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EXHIBIT 99.1
THE ENSTAR GROUP, INC.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Section 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. The Enstar Group, Inc. ("Enstar" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Enstar. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Enstar undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Enstar provides the following risk factor disclosure in connection with its
continuing effort to qualify its written and oral forward-looking statements for
the safe harbor protection of the Reform Act and any other similar safe harbor
provisions. Important factors currently known to management that could cause
actual results to differ materially from those in forward-looking statements
include the following:
RECENT ACQUISITION; UNCERTAINTY OF ACQUISITION TARGET; COMPETITION FOR SUITABLE
ACQUISITIONS
In July 2000, the Company, through B.H. Acquisition Limited ("B.H.
Acquisition"), a joint venture, acquired two reinsurance companies of Petrofina
S.A., a subsidiary of TotalFina Elf S.A. The reinsurance companies, Brittany
Insurance Company, Ltd. ("Brittany"), incorporated under the laws of Bermuda,
and Compagnie Europeenne d'Assurances Industrielles S.A. ("CEAI"), a Belgian
corporation, were purchased by B.H. Acquisition for $28.5 million. In exchange
for a capital contribution of approximately $9.6 million, including
approximately $200,000 for expenses and working capital, the Company received
50% of the voting stock and a 33% economic interest in B.H. Acquisition.
Brittany and CEAI are principally engaged in the active management of books of
reinsurance business from the international markets. There can be no assurance
that Brittany and CEAI or any other operating business that the Company may
acquire in the future will bring value to the Company's shareholders.
In terms of the Company's on-going search for one or more suitable
operating businesses, the business of any future acquisition target may be
subject to numerous, unpredictable risks. By way of example only, the
acquisition target may be subject to government regulation, or dependent upon
new technology or new product development. In sum, there can be no assurance
that the Company will make any acquisition that will prove financially
advantageous to the Company's shareholders.
The Company faces intense competition in its search for one or more
operating businesses. The Company competes with strategic and financial buyers
and others looking to acquire suitable operating businesses, who have greater
financial resources and greater flexibility in structuring acquisition
transactions or strategic relationships than the Company.
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NO RECENT OPERATING HISTORY; BLIND POOL INVESTMENT
The Company filed for protection under Chapter 11 of the United States
Bankruptcy Code on May 31, 1991 and operated as a reorganized debtor pursuant to
its Second Amended Plan of Reorganization, as modified until July 17, 1997 when
the United States Bankruptcy Court for the Middle District of Alabama closed the
Company's Chapter 11 proceedings by final order.
Because the Company has only recently acquired an operating business, the
Company does not have any significant operating history on which to base its
performance or its prospects. The executive officers and Board of Directors will
select future acquisitions for the Company. For certain acquisitions no
shareholder approval will be necessary. Thus, the Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their beginning stages of development.
SUBSTANTIAL CHANGE IN THE NATURE OF THE COMPANY'S BUSINESS
The Company's long term viability, profitability and growth depend on its
ability to successfully realize the plans of the Company's management and Board
of Directors. The magnitude of the changes in the Company that have occurred
since its emergence from bankruptcy make it difficult to evaluate its future
prospects on the basis of historical information relating to the Company. In
addition, significant challenges are often encountered in attempting to build a
business upon emerging from bankruptcy.
DEPENDENCE ON EXECUTIVE OFFICERS AND DIRECTORS
The success of the Company is highly dependent on the ability of Nimrod T.
Frazer, the Company's Chairman, President and Chief Executive Officer, and the
other executive officers and directors of the Company to identify and consummate
an acquisition on favorable terms. Effective December 1, 1998, J. Christopher
Flowers became Vice Chairman of the Board of Directors. Additionally, on March
2, 2000, John J. Oros was named Executive Vice President and elected as a
director of the Company. The Company believes Mr. Flowers and Mr. Oros'
extensive business and financial talent and experience greatly enhance the
Company's ability to locate an operating business.
The identification of attractive business opportunities is difficult and
involves a high degree of uncertainty. There can be no assurance that the
Company's Board of Directors or management will be successful in identifying
attractive business opportunities or successfully consummating any transactions.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price for the Company's common stock may fluctuate substantially
due to the following factors:
- announcements with respect to an acquisition;
- changes in the value of the Company's assets;
- quarterly operating results of the Company;
- changes in general conditions in the economy;
- the financial markets; and
- adverse press or news announcements.
