<PAGE> 1
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
Commission File Number 033-73270
------------
Commission File Number 033-73270-1
--------------
TRANSTAR HOLDINGS, L.P.
TRANSTAR CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486874
DELAWARE 13-3745313
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
345 PARK AVENUE
NEW YORK, NY 10154
(Address and zip code of principal executive offices)
(212) 935-2626
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
--------------------------------------------------------------------------------
<PAGE> 2
Transtar Holdings, L.P.
Transtar Capital Corporation
Form 10-Q
Quarterly Period Ended June 30, 2000
INDEX
-----
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
A. TRANSTAR HOLDINGS, L.P.
Consolidated Balance Sheet 3
Consolidated Statements of Operations and Partners' Equity 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Quantitative and Qualitative Disclosures About Market Risk 8
B. TRANSTAR, INC.
Consolidated Balance Sheet 9
Consolidated Statements of Income and Retained Earnings 10
Consolidated Statement of Cash Flows 11
Notes to Consolidated Financial Statements 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Quantitative and Qualitative Disclosures About Market Risk 14
PART II - OTHER INFORMATION 15
SIGNATURE 16
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
------------------------------
A. TRANSTAR HOLDINGS, L.P.
TRANSTAR HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 307 $ 299
Other current assets -- 10
--------- ---------
Total current assets 307 309
Restricted cash 36,755 49,846
Investment in Transtar 92,179 81,340
Other assets 2,522 2,891
--------- ---------
Total assets $ 131,762 $ 134,386
========= =========
LIABILITIES
Current liabilities:
Accounts payable and other current liabilities $ 473 $ 389
Accrued interest 1,296 1,296
--------- ---------
Total current liabilities 1,769 1,685
Long-term debt (Note 3) 218,080 218,080
--------- ---------
Total liabilities 219,849 219,765
PARTNERS' EQUITY (DEFICIT) (88,087) (85,379)
--------- ---------
Total liabilities and partners' equity $ 131,762 $ 134,386
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 4
TRANSTAR HOLDINGS, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
Operating expenses:
Selling, general and administrative expenses 43 58 95 104
-------- -------- -------- --------
Operating (loss) (43) (58) (95) (104)
Interest income 741 582 1,501 1,172
Interest and other financial expenses (7,476) (6,667) (14,953) (13,258)
-------- -------- -------- --------
(Loss) before equity in earnings of Transtar (6,778) (6,143) (13,547) (12,190)
Equity in earnings of Transtar 9,752 10,018 10,839 8,615
-------- -------- -------- --------
Net income (loss) $ 2,974 $ 3,875 $ (2,708) $ (3,575)
======== ======== ======== ========
</TABLE>
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Partners' equity (deficit), beginning of period $(91,061) $(95,154) $(85,379) $(87,432)
Net income (loss) 2,974 3,875 (2,708) (3,575)
Other adjustments to partners' equity -- (933) -- (1,205)
-------- -------- -------- --------
Partners' equity (deficit), end of period $(88,087) $(92,212) $(88,087) $(92,212)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
TRANSTAR HOLDINGS, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,708) $ (3,575)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Non-cash interest and other financial expenses 369 13,258
Non-cash interest income (1,493) (1,166)
Equity in earnings of Transtar (10,839) (8,615)
Changes in:
Accrued interest -- --
Accounts payable 84 96
Other assets and liabilities 11 8
-------- --------
Net cash provided by (used for) operating activities (14,576) 6
-------- --------
INVESTING ACTIVITIES:
Withdrawal from restricted cash 14,584 --
-------- --------
Net cash provided by investing activities 14,584 --
-------- --------
FINANCING ACTIVITIES:
Distribution to partners -- --
-------- --------
Net cash provided by financing activities -- --
-------- --------
Increase in cash and cash equivalents 8 6
Cash and cash equivalents at beginning of period 299 286
-------- --------
Cash and cash equivalents at end of period $ 307 $ 292
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
TRANSTAR HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
NOTE 1: BASIS OF FINANCIAL STATEMENT PRESENTATION:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all normal recurring adjustments considered
necessary for a fair statement of the results of operations for the three and
six month periods ended June 30, 2000 have been included. The results of
operations for the three and six month periods ended June 30, 2000 are not
necessarily indicative of the results of operations for the full year. When
reading the financial information contained in this quarterly report, reference
should be made to the financial statements, schedules and notes contained in
Transtar Holdings, L.P.'s (Holdings) Annual Report on Form 10-K for the year
ended December 31, 1999. Transtar Capital Corporation (TCC), a subsidiary of
Holdings, is a shell corporation which has nominal assets and no liabilities,
operations or cash flows. Accordingly, the financial statements of TCC are not
presented because they do not provide material information to investors.
