement benefits, net of current
portions of $653 and $637 for 1999 and 1998, respectively 8,237 8,419
Reserve for post employment benefits 626 514
Gain on sale/leaseback of equipment 550 -0-
------- -------
$12,369 $12,023
======= =======
</TABLE>
10. Employee Benefit Plans
In connection with the acquisition described in Note 4, Holt assumed and
continued all the NPR employee benefit plans.
Pension and Postretirement Benefits Plans
Substantially all nonunion employees of NPR are covered under a noncontributory
defined benefit retirement plan. In addition, Holt has an unfunded plan to
provide postretirement health care and life insurance benefits to certain NPR
employees who retire with a minimum of 10 years of service. These benefits are
accrued over the period the employee provides services to Holt.
Holt amended the plan effective January 31, 1998 freezing the accrued benefit as
of that date. This amendment eliminated for all employees the accrual of
benefits for future service.
F-19
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
10. Employee Benefit Plans - (Continued)
The following tables provide a reconciliation of the changes in the plans'
benefit obligations, fair value of assets and the plans' the funded status as of
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1999 1998
--------------------- -----------------
Pension Other Pension Other
Benefits Benefits Benefits Benefits
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Reconciliation of benefit obligation
Benefit obligation at beginning of year/period $48,539 $8,066 $45,293 $7,624
Service cost - 122 129 125
Interest cost 3,157 531 3,186 545
Participant contributions - 33 - 45
Actuarial (gain) loss (4,883) (263) 3,074 581
Benefits paid (3,405) (855) (3,143) (854)
------- ------ ------- ------
Benefit obligation at December 31, $43,408 $7,634 $48,539 $8,066
------- ------ ------- ------
</TABLE>
F-20
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
10. Employee Benefit Plans - (Continued)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1999 1998
------------------- -------------------
Pension Other Pension Other
Benefits Benefits Benefits Benefits
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of
year/period $50,421 $ - $48,246 $ -
Actual return on plan assets 4,066 - 4,291 -
Employer contributions - 820 1,028 809
Participant contributions - 33 - 45
Benefit payments (3,405) (853) (3,144) (854)
------- ------ ------- ------
Fair value of plan assets at December 31, $51,082 $ _ $50,421 $ _
======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1999 1998
------------------- -------------------
Pension Other Pension Other
Benefits Benefits Benefits Benefits
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Funded status
Funded status at December 31 $(43,408) $(7,634) $(48,539) $(8,066)
Fair value of assets 51,082 - 50,421 -
Unrecognized (gain) loss (2,466) (1,256) 2,592 (990)
-------- ------- -------- -------
Prepaid (accrued) benefit cost* $ 5,208 $(8,890) $ 4,474 $(9,056)
======== ======= ======== =======
</TABLE>
----------------
* Included in Other Non-current Assets
The assumptions used in the measurement of Holt's benefit obligations are shown
in the following table:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1999 1998
------------------- -------------------
Pension Other Pension Other
Benefits Benefits Benefits Benefits
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Discount rate 7.75% 7.75% 6.75% 6.75%
Expected return on plan assets 8.00% n/a 8.00% n/a
</TABLE>
F-21
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
10. Employee Benefit Plans - (Continued)
The following table provides the components of net periodic benefit cost for the
plans:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1999 1998 1997
------------------- -------------------- ------------------
Pension Other Pension Other Pension Other
Benefits Benefits Benefits Benefits Benefits Benefits
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ - $122 $ 129 $125 $118 $12
Interest cost 3,157 531 3,186 545 294 45
Expected return on plan assets (3,891) - (3,809) - (268) -
Amortizatioh of net (gain) - - (33) (31) (5)
------- ---- -------- ---- ---- ---
Net periodic benefit cost $ (734) $653 $ (494) $637 $131 $52
------- ---- -------- ---- ---- ---
</TABLE>
Gains and losses in excess of 10% of the greater of the benefit obligation and
the market-related value of assets are amortized over the average remaining
service period of active participants.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in the assumed health care cost
trend rates would have the following effects:
<TABLE>
<CAPTION>
1% 1%
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost components of
net periodic postretirement health care benefit cost $ 12 $ (12)
Effect on the health care component of the accumulated
postretirement benefit obligation $137 $(144)
</TABLE>
It is the policy of NPR to fund pension costs in accordance with actuarially
computed funding requirements and the various bargaining agreements.
