-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HerBngDYmzOMFmNx1R3ZoQvYCEMZT1jaBV2kY4H6mQhKt803yalEfbQeAfVGknC3 /BbSj6pLmSuDBa9QeOo+Jw== 0000950123-02-003999.txt : 20020419 0000950123-02-003999.hdr.sgml : 20020419 ACCESSION NUMBER: 0000950123-02-003999 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20020418 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DANIELSON HOLDING CORP CENTRAL INDEX KEY: 0000225648 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 956021257 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06732 FILM NUMBER: 02616118 BUSINESS ADDRESS: STREET 1: 767 THIRD AVE 5TH FL CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2128880347 MAIL ADDRESS: STREET 1: 767 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10017-2023 FORMER COMPANY: FORMER CONFORMED NAME: MISSION EQUITIES CORP DATE OF NAME CHANGE: 19770921 FORMER COMPANY: FORMER CONFORMED NAME: MISSION INSURANCE GROUP INC DATE OF NAME CHANGE: 19900826 8-K 1 y59743e8-k.txt DANIELSON HOLDING CORPORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: April 19, 2002 (Date of earliest event reported) DANIELSON HOLDING CORPORATION (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 1-6732 95-6021257 (Commission File Number) (IRS Employer Identification Number) 767 Third Avenue, New York, New York 10017 (Address of principal executive offices) (Zip Code) (212) 888-0347 (Registrant's telephone number, including area code) Item 2. Acquisition or Disposition of Assets As previously announced, on March 15, 2002, we entered into a Recapitalization Agreement (referred to as the "Recapitalization Agreement"), with American Commercial Lines LLC ("ACL"), American Commercial Lines Holdings LLC ("ACL Holdings"), all the preferred unitholders of ACL Holdings, which include the members of ACL management holding preferred and common units of ACL Holdings, and holders of approximately 97.5% of the existing common units of ACL Holdings, including those held by preferred unitholders and management unitholders, with respect to a comprehensive restructuring of ACL Holdings and ACL (the "Restructuring"). The material elements of the Restructuring will include: o the recapitalization of ACL Holdings pursuant to a series of transactions which will result in us owning 100% of the membership interests in ACL Holdings (referred to as the "Recapitalization"), including: -- our, and/or one or more of our subsidiaries, exchanging $7 million in cash for all preferred units of ACL Holdings (other than preferred units held by the members of ACL management); and -- our, and/or one or more of our subsidiaries, contributing $25 million in cash and $58.493 million of 10-1/4% senior notes due June 30, 2008 issued by ACL (referred to as the "Existing Notes") and held by us and/or one or more of our subsidiaries (together with the interest obligations, if any, thereon) in exchange for newly issued common units of ACL Holdings; o the restructuring of ACL's outstanding debt obligations (referred to as the "Debt Restructuring"), pursuant to which: -- ACL's outstanding Existing Notes, other than the Existing Notes held by us and/or one or more of our subsidiaries, will be exchanged for (1) $120 million of new 11-1/4% senior notes due January 1, 2008 and (2) $116.5 million of new 12% pay-in-kind senior subordinated notes due July 1, 2008 (collectively, referred to as the "New Notes") pursuant to an exchange offer and solicitation of releases and consents (referred to as the "Exchange Offer") or a plan of reorganization under Chapter 11 of the United States Bankruptcy Code (referred to as the "Plan"); -- additional New Notes will be issued in respect of Existing Notes, other than Existing Notes held by us and/or one or more of our subsidiaries, in an aggregate principal amount calculated based on the accrued and unpaid interest owing in respect of the Existing Notes through the closing of the Restructuring; -- ACL's existing credit facility will be amended and restated, including a $25 million prepayment of term debt thereunder from the proceeds of the $25 million cash contribution made to ACL Holdings; and -- ACL's existing receivables facility will be replaced on substantially the same terms; o the purchase by us of (1) the equity interests that 399 Venture Partners, Inc. owns in Global Material Services, LLC, an entity of which ACL owns 50% of the equity interests, and (2) the equity interests that Vectura Group LLC owns in Vessel Leasing LLC, an entity of which ACL owns 50% of the equity interests; and o members of ACL management will surrender the preferred and common units of ACL Holdings held by them, and in consideration of their continued employment with ACL, will receive shares of our restricted common stock with a fair market value of approximately $1.7 million as determined pursuant to the Recapitalization Agreement. In addition, 6.0% of our common stock, calculated on a fully-diluted basis as of the closing of the Restructuring, will be reserved under a management stock incentive plan for issuance to members of ACL management over time. The Restructuring is simultaneously being pursued via two alternative mechanisms: (1) an out-of-court alternative centered around the Exchange Offer and (2) an in-court-alternative centered around the Plan. The Exchange Offer is conditioned upon, among other conditions: o the holders of at least 95% of the aggregate principal amount of Existing Notes (with the Existing Notes held by us and our subsidiaries being deemed tendered in the Exchange Offer for these purposes) tendering, and not withdrawing, their existing notes in the exchange offer; and o the Recapitalization and the Debt Restructuring, other than the Exchange Offer, having been consummated on or prior to the date of consummation of the Exchange Offer as contemplated by the Recapitalization Agreement. We filed a copy of the Recapitalization Agreement as Exhibit 2.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 27, 2002. Attached as Exhibit 99.2 hereto, and incorporated by reference herein, is our unaudited pro forma condensed consolidated financial information that gives effect to (1) the Restructuring, (2) the rights offering described under Item 5 below and the payment of related fees and expenses and (3) the exercise of outstanding warrants upon consummation of the rights offering as described in Item 5 below and the exercise of options in 2002 pursuant to our 1995 Stock and Incentive Plan. Attached as Exhibit 99.3 hereto, and incorporated by reference herein, are the audited consolidated financial statements of ACL Holdings and subsidiaries for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 and as of December 28, 2001 and December 29, 2000. Attached as Exhibit 99.8 hereto, and incorporated by reference herein, is the consent of PricewaterhouseCoopers LLP with respect to the matters set forth in such consent. Attached as Exhibit 99.4 hereto, and incorporated by reference herein, are the audited consolidated financial statements of UABL Limited for the year ended December 31, 2001 and for the period of October 24, 2000 to December 31, 2000 and as of December 31, 2001 and December 31, 2000. Attached as Exhibit 99.10 hereto, and incorporated by reference herein, is the consent of Pistrelli, Diaz y Asociados, Member of Andersen. ACL holds an approximately 50% indirect equity interest in UABL Limited, an entity through which it conducts substantial international operations. Attached as Exhibit 99.5 hereto, and incorporated by reference herein, are the audited consolidated financial statements of Global Materials Services LLC and subsidiaries as of and for the years ended December 31, 2001 and December 31, 2000. Attached as Exhibit 99.9 hereto, and incorporated by reference herein, is the consent of PricewaterhouseCoopers LLP with respect to the matters set forth in such consent. Attached as Exhibit 99.6 hereto, and incorporated by reference herein, are the unaudited financial statements of Vessel Leasing LLC as of and for the year ended December 28, 2001. Item 5. Other Events In order to fund our cash obligations in the Restructuring and related expenses, we are conducting a rights offering in the amount of approximately $43.6 million. We intend to issue a press release announcing that we have commenced a rights offering of warrants exercisable for common stock. We issued at no charge one non-transferable warrant with respect to each share of our common stock outstanding as of the open of business on April 19, 2002. In addition, we issued at no charge one non-transferable warrant with respect to each share of our common stock underlying previously outstanding warrants to purchase our common stock, as of the open of business on April 19, 2002, contingent on each such holder fully exercising their warrants upon completion of the rights offering. Holders of warrants will be entitled to purchase 0.4 shares of our common stock for every warrant held at the exercise price of $5.00 per share. Holders may be able to purchase additional shares at the exercise price if other holders do not fully exercise their warrants. We will terminate the rights offering if the Restructuring is consummated pursuant to the in-court-alternative. However, we expressly reserve our right to recommence the rights offering at a later date. In connection with the rights offering, we entered into an agreement with SZ Investments, L.L.C. ("SZ Investments"), the holder of approximately 18.0% of our common stock on a fully diluted basis, pursuant to which SZ Investments agreed to purchase shares of our common stock offered in the rights offering and not purchased pursuant to the rights offering, up to a maximum total investment by SZ Investments pursuant to the backstop of $20,000,000 (the "Backstop Agreement"). Our obligation to consummate the rights offering is subject to, among other conditions, the consummation of the recapitalization and debt restructuring. Attached as Exhibit 99.1 is a copy of the Backstop Agreement. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits
Exhibit Number Description - ------ ----------- 99.1 Agreement between Danielson Holding Corporation and SZ Investments, L.L.C., dated March 21, 2002. 99.2 Unaudited Pro Forma Condensed Consolidated Financial Information for Danielson Holding Corporation. 99.3 Audited Consolidated Financial Statements of American Commercial Lines Holdings LLC and Subsidiaries for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 and as of December 28, 2001 and December 29, 2000. 99.4 Audited Consolidated Financial Statements of UABL Limited for the year ended December 31, 2001 and for the period of October 24, 2000 to December 31, 2000 and as of December 31, 2001 and December 31, 2000. 99.5 Audited Consolidated Financial Statements of Global Materials Services LLC and subsidiaries as of and for the years ended December 31, 2001 and December 31, 2000. 99.6 Unaudited Financial Statements of Vessel Leasing LLC as of and for the year ended December 28, 2001. 99.7 Consent of KPMG LLP. 99.8 Consent of PricewaterhouseCoopers LLP. 99.9 Consent of PricewaterhouseCoopers LLP. 99.10 Consent of Pistrelli, Diaz y Asociados, Member of Andersen.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: April 19, 2002 Danielson Holding Corporation By: /s/ David M. Barse ------------------------------------ David M. Barse President /s/ Michael Carney ------------------------------------ Michael Carney Chief Financial Officer EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 99.1 Agreement between Danielson Holding Corporation and SZ Investments, L.L.C., dated March 21, 2002. 99.2 Unaudited Pro Forma Condensed Consolidated Financial Information for Danielson Holding Corporation. 99.3 Audited Consolidated Financial Statements of American Commercial Lines Holdings LLC and Subsidiaries for the years ended December 28, 2001, December 29, 2000 and December 31, 1999 and as of December 28, 2001 and December 29, 2000. 99.4 Audited Consolidated Financial Statements of UABL Limited for the year ended December 31, 2001 and for the period of October 24, 2000 to December 31, 2000 and as of December 31, 2001 and December 31, 2000. 99.5 Audited Consolidated Financial Statements of Global Materials Services LLC and subsidiaries as of and for the years ended December 31, 2001 and December 30, 2000. 99.6 Unaudited Financial Statements of Vessel Leasing LLC as of and for the year ended December 28, 2001. 99.7 Consent of KPMG LLP. 99.8 Consent of PricewaterhouseCoopers LLP. 99.9 Consent of PricewaterhouseCoopers LLP. 99.10 Consent of Pistrelli, Diaz y Asociados, Member of Andersen.