NOTE 2: LONG-TERM DEBT:
On December 7, 1993, Holdings and TCC (Issuers) issued $218 million aggregate
principal of 13.375% Senior Discount Notes due December 15, 2003 (Notes). The
Notes are the joint and several obligations of the Issuers. An original issue
discount of $118 million was amortized over a six-year period commencing
December 15, 1993 and ending December 15, 1999. Interest is payable in cash
semi-annually in arrears on June 15 and December 15 commencing on June 15, 2000.
Interest paid on June 15, 2000 was $14.6 million. The carrying value of the
Notes is the same as the principal at maturity of $218 million. The Notes are
not guaranteed by Transtar, Inc. (Transtar) or any of its subsidiaries and are
subordinated to all existing and future liabilities of the Issuers'
subsidiaries. Interest expense attributable to the Notes was $14.6 million and
$12.9 million in the first half of 2000 and 1999, respectively, and was $7.3
million and $6.5 million in the second quarter of 2000 and 1999, respectively.
In accordance with an Indenture relating to the issuance of the Notes (the Notes
Indenture) certain dividends received from Transtar were paid into an escrow
account. Funds in the escrow account are invested in cash equivalents and may
only be released to pay interest and principal on the Notes, make certain
payments permitted under the Notes Indenture, purchase or optionally redeem
Notes or to pay administrative expenses of Holdings. On June 15, 2000 in
accordance with the Notes Indenture and an agreement governing the escrow
account, Holdings withdrew from the escrow account $14.6 million to pay interest
on the Notes. As of June 30, 2000, the escrow balance is $36.8 million. Interest
earned on the escrow balance was $1.5 million and $1.2 million in the first half
of 2000 and 1999, respectively, and was $0.7 million and $0.6 million in the
second quarter of 2000 and 1999, respectively.
NOTE 3: PARTNERS' EQUITY (DEFICIT)
In the first half of 1999, Holdings recorded an adjustment to Partners' Equity
(Deficit) of $(1.2) million. This adjustment was recorded as a result of changes
in ownership related to Transtar treasury stock transactions with its Management
Stock Trusts.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes an analysis of Holdings' equity investment in Transtar, Inc.
(Transtar). Holdings is a Delaware limited partnership. It was originally formed
in 1988 as Blackstone Transportation Partners L. P. (BTP) for the sole purpose
of holding voting and nonvoting stock of Transtar. BTP was renamed Transtar
Holdings, L. P. in November 1993. Holdings' net earnings are derived primarily
from its 54.0 percent economic interest in Transtar and interest expense related
to certain Senior Discount Notes (Notes) issued in 1993. The following
discussion should be read in conjunction with Holdings' Consolidated Financial
Statements and the notes related hereto included within this filing.
Transtar Holdings L.P. Results
For the Three and Six Months ended June 30, 2000
Compared to the
Three and Six Months ended June 30, 1999
Overall
Holdings recorded net income for the second quarter of $3.0 million and a net
loss of $2.7 million during the first six months of 2000. This represents a $0.9
million unfavorable change from the $3.9 million net income recorded during the
second quarter of 1999 and a $0.9 million favorable change from the $3.6 million
net loss reported for the first six months of 1999. Holdings' results include
its equity investment in Transtar and interest and other financial expenses. For
a discussion of results of operations of Transtar, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for Transtar,
Inc.
Revenues and Expenses
Holdings did not record any revenues in either 2000 or 1999. Holdings' selling,
general and administrative expenses of $0.1 million during the first six months
of 2000 were essentially the same as what was incurred during the first half of
1999. During the first six months of 2000, equity in earnings of Transtar and
interest income improved from 1999 levels by $2.2 million and $0.3 million,
respectively. Interest and other financial expense increased by $0.8 million
during the second quarter of 2000 to $7.5 million and by $1.7 million in the
first six months to $15.0 million.
Liquidity and Capital Resources
In accordance with an Indenture relating to the issuance of the Notes (the Notes
Indenture) certain dividends received from Transtar were paid into an escrow
account. Transtar declared no dividends during 1999 or the first six months of
2000. During the second quarter of 2000, Holdings earned $0.7 million in
interest from the balance in the escrow account, an increase of $0.1 million
from the amount earned in the second quarter of 1999.