Certain Holt employees are covered under union-sponsored collectively bargained
defined benefit plans. Expenses for these plans were $8,046 in 1999, $7,727 in
1998 and $5,722 in 1997 as determined in accordance with negotiated labor
contracts.
NPR also provides a defined contribution 401(k) plan for its management
employees. The plan is 100% contributory by the employees.
F-22
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
11. Commitments and Contingencies and Other Matters
Commitments
Contributions to certain labor-related benefit plans are subject to various
assessments under certain collective bargaining agreements. Certain of these
assessments are subject to audit and final determination, and in the opinion of
Holt, the accompanying financial statements include adequate recognition of the
estimated liability for these assessments.
At December 31, 1999 and 1998, Holt was contingently liable for outstanding
standby letters of credit in the amount of $6,325 and $6,340, respectively.
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 withdrawal liability that could approximate $12.8 million. While the
Company has several options to fully mitigate this potential claim, it has
accrued its estimate of the maximum exposure at this time.
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.
For the years ended December 31, 1999 and 1998, the Company deferred $11.6
million and $8.4 million, respectively of incremental direct expenses incurred
as a result of Hurricane Georges. During the fourth quarter of 1999, the Company
revised certain of its estimates relating to its insurance claim. The change in
estimate resulted in a $3.6 million charge to operations. To date the Company
has received $8 million from its insurance carrier and has recorded an insurance
claim receivable of $8.4 million at 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.
Contingencies
Philadelphia Regional Port Authority
The Company 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
F-23
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
11. Commitments and Contingencies and Other Matters - (Continued)
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 Company.
PRPA filed a counterclaim alleging that the Company breached its obligations
under the PRPA lease by operating the Packer Avenue Facility in a manner
intended to benefit the Company's 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 Company has 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
Company and the DRPA and PPC. As part of the same settlement agreement, the
Company agreed that it would withdraw its claim against PRPA for monetary
damages. The settlement agreement further resolved all other claims except the
Company's 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 Company's 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 $50,000,000 to compensate
them for damages to their property and business arising out of defendants'
alleged negligence and NPR's breach of contract.
In their lawsuit, the plaintiffs claim that during Hurricane Georges, NPR's
cranes, two of which are leased from Sea-Land, broke from their securing
arrangements and struck plaintiffs' cranes because defendants failed to properly
prepare for the Hurricane. Furthermore, the plaintiffs claim that since NPR is
obligated, under its lease with Sea-Land for the cranes, to indemnify Sea-Land
for all losses incurred by Sea-Land in any way relating to possession and use of
the 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 and a pretrial conference has
been scheduled for November 1, 2000. 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.
F-24
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
11. Commitments and Contingencies and Other Matters - (Continued)
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. The Company is unable to determine the outcome or to reasonably
estimate the amount of loss, if any, with respect to this matter at this time.
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.
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.
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.
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 $4.9 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 Company and other defendants have filed an answer to the City and intend to
vigorously defend this suit. The Company is unable to determine the outcome or
to reasonably estimate the amount of loss, if any, with respect to this matter
at this time.
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 ebt and on a parity with the remaining
mortgage debt.
F-25
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
11. Commitments and Contingencies and Other Matters - (Continued)
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 is outstanding
at December 31, 1999. 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 is outstanding at
December 31, 1999. 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 December 31, 1999, 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 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 December 31, 1999 is $4.7
million.
Vessel Financings
Certain of the Company's subsidiaries have guaranteed obligations of Christian
Holdings (Luxembourg) S.A. ("CHL") in connection to 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 March 31, 2001. CHL is
currently in the process of completing these negotiations. The balance of the
loan on June 30, 2000 is $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. In
addition, 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.
F-26
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
11. Commitments and Contingencies and Other Matters - (Continued)
Lease Commitments
As of December 31, 1999, Holt leases property and equipment under noncancelable
operating leases requiring minimum annual rentals as follows:
Related
Party Other
Year Ending December 31, Leases Leases Total
------------------------ ----------- -------- --------
2000 $ 3,566 $ 18,308 $ 21,874
2001 2,121 15,945 18,066
2002 2,121 14,469 16,590
2003 2,121 11,117 13,238
2004 1,761 10,824 12,585
Thereafter 4,238 95,763 100,001
------- -------- --------
$15,928 $166,426 $182,354
======= ======== ========
Rental expense under the Related Party Leases (referenced above) consist of
several components, including base rent, a container pick fee, a break bulk
cargo fee and certain other fees.