EX-99.1 3 y59743ex99-1.txt AGREEMENT DATED MARCH 21, 2002 Exhibit 99.1 SUMMARY TERMS OF STANDBY COMMITMENT OF RIGHTS OFFERING PARTIES Danielson Holding Corporation ("DHC") SZ Investments, L.L.C. ("STANDBY PURCHASER") BACKGROUND: ACL RECAPITALIZATION There has been proposed a restructuring of the obligations of American Commercial Lines Holdings LLC ("ACL HOLDINGS") and the obligations of American Commercial Lines LLC (the "COMPANY") and the recapitalization of ACL Holdings and the Company on substantially the same terms as the terms described in the term sheet (the "TERM SHEET") attached hereto as EXHIBIT A (collectively, the "RECAPITALIZATION"). It is anticipated that the Recapitalization will be implemented either through (a) an outofcourt exchange offer and consent solicitation pursuant to which the Existing Senior Notes (as defined in the Term Sheet) will be exchanged for $120 million of new 111/4% cash pay senior notes due January 1, 2008 and $116.507 million of new 12% payinkind senior subordinated notes due July 1, 2008 on substantially the same terms as the terms described in the Term Sheet (the "EXCHANGE OFFER AND CONSENT SOLICITATION"), or (b) if the Exchange Offer and Consent Solicitation is not consummated, a prearranged or prepackaged plan of reorganization pursuant to the U.S. Bankruptcy Code on substantially the same terms as the terms described in the Term Sheet (the "PREARRANGED PLAN"). ACL Holdings, the Company, DHC and the members of ACL Holdings have signed a recapitalization agreement (the "RECAPITALIZATION AGREEMENT"), which is on substantially the same terms as the terms described in the Term Sheet, pursuant to which DHC and/or one or more of its subsidiaries will acquire 100% of the equity interests in ACL Holdings or the Company as set forth in the Recapitalization Agreement. HY I Investments, L.L.C. ("HYI") has entered into a LockUp, Support and Voting Agreement dated February 26, 2002, with ACL Holdings, the Company and certain other parties (the "LOCKUP AGREEMENT"). RIGHTS OFFERING In connection with the Recapitalization, DHC shall conduct a rights offering ("RIGHTS OFFERING") of rights to purchase ("RIGHTS") an aggregate of approximately $43.6 million of newly issued shares of Common Stock, par value $.01 per share ("COMMON STOCK"), the net proceeds of which shall be used to satisfy DHC's cash contribution obligations in the Recapitalization as described in the Term Sheet and, to the extent of any excess proceeds, general corporate purposes. The purchase price for the Common Stock in the Rights Offering will be $5.00 per share ("SUBSCRIPTION PRICE"), and the total number of Common Stock shares to be offered will be approximately 8.7 million. The Rights shall be offered to each stockholder (including, without limitation, to Standby Purchaser with respect to the Warrant Shares (as defined below)) on a pro rata basis ("BASIC SUBSCRIPTION RIGHT") and shall be nontransferable. Stockholders who fully exercise their basic subscription right shall also be entitled to subscribe for any Common Stock shares offered in the Rights Offering and not purchased by other stockholders, subject to proration (in proportion to the number of Common Stock shares a stockholder has subscribed for pursuant to the basic subscription right) if the oversubscribed shares exceed the number of Common Stock shares available ("OVERSUBSCRIPTION RIGHT"). Exercise of the basic subscription right and the oversubscription right shall be subject, in each instance, to the restrictions contained in Article Fifth of DHC's Certificate of Incorporation and such other transfer restrictions and/or stock certificate escrow protection mechanisms as may be imposed by DHC in accordance with past practice to insure compliance with Article Fifth. STANDBY PURCHASER WARRANT EXERCISE Provided that the condition precedents specified under the heading "Conditions to Standby Purchaser's Obligations" below have been satisfied, or waived by Standby Purchaser in its sole discretion in writing, then, simultaneously with the closing of the Rights Offering, Standby Purchaser shall exercise in full its warrant dated August 12, 1999, for 1,898,000 Common Stock shares, at a current exercise price of $4.74391 per share ("WARRANT"), resulting in the issuance of 1,900,437 Common Stock shares ("WARRANT SHARES") as a result of such exercise. Notwithstanding the foregoing, for purposes of the Rights Offering, all Warrant shares shall be treated as if exercised such that the Warrant Shares shall have basic subscription rights and oversubscription rights as if the Warrant Shares were in fact issued and outstanding as of the commencement of the Rights Offering. If necessary, DHC shall amend its registration statement to allow the Warrant to participate in the Rights Offering on an "as exercised" basis. STANDBY COMMITMENTS Standby Purchaser shall be obligated to purchase up to 4.0 million Common Stock shares offered in the Rights Offering, (i) which are not otherwise subscribed for pursuant to basic subscription rights and oversubscription rights and (ii) the purchase of which by Standby Purchaser would not require Standby Purchaser to make an HSR filing or insurance regulatory filing(s) or DHC to obtain approval of its stockholders under SEC or AMEX rules or other applicable requirements (either requirement, an "APPROVAL 2 REQUIREMENT LIMITATION") ("STANDBY SHARES"). In the event Standby Purchaser would be otherwise obligated to purchase hereunder Common Stock shares but is relieved of such obligation pursuant to an Approval Requirement Limitation, Standby Purchaser shall 1) file the necessary filings under the HSR Act or applicable insurance regulatory requirements (and DHC shall cooperate with Standby Purchaser in preparing its filing and shall make DHC's required filings) or DHC shall take all actions and prepare and make such filings necessary to obtain approval of it's stockholders, as the case may be, 2) loan to DHC an amount equal to the number of shares it did not purchase due to the Approval Requirement Limitation multiplied by $5.00, at an interest rate of 12% per annum payable in cash with a maturity of the earlier of 180 days after issuance of the loan and the date Standby Purchaser consummates the purchase of shares pursuant to the following clause 3) and on other standard and customary terms (the "BRIDGE LOAN"), and 3) upon clearance under the HSR Act, insurance commissioners or receipt of approval of DHC's stockholders, as the case may be, purchase the Common Stock shares it did not purchase due to the Approval Requirement Limitation provision at $5.00 per share (and DHC shall use such proceeds to repay the Bridge Loan). STANDBY COMMITMENT FEE In consideration of the Standby Purchaser's commitment to purchase Standby Shares, DHC shall pay to Standby Purchaser: 1) $1,000,000 (5% of the aggregate standby commitment) in cash in the event DHC commences the Rights Offering while Standby Purchaser's commitment hereunder is in effect; or 2) $250,000 (1.25% of the aggregate standby commitment) in cash in the event DHC terminates this Summary of Terms or does not commence the Rights Offering (the "STANDBY FEE"). The Standby Fee shall be paid $250,000 on the date hereof and $750,000 when DHC commences the Rights Offering as set forth in the foregoing clause 1). In addition, DHC shall reimburse Standby Purchaser for all fees and expenses incurred in connection with the transactions contemplated by the Rights Offering, up to $25,000 in the aggregate, plus, if applicable, all fees and expenses incurred in preparation and filing of notices and filings under the HSR Act and insurance regulatory requirements. 3 REGISTRATION RIGHTS All Common Stock shares acquired by Standby Purchaser in the Rights Offering, whether pursuant to the exercise of its basic subscription right, its oversubscription right and/or its standby commitment, shall be registered in a "shelf" registration statement within 60 days following the closing of the Rights Offering. All additional Common Stock shares acquired by Standby Purchaser or its affiliates from time to time after the closing of the Rights Offering shall be added to such shelf registration statement. Finally, Standby Purchaser shall have unlimited demand and piggyback registration rights with respect all notes of the Company held by Standby Purchaser or its affiliates. DHC and Standby Purchaser agree that they will negotiate, execute and deliver a definitive Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") containing customary covenants, representations, warranties and conditions, including without limitation the terms and conditions described above. REPRESENTATIONS, WARRANTIES AND COVENANTS DHC makes to Standby Purchaser the representations, warranties and covenants set forth on EXHIBIT B hereto. Standby Purchaser makes to DHC the representations, warranties and covenants set forth on EXHIBIT C hereto. CONDITIONS TO STANDBY PURCHASER'S OBLIGATIONS The obligations of Standby Purchaser to act as a "standby purchaser" as described herein shall be subject to certain conditions precedent (which may be waived in Standby Purchaser's sole discretion), including, without limitation, the following: (i) An independent and disinterested committee of DHC's Board of Directors having approved the Rights Offering and related transactions after consulting with independent counsel of its own choice and having an independent investment banking firm of national reputation analyze the terms of the Rights Offering and related transactions and advising in a presentation to the committee that such terms are fair and reasonable; (ii) Obtaining all required SEC and AMEX approvals (if any); (iii) With respect to Standby Purchaser, the LockUp Agreement to which HYI is a party being in effect with respect to HYI; (iv) The Rights Offering being on file with the SEC no later than April 20, 2002; 4 (v) The execution and delivery by DHC of the Registration Rights Agreement on terms acceptable to Standby Purchaser; (vi) The representations and warranties set forth on EXHIBIT B hereto being true and correct and the covenants set forth on EXHIBIT B having been performed; and (vii) The Recapitalization being consummated on substantially the same terms as those set forth in the Term Sheet no later than June 15, 2002 (unless the Recapitalization Agreement has been otherwise extended by no more than 15 days by DHC, ACL Holdings and the Company; PROVIDED, that the related right of termination contained in each of the Senior Noteholder LockUp Agreement, the DHC LockUp Agreement, and the Forbearance Agreement is extended by all parties thereto for the same number of days), and simultaneously with the closing of the Rights Offering. STANDBY PURCHASER'S TERMINATION RIGHTS Standby Purchaser shall be entitled to terminate its obligations to act as standby purchaser hereunder by delivery of written notice to DHC in the event that: (i) the Recapitalization on substantially the same terms as the terms described in the Term Sheet is not consummated on or before June 15, 2002 (unless the Recapitalization Agreement has been otherwise extended by no more than 15 days by DHC, ACL Holdings and the Company; PROVIDED, that the related right of termination contained in each of the Senior Noteholder LockUp Agreement, the DHC LockUp Agreement, and the Forbearance Agreement is extended by all parties thereto for the same number of days) or simultaneously with the closing of the Rights Offering; (ii) HYI terminates the LockUp Agreement in accordance with the provisions thereof, or the LockUp Agreement otherwise is not in effect with respect to HYI; (iii) the Rights Offering is not on file with the SEC on or before April 20, 2002; (iv) a PreArranged Plan or any other proceeding under the U.S. Bankruptcy Code is filed involving ACL Holdings or the Company; or (v) the Recapitalization Agreement, after being executed and delivered by the proper parties, is terminated or expires prior to consummation of the Recapitalization. 5 DHC'S TERMINATION RIGHT DHC shall be entitled to terminate this Summary of Terms by delivery of written notice to Standby Purchaser in the event that another party provides a standby commitment for no fewer Common Stock shares than Standby Purchaser with respect to the Rights Offering on terms that are materially more favorable to DHC that those provided by Standby Purchaser. PUBLIC ANNOUNCEMENTS DHC and the Standby Purchaser will mutually agree in writing and prior to dissemination on the text of any public announcement that may be made regarding this standby commitment. INDEMNIFICATION DHC agrees to indemnify and hold Standby Purchaser, its affiliates, any of its or their affiliates, and any of its or their respective officers, directors, employees, agents, representatives, successors, members, stockholders, partners, lenders and capital sources (each, a "STANDBY PURCHASER INDEMNITEE") harmless from and against any and all losses, claims, damages and liabilities, joint or several (including any investigation, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted) (collectively, "LOSSES"), to which any Standby Purchaser Indemnitee may become subject to the extent resulting from, due to or based upon Standby Purchaser having entered into this Summary of Terms or agreeing to act or acting as a standby purchaser in the Rights Offering under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or other federal or state statutory law or regulation, at common law or otherwise, insofar as such Losses arise out of or are based upon (i) any inaccuracy in, breach of or failure to comply with, any representation, warranty, or covenant made by DHC in this Summary of Terms, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus (as defined in Exhibit B)(as amended or supplemented, if DHC shall have filed with the SEC any amendment thereof or supplement thereto), or any amendment or supplement thereto, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as any such untrue statement or omission or alleged untrue statement or omission was made in such, preliminary prospectus, the Registration Statement or the Prospectus, or such amendment or supplement in reliance upon, and in conformity with, information furnished in writing to DHC by Standby Purchaser expressly for use therein. DHC agrees to indemnify and hold each Standby Purchaser Indemnitee harmless from and against any and all Losses to which any Standby Purchaser Indemnitee may become subject to the extent resulting from, due to or based upon Standby Purchaser having entered into this Summary of Terms or agreeing 6 to act or acting as Standby Purchaser in accordance with this Summary of Terms; provided, however, if such Losses are solely the result of the amount of the Standby Fee, DHC shall only be obligated for Losses in excess of the amount of the Standby Fee actually paid to Standby Purchaser. Standby Purchaser agrees to indemnify and hold DHC, its affiliates, any of its or their affiliates, and any of its or their respective officers, directors, employees, agents, representatives, successors, members, stockholders, partners, lenders and capital sources (each, a "DHC INDEMNITEE") harmless from and against any and all Losses to which any DHC Indemnitee may become subject insofar as such Losses arise out of or are based upon any inaccuracy in, breach of or failure to comply with, any representation, warranty, or covenant made by DHC in this Summary of Terms. MISCELLANEOUS This Summary of Terms is made solely for the benefit of Standby Purchaser, the affiliates of Standby Purchaser, the Standby Purchaser Indemnitees and DHC, and no other person, partnership, association or corporation shall acquire or have any right under or by virtue of this Summary of Terms. Neither DHC nor Standby Purchaser may assign any of its rights under this Summary of Terms without the prior written consent of the other party hereto. This Summary of Terms constitutes the entire agreement between Standby Purchaser and DHC with respect to the subject matter hereof (excluding the Bridge Loan and the Registration Rights Agreement), and supersedes all prior agreements and understandings with respect to the subject matter hereof (excluding the Bridge Loan and the Registration Rights Agreement). In case any one or more of the provisions contained in this Summary of Terms, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect under the laws of any jurisdiction, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way affected or impaired thereby or under the laws of any other jurisdiction. This Summary of Terms may not be amended, modified or changed, in whole or in part, except by an instrument in writing signed by DHC and Standby Purchaser. 