In addition, from time to time the stock market experiences significant
price and volume fluctuations. This volatility affects the market prices of
securities issued by many companies for reasons unrelated to their operating
performance.
INVESTMENT COMPANY ACT OF 1940
As a result of the Company's Second Amended Plan of Reorganization, as
modified, the Company held shares of First Union common stock as its primary
asset for a period of time longer than the twelve months
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ending March 27, 1998, and may have been required to register as an investment
company under the Investment Company Act of 1940 (the "1940 Act"). Registration
under the 1940 Act would subject the Company to many constraints not incurred by
most operating companies. On March 19, 1998, the Company filed an application
with the Securities and Exchange Commission (the "SEC") requesting a two year
exemption from registration under the 1940 Act. In April 1998, the Company
received initial comments on the original application from the staff of the SEC
and filed an amended application on May 22, 1998. While the amended application
was still pending, the Company liquidated all of its First Union common stock
and is generally holding the proceeds in cash, cash equivalents and short-term
certificates of deposit. Accordingly, the Company believes that its status as an
inadvertent investment company has been effectively resolved. In the event the
Company again holds securities as its primary asset, then it may be required to
register under the 1940 Act. If the Company were required to register under the
1940 Act, registration could have material adverse consequences on the Company's
operations. The 1940 Act imposes, among other things, significant restrictions
and requirements on an investment company's capital structure, the composition
and duties of its board of directors, the custody of its assets, the declaration
of dividends, and transactions with its affiliated persons.
GENERAL ECONOMIC RISKS AND BUSINESS CYCLES
Acquisitions are affected by the current economic conditions and the
business cycle. There can be no assurance that the economic conditions or status
of the business cycle will be favorable.
RISK OF NO DIVERSIFICATION
The Company does not plan to diversify across several industries. In fact,
the Company may decide to acquire one or more businesses operating in a single
industry.
FINANCING LIMITATIONS
The Company may be outbid by another company with respect to any given
acquisition and there may be certain financing contingencies that will restrict
the ability of the Company to make a given acquisition.
ANTITAKEOVER PROVISIONS
The Company's Articles of Incorporation and Bylaws contain provisions that
may discourage other persons from attempting to acquire control of the Company.
One such provision involves procedural requirements in connection with
shareholder nominations for election of directors. The Company has also elected
to be subject to certain provisions of the Georgia Business Corporation Code and
has adopted a share purchase rights plan. The market price of the Company's
common stock may be affected by the forgoing provisions and agreements which
inhibit or discourage take-over attempts.
TAX CONSIDERATIONS
The Company has claimed total deductions for net operating loss
carryforwards ("NOLs") of approximately $47.4 million on its federal income tax
returns for its taxable years ended August 31, 1997, 1998 and 1999. The Company
has remaining NOLs of approximately $47.2 million that may be deductible in
future taxable years (subject to applicable limitations under the Internal
Revenue Code). Although the Company believes that it is entitled to the
deductions for NOLs that it has claimed on its federal income tax returns for
the taxable years ended August 31, 1997, 1998 and 1999, there can be no
assurance that the Internal Revenue Service will not challenge the Company's
position or as to the result of any such challenge. Further, there can be no
assurance that the Company will be able to deduct the remainder of its NOLs for
federal income tax purposes in future taxable years.
INVESTMENTS
On July 3, 2000, the Company, through a joint venture, acquired two
reinsurance companies of Petrofina S.A., a subsidiary of TotalFina Elf S.A. The
two companies are principally engaged in the active management
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of books of reinsurance business from the international markets. There can be no
assurance that this acquisition will be financially advantageous to the Company.
In November 1998, the Company purchased $950,000 of membership units of
B-Line LLC ("B-Line"), a privately owned company that provides services to
credit card issuers and other holders of similar receivables. B-Line also
purchases credit card receivables and recovers payments on these accounts. There
can be no assurance that this acquisition will be financially advantageous for
the Company.
This Safe Harbor Statement supersedes the Safe Harbor Statement filed as
Exhibit 99.1 to the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 2000.
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