Holt has a 25-year noncancelable lease for certain buildings located on the
Gloucester Marine Terminal and a 30-year noncancelable lease for a marine
terminal facility located in Camden, New Jersey (collectively the "Facilities")
all of which are owned by the same governmental authority referred to in the
first paragraph under "Guarantees" above. Minimum annual rentals are reflected
in the above schedule. Holt has the right to purchase the Facilities throughout
the term of the lease. The purchase price is the greater of the fair market
value of the Facilities or the amount required to optionally redeem or defease
the bonds under the landlord's indenture.
As of December 31, 1999, the Company is in default with certain financial
covenants under the above lease agreements. As a result of these covenant
defaults, the lessor has the right to accelerate the Company's lease payments.
The Company intends to request waivers of its financial covenant defaults, but
there can be no assurance that these waivers will be obtained.
Rent expense under noncancelable lease obligations charged to operations was
$21,306 in 1999, $17,960 in 1998 and $8,364 in 1997.
12. Leases
Holt is the lessor of substantially all of the Gloucester Marine Terminal
utilizing operating leases for periods expiring through September 2004.
F-27
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
12. Leases - (Continued)
Minimum rentals receivable under noncancelable lease arrangements as of December
31, 1999 were as follows:
Related
Party Other
Year Ending December 31, Leases Leases Total
------------------------ ------- ------ -------
2000 $ 9,121 $1,637 $10,758
2001 9,000 184 9,184
2002 9,000 - 9,000
2003 9,000 - 9,000
2004 6,750 - 6,750
------- ------ -------
$42,871 $1,821 $44,692
======= ====== =======
Holt leases property to companies (the "Lessee-Operators") owned by a related
party as discussed below. Effective October 1, 1999, Holt amended certain of the
Lessee-Operators' lease agreements for its Gloucester Facility. As a result of
the new lease agreements, rental revenues for the quarter ended December 31,
1999 were $4.7 million less than they would have been under the prior leases.
During January 2000, the Lessee-Operators were acquired by a company owned by
the sons of Holt's principal stockholder. Effective April 3, 2000, in a debt
restructuring by the Lessee-Operators, Holt received a $36.1 million promissory
note in exchange for 100% of the unpaid receivable balances due from the
Lessee-Operators arising on or before December 31, 1999. The promissory note
bears interest of 2% per annum and is payable in monthly installments of not
less than $750,000, including interest. As a result of the amended lease
agreements and execution of the promissory note, the Company reclassified $14.2
million of Tenant receivables to Other non-current assets in the accompanying
consolidated balance sheet.
At December 31, 1999 and 1998, "Tenant receivables" includes $27,511, net of
reserves of $17,000, and $29,074 respectively, due from the Lessee-Operators.
Net book value of property being leased was approximately $53.2 million and
$50.9 million at December 31, 1999 and 1998, respectively.
13. Non-Consolidated Affiliate Transactions
Holt transacts business with companies which are 100% or majority owned by
Holt's principal 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 December 31, 1999 and 1998, $25,406 and $25,403 was due to Holt in
connection with net advances made and services performed on behalf of certain
non-consolidated affiliates. At December 31, 1999 and 1998, $9,782 and $13,979
was due to certain non-consolidated affiliates in connection with net advances
and services received. Revenue for these services totaled $99, $41 and $55 in
1999, 1998 and 1997, respectively. These companies provided services to Holt
which included rental of warehouse space, building and equipment repairs,
management services and sale of ice. Expenses for these services totaled $574,
$741 and $1,207 in 1999, 1998 and 1997, respectively.
F-28
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
14. Other Related Party Transactions
Leases
In 1999, 1998, and 1997, 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 $2,674 in 1999, $2,972 in 1998 and $2,981 in 1997 and
are included in the minimum annual rentals disclosed in Note 11 above.
Account Receivable - Trade
At December 31, 1999, Account Receivable, Trade includes $3.3 million, net of
reserves of $5.0 million, due from a Holt related party.