7 BINDING COMMITMENT This Summary of Terms represents a binding commitment among DHC and Standby Purchaser with respect to the subject matter hereof and is enforceable by any party against the other parties. AGREED AND ACKNOWLEDGED THIS 21ST DAY OF MARCH, 2002. DANIELSON HOLDING CORPORATION BY: /s/ David Barse ----------------------------------- DAVID BARSE, PRESIDENT SZ INVESTMENTS, L.L.C. BY: /s/ William C. Pate ----------------------------------- WILLIAM C. PATE, VICE PRESIDENT 8 EX-99.2 4 y59743ex99-2.txt UNAUDITED PRO FORMA FINANCIAL INFORMATION Exhibit 99.2 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2001 and the unaudited pro forma condensed consolidated statement of operations for the fiscal year ended December 31, 2001 is based on historical financial statements of us as of and for the fiscal year ended December 31, 2001, ACL Holdings as of and for the year ended December 28, 2001, GMS as of and for the fiscal year ended December 31, 2001 and Vessel Leasing as of and for the fiscal year ended December 28, 2001 and have been prepared to illustrate the effects described in the next paragraph. The unaudited pro forma condensed consolidated financial information should be read in conjunction with "Selected Financial Data -- Danielson Holding Corporation," "Selected Financial Data -- American Commercial Lines Holdings LLC," "About ACL -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- ACL" included elsewhere in this prospectus supplement, our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and incorporated by reference herein and the audited consolidated financial statements and related notes of ACL Holdings, the audited consolidated financial statements and related notes of GMS and the unaudited consolidated financial statements and related notes of Vessel Leasing, each filed as an exhibit to our Current Report on Form 8-K filed with the Commission on April 19, 2002 and incorporated by reference herein. The pro forma adjustments to the unaudited pro forma condensed consolidated balance sheet as of December 31, 2001 and the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2001 give effect to: - our purchase price of $80,580,030 for 100% of ACL Holdings, $1,290,000 for 5.4% of GMS (following which we will indirectly own 55.4% of GMS, 50% of which through ACL) and $2,768,869 for 50% of Vessel Leasing (following which we will indirectly own 100% of Vessel Leasing, 50% of which through ACL). The purchase price of ACL Holdings is comprised of $58,493,000 face amount of ACL existing notes, discounted to a preliminary estimate of fair value of $41,530,030, that are held by us and our subsidiaries and that will be contributed to ACL Holdings, $25,000,000 cash which will be used to reduce ACL's outstanding indebtedness, $7,000,000 cash which will be exchanged for the preferred membership interests in ACL Holdings and $7,050,000 in fees and expenses related to the restructuring. The purchase price of GMS and Vessel Leasing are comprised solely of cash; - cash of $43,526,095 raised through the rights offering, $9,500,000 received from the exercise of the 1999 warrants, $1,038,407 received from the exercise of options in 2002 under our 1995 Stock and Incentive Plan, the $1,000,000 backstop fee to be paid to SZ Investments and $400,000 in expenses related to the rights offering; and - the other aspects of the restructuring as described in further detail in the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements. The unaudited pro forma condensed consolidated financial information is provided for comparative purposes only and is not indicative of the results of operations or financial position of the combined companies that would have occurred had the transactions been consummated at the beginning of the period presented or on the date indicated, nor is it indicative of future operating results or financial position. The unaudited pro forma adjustments are based upon currently available information and upon certain preliminary assumptions that management believes are reasonable under the circumstances. The pro forma adjustments are subject to revision once appraisals and other evaluations of the fair value of the assets acquired and liabilities assumed are completed. Accordingly, actual purchase accounting adjustments could differ materially from the pro forma adjustments presented in this prospectus supplement. 46 DANIELSON HOLDING CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------- AS OF DECEMBER 28, 2001 AS OF DECEMBER 31, 2001 -------------------------------------------------------------------------- ACL HISTORICAL HOLDINGS PRO FORMA HISTORICAL ACL PRO FORMA ACL VESSEL HISTORICAL HISTORICAL HOLDINGS ADJ HOLDINGS LEASING GMS DHC ---------- --------- --------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Investment securities..... -- -- -- -- -- $148,512 Cash and cash equivalents............. 47,253 -- 47,253 12 821 17,866 Restricted cash........... 5,801 Premiums and fees receivable.............. -- -- -- -- -- 14,876 Reinsurance recoverable on paid losses............. -- -- -- -- -- 2,142 Reinsurance recoverable on unpaid losses........... -- -- -- -- -- 17,733 Prepaid reinsurance premiums................ -- -- -- -- -- 2,078 Deferred policy acquisition costs....... -- -- -- -- -- 2,209 Accounts receivable, net..................... 54,785 -- 54,785 -- 5,987 -- Materials and supplies.... 31,335 -- 31,335 -- -- -- Other current assets...... 29,633 -- 29,633 86 3,339 2,498 --------- --------- -------- ------- ------- -------- Total Current Assets.... 163,006 0 163,006 5,899 10,147 207,914 Properties-net.............. 464,133 111,930 (1) 576,063 43,101 38,198 957 Pension asset............... 26,067 (4,823)(2) 21,244 -- -- -- Other assets................ 104,730 (24,475)(3) 80,255 5,921 29,527 -- --------- --------- -------- ------- ------- -------- TOTAL ASSETS.............. $ 757,936 $ 82,632 $840,568 $54,921 $77,872 $208,871 ========= ========= ======== ======= ======= ======== LIABILITIES CURRENT LIABILITIES Unpaid losses and loss adjustment expenses..... -- -- -- -- -- 105,745 Unearned premiums......... -- -- -- -- -- 21,117 Reinsurance premiums payable................. -- -- -- -- -- 763 Funds withheld on ceded reinsurance............. -- -- -- -- -- 1,666 Payable for securities sold not yet purchased............... -- -- -- -- -- 2,247 Accounts payable.......... 29,737 -- 29,737 -- 4,420 -- Accrued claims and insurance premiums...... 24,200 -- 24,200 -- -- -- Accrued interest.......... 18,659 (14,870)(4) 3,789 161 Short-term debt........... 84,000 (50,000)(5) 34,000 -- -- -- Current portion of long-term debt.......... 608,519 (602,079)(6) 6,440 2,885 4,600 -- Other current liabilities............. 79,565 14,819(7) 94,384 2,517 1,485 2,870 --------- --------- -------- ------- ------- -------- Total Current Liabilities........... 844,680 (652,130) 192,550 5,563 10,505 134,408 Long-term debt.............. -- 534,797(8) 534,797 39,695 41,168 -- Pension liability........... 18,907 (18,907)(9) 0 -- -- ------------------------- AS OF DECEMBER 31, 2001 ------------------------- DHC PRO FORMA CONSOLIDATED ADJ PRO FORMA --------- ------------ (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Investment securities..... $(31,952)(12) $ 116,560 Cash and cash equivalents............. 9,556(13) 75,508 Restricted cash........... 5,801 Premiums and fees receivable.............. -- 14,876 Reinsurance recoverable on paid losses............. -- 2,142 Reinsurance recoverable on unpaid losses........... -- 17,733 Prepaid reinsurance premiums................ -- 2,078 Deferred policy acquisition costs....... -- 2,209 Accounts receivable, net..................... -- 60,772 Materials and supplies.... -- 31,335 Other current assets...... -- 35,556 --------- ---------- Total Current Assets.... (22,396) 364,570 Properties-net.............. 26,566(14) 684,885 Pension asset............... -- 21,244 Other assets................ (43,495)(15) 72,208 --------- ---------- TOTAL ASSETS.............. $(39,325) $1,142,907 ========= ========== LIABILITIES CURRENT LIABILITIES Unpaid losses and loss adjustment expenses..... -- 105,745 Unearned premiums......... -- 21,117 Reinsurance premiums payable................. -- 763 Funds withheld on ceded reinsurance............. -- 1,666 Payable for securities sold not yet purchased............... -- 2,247 Accounts payable.......... -- 34,157 Accrued claims and insurance premiums...... -- 24,200 Accrued interest.......... 3,950 Short-term debt........... -- 34,000 Current portion of long-term debt.......... -- 13,925 Other current liabilities............. -- 101,256 --------- ---------- Total Current Liabilities........... -- 343,026 Long-term debt.............. -- 615,660 Pension liability........... -- --
48
-------------------------------------------------------------------------- AS OF DECEMBER 28, 2001 AS OF DECEMBER 31, 2001 -------------------------------------------------------------------------- ACL HISTORICAL HOLDINGS PRO FORMA HISTORICAL ACL PRO FORMA ACL VESSEL HISTORICAL HISTORICAL HOLDINGS ADJ HOLDINGS LEASING GMS DHC ---------- --------- --------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Minority interest in GMS.... -- -- -- -- -- Other long-term liabilities............... 37,292 (4,651)(10) 32,641 313 5,191 -- --------- --------- -------- ------- ------- -------- TOTAL LIABILITIES......... 900,879 (140,891) 759,988 45,571 56,864 134,408 --------- --------- -------- ------- ------- -------- Preferred members' interest (mandatory redemption value of $1,037,230)............. 311,292 (311,292)(11) -- -- -- -- Members'/stockholders' equity.................. Common members' interest.. 4,463 76,117(11) 80,580 5,236 21,008 -- Preferred members' interest................ -- -- -- 4,190 -- -- Common stock.............. -- -- -- -- -- 1,952 Unearned compensation..... -- (1,695)(11) (1,695) -- -- -- Additional paid in capital................. 70,899 (69,204)(11) 1,695 63,115 Retained earnings......... (527,740) 527,740(11) -- (76) -- 3,746 Accumulated other comprehensive income.... (1,857) 1,857(11) -- -- -- 5,716 Treasury stock............ -- -- -- -- -- (66) --------- --------- -------- ------- ------- -------- TOTAL MEMBERS'/ STOCKHOLDERS' (DEFICIT) EQUITY.................. (454,235) 534,815 80,580 9,350 21,008 74,463 --------- --------- -------- ------- ------- -------- --------- --------- -------- ------- ------- -------- TOTAL LIABILITIES PREFERRED MEMBERS' INTEREST, & MEMBERS'/ STOCKHOLDERS' EQUITY.... $ 757,936 $ 82,632 840,568 $54,921 $77,872 $208,871 ========= ========= ======== ======= ======= ======== ------------------------- AS OF DECEMBER 31, 2001 ------------------------- DHC PRO FORMA CONSOLIDATED ADJ PRO FORMA --------- ------------ (DOLLARS IN THOUSANDS) Minority interest in GMS.... 9,370(16) 9,370 Other long-term liabilities............... -- 38,145 --------- ---------- TOTAL LIABILITIES......... 9,370 1,006,201 --------- ---------- Preferred members' interest (mandatory redemption value of $1,037,230)............. -- -- Members'/stockholders' equity.................. Common members' interest.. (106,824)(19) -- Preferred members' interest................ (4,190)(19) -- Common stock.............. 1,130(17) 3,082 Unearned compensation..... (1,695) Additional paid in capital................. 51,535(18) 116,345 Retained earnings......... 11,582(19) 15,252 Accumulated other comprehensive income.... (1,928)(20) 3,788 Treasury stock............ -- (66) --------- ---------- TOTAL MEMBERS'/ STOCKHOLDERS' (DEFICIT) EQUITY.................. (48,695) 136,706 --------- ---------- --------- ---------- TOTAL LIABILITIES PREFERRED MEMBERS' INTEREST, & MEMBERS'/ STOCKHOLDERS' EQUITY.... $(39,325) $1,142,907 ========= ==========
49 DANIELSON HOLDING CORPORATION AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
------------------------------------------------- YEAR ENDED DECEMBER 28, 2001 ------------------------------------------------- ACL HISTORICAL HOLDINGS PRO FORMA HISTORICAL ACL PRO FORMA ACL VESSEL HOLDINGS ADJ HOLDINGS LEASING ---------- --------- --------- ---------- (DOLLARS IN THOUSANDS) REVENUES Gross premiums earned....... -- -- -- Ceded premiums earned....... -- -- -- Net premiums earned......... -- -- -- Operating Revenue -- marine transportation & services.................. 788,501 -- 788,501 1,705 Net investment income....... -- -- -- Net realized investment gains..................... -- -- -- Other income................ -- -- -- -------- -------- ------- ------ TOTAL REVENUES................ 788,501 -- 788,501 1,705 OPERATING LOSSES AND EXPENSES Gross losses and loss adj exp....................... -- -- -- Ceded losses and loss adj exp....................... -- -- -- Net losses and loss adj exp....................... -- -- -- Policyholder dividends...... -- -- -- Policy acquisition expenses.................. -- -- -- General and administrative exp....................... -- -- -- Cost of sales and services.................. Materials, supplies and other..................... 341,606 (1,164)(21) 340,442 -- Rent........................ 56,711 -- 56,711 -- Labor and fringe benefits... 166,041 3,632(22) 169,673 -- Fuel........................ 93,560 -- 93,560 -- Deprec and amort............ 55,497 7,965(23) 63,462 731 (Gain) loss on property disposition............... (16,498) -- (16,498) -- Taxes, other than income tax....................... 26,223 -- 26,223 -- Other....................... -- -- 5 -------- -------- ------- ------ TOTAL OPERATING LOSSES AND EXPENSES.................... 723,140 10,433 733,573 736 OPERATING INCOME.............. 65,361 (10,433) 54,928 969 OTHER EXPENSE (INCOME) Minority interest in net income of GMS............. -- -- -- Interest expense............ 70,932 (9,672)(24) 61,260 1,109 Interest income............. (1,311) -- (1,311) (64) Equity in earnings of joint ventures.................. -- -- -- Foreign exchange gain....... -- -- -- Other....................... 720 -- 720 -- -------- -------- ------- ------ 70,341 (9,672) 60,669 1,045 INCOME (LOSS) BEFORE INCOME TAXES....................... (4,980) (761) (5,741) (76) INCOME TAX.................... 118 -- 118 -- -------- -------- ------- ------ NET INCOME (LOSS)(1).......... $ (5,098) $ (761) (5,859) $ (76) ======== ======== ======= ====== Loss Per Share of Common Stock(1).................... -- -- -- --------------------------------------------------- YEAR ENDED DECEMBER 31, 2001 --------------------------------------------------- DHC HISTORICAL HISTORICAL PRO FORMA CONSOLIDATED GMS DHC ADJ PRO FORMA ---------- ---------- --------- ------------ (DOLLARS IN THOUSANDS) REVENUES Gross premiums earned....... -- $ 90,767 -- $ 90,767 Ceded premiums earned....... -- (8,913) -- (8,913) -------- -------- Net premiums earned......... -- 81,854 -- 81,854 Operating Revenue -- marine transportation & services.................. 46,599 -- (1,705)(25) 835,100 Net investment income....... -- 9,448 -- 9,448 Net realized investment gains..................... -- 1,558 1,558 Other income................ -- 1,242 -- 1,242 ------- -------- -------- -------- TOTAL REVENUES................ 46,599 94,102 (1,705) 929,202 OPERATING LOSSES AND EXPENSES Gross losses and loss adj exp....................... -- 78,295 -- 78,295 Ceded losses and loss adj exp....................... -- (1,801) -- (1,801) -------- -------- Net losses and loss adj exp....................... -- 76,494 -- 76,494 Policyholder dividends...... -- (81) -- (81) Policy acquisition expenses.................. -- 20,795 -- 20,795 General and administrative exp....................... 6,505 9,733 -- 16,238 Cost of sales and services.................. 28,092 28,092 Materials, supplies and other..................... -- -- -- 340,442 Rent........................ -- -- (1,705)(25) 55,006 Labor and fringe benefits... -- -- -- 169,673 Fuel........................ -- -- -- 93,560 Deprec and amort............ 5,332 1,422 1,114(26) 72,061 (Gain) loss on property disposition............... 29 -- -- (16,469) Taxes, other than income tax....................... -- -- -- 26,223 Other....................... -- -- 5 ------- -------- -------- -------- TOTAL OPERATING LOSSES AND EXPENSES.................... 39,958 108,363 (591) 882,039 OPERATING INCOME.............. 6,641 (14,261) (1,114) 47,163 OTHER EXPENSE (INCOME) Minority interest in net income of GMS............. -- -- 1,075(27) 1,075 Interest expense............ 4,384 -- (290)(28) 66,463 Interest income............. (27) -- 290(28) (1,112) Equity in earnings of joint ventures.................. (163) -- -- (163) Foreign exchange gain....... (14) -- -- (14) Other....................... (21) -- 978(29) 1,677 ------- -------- -------- -------- 4,159 -- 2,053 67,926 INCOME (LOSS) BEFORE INCOME TAXES....................... 2,482 (14,261) (3,167) (20,763) INCOME TAX.................... 71 73 -- 262 ------- -------- -------- -------- NET INCOME (LOSS)(1).......... $ 2,411 $(14,334) $ (3,167) $(21,025) ======= ======== ======== ======== Loss Per Share of Common Stock(1).................... -- $ (0.74) -- $ (0.68)