Funds in the escrow account are invested in cash equivalents and may only be
released to pay interest and principal on the Notes, make certain payments
permitted under the Notes Indenture, purchase or optionally redeem Notes or to
pay administrative expenses of Holdings. In June 2000, Holdings withdrew from
the escrow account $14.6 million to make the first cash interest payment due for
the period commencing December 15, 1999 and ending on June 15, 2000. Cash
interest will thereafter be payable semi-annually in arrears on June 15 and
December 15 of each year through 2003. As of June 30, 2000 the balance in the
escrow account is $36.8 million. Funds currently in the escrow account will be
sufficient to make the next two semi-annual interest payments on the Notes. When
funds in the escrow account have been expended, Holdings will be required to
seek additional sources of funds in order to make future interest payments on
the Notes. Holdings cannot give any assurances that they will be able to obtain
additional funds in order to make such interest payments.
7
<PAGE> 8
In the past Holdings has received dividends from Transtar in respect of the
common stock of Transtar held by Holdings. These dividends and interest earned
thereon have been the source of substantially all of the money currently on
deposit in the escrow account. Future dividends of Transtar are governed by
Transtar's bylaws that require unanimous approval by the Company's directors to
declare a dividend or other distribution (absent a decision by an independent
consultant breaking a deadlocked vote). Holdings and USX Corporation (USX) each
have the right, pursuant to a Stockholders' Agreement dated as of December 28,
1988, as amended (the Stockholders' Agreement), to designate certain directors
to the board of directors of the Company. As such, Holdings' ability to cause
the Company to declare and pay a dividend or other distribution is dependent
upon the concurrence of USX and no assurances can be given that USX will concur
in the declaration and payment of such dividends or that any such dividends will
actually be declared and paid or that, if declared and paid, any such dividends
will be sufficient to fund the remaining payments due under the Notes. The only
business activity of Holdings is its investment in Transtar.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
8
<PAGE> 9
B. TRANSTAR, INC.
TRANSTAR, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, December 31,
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,467 $ 14,274
Accounts receivable from related parties 22,164 20,921
Accounts receivable from others 54,828 62,017
Other current assets 15,114 11,049
--------- ---------
Total current assets 103,573 108,261
Property, plant, and equipment,
less accumulated depreciation 415,580 417,902
Operating parts and supplies 18,281 14,344
Other assets 18,933 21,690
--------- ---------
Total assets $ 556,367 $ 562,197
========= =========
LIABILITIES
Current liabilities:
Accounts payable $ 72,910 $ 75,047
Payroll and benefits payable 38,384 39,059
Accrued taxes 16,455 13,447
Accrued interest 735 1,299
Current portion of long-term debt 81,000 110,000
Other current liabilities 4,401 1,560
--------- ---------
Total current liabilities 213,885 240,412
Long-term debt less current portion -- --
Postretirement benefits other than pensions 114,507 112,589
Deferred credits and other liabilities 55,817 57,281
--------- ---------
Total liabilities 384,209 410,282
STOCKHOLDERS' EQUITY
Common stock 1,000 1,000
Paid-in capital 28,601 28,601
Retained earnings 159,985 139,742
Treasury stock (17,428) (17,428)
--------- ---------
Total stockholders' equity 172,158 151,915
--------- ---------
Total liabilities and stockholders' equity $ 556,367 $ 562,197
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
9
<PAGE> 10
TRANSTAR, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Revenues from related parties $ 70,605 $ 67,467 $ 123,518 $ 110,628
Revenues from others 69,863 60,048 116,399 101,218
--------- --------- --------- ---------
Total revenues 140,468 127,515 239,917 211,846
--------- --------- --------- ---------
Operating expenses (excluding items shown below) 100,176 86,278 184,187 163,488
Selling, general, and administrative expenses 3,440 3,190 6,236 5,978
Depreciation 6,960 6,253 13,956 12,589
--------- --------- --------- ---------
Total operating expenses 110,576 95,721 204,379 182,055
--------- --------- --------- ---------
Operating income 29,892 31,794 35,538 29,791
Other income 1,377 709 1,151 1,029
Interest income 116 117 312 300
Interest and other financial expenses (2,238) (2,089) (4,582) (4,332)
--------- --------- --------- ---------
Income before income taxes 29,147 30,531 32,419 26,788
Less provision for income taxes 10,935 11,593 12,176 10,502
--------- --------- --------- ---------
Net income $ 18,212 $ 18,938 $ 20,243 $ 16,286
========= ========= ========= =========
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Retained earnings beginning of period $ 141,773 $ 82,925 $ 139,742 $ 85,577