Corporate Services
Holt has an agreement to purchase general and administrative support services
from SLS. Expense for these services totaled $9,264 in 1999, $6,509 in 1998 and
$4,492 in 1997.
In the normal course of business, Holt performs services for SLS. At December
31, 1999 and 1998, Receivables tenants includes $931 and $513, respectively, due
from SLS.
At December 31, 1999 and 1998, "Other Noncurrent Receivables" included $4,913
and $12,023, respectively, due from SLS and other companies owned by
shareholders of SLS.
Sale of Equipment
On January 5, 1998, Holt sold certain equipment to a Holt related party for $5
million of which $1.9 million is included in "Other Noncurrent Receivables" in
the accompanying balance sheet at December 31, 1999. The sale resulted in a gain
of $500 which is included as a component of stockholder's equity.
Agreements
During 1998, Holt has entered into an Option to Purchase and Development
Agreement with Delaware Avenue Enterprises, Inc. (DEL), a Holt related party.
Pursuant to the agreement, Holt paid $8 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 Holt in its future operations. The option
expires on December 31, 2013. The cost of the option is included in "Noncurrent
Receivables Other" in the accompanying balance sheet.
In connection with the agreement, the Company loaned $10 million in 1998 and an
additional $4.0 million in 1999 in exchange for promissory notes, collectively,
(the "Notes"). The Notes bear interest at 1% over the prime rate and mature on
the earlier of December 31, 2013 or the date on which Holt exercises its option
and purchases the Premises. The notes are secured by a mortgage and security
agreement on the Premises and a contiguous 28-acre site. The note is 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 intends to use the
remainder for general working capital purposes. In conjunction with the
transaction, the Company terminated its $8.0 Option to Purchase and Development
Agreement with DEL and will record this charge to earnings in the second quarter
of 2000.
F-29
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
14. Other Related Party Transactions - (Continued)
Note Receivable
In 1998, the Company loaned the principal stockholder $5.0 million in exchange
for a promissory note. The note bears interest at prime plus 1% (8.75% at
December 31, 1998) and is included in "Other Current Receivables" in the
accompanying Balance Sheet. The note and related interest were repaid in full
during 1999.
15. Concentrations of Credit Risk
Financial instruments which potentially expose the Company to concentrations of
credit risk consist primarily of trade receivables. A significant portion of the
Company's sales are to customers in diversified industries, and as such, the
Company is directly affected by the well-being of these industries.
The credit risk associated with trade receivables is limited due to the large
number of customers comprising the Company's customer base, except for trade
receivables from related parties for which reserves have been provided.
Likewise, the credit risk associated with tenant receivables is mitigated as
reserves have been provided. The Company does not obtain collateral from its
customers. During 1997, sales to one customer accounted for 10.5% of revenues,
whereas sales to this customer were less than 10% of revenues for 1999 and 1998.
No other customer generated more than 10% of the Company's sales for the years
ended December 31, 1999, 1998 and 1997, respectively.
16. Fair Value of Financial Instruments
As of December 31, 1999, the estimated fair values of the Company's financial
instruments and significant assumptions made in determining fair values are as
follows:
o Cash, accounts receivable, accounts payable, payroll taxes payable and
accrued expenses: The amounts reported in the balance sheet approximate
fair value due to the short-term maturities of these instruments.
o Receivables, other and long-term debt: The amounts reported in the balance
sheet are at market rates of interest and approximate fair value.
o Receivable from/payables to non-consolidated affiliates: Due to uncertain
repayment terms, it is not practicable to estimate fair market value.
17. Non-Guarantors
RFD, a wholly owned subsidiary of Holt and Emerald, are not guarantors on the
Senior Notes (See note 8). The guarantor subsidiaries are wholly owned 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.