- --------------- (1) Before extraordinary item, cumulative effect of accounting changes, and preferred members' interest accretion. 50 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET 1. To adjust ACL properties-net to their relative fair values by $190,102 based on a third-party appraisal prepared on ACL's marine assets and preliminary estimates made by management of the fair values of ACL's other property and equipment and to allocate ($78,172), representing the excess of fair value over cost, in proportion to the relative fair value of assets acquired. 2. To adjust ACL's pension asset to fair value based on third-party actuarial calculations. 3. To reverse unamortized debt issuance costs of $16,442 from previous ACL debt facilities, and to establish new debt issuance cost of $4,175. To increase ACL investments in subsidiaries to fair value by $982, to eliminate goodwill of $838, to reduce favorable lease intangibles to fair value by $2,203 and to allocate the excess of fair value over cost in proportion to restated fair values by reducing other assets by $10,149. Management of ACL has estimated that ACL has no intangible assets, other than the favorable lease intangibles, which have fair values in excess of their historical carrying values. 4. To eliminate accrued bond interest of $14,870 according to the terms of ACL's debt restructuring. 5. To remove $50,000 of existing revolving credit loans according to the terms of ACL's debt restructuring. 6. To reclassify outstanding indebtedness under ACL's senior notes and term loans, other than $6,250 in term loans, from current to long term. 7. To accrue ACL transaction fees of $14,800 and to adjust ACL's non-qualified pension plan liability to fair value based on third party actuarial calculation. 8. To reclassify indebtedness under ACL's senior notes and term loans of $602,079 from current to long term, to convert $50,000 in existing revolving credit loans to new term loan A, to reduce outstanding senior note indebtedness by $58,493 from the contribution and cancellation of existing notes held by us and our subsidiaries, to reduce outstanding indebtedness under the term loans from the contribution of $25,000 in cash by us and/or one or more of our subsidiaries and to record additional new senior notes of $11,922 from the conversion of existing accrued senior note interest. To discount the new senior notes and the new senior subordinated notes by $45,711 to a preliminary estimate of fair value. 9. To eliminate the ACL pension plan liability in accordance with adjusting the plan to fair value. 10. To adjust ACL's post-retirement medical plan liability to fair value based on third-party actuarial calculations. 11. To eliminate the preferred members interest of $311,292 and the common members interest of $4,463, to eliminate other paid-in-capital of $70,899, to eliminate $527,740 retained deficit after debt restructuring and $(1,857) accumulated other comprehensive loss and to establish new members interest of $80,580 based upon the fair value of the consideration contributed by us and/or one or more of our subsidiaries. To record our 399,039 shares of restricted common stock with a value of $1,695 issued to ACL management, which will vest over the next three years. 12. To eliminate existing notes held by us and/or one or more of our subsidiaries. We will recognize a gain of $11,506 when the notes are contributed. Such gain has not been reflected in our unaudited pro forma condensed consolidated statement of operations. 13. Cash raised by us through the rights offering, the exercise of options and the exercise of warrants less cash paid by us in connection with the acquisitions and the rights offering. 14. To adjust GMS properties-net to fair value by $30,829 based on management estimates and to allocate ($4,263) representing the excess of fair value over cost in proportion to adjusted fair value. 51 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) 15. To remove goodwill on GMS of $24,970 and establish goodwill of $189 for Vessel Leasing. To eliminate ACL's investment in GMS of $11,942 and Vessel Leasing of $6,772 upon consolidation. 16. To reflect DHC's acquired 55.4% (50% owned by ACL) ownership of GMS and record a 44.6% minority interest in GMS. 17. New common stock issued as a result of the rights offering, the exercise of warrants and the exercise of options and the restricted stock issued to ACL management. 18. To record additional paid in capital resulting from the rights offering, the exercise of warrants and the exercise of options less fees related to rights offering. 19. To eliminate common members' interest in ACL Holdings, GMS and Vessel Leasing, to eliminate preferred members' interest in Vessel Leasing, to eliminate Vessel Leasing retained earnings and to record a gain of $11,506 realized on the existing notes contributed by us and/or one or more of our subsidiaries. 20. To eliminate our other comprehensive income on our investment in existing notes upon realization of gain. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 21. To eliminate $1,164 of non-recurring consulting and legal fees directly related to ACL's debt restructuring. 22. To increase ACL's pension and post-retirement medical expenses as a result of adjusting the plans to fair value based on third-party actuarial calculations by $3,067 and to record $565 in expense for the vesting of 1/3 of our restricted common stock. 23. To record additional depreciation of $9,027, based on an average remaining life of approximately nine years, to reduce amortization of software by $296, to reduce amortization of the intangible favorable lease asset by $557 and to eliminate goodwill amortization of $209 as a result of adjusting assets to the cost of the acquisition. 24. To eliminate interest expense and debt amortization from ACL's existing senior credit facility and the existing notes of $68,257 and to record interest expense and debt amortization on the new senior credit facility, the new senior notes and the new senior subordinated notes of $52,490 and to amortize the discount of $6,095 on the new senior notes and the new senior subordinated notes under the straight-line method which approximates the effective interest rate method. Interest is calculated based on current market rates. A 1/8% change in the interest rate would have a $465 impact on interest expense due to 52 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) variable rates in the new senior credit facility. The components of the new debt, interest expense and amortization of debt issuance costs are as follows:
VARIABLE INTEREST INTEREST & RATE PRINCIPAL RATE AMORTIZATION CHANGE --------- -------- ------------ -------- Term Loan A...................................... $ 46,560 5.78% $ 2,691 $ 58 Term Loan B...................................... 134,046 6.03 8,083 167 Term Loan C...................................... 157,723 6.28 9,905 197 Revolver......................................... 34,000 5.78 1,965 43 New Senior Notes................................. 131,922 11.25 14,841 -- New Subordinated Senior Notes (compounded semi- annually)...................................... 116,507 12.00 14,400 -- Fair value discount of New Senior Notes and New Senior Subordinated Notes...................... (45,711) -- 6,095 -- New Debt Issuance Costs -- Bank Fees (6.5 year life).......................................... 2,375 365 -- New Debt Issuance Costs -- Other Fees (7.5 year life).......................................... 1,800 240 -- ------- ---- $58,585 $465 ======= ====
25. To eliminate intercompany charter revenue recognized by Vessel Leasing and charter expense recognized by ACL. 26. To record additional depreciation of $2,079 related to the increase in value of properties for GMS and to eliminate goodwill amortization of $965 for GMS. 27. To record a 44.6% minority interest in net income of GMS. 28. To eliminate intercompany interest expense recognized by Vessel Leasing and interest income recognized by ACL. 29. To eliminate ACL's equity in net income in GMS of $1,016 and Vessel Leasing of $(38) upon consolidation. 53 EX-99.3 5 y59743ex99-3.txt AUDITED FINANCIAL STATEMENTS Exhibit 99.3 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants........................... 2 Consolidated Statement of Operations, for the years ended December 28, 2001, December 29, 2000 and December 31, 1999...................................................... 3 Consolidated Statement of Cash Flows, for the years ended December 28, 2001, December 29, 2000 and December 31, 1999...................................................... 4 Consolidated Statement of Financial Position as of December 28, 2001 and December 29, 2000............................ 5 Consolidated Statement of Members' Deficit, for the years ended December 28, 2001, December 29, 2000 and December 31, 1999......................................... 6 Notes to Consolidated Financial Statements, for the years ended December 28, 2001, December 29, 2000 and December 31, 1999.................................................. 7-30
REPORT OF INDEPENDENT ACCOUNTANTS To Board of Managers of American Commercial Lines Holdings LLC and Subsidiaries: In our opinion, based on our audits and the reports of other auditors, the accompanying consolidated statements of financial position and the related consolidated statements of operations, members' deficit and cash flows present fairly, in all material respects, the financial position of American Commercial Lines Holdings LLC and its subsidiaries (the "Company") at December 28, 2001 and December 29, 2000, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 28, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of UABL Limited (UABL), a 50% owned subsidiary, for 2001, which statements reflect 7% of consolidated total assets as of December 28, 2001, and 27% of consolidated net loss for the fiscal year ended December 28, 2001. We also did not audit the financial statements of Global Material Services LLC (GMS), a 50% owned subsidiary, for 1999, which statements reflect 1% of consolidated total assets as of December 31, 1999, and 45% of consolidated net earnings for the fiscal year ended December 31, 1999. Those statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for UABL and GMS, is based solely on the reports of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a substantial loss during 2001. As discussed in Note 4 to the consolidated financial statements, subsequent to December 28, 2001 American Commercial Lines LLC (ACL), a wholly-owned subsidiary of ACL Holdings, defaulted on its Senior Notes and Senior Credit Facilities and has determined that it is not likely that it will be able to meet the covenant requirements included in the Senior Credit Facilities agreement for 2002. Accordingly, the outstanding debt has been classified as current in the consolidated statement of financial position at December 28, 2001. The above facts raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As discussed in Note 1 to the consolidated financial statements, during the fourth quarter of 2001 the Company prospectively increased its estimate of the useful life of towboats, which reduced the loss before extraordinary items and the net loss by $1.1 million for the fiscal year ended December 28, 2001. PRICEWATERHOUSECOOPERS LLP Louisville, Kentucky April 19, 2002 2 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEARS ENDED ------------------------------------------ DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ (DOLLARS IN THOUSANDS) OPERATING REVENUE Revenue............................................... $729,692 $771,749 $739,136 Revenue from related parties.......................... 58,809 2,089 -- -------- -------- -------- 788,501 773,838 739,136 OPERATING EXPENSE Materials, Supplies and Other......................... 341,606 334,872 306,763 Rent.................................................. 56,711 49,463 43,978 Labor and Fringe Benefits............................. 166,041 163,251 182,225 Fuel.................................................. 93,560 88,094 53,307 Depreciation and Amortization......................... 55,497 56,014 51,222 (Gain) Loss on Property Dispositions, Net............. (16,498) (1,686) 384 Taxes, Other Than Income Taxes........................ 26,223 27,522 26,665 -------- -------- -------- 723,140 717,530 664,544 -------- -------- -------- OPERATING INCOME........................................ 65,361 56,308 74,592 OTHER EXPENSE (INCOME) Interest Expense...................................... 70,932 70,813 71,275 Other, Net............................................ (591) 1,050 (3,048) Gain on Sale of Watercom.............................. -- (11,418) -- -------- -------- -------- 70,341 60,445 68,227 -------- -------- -------- (LOSS) EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE............ (4,980) (4,137) 6,365 INCOME TAXES............................................ 118 4,263 1,658 -------- -------- -------- (LOSS) EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE................................................ (5,098) (8,400) 4,707 EXTRAORDINARY ITEM -- GAIN/(LOSS) ON EARLY EXTINGUISHMENT OF DEBT................................ 1,885 (734) -- CUMULATIVE EFFECT OF ACCOUNTING CHANGE.................. (490) -- (1,737) -------- -------- -------- NET (LOSS) EARNINGS..................................... (3,703) (9,134) 2,970 PREFERRED MEMBERS' INTEREST ACCRETION................... (30,899) (27,832) (25,070) -------- -------- -------- NET LOSS APPLICABLE TO COMMON MEMBERS' INTEREST......... $(34,602) $(36,966) $(22,100) ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
FISCAL YEARS ENDED ------------------------------------------ DECEMBER 28, DECEMBER 29, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net (Loss) Earnings................................... $ (3,703) $ (9,134) $ 2,970 Adjustments to Reconcile Net (Loss) Earnings to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization...................... 59,910 59,076 54,039 Impairment of Barges............................... -- 3,865 230 Gain on Property Dispositions...................... (16,498) (1,686) 384 Gain on Sale of Watercom........................... -- (11,418) -- Proceeds from the Initial Sale of Accounts Receivable....................................... -- -- 50,000 Other Operating Activities......................... (3,852) (6,580) 1,684 Changes in Operating Assets and Liabilities: Accounts Receivable.............................. (12,010) (2,547) 5,146 Materials and Supplies........................... (1,384) 13,890 (3,287) Accrued Interest................................. 413 10,557 (14,834) Other Current Assets............................. (4,998) (3,715) (2,136) Other Current Liabilities........................ 6,710 (21,526) 406 -------- -------- -------- Net Cash Provided by Operating Activities........ 24,588 30,782 94,602 INVESTING ACTIVITIES Property Additions.................................... (19,772) (30,554) (55,880) Purchase of Barging Assets............................ -- (31,500) -- Investment in Vessel Leasing LLC...................... (6,808) -- -- Proceeds from Property Dispositions................... 23,918 4,089 2,133 Proceeds from Sale of Terminals....................... 7,818 -- -- Proceeds from Property Condemnation................... 2,730 -- -- Proceeds from Sale of Watercom........................ -- 13,600 -- Proceeds from Sale of Restricted Investments.......... -- 25,288 -- Other Investing Activities............................ (4,594) (5,115) (5,409) -------- -------- -------- Net Cash Provided by (Used in) Investing Activities.................................... 3,292 (24,192) (59,156) FINANCING ACTIVITIES Short-Term Borrowings................................. 17,250 66,750 -- Member Distribution................................... -- -- (541) Long-Term Debt Repaid................................. (47,937) (54,752) (53,046) Outstanding Checks Net of Deposits.................... (6,670) 10,075 1,029 Debt Costs............................................ (3,463) -- -- Other Financing....................................... 625 64 (1,403) -------- -------- -------- Net Cash (Used in) Provided by Financing Activities.................................... (40,195) 22,137 (53,961) Net (Decrease) Increase in Cash and Cash Equivalents.... (12,315) 28,727 (18,515) Cash and Cash Equivalents at Beginning of Period........ 59,568 30,841 49,356 -------- -------- -------- Cash and Cash Equivalents at End of Period....... $ 47,253 $ 59,568 $ 30,841 ======== ======== ======== Supplemental Cash Flow Information: Interest Paid......................................... $ 65,504 $ 57,107 $ 84,084 Income Taxes Paid..................................... 1,175 5,685 3,987