Net income 18,212 18,938 20,243 16,286
--------- --------- --------- ---------
Retained earnings end of period $ 159,985 $ 101,863 $ 159,985 $ 101,863
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
10
<PAGE> 11
TRANSTAR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
2000 1999
--------- --------
(dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 20,243 $ 16,286
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 13,956 12,589
Amortization 285 138
Deferred taxes 997 1,243
Gain on sale of assets (749) (449)
Changes in other assets and liabilities 1,259 (72)
-------- --------
Net cash provided by operating activities 35,991 29,735
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (12,107) (54,914)
Proceeds from the sale of assets 2,310 855
-------- --------
Net cash used for investing activities (9,797) (54,059)
-------- --------
FINANCING ACTIVITIES:
Short-term debt net -- 45,000
Repayment of debt (29,000) (21,000)
Payments to acquire Treasury Stock -- (2,603)
-------- --------
Net cash provided by (used for) financing activities (29,000) 21,397
-------- --------
Decrease in cash and cash equivalents (2,807) (2,927)
Cash and cash equivalents at beginning of period 14,274 21,428
-------- --------
Cash and cash equivalents at end of period $ 11,467 $ 18,501
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
11
<PAGE> 12
TRANSTAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2000
NOTE 1: BASIS OF FINANCIAL STATEMENT PRESENTATION:
Separate consolidated financial statements of Transtar are included in this 10-Q
because Transtar is a majority owned subsidiary of Holdings which is not
consolidated in the consolidated financial statements of Holdings. The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all normal recurring adjustments considered
necessary for a fair statement of the results of operations for the three and
six month periods ended June 30, 2000 have been included. The results of
operations for the three and six-month periods ended June 30, 2000 are not
necessarily indicative of the results of operations for the full year. When
reading the financial information contained in this quarterly report, reference
should be made to the Transtar financial statements, schedules and notes
contained in Holdings' Annual Report on Form 10-K for the year ended December
31, 1999. Certain reclassifications of prior years' data have been made to
conform to 2000 classifications.
NOTE 2: OPERATING SEGMENTS:
Transtar consists of two reportable segments: Railroad Group and Marine Group.
Summarized financial information concerning reportable segments is shown on the
following table. The "Other" column includes non-allocated corporate related
items and the elimination of inter-business unit transactions.
<TABLE>
<CAPTION>
Railroad Marine
Group Group Other Total
----- ----- ----- -----
(dollars in thousands)
<S> <C> <C> <C> <C>
For the three months ended June 30, 2000
----------------------------------------
Revenues - external customers $ 91,201 $ 49,267 $ -- $ 140,468
Income before income taxes 21,565 7,560 22 29,147
For the six months ended June 30, 2000
--------------------------------------
Revenues - external customers $ 170,353 $ 69,564 $ -- $ 239,917
Income before income taxes 29,436 2,930 53 32,419
As of June 30, 2000
-------------------
Total Assets $ 414,740 $ 167,838 $ (26,211) $ 556,367
For the three months ended June 30, 1999
----------------------------------------
Revenues - external customers $ 88,443 $ 39,072 $ -- $ 127,515
Income before income taxes 22,959 7,563 9 30,531
For the six months ended June 30, 1999
--------------------------------------
Revenues - external customers $ 163,217 $ 48,629 $ -- $ 211,846
Income (loss) before income taxes 28,547 (1,779) 20 26,788
As of December 31, 1999
-----------------------
Total assets $ 423,634 $ 163,754 $ (25,191) $ 562,197
</TABLE>
NOTE 3: SUBSEQUENT EVENTS:
Effective August 1, 2000, Thomas W. Sterling was elected President and Chief
Executive Officer of Transtar, Inc. He succeeds Robert S. Rosati who retired
July 31, 2000.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Transtar, Inc. Results
For the Three and Six Months ended June 30, 2000
Compared to the
Three and Six Months ended June 30, 1999
Overall
Transtar is a transportation holding company composed of two segments: the
Railroad Group and the Marine Group. Transtar's net income for the quarter
ending June 30, 2000 of $18.2 million was a decline of $0.7 million compared
with the same period of 1999. Operating income of $29.9 million recorded in the
second quarter of 2000 was $1.9 million less than the comparable period of 1999.
Net income for the six months ended June 30, 2000 was $20.2 million, a $4.0
million increase from the first six months of 1999. Operating income of $35.5
million generated during the first half of 2000 was $5.7 million more than the
same period of 1999. Increased tonnage, additional employment costs, and
escalating fuel prices impacted Transtar's second quarter and first half 2000
operating results.