F-30
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
17. Non-Guarantors - (Continued)
Summarized financial information is as follows:
<TABLE>
<CAPTION>
December 31, 1999
--------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
-------- ---------- ------- ------- ------------ ------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 76 $ 78,640 $33,369 $ 617 $ - $112,702
Non-current assets 289,130 298,657 3,925 36,156 (303,684) 324,184
Current liabilities 208,587 99,190 10,013 37,925 - 355,715
Non-current liabilities - 145,906 21,041 2,237 (97,283) 71,901
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1999
--------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
-------- ---------- ------- ------- ------------ ------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 30,145 $373,479 $ - $10,260 $ (67,170) $346,714
Operating income (loss) 26,042 (14,836) (56) 2,231 (30,145) (16,764)
Net income (loss) 7,559 (19,563) 2,078 (1,252) (30,145) (41,323)
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
-------- ---------- ------- ------- ------------ ------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 5,794 $116,374 $26,130 $ 750 $ - $149,048
Non-current asssets 257,325 300,432 2,925 44,427 (27,735) 331,374
Current liabilities 44,533 296,730 9,069 46,399 - 396,731
Non-current liabilities 140,000 (32,729) 15,257 915 (97,441) 26,002
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
-------- ---------- ------- ------- ------------ ------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 28,730 $395,943 $ - $ 8,857 $ (63,054) $370,476
Operating income 25,073 27,421 (204) 1,619 (28,729) 25,180
Net income 11,036 23,941 4,811 (1,773) (29,229) 8,786
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
-------- ---------- ------- ------- ------------ ------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 500 $ 99,943 $40,144 $ - $ - $140,587
Non-current assets 208,048 240,497 3,925 - (210,679) 241,791
Current liabilities 11,134 69,497 9,234 - - 89,865
Non-current liabilities 125,000 144,188 14,817 - (64,221) 219,784
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997
--------------------------------------------------------------------------
Subsidiary
HGI Guarantors RFD Emerald Eliminations Consolidated
-------- ---------- ------- ------- ------------ ------------
Non-Guarantors
<S> <C> <C> <C> <C> <C> <C>
Revenue $ - $132,746 $ - $ - $ (13,748) 118,998
Operating income (2,344) 20,790 (149) - 117 18,414
Net income (3,883) 13,513 1,008 - 117 10,755
</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.
F-31
<PAGE>
THE HOLT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
18. Unaudited Quarterly Results
Summarized quarterly financial data for the years ended December 31, 1999 and
1998 are as follows:
Quarter Ended*
----------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1999
Revenues $93,127 $85,972 $ 86,352 $ 81,263
Income (loss) from operations 10,788 4,086 (4,882) (26,756)
Depreciation expense 6,992 6,948 7,444 5,480
Interest expense 6,189 7,332 7,005 7,079
Net income (loss) $ 4,587 $ (190) $(11,877) $(33,843)
1998
Revenues $95,765 $92,860 $ 84,513 $ 97,338
Income from operations 10,691 2,586 6,103 5,800
Depreciation expense 6,274 5,389 5,514 6,421
Interest expense 5,530 5,306 5,812 5,523
Net income $ 5,164 $ 3,055 $ 276 $ 291
Income (loss) from operations and net income (loss) for all quarters presented
have been adjusted to include the operations of Emerald (see Note 3), reflect
revenue adjustments of $4.0 million for the six months ended June 30, 1999 and
$1.2 million for the three months ended September 30, 1999 and to reallocate
$2.7 million of the advances of $8.0 million received by the Company from its
insurance carrier previously recorded as other income for the three months ended
September 30, 1999.
In addition, income (loss) from operations and net income (loss) for the
quarters ended September 30, 1999 and December 31, 1999 have been adjusted by
$8.0 million and $9.0 million, respectively, to reflect increases in the
allowance for uncollectible receivables. (see Note 19)
* Restated for all quarters for the year ended December 31, 1998 and for the
first, second and third quarters of 1999.
19. Fourth Quarter Adjustments
During the fourth quarter of 1999, the Company established reserves of $10.0
million for certain of its trade receivables and other receivables. The Company
also established reserves of $9.0 million for certain of its tenants
receivables.
F-32
<PAGE>
THE HOLT GROUP, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Dollars in Thousands
Balance at (Credited) Balance at
Year Beginning to Costs End
Ended of Period and Expenses Deductions(1) of Period
----- ---------- ------------ ------------- ----------
1999 $3,373 $24,512 $ (286) $27,599
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1998 6,146 407 (3,180) 3,373
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1997 $5,107 $ 1,952 $ (913) $ 6,146
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(1) Represents uncollectible accounts written off.
1998 amount includes $1.0 million general reduction in reserve balance