The accompanying notes are an integral part of the consolidated financial statements. 4 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION
DECEMBER 28, DECEMBER 29, 2001 2000 ------------ ------------ (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Cash and Cash Equivalents................................. $ 47,253 $ 59,568 Accounts Receivable, Net.................................. 41,383 40,717 Account Receivable -- Related Parties..................... 13,402 2,111 Materials and Supplies.................................... 31,335 29,773 Other Current Assets...................................... 29,633 23,660 --------- --------- Total Current Assets................................... 163,006 155,829 PROPERTIES-Net.............................................. 464,133 509,443 PENSION ASSET............................................... 26,067 24,512 OTHER ASSETS................................................ 104,730 97,754 --------- --------- Total Assets...................................... $ 757,936 $ 787,538 ========= ========= LIABILITIES CURRENT LIABILITIES Accounts Payable.......................................... $ 29,737 $ 29,730 Accrued Payroll and Fringe Benefits....................... 17,206 14,003 Deferred Revenue.......................................... 11,890 12,011 Accrued Claims and Insurance Premiums..................... 24,200 21,047 Accrued Interest.......................................... 18,659 18,246 Short-Term Debt........................................... 84,000 66,750 Current Portion of Long-Term Debt......................... 608,519 44,579 Other Current Liabilities................................. 42,072 55,360 Other Current Liabilities -- Related Parties.............. 8,397 1,457 --------- --------- Total Current Liabilities......................... 844,680 263,183 LONG-TERM DEBT.............................................. -- 613,476 PENSION LIABILITY........................................... 18,907 21,389 OTHER LONG-TERM LIABILITIES................................. 37,292 29,149 --------- --------- Total Liabilities................................. 900,879 927,197 --------- --------- PREFERRED MEMBERS' INTEREST; MANDATORY REDEMPTION VALUE OF $1,037,230................................................ 311,292 280,393 --------- --------- MEMBERS' DEFICIT Common Members' Interest.................................... 4,463 4,463 Other Capital............................................... 70,899 99,017 Retained Deficit............................................ (527,740) (523,048) Accumulated Other Comprehensive Loss........................ (1,857) (484) --------- --------- Total Members' Deficit............................ (454,235) (420,052) --------- --------- Total Liabilities, Preferred Members' Interest and Members' Deficit................................ $ 757,936 $ 787,538 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 5 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES CONSOLIDATED STATEMENT OF MEMBERS' DEFICIT
ACCUMULATED COMMON RETAINED OTHER MEMBERS' OTHER EARNINGS COMPREHENSIVE INTEREST CAPITAL (DEFICIT) EARNINGS (LOSS) TOTAL -------- -------- --------- --------------- --------- (DOLLARS IN THOUSANDS) Balance at December 25, 1998......... $ 4,436 $149,171 $(511,493) $ -- $(357,886) Comprehensive Income: Net earnings....................... -- -- 2,970 2,970 Foreign Currency Translation....... -- -- (337) (337) -------- -------- --------- ------- --------- Total Comprehensive Income................... -- 2,970 (337) 2,633 Contribution of capital by CSX....... -- 1,054 -- -- 1,054 Other................................ -- -- (4,850) -- (4,850) Issuance of membership interests..... 27 -- -- -- 27 Cash distribution to partners........ -- -- (541) -- (541) Preferred members' interest accretion.......................... -- (25,070) -- -- (25,070) -------- -------- --------- ------- --------- Balance at December 31, 1999......... 4,463 125,155 (513,914) (337) (384,633) Comprehensive Loss: Net loss........................... -- -- (9,134) -- (9,134) Foreign Currency Translation....... -- -- (147) (147) -------- -------- --------- ------- --------- Total Comprehensive Loss... -- (9,134) (147) (9,281) Contribution of capital by CSX....... -- 1,694 -- -- 1,694 Preferred members' interest accretion.......................... -- (27,832) -- -- (27,832) -------- -------- --------- ------- --------- Balance at December 29, 2000......... 4,463 99,017 (523,048) (484) (420,052) Cumulative Effect of Accounting Change as of December 30, 2000..... -- -- (300) (300) Comprehensive Loss: Net loss........................... -- -- (3,703) -- (3,703) Net loss on fuel swaps designated as cash flow hedging instruments..................... -- -- (271) (271) Net loss on interest rate swaps designated as cash flow hedging instruments..................... -- -- (747) (747) Foreign Currency Translation....... -- -- (55) (55) -------- -------- --------- ------- --------- Total Comprehensive Loss... -- (3,703) (1,073) (4,776) Contribution of capital by CSX....... -- 2,781 -- -- 2,781 Consolidation of ACL Funding Corp.... -- -- (989) -- (989) Preferred members' interest accretion.......................... -- (30,899) -- -- (30,899) -------- -------- --------- ------- --------- Balance at December 28, 2001......... $ 4,463 $ 70,899 $(527,740) $(1,857) $(454,235) ======== ======== ========= ======= =========
The accompanying notes are an integral part of the consolidated financial statements. 6 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS American Commercial Lines Holdings LLC ("ACL Holdings" or the "Parent") is a holding company with no operations and no assets or liabilities other than its investment in American Commercial Lines LLC and subsidiaries ("ACL"). The operations of ACL include barge transportation together with related terminal, marine construction and repair along inland waterways. Barge transportation services include the movement of steel and other bulk products, grain, coal, and liquids in the United States and South America and account for the majority of ACL's revenues. Marine construction, repair and terminal services are provided to customers in marine transportation and other related industries in the United States. ACL has long term contracts with some customers. PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements reflect the results of operations, cash flows and financial position of ACL Holdings and ACL and its majority-owned subsidiaries as a single entity, collectively referred to as the "Company". All significant intercompany accounts and transactions have been eliminated. Investments in companies that are not majority-owned are accounted for under the equity method. FISCAL YEAR The Company follows an annual fiscal reporting period, which ends on the last Friday in December. The consolidated financial statements presented are for the fiscal years ended December 28, 2001 and December 29, 2000 and December 31, 1999. 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. The Company's significant estimates include barge transportation revenue and expense recognition, the carrying values and estimated useful lives of fixed assets, allowances for doubtful accounts, insurance reserves, employee benefit plan liabilities and others. CASH AND CASH EQUIVALENTS Cash and cash equivalents include short-term investments with a maturity of less than three months when purchased. ACL has from time to time, cash in banks in excess of federally insured limits. ACCOUNTS RECEIVABLE Accounts Receivable, Net consist of the following:
2001 2000 ------- ------- Accounts Receivable......................................... $43,014 $26,542 Note Receivable -- ACLF (See Note 3)........................ -- 15,332 Allowance for Doubtful Accounts............................. (1,631) (1,157) ------- ------- $41,383 $40,717 ======= =======
7 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACL maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable. MATERIALS AND SUPPLIES Materials and Supplies are carried at the lower of cost (average) or market and consist of the following:
2001 2000 ------- ------- Raw Materials............................................... $ 3,633 $ 2,805 Work in Process............................................. 13,029 9,764 Parts and Supplies.......................................... 14,673 17,204 ------- ------- $31,335 $29,773 ======= =======
PROPERTIES Properties, at cost, consist of the following:
2001 2000 -------- -------- Land........................................................ $ 11,066 $ 12,813 Buildings and Improvements.................................. 36,130 42,721 Equipment................................................... 789,567 800,041 -------- -------- 836,763 855,575 Less Accumulated Depreciation............................... 372,630 346,132 -------- -------- $464,133 $509,443 ======== ========
Provisions for depreciation of properties are based on the estimated useful service lives computed on the straight-line method. Buildings and improvements are depreciated from 15 to 45 years. Equipment is depreciated from 5 to 42 years. Depreciation expense was $52,100 in 2001, $53,457 in 2000 and $49,779 in 1999. In the fourth quarter 2001, the Company changed the useful life of towboats from 30 to 42 years, which reduced the loss before extraordinary items and net loss by $1,142 for the year ended December 28, 2001. This change in accounting estimate was based on additional information about the useful life of the towboat fleet. Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets. Where impairment is indicated, the assets are evaluated for sale or other disposition, and their carrying amount is reduced to fair value based on discounted net cash flows or other estimates of fair value. There were no fixed asset impairment losses in 2001. Fixed asset impairment losses of $3,865 and $230 were recorded in 2000 and 1999 respectively in Materials, Supplies and Other on the Consolidated Statement of Operations. These losses affect the barging segment. GLOBAL MATERIALS SERVICES LLC ACL's ownership interest in Global Materials Services LLC ("GMS"), a joint venture between American Commercial Terminals LLC ("ACT") a wholly owned subsidiary of ACL, and Mid-South Terminal Company, L.P., an unaffiliated third party, was 50% at December 28, 2001 and December 29, 2000. ACL accounts for this investment by the equity method. ACL's investment in GMS at December 28, 2001 8 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and December 29, 2000 of $10,208 and $9,124 respectively, is included in other assets on the consolidated statement of financial position. Earnings related to ACL's investment in GMS for the year ended December 28, 2001 and December 29, 2000 were $1,015 and $1,138, respectively, and are included in other income in the consolidated statement of operations. During 2001, ACL contributed $1,200 in cash to GMS. Other comprehensive loss related to ACL's investment in GMS for the year ended December 28, 2001 and December 29, 2000 was $1,131 and $329, respectively, related to interest rate swaps and foreign currency translation. UABL LIMITED On October 24, 2000, ACL contributed certain assets at book value to UABL Limited ("UABL"), an Argentine company. ACL accounts for its 50% ownership in UABL by the equity method. ACL's investment in UABL of $49,892 at December 28, 2001 and $49,686 at December 29, 2000, is included in other assets on the consolidated statement of financial position. ACL's loss (net of minority interest) of $2,960 and $1,440 for the years ended December 28, 2001 and December 29, 2000, respectively, are included in other income in the consolidated statement of operations. In 2001, ACL made additional investments in UABL of $4,069. VESSEL LEASING LLC In 2001 ACL and Vectura Group LLC ("Vectura") invested in a new company named Vessel Leasing LLC ("Vessel Leasing"). 399 Venture Partners, Inc., the majority owner of ACL Holdings, also holds a majority ownership interest in Vectura Holding Company LLC which holds a majority ownership interest in Vectura. ACL accounts for its 50% ownership in Vessel Leasing by the equity method. ACL's investment of $6,808 in Vessel Leasing is included in other assets on the consolidated statement of financial position. ACL's share of Vessel Leasing's net loss is $38 in 2001 and is included in other income in the consolidated statement of operations. Vessel Leasing's statement of financial position is not consolidated with ACL. As of December 28, 2001 Vessel Leasing had total assets of $54,921 and total liabilities of $45,571 including public long term debt of $42,580 (including current portion) and $2,830 in unearned revenue from prepaid charter payments made by ACL's domestic barging subsidiary. Vessel Leasing's long term debt is not guaranteed by the Company or any of its subsidiaries. ACL's domestic barge operating subsidiary has a long term operating lease commitment to Vessel Leasing, which is guaranteed by ACL. ACL sold new barges for $47,757 to Vessel Leasing in 2001. Profit on sales of barges to Vessel Leasing is deferred by Jeffboat and recognized over the life of the lease. All of these barges, except for those representing a capital lease commitment of $3,924 were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1,705. ACL also recorded $3,924 in capital leases with Vessel Leasing in 2001. DEBT AMORTIZATION ACL amortizes debt costs over the term of the debt. Amortization expense was $4,413 in 2001, $2,801 in 2000 and $2,802 in 1999 and is included in interest expense. REVENUE RECOGNITION Barge transportation revenue is recognized proportionately as shipments move from origin to destination. The position of shipments is determined by boat position tracking through use of a global positioning system. This method results in a better matching of revenue and expense. Terminal, repair and other revenue is recognized as services are provided. Marine construction revenue and related expense is primarily recognized 9 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) on the completed-contract method, due to the short-term nature of contracts. Revenue from sale/leaseback transactions is deferred in other liabilities and recognized over the life of the lease. SECOND INJURY FUND ACL recognized $1,737 in non-cash expense related to a workers compensation second injury fund in accordance with adoption of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" in the first quarter of 1999. RECLASSIFICATION Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 2. PURCHASES AND DISPOSITIONS In 2001, ACL sold five towboats, a shipyard in Harahan, Louisiana, a cleaning facility in Baton Rouge, Louisiana and other assets to meet the requirements of the Senior Debt Facility amendments described in Note 4. This resulted in a gain of $16,762 which is reported in gain on property