Operating Revenues
Operating revenues totaled $140.5 million in the second quarter of 2000, an
increase of $13.0 million over the second quarter of 1999. Railroad Group
operating revenues improved by $2.8 million while Marine Group revenues
increased by $10.2 million between these periods. During the first six months of
2000, Transtar's operating revenues improved to $239.9 million, a $28.1 million
increase over the comparable period of 1999. Both the operating revenues of the
Railroad Group and the Marine Group improved during this period, $7.2 million
for the Railroad Group and $20.9 million for the Marine Group. The operating
revenue increases between these periods were created by the transportation of
higher volumes of raw materials for steel production, and other improvements in
steel related business driven by increased demand for domestically produced
steel. Also contributing to the revenue gain was transportation of additional
coal tonnage for export to Asian markets coupled with increased consumption of
coal by domestic utilities served by Transtar.
Operating Expenses
Transtar's operating expenses increased $14.9 million and $22.3 million,
respectively, during the second quarter and first half of 2000 when compared to
the same periods of 1999. The Railroad Group's operating expenses totaled $70.0
million and $140.2 million during the second quarter and first six months of
2000, increases of $5.5 million and $8.2 million, respectively. The Marine
Group's operating expenses were $9.4 million and $14.3 million more in the
second quarter and first six months of 2000, respectively, as compared to the
same periods of 1999. These costs were driven by higher employment costs,
increased fuel consumption associated with improved business volumes, a 78
percent ($6.8 million) increase in fuel prices and additional usage by the
Marine Group of charter service for the movement of various products. Partially
offsetting these increases was a $1.1 million (18 percent) improvement in car
hire earnings (a contra to cost) as Transtar's freight car fleet was used in
additional off-line loadings. In addition, a $0.9 million charge was recorded in
the second quarter of 1999 for additional pension expense relating to the
reduced service levels provided by the Lake Terminal Railroad at the USS/Kobe
facility in Lorain, Ohio.
Other Expense, net
Transtar's other expense, net, declined by $0.1 million during the first half of
2000 when compared with the first six months of 1999. Interest and other
financial expense recorded during the first six months of 2000 was $4.6 million,
or $0.3 million more than the same period in 1999. Other miscellaneous income
improved by $0.1 million.
13
<PAGE> 14
Provision for Income Taxes
Transtar's provision for income taxes decreased $0.7 million during the second
quarter and increased $1.7 million for the first six months of 2000, when
compared to the same period of 1999, directly as a result of changes in before
tax earnings.
Liquidity and Capital Resources
Transtar's cash and temporary investments were $11.5 million at June 30, 2000, a
$2.8 million reduction from the balance at December 31, 1999. Cash flow from
operating activities during the six months ended June 30, 2000 was $36.0 million
or $6.3 million more than was generated during the same period of 1999.
Contributing to this increase were higher business activity levels, which
produced a $4.0 million improvement in net income. Gross capital expenditures
were $12.1 million in the first half of 2000, a decline of $42.8 million from
the same period of 1999. Capital expenditures in the first half of 1999 included
the purchase of a tug barge lake vessel. Proceeds from the disposition of assets
were $1.5 million more in the first six months of 2000 than in the same period
of 1999.
In August 1999 Transtar amended and restated its original Credit Agreement to
acquire additional term loans in the amount of $45.0 million to refinance
certain short-term borrowings used in June 1999 for the purchase of a tug barge
lake vessel that was previously operated under a long-term lease. This restated
term loan facility was collateralized by the stock of Transtar's subsidiaries.
During the first six months of 2000, Transtar retired $29.0 million of debt
compared to $21.0 million retired during the first half of 1999. Including the
August 1999 borrowing, Transtar has a remaining balance of $81.0 million on its
term loan obligations. Only nominal letters of credit are currently outstanding
against Transtar's $25.0 million Revolving Credit Facility.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
14
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Holdings and TCC had no reportable events of material pending legal proceedings
other than ordinary routine litigation incidental to the business during the
three-month period ended June 30, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on 8-K
Holdings and TCC did not file any Current Reports on Form 8K during the
quarter ended June 30, 2000.
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: August 10, 2000
TRANSTAR HOLDINGS, L.P.
TRANSTAR CAPITAL CORPORATION
By: /s/Howard A. Lipson
----------------------------
Howard A. Lipson, Treasurer
16