dispositions in the consolidated statement of operations. On May 25, 2001, ACL entered into an agreement to sell substantially all of the terminals of ACT, other than its coal transfer facility at St. Louis, Missouri and its tank storage facility at Memphis, Tennessee. The sale of seven terminals was completed on May 25, 2001. An additional terminal site in Omaha, Nebraska was transferred on June 29, 2001. Subsequent to June 29, 2001, additional proceeds were received from the condemnation of Omaha Terminal. ACL recorded a gain from these transactions of $1,886 in Other Income. On May 26, 2000, ACL purchased certain barging assets of the Peavey Barge Line ("Peavey") from ConAgra, Inc. for $31,500 in cash. The purchase price was financed with existing credit facilities and cash flows from operations. ACL also assumed $3,800 in capital leases. ACL sold its 100% membership interest in Waterway Communications System LLC ("Watercom") on September 6, 2000 to Mobex Communications, Inc. ("Mobex") for $13,600 in cash and $2,400 in Mobex preferred stock. The sale resulted in a gain of $11,418. Cash proceeds were used to pay existing ACL debt. NOTE 3. ACCOUNTS RECEIVABLE SECURITIZATION At December 28, 2001 and December 29, 2000 ACL had $51,000 and $56,000, respectively, outstanding under the accounts receivable securitization facility agreement and had $22,603 and $15,332, respectively, of net residual interest in the securitized receivables which is included in Accounts Receivable, Net in the Company's consolidated financial statements. The fair value of the net residual interest is measured at the time of the sale and is based on the sale of similar assets. In 2001, ACL received gross proceeds of $30,800 from the sale of receivables and made gross payments of $35,800 under this Agreement. PNC Bank, National Association ("PNC"), as Administrator under ACL's receivables facility with PNC (the "Receivables Purchase Agreement"), asserted that ACL was in default under the Receivables Purchase Agreement. ACL and PNC entered into a waiver of the Receivables Purchase Agreement on February 11, 2002 and modifications to that waiver on February 25, 2002 and April 1, 2002 (the "RPA Waiver"). The RPA Waiver has the effect of waiving the default asserted by PNC, provided that the Company enters into certain definitive agreements with Danielson relating to the Danielson Recapitalization and refinances the Receivables Purchase Agreement on or before June 30, 2002. The RPA Waiver also requires ACL to reduce its overall borrowings under the facility to no more than $50.0 million. A default under the Receivables Purchase Agreement or the RPA Waiver could have a material adverse effect on the Company's liquidity. 10 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In September 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 140"). The Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. ACL adopted FAS 140 on April 1, 2001. The adoption required the consolidation of ACL Funding Corp. ("ACLF"), a wholly-owned subsidiary, that was previously treated as a non-consolidated Qualified Special Purpose Entity. The consolidation resulted in a charge to Retained Earnings of $989 in the second quarter 2001. NOTE 4. DEBT Debt consists of the following:
2001 2000 -------- -------- Revolving Credit Facility................................... $ 84,000 $ 66,750 $235 million Term Loan...................................... 169,378 191,001 $200 million Term Loan...................................... 143,951 162,328 $300 million Senior Notes................................... 295,000 300,000 Other Notes................................................. 190 4,726 -------- -------- 692,519 724,805 Less, short-term debt....................................... 84,000 66,750 Less, current portion long-term debt........................ 608,519 44,579 -------- -------- $ 0.0 $613,476 ======== ========
ACL has a Revolving Credit Facility, which provides for revolving loans and letters of credit not to exceed the aggregate principal amount of $100,000, maturing in June, 2005, but each loan must be repaid within one year. The Revolving Credit Facility bears an interest rate equal to LIBOR plus a margin based on ACL's performance. Borrowings on the facility at December 28, 2001 and December 29, 2000 were $84,000 and $66,750, respectively, with interest rates of 5.75% to 7.5% at December 28, 2001 and 8.75% at December 29, 2000. The borrowing base was reduced by outstanding letters of credit of $16,260 and $17,857 at December 28, 2001 and December 29, 2000, respectively. The $235,000 Term Loan matures in 2001 through 2007. The $200,000 Term Loan matures in 2001 through 2006. The two Term Loans bear interest at a rate equal to LIBOR plus a margin based on ACL's performance. The interest rate at December 28, 2001 was 6.3125% for the $235,000 and 6.0625% for the $200,000 term loans. Interest on the Term Loans is payable quarterly. The Senior Notes require no principal payments until maturity in 2008 and have a fixed interest rate of 10.25%. Interest is payable semi-annually. The Term Loans and Revolving Credit Facility are collateralized by most of ACL's assets. The Senior Notes are not collateralized. ACL has Other Notes totaling $190 which mature in 2002 with rates of 6.75% and 4.9%. The Term Loans, Revolving Credit Facility and Senior Notes contain a number of covenants, including specified financial ratios. As of December 28, 2000 ACL failed to meet the leverage ratio and the coverage ratio covenants as defined in the Senior Credit Facility ("Amendment No. 5"). ACL entered into an agreement to amend the covenants in the Senior Credit Facility. Under the terms of the amendment, ACL sold $40,000 in certain identified assets and used the proceeds to repay the Term Loans in 2001. ACL also purchased $5,000 par value of ACL Senior Notes at a discount in 2001 which resulted in a gain of $1,885 in 2001 from the early extinguishment of debt and is reported as an extraordinary item in the consolidated statement of operations. ACL also repaid $4,937 in Other Notes in 2001. 11 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Following December 31, 2001, the covenant requirements reverted to those specified in the original Senior Credit Facilities which are more restrictive than the amended covenants. Certain covenants added by Amendment No. 5 also become more restrictive. Due in part to reduced EBITDA as a result of the closure of the upper Mississippi River because of flooding during the second quarter of 2001, it is not likely that ACL will be able to meet these covenant requirements in 2002, absent an additional amendment to the Senior Credit Facilities and the consummation of the Danielson Recapitalization discussed below. Failure to meet these covenants could have a material adverse effect on the Company. On December 31, 2001, ACL elected not to pay the interest due (the "Bond Interest Payment") on its Senior Notes due to ongoing negotiations with its lenders and noteholders regarding the restructuring of ACL's bank and bond debt. Following the thirty (30) day grace period provided by the Indenture, ACL again elected not to make the Bond Interest Payment. This election not to pay the Bond Interest Payment is an event of default under the Indenture, however, certain Noteholders party thereto entered into forebearance agreements with ACL agreeing not to accelerate the debt or take additional adverse actions against ACL. Acceleration of the debt under the Indenture would have a material adverse effect on the Company's liquidity. Further, as a result of ACL's failure to make the Bond Interest Payment, J.P. Morgan Chase & Co. ("J.P. Morgan") delivered a notice to ACL in January 2002 asserting that ACL was in default of the Credit Agreement. Certain lenders party to the Credit Agreement also entered into forebearance agreements with ACL, agreeing not to accelerate the debt or take additional adverse actions against ACL. An acceleration of the debt under the Credit Agreement would have a material adverse effect on ACL's liquidity. In accordance with these facts and circumstances, the Company has reclassified the outstanding obligations under the Indenture and the Credit Agreement from long term to current. The Company has been pursuing strategic financial restructuring alternatives. On March 15, 2002, the Company entered into a definitive recapitalization agreement (the "Recapitalization Agreement") regarding the acquisition and recapitalization of the Company (the "Danielson Recapitalization") by Danielson Holding Corporation ("Danielson"). Under the terms of the Danielson Recapitalization, Danielson would acquire 100% of the membership interests of ACL Holdings. ACL Holdings' present preferred equity holders would receive $7,000 in cash. ACL management will receive approximately $1,695 of restricted Danielson common stock. In addition, Danielson will deliver $25,000 in cash and approximately $58,493 of ACL's existing Series B 10 1/4% Senior Notes due June 2008 (the "Senior Notes") issued pursuant to an indenture dated as of June 30, 1998 with the United States Trust Company of New York (the "Indenture"), to ACL Holdings in connection with the transaction. Danielson currently expects to fund the acquisition through a rights offering to its existing security holders, upon terms and conditions to be determined. However, consummation of the Recapitalization Agreement is not conditioned on the successful completion of the rights offering. The Danielson Recapitalization will result in a reduction of ACL's senior secured bank debt incurred under the Senior Credit Facilities and the restructuring of the Senior Notes pursuant to an exchange offer and consent solicitation in which $236,507 of the existing Senior Notes (all notes held by parties other than Danielson) would be exchanged for $120,000 of new 11 1/4% senior notes due January 1, 2008 ("New Senior Notes") and approximately $116,507 of new 12% pay-in-kind senior subordinated notes due July 1, 2008 ("PIK Notes"). Senior Notes held by Danielson would be retired in conjunction with the Danielson Recapitalization. ACL would also issue additional New Senior Notes in an aggregate principal amount equal to the accrued and unpaid interest on its existing Senior Notes, other than those held by Danielson, through the effective date of the transaction up to $20,000, and to the extent that such accrued and unpaid interest exceeds $20,000, additional PIK Notes in an amount equal to such excess would be issued. The Recapitalization Agreement provides that the exchange offer and consent solicitation will be made in reliance on a registration exemption provided by Section 3(a)(9) under the Securities Act of 1933, conditioned on the minimum participation of 95% of the outstanding principal amount of ACL's outstanding Senior Notes, as to which noteholders holding more than two-thirds of the outstanding principal amount of 12 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) such notes have agreed to tender. In the event that the exchange offer and consent solicitation is not consummated by June 15, 2002, the Recapitalization Agreement provides for the implementation of the Danielson Recapitalization through a voluntary prepackaged bankruptcy plan under Chapter 11 of the Bankruptcy Code, as to which noteholders holding more than two-thirds of the outstanding principal amount of ACL's outstanding Senior Notes have agreed to accept. In order to assist in the consummation of the Danielson Recapitalization, the Company has received forbearance agreements from its senior secured lenders pending the negotiation and execution of definitive documentation relating to the amendment of ACL's Senior Credit Facilities satisfactory to the parties. As of April 11, 2002, the Company and certain lenders executed an amendment agreement under which the Senior Credit Facilities will be amended and restated upon the satisfaction of certain conditions set forth in the amendment agreement, including the consummation of the Danielson Recapitalization. In June 1998, ACL deposited $26,128 into an escrow fund which, together with future income earned on such amount, was used to repay $24,400 principal of the Terminal Revenue Refunding Bonds ("Revenue Bonds") plus redemption premium and interest in 2000. The redemption premium of $734 was reported as an extraordinary item in the consolidated statement of operations. Long-term debt due in the next five years under the revised Term Loan agreement, the Senior Notes and Other Notes is $608,519 in 2002, and $0 thereafter. NOTE 5. INCOME TAXES The Company and its subsidiaries (except for ACL Capital Corp., American Commercial Lines Funding Corporation and the foreign subsidiaries) are organized as limited liability companies. As such, the Company passes through its U.S. federal and substantially all of its state (but not foreign) taxable income to its members who are responsible for income taxes on such taxable income. Components of income tax expense (benefit) follow:
2001 2000 1999 ---- ------ ------ Currently payable: State..................................................... $ 24 $ 37 $ (27) Foreign................................................... 94 4,226 1,685 ---- ------ ------ $118 $4,263 $1,658 ==== ====== ======
Income tax computed at federal statutory rates reconciled to income tax expense (benefit) follows:
2001 2000 1999 ---- ------ ------ State Income Taxes, Net..................................... $ 24 $ 37 $ (27) Foreign Operations, Net..................................... 94 4,226 1,685 ---- ------ ------ Total Income Tax Expense............................... $118 $4,263 $1,658 ==== ====== ======
NOTE 6. EMPLOYEE BENEFIT PLANS ACL sponsors or participates in defined benefit plans covering both salaried and hourly employees. The plans provide for eligible employees to receive benefits based on years of service and either compensation rates near retirement or at a predetermined multiplier factor. Contributions to the plans are sufficient to meet the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Plan assets consist primarily of common stocks, corporate bonds and cash and cash equivalents. As of January 31, 2000, the accrued benefit obligation under the American Commercial Lines LLC Pension Plan ("ACL Pension Plan") was frozen. The past service benefit obligation is complemented by a new prospective annual benefit obligation. This change affects salaried employees covered by the ACL 13 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pension Plan and resulted in cost savings to ACL in 2001 and 2000. In 1999 the National Marine Pension Plan was merged into the ACL Pension Plan. In addition to the defined benefit pension and related plans, ACL has a defined benefit post-retirement plan covering most full-time employees. The plan provides medical benefits and is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the health care plan anticipates future cost-sharing changes to the written plan that are consistent with ACL's expressed intent to increase the retiree contribution rate annually. A summary of the pension and post-retirement plan components at September 30 (valuation date) follows:
PENSION BENEFITS POST-RETIREMENT PLAN ------------------- --------------------- 2001 2000 2001 2000 -------- -------- --------- --------- CHANGE IN BENEFIT OBLIGATION: Benefit obligation, beginning of year...... $(84,050) $(97,480) $(11,161) $(10,319) Service cost............................... (3,818) (3,783) (399) (380) Interest cost.............................. (6,408) (6,092) (826) (807) Plan participants' contributions........... -- -- (261) (206) Amendments................................. -- 18,657 -- -- Actuarial (loss) gain...................... -- -- (1,176) (480) Liability gain (loss)...................... (2,913) 574 -- -- Benefits paid.............................. 4,253 4,074 1,411 1,031 -------- -------- -------- -------- Benefit obligation, end of year............ $(92,936) $(84,050) $(12,412) $(11,161) ======== ======== ======== ======== CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year..................................... $118,305 $114,446 $ -- $ -- Actual return on plan assets............... (1,100) 7,919 -- -- Employer contribution...................... 12 14 1,150 825 Plan participants' contributions........... -- -- 261 206 Benefits paid.............................. (4,253) (4,074) (1,411) (1,031) -------- -------- -------- -------- Fair value of plan assets at end of year... $112,964 $118,305 $ -- $ -- ======== ======== ======== ======== FUNDED STATUS: Funded status.............................. $ 20,027 $ 34,255 $(12,412) $(11,161) Unrecognized net actuarial loss (gain)..... 7,193 (8,929) (3,499) (4,946) Unrecognized prior service cost............ (21,094) (23,110) (1,153) (1,441) Net claims during 4th quarter.............. 4 -- 407 196 -------- -------- -------- -------- Prepaid (accrued) benefit cost............. $ 6,130 $ 2,216 $(16,657) $(17,352) ======== ======== ======== ======== AMOUNTS RECOGNIZED IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSIST OF: Prepaid benefit cost....................... $ 26,067 $ 24,512 $ -- $ -- Accrued benefit liability.................. (20,108) (22,614) (16,657) (17,352) Other...................................... 171 318 -- -- -------- -------- -------- -------- Net amount recognized...................... $ 6,130 $ 2,216 $(16,657) $(17,352) ======== ======== ======== ========
14 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 28, 2001, the American Commercial Vessel and Terminal Employees' Pension Plan (the "ACV&T Plan") had an accumulated benefit obligation of $10,181 and a fair value of assets of $9,277. With the merger of the ACV&T Plan into the ACL Pension Plan on December 31, 2001, the fair value of the assets of the combined plans exceeds the accumulated benefit obligations related thereto. COMPONENTS OF NET PERIODIC BENEFIT COST:
PENSION PLANS POST-RETIREMENT PLAN ------------------------------ --------------------- 2001 2000 1999 2001 2000 1999 -------- -------- -------- ----- ----- ----- Service cost......................... $ 3,818 $ 3,783 $ 6,682 $ 399 $ 380 $ 633 Interest cost........................ 6,408 6,092 6,898 826 807 767 Expected return on plan assets....... (11,937) (11,169) (10,093) -- -- -- Transition obligation amortization... -- (957) (1,237) -- -- -- Amortization of prior service costs.............................. (2,015) (1,875) (609) (288) (288) -- (Gain)/loss Amortization............. (172) (220) 167 (348) -- -- Recognized net actuarial gain........ -- -- -- -- (418) (575) -------- -------- -------- ----- ----- ----- Net periodic benefit cost............ $ (3,898) $ (4,346) $ 1,808 $ 589 $ 481 $ 825 ======== ======== ======== ===== ===== ===== WEIGHTED-AVERAGE ASSUMPTIONS AS OF SEPTEMBER 30: Discount rate........................ 7.50% 7.75% 7.75% 7.75% 7.50% 6.75% Expected return on plan assets....... 10.00% 10.00% 10.00% NA NA NA Rate of compensation increase........ 4.00% 4.00% 5.00% NA NA NA
The net post-retirement benefit obligation was determined using the assumption that the health care cost trend rate for retirees was 8.0% for 2000-2001, decreasing gradually to a 5.5% trend rate by 2008 and remaining at that level thereafter. A 1% increase in the assumed health care cost trend rate would have increased the accumulated post-retirement benefit obligation as of December 28, 2001 by $875 and the aggregate of the service and interest cost components of net periodic post-retirement benefit expense for 2001 by $125. A 1% decrease in the assumed health care cost trend rate would have decreased the accumulated post-retirement obligation as of December 28, 2001 by $750 and the aggregate of the service and interest cost components of net periodic post-retirement benefit expense for 2001 by $105. ACL also sponsors certain contributory defined contribution plans covering eligible employee groups. Contributions to such plans are based upon a percentage of employee contributions and were $1,471, $1,456 and $2,028 in 2001, 2000 and 1999, respectively. Certain employees are covered by union-sponsored, collectively-bargained, multi-employer defined benefit pension plans. Contributions to such plans, which are based upon union contracts, were approximately $74, $84 and $76 in 2001, 2000 and 1999, respectively. NOTE 7. LEASE OBLIGATIONS ACL leases buildings, data processing hardware and operating equipment under various operating leases and charter agreements, which expire from 2001 to 2017 and which generally have renewal options at similar terms. Certain vessel leases also contain purchase options at prices approximating fair value of the leased vessels. Rental expense under continuing obligations was approximately $56,711 in 2001, $49,463 in 2000 and $43,978 in 1999. 15 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 28, 2001, ACL's operating leases with initial or remaining noncancelable lease terms longer than one year and capital leases were as follows:
2007 2002 2003 2004 2005 2006 AND AFTER ------- ------- ------- ------- ------- --------- Operating Lease Obligations: Operating Leases.................. 40,735 33,003 28,905 26,891 19,732 94,199 Operating Leases -- Related Parties........................ 4,849 5,378 5,317 4,930 4,930 33,984 ------- ------- ------- ------- ------- ------- 45,584 38,381 34,222 31,821 24,662 128,183 Future Capital lease Obligations: Capital Leases.................... 557 460 460 460 460 192 Capital Leases -- Related Parties........................ 432 586 568 455 455 5,087 ------- ------- ------- ------- ------- ------- 989 1,046 1,028 915 915 5,279
ACL entered into capital leases of $3,924 and $6,163 in 2001 and 2000, respectively. The 2001 capital lease was with a related party. ACL incurred interest expense related to capital leases of $235 in 2001 and $112 in 2000. The total future minimum lease payments under capital leases of $10,172 less an interest amount of $4,245 results in a present value of net minimum lease payments of $5,927. NOTE 8. RELATED PARTIES CSX Corporation ("CSX") owns senior preferred members' interests, junior preferred members' interests and common members' interests in ACL Holdings. ACL had a new equipment charter with a CSX subsidiary and recorded expense of $1,070 in 1999 until the charter was bought out in 1999 for $2,419. In 2001 ACL received $11,969 from GMS for the sale of terminals and proceeds from the condemnation of a terminal. ACL recognized a gain of $1,886 from these transactions. ACL recorded charter income from UABL of $11,052 and $2,089 in 2001 and 2000, respectively. ACL also recorded administrative fee expenses to UABL of $7,709 and $1,457 in 2001 and 2000, respectively. ACL sold used barges to UABL for $790 in 2001. At December 28, 2001 ACL had receivables of $13,402 and payables of $8,397 with UABL. 399 Venture Partners, Inc., which owns senior preferred members' interests, junior preferred members' interests and common members' interests in ACL Holdings, also holds a majority ownership interest in Vectura Holding Company LLC which holds a majority ownership interest in Vectura. Vectura owns 50% of Vessel Leasing. ACL accounts for its 50% ownership in Vessel Leasing by the equity method. ACL's investment of $6,808 in Vessel Leasing is included in other assets on the consolidated statement of financial position. ACL's share of Vessel Leasing's net loss is $38 in 2001 and is included in other income in the consolidated statement of operations. Vessel Leasing's statement of financial position is not consolidated with ACL. As of December 28, 2001 Vessel Leasing had total assets of $54,921 and total liabilities of $45,571 including public long term debt of $42,580 (including current portion) and $2,830 in unearned revenue from prepaid charter payments made by ACL's domestic barging subsidiary. Vessel Leasing's long term debt is not guaranteed by the Company. ACL's domestic barge operating subsidiary has a long term operating lease commitment to Vessel Leasing, which is guaranteed by ACL. 16 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACL sold new barges for $47,757 to Vessel Leasing in 2001. Profit on sales of barges to Vessel Leasing is deferred by Jeffboat and recognized over the life of the lease. All of these barges, except for those representing a capital lease commitment of $3,924 million, were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1,705. ACL also recorded $3,924 in capital leases with Vessel Leasing in 2001. NOTE 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The carrying amounts and fair values of the Company's financial instruments are as follows:
2001 2000 --------------------- --------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------- ---------- -------- ---------- ASSETS: Interest Rate Cap.......................... $ 37 $ 37 $ 688 $ 198 LIABILITIES: Revolving Credit Facility.................. $ 84,000 $ 84,000 $ 66,750 $ 66,750 $235 million Term Loan..................... 169,378 169,378 191,001 191,001 $200 million Term Loan..................... 143,951 143,951 162,328 162,328 $300 million Senior Notes.................. 295,000 147,500 300,000 229,500 Other Notes................................ 190 187 4,726 4,735 Net unrealized (loss) gain on fuel hedge agreements............................... (242) (242) -- 29
The fair values of the Interest Rate Cap and Senior Notes payable are based on quoted market values. The carrying values of the Term Loans, all of which bear interest at floating rates, approximate their fair values. The fair value of the Other Notes have been estimated using discounted cash flow analyses based on ACL's current incremental borrowing rates for similar types of borrowing arrangements. FUEL PRICE RISK MANAGEMENT ACL uses forward purchases to provide short-term protection against a sharp increase in diesel fuel prices. These instruments generally cover a portion of ACL's forecasted diesel fuel needs for towboat operations over the next one to twelve months. ACL accounts for the forward fuel purchases as cash flow hedges. In accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), such financial instruments are marked-to-market with the offset to other comprehensive income and then subsequently recognized as a component of fuel expense when the underlying fuel being hedged is used. ACL adopted SFAS 133 at the beginning of the first quarter of 2001. At December 28, 2001, ACL had forward fuel purchase contracts outstanding with an aggregate notional value of approximately $2,806, and a fair value of approximately $242 (loss), which has been recorded in other current liabilities with the offset to other comprehensive earnings for $242 (loss) and an additional fair value of $131 (loss) which has been recorded as other current liabilities with the offset to fuel expense in the consolidated statement of operations. The $242 loss will be recognized in earnings within the next ten months. Under these agreements, ACL will pay fixed prices ranging from $0.51 to $0.86 per gallon. There were 4.4 million gallons remaining on the contracts at December 28, 2001. The agreements terminate October 31, 2002. Due to the bankruptcy of Enron, one of the trading partners, ACL believes the hedge is no longer effective and has expensed the mark-to-market loss of $131 as fuel expense in the 2001 consolidated statement of operations. Management believes that the other trading partner does not present a credit risk to ACL. 17 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INTEREST RATE RISK MANAGEMENT ACL entered into an interest rate cap agreement in the third quarter of 2000 to reduce the impact of potential rate increases on floating rate debt. The interest rate cap has a notional amount of $202,000 and a fair value of $37 as of December 28, 2001 and is effective through August 11, 2003. The Company accounts for the interest rate cap as a cash flow hedge whereby the fair value of the interest rate cap is reflected as an asset or liability in the accompanying consolidated statement of financial position. The cap rate (hedging instrument) is the same interest rate index as the base interest rate for the floating rate debt (hedged item). When the interest rate index exceeds the interest rate cap, a portion of the change in fair value of the instrument represents a change in intrinsic value which is an effective hedge. This portion of the change in value will be recorded as other comprehensive income. The remaining change in fair value of $162 in 2001 is recorded as other expense (income) on the consolidated statement of operations. The Company also records changes to other assets on the accompanying consolidated statement of financial position, with the offset recorded as comprehensive income (loss), for changes in the fair value of interest rate swap agreements entered into by GMS. The Company recognized a comprehensive loss of $747 for its share of these swaps in 2001. NOTE 10. CONTINGENCIES A number of legal actions are pending against the Company in which claims are made in substantial amounts. While the ultimate results of pending litigation cannot be predicted with certainty, management does not currently expect that resolution of these matters will have a material adverse effect on the consolidated results of operations, financial position and cash flows. NOTE 11. BUSINESS SEGMENTS The Company has two reportable business segments -- barging and construction. The Company's barging segment includes ACL's barge transportation operations in North and South America and domestic fleeting facilities that provide fleeting, shifting, cleaning and repair services at various locations along the inland waterways. The construction segment constructs marine equipment for ACL's domestic and international fleets as well as external customers. Management evaluates performance based on segment earnings, which is defined as operating income before income taxes. The accounting policies of the reportable segments are consistent with those described in the summary of significant accounting policies. Intercompany sales are transferred at cost. Reportable segments are business units that offer different products or services. The reportable segments are managed separately because they provide distinct products and services to internal and external customers.
REPORTABLE SEGMENTS ----------------------- ALL OTHER BARGING CONSTRUCTION SEGMENTS(1) TOTAL -------- ------------ ----------- -------- YEAR ENDED DECEMBER 28, 2001 Revenues from external customers........... $675,697 $102,862 $ 9,942 $788,501 Intersegment revenues...................... -- 1,563 4 1,567 Depreciation expense....................... 48,595 2,125 1,380 52,100 Segment earnings........................... 58,956 4,713 1,692 65,361 Segment assets............................. 672,057 59,676 26,203 757,936 Property Additions (Excluding $5,811 in capital leases, and related expenditures)............................ 16,879 2,094 799 19,772
18 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REPORTABLE SEGMENTS ----------------------- ALL OTHER BARGING CONSTRUCTION SEGMENTS(1) TOTAL -------- ------------ ----------- -------- YEAR ENDED DECEMBER 29, 2000 Revenues from external customers........... $631,748 $124,068 $18,022 $773,838 Intersegment revenues...................... -- 2,917 4,308 7,225 Depreciation expense....................... 48,833 2,011 2,613 53,457 Segment earnings........................... 44,243 8,318 3,747 56,308 Segment assets............................. 698,446 52,704 36,388 787,538 Property Additions* (Excluding $6,163 in capital leases).......................... 48,005 1,922 934 50,861 YEAR ENDED DECEMBER 31, 1999 Revenues from external customers........... $593,939 $124,423 $20,774 $739,136 Intersegment revenues...................... -- 20,442 5,174 25,616 Depreciation expense....................... 44,787 1,911 3,081 49,779 Segment earnings........................... 57,670 12,387 4,535 74,592 Segment assets............................. 646,613 60,990 68,493 776,096 Property Additions......................... 52,387 1,790 1,703 55,880
- --------------- * Barging includes $20,307 of purchased Barging Assets. (1) Financial data for segments below the reporting thresholds are attributable to two operating segments -- a segment operating terminals along the U.S. inland waterways and a segment providing voice and data communications to marine companies operating on the U.S. inland waterways. The segment providing voice and data communications was sold in 2000. The following is a reconciliation of the Company's revenues from external customers and segment earnings to the Company's consolidated totals.
2001 2000 1999 -------- -------- -------- REVENUES Revenues from external customers..................... $788,501 $773,838 $739,136 Intersegment revenues................................ 1,567 7,225 25,616 Elimination of intersegment revenues................. (1,567) (7,225) (25,616) -------- -------- -------- Operating revenue.................................... $788,501 $773,838 $739,136 ======== ======== ======== EARNINGS Total segment earnings............................... $ 65,361 $ 56,308 $ 74,592 Unallocated amounts: Interest expense................................... (70,932) (70,813) (71,275) Other, net......................................... 591 (1,050) 3,048 Gain on Sale of Watercom........................... -- 11,418 -- -------- -------- -------- (Loss) Earnings before income taxes, extraordinary item and cumulative effect of accounting change.... $ (4,980) $ (4,137) $ 6,365 ======== ======== ========
19 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) GEOGRAPHIC INFORMATION
REVENUES PROPERTIES -- NET ------------------------------ ------------------- 2001 2000 1999 2001 2000 -------- -------- -------- -------- -------- United States........................... $748,837 $733,870 $699,072 $422,877 $469,714 South America........................... 39,664 39,968 40,064 41,256 39,729 -------- -------- -------- -------- -------- Total................................... $788,501 $773,838 $739,136 $464,133 $509,443 ======== ======== ======== ======== ========
Revenues are attributed to countries based on the location of the service provided. Properties represent the only long lived assets of the Company. MAJOR CUSTOMER Revenues from one customer of the barging segment represented approximately 15% in 2001, 14% in 2000 and 14% in 1999 of the Company's consolidated revenues. NOTE 12. QUARTERLY DATA (UNAUDITED)
2001 ---------------------------------------------------- 1ST 2ND 3RD 4TH TOTAL -------- -------- -------- -------- -------- Operating Revenue....................... $173,098 $192,884 $207,341 $215,178 $788,501 Operating (Loss) Income................. (10,434) 17,194 24,164 34,437 65,361 (Loss) Earnings Before Extraordinary Item and Cumulative Effect............ (29,618) 142 5,690 18,688 (5,098) Net (Loss) Earnings..................... (30,108) 2,027 5,690 18,688 (3,703)
2000 ---------------------------------------------------- 1ST 2ND 3RD 4TH TOTAL -------- -------- -------- -------- -------- Operating Revenue....................... $167,477 $193,458 $205,738 $207,165 $773,838 Operating Income........................ 7,971 16,122 18,217 13,998 56,308 (Loss) Earnings Before Extraordinary Item.................................. (8,097) (2,116) 8,432 (6,619) (8,400) Net (Loss) Earnings..................... (8,097) (2,850) 8,432 (6,619) (9,134)
1999 ---------------------------------------------------- 1ST 2ND 3RD 4TH TOTAL -------- -------- -------- -------- -------- Operating Revenue....................... $173,217 $189,961 $188,617 $187,341 $739,136 Operating Income........................ 4,316 19,955 22,480 27,841 74,592 (Loss) Earnings Before Cumulative Effect of Accounting Change.................. (12,810) 2,788 5,240 9,489 4,707 Net (Loss) Earnings..................... (14,547) 2,788 5,240 9,489 2,970
ACL's business is seasonal, and its quarterly revenues and profits historically are lower during the first and second fiscal quarters of the year (January through June) and higher during the third and fourth fiscal quarters (July through December) due to the North American grain harvest. A loss of $490 was recorded in the first quarter of 2001 as the cumulative effect of adopting SFAS 133. An extraordinary gain of $1,885 was recorded in the second quarter of 2001 relating to the retirement of Senior Notes. In the fourth quarter 2001, the estimated useful life of boats was changed from 30 to 42 years. This resulted in $1,142 less depreciation for the quarter. The year 2000 included a second quarter extraordinary item charge of $734 for the Terminal Bond redemption premium, the gain on the sale of Watercom of $11,418 is included in the third quarter and an impairment loss of $3,865 is included in the fourth quarter. The first 20 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) quarter of 1999 includes a non-cash charge of $1,737 for the workers' compensation second-injury funds due to the adoption of Statement of Position (SOP) 97-3. NOTE 13. CHANGES IN ACCOUNTING STANDARDS In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), which provides that all business combinations should be accounted for using the purchase method of accounting and establishes criteria for the initial recognition and measurement of goodwill and other intangible assets recorded in connection with a business combination. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. The Company will apply the provisions of SFAS 141 to any future business combinations. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which establishes the accounting for goodwill and other intangible assets following their recognition. SFAS 142 applies to all goodwill and other intangible assets whether acquired singly, as part of a group, or in a business combination. SFAS 142 provides that goodwill should not be amortized but should be tested for impairment annually using a fair-value based approach. In addition, SFAS 142 provides that other intangible assets other than goodwill should be amortized over their useful lives and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of" ("SFAS 121"). SFAS 142 is effective beginning on December 29, 2001. Upon adoption, the Company will be required to perform a transitional impairment test under SFAS 142 for all goodwill recorded as of December 29, 2001. Any impairment loss recorded as a result of completing the transitional impairment test will be treated as a change in accounting principle. The impact of the adoption of SFAS 142 on the Company's results of operations for all periods beginning on or after December 29, 2001 will be to eliminate amortization of goodwill. Management of the Company has not performed a transitional impairment test under SFAS 142 and accordingly cannot estimate the impact of the adoption SFAS 142 as of December 29, 2001. In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). The Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS 121, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of business (as previously defined in that Opinion). This statement also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The objectives of SFAS 144 are to address significant issues relating to the implementation of SFAS 121 and to develop a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The Company will adopt SFAS 144 in its first quarter 2002. Management is currently evaluating the impact of SFAS 144 on the Company's future financial reporting. NOTE 14. SUMMARIZED FINANCIAL INFORMATION FOR SIGNIFICANT 50-PERCENT-OR-LESS-OWNED PERSONS
DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ------------ Current assets.............................................. 36,931 21,624 Noncurrent assets........................................... 149,593 130,508 Current liabilities......................................... 43,400 18,882 Noncurrent liabilities...................................... 55,593 43,791
21 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED ------------------------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 1999 ------------ ------------ ------------ Revenue................................................. 103,364 52,430 37,102 Operating income (loss)................................. 3,117 3,830 6,205 (Loss) earnings before extraordinary item............... (4,990) (1,173) 2,896 and cumulative effect of accounting................ -- -- -- change............................................. -- -- -- Net (loss) earnings..................................... (4,990) (1,173) 2,896
NOTE 15. MANDATORILY REDEEMABLE PREFERRED MEMBERS' INTEREST Preferred Members' Interest consists of 11,500,000 senior preferred units with an initial value of $115,000 and 10,061,091 junior preferred units with an initial value of $100,611 at December 28, 2001 and December 29, 2000. The senior preferred units and junior preferred units are non-voting and are mandatorily redeemable on June 30, 2013 and are redeemable at the holders' option upon a change in control. No distributions under the mandatory redemption provisions can be made to the holders of the junior preferred members' interests, without majority approval of the holders of the senior preferred members' interests, until all senior preferred members' interests have been completely redeemed. The mandatory redemption value is determined as the original preferred interest contribution compounded annually through the redemption date at 11.02%. The mandatory redemption value as of June 13, 2013 is $1,037,230 ($553,225 for the senior preferred units and $484,004 for the junior preferred units). The difference between the carrying value and the mandatory redemption value is being accreted under the effective interest method as an increase in preferred members' interest and a reduction in other capital in the statements of financial position and members' deficit. The amount of accretion each year is disclosed as an increase (decrease) in the net loss (earnings) applicable to common members' interest in the statement of operations. Accumulated accretion was $95,681 ($51,033 for the senior preferred units and $44,648 for the junior preferred units) and $64,782 ($34,553 for the senior preferred units and $30,229 for the junior preferred units) as of December 28, 2001 and December 29, 2000. Based on the terms of the Recapitalization Agreement described in Note 4, the holders of the senior and junior preferred units would receive $7 million cash in exchange for their units upon the completion of the Danielson Recapitalization. NOTE 16. COMMON MEMBERS' INTEREST Common Members' Interest consists of the following classes at December 28, 2001 and December 29, 2000: Capital Units Interest ----- -------- Senior common members' interest 338,909 $3,389 Junior common members' interest: Class A 10,000 1,074 Class B 94,700 -- -------- Total common members' interest $4,463 ========
The senior common members' interest also includes an aggregate future profits interest in the Company of $32,500 (subject to certain adjustments) and accrues a compound annual yield at 11.02% on a notional principal amount of $35,889. The senior common members' interests are redeemable at the Company's option. Class A common members' interests are voting while all other common members' interests are non-voting, except that Class B members' interests are voting with respect to a merger, consolidation, recapitalization or reorganization of the Company on which Class A members have the right to vote. Additionally, Class B members' interests can be converted into an equal number of Class A members' interests at any time upon majority approval of the holders of Class B members' interests. NOTE 17. GUARANTOR FINANCIAL STATEMENTS The $735,000 of debt issued by ACL and a revolving credit facility, which provides for revolving loans and the issuance of letters of credit in an aggregate amount up to $100,000, are guaranteed by the Company and its wholly-owned domestic subsidiaries, other than ACL Capital Corp. (which was formed in connection with the transaction), any Accounts Receivable Subsidiary (as defined in the Indentures with respect to such debt) and certain subsidiaries of ACL without substantial assets or operations (collectively the "Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint and several. Separate financial statements of the Guarantor Subsidiaries are not presented because management has determined that they would not be material to investors. The following supplemental financial information sets forth on a combined basis, combining statements of financial position, statements of earnings and statements of cash flows for the Parent, Guarantor Subsidiaries, non-guarantor subsidiaries and for the Company as of December 28, 2001 and December 29, 2000 and for the fiscal years ended December 28, 2001, December 29, 2000 and December 31, 1999. 22 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 2001
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS -------- ------------ ------------ ------------ -------- (DOLLARS IN THOUSANDS) OPERATING REVENUE Revenue............................ -- $701,081 $28,611 $ -- $729,692 Revenue from related parties....... -- 47,757 11,052 -- 58,809 -------- -------- ------- ------- -------- -- 748,838 39,663 -- 788,501 OPERATING EXPENSE Materials, Supplies and Other...... -- 319,093 22,513 -- 341,606 Rent............................... -- 55,191 1,520 -- 56,711 Labor and Fringe Benefits.......... -- 161,606 4,435 -- 166,041 Fuel............................... -- 92,991 569 -- 93,560 Depreciation and Amortization...... -- 50,364 5,133 -- 55,497 Gain on Property Dispositions, Net............................. -- (16,498) -- -- (16,498) Taxes, Other Than Income Taxes..... -- 26,166 57 -- 26,223 -------- -------- ------- ------- -------- -- 688,913 34,227 -- 723,140 -------- -------- ------- ------- -------- OPERATING INCOME..................... -- 59,925 5,436 -- 65,361 OTHER EXPENSE (INCOME) Interest Expense................... -- 70,932 -- -- 70,932 Interest Expense, Affiliate -- Net................ -- -- 6,364 (6,364) -- Equity in Net Loss of Subsidiaries.................... 3,703 -- -- (3,703) -- Other, Net......................... -- (8,328) 1,373 6,364 (591) -------- -------- ------- ------- -------- 3,703 62,604 7,737 (3,703) 70,341 -------- -------- ------- ------- -------- LOSS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE........ (3,703) (2,679) (2,301) 3,703 (4,980) INCOME TAXES......................... -- (21) 139 -- 118 -------- -------- ------- ------- -------- LOSS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE............................. (3,703) (2,658) (2,440) 3,703 (5,098) EXTRAORDINARY ITEM -- GAIN ON EARLY EXTINGUISHMENT OF DEBT............. -- 1,885 -- -- 1,885 CUMULATIVE EFFECT OF ACCOUNTING CHANGE............................. -- (490) -- -- (490) -------- -------- ------- ------- -------- NET LOSS............................. (3,703) (1,263) (2,440) 3,703 (3,703) Preferred Members' Interest Accretion....................... (30,899) -- -- -- (30,899) -------- -------- ------- ------- -------- Net Loss Applicable to Common Members' Interest............... $(34,602) $ (1,263) $(2,440) $ 3,703 $(34,602) ======== ======== ======= ======= ========
23 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 29, 2000
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS -------- ------------ ------------ ------------ -------- (DOLLARS IN THOUSANDS) OPERATING REVENUE Revenue................................ $ -- $733,870 $37,879 $ -- $771,749 Revenue from related parties........... -- -- 2,089 -- 2,089 -------- -------- ------- ------- -------- -- 733,870 39,968 -- 773,838 OPERATING EXPENSE Materials, Supplies and Other.......... -- 315,275 19,597 -- 334,872 Rent................................... -- 48,033 1,430 -- 49,463 Labor and Fringe Benefits.............. -- 155,903 7,348 -- 163,251 Fuel................................... -- 85,159 2,935 -- 88,094 Depreciation and Amortization.......... -- 49,104 6,910 -- 56,014 Gain on Property Dispositions, Net..... -- (1,686) -- -- (1,686) Taxes, Other Than Income Taxes......... -- 26,425 1,097 -- 27,522 -------- -------- ------- ------- -------- -- 678,213 39,317 -- 717,530 -------- -------- ------- ------- -------- OPERATING INCOME (LOSS).................. -- 55,657 651 -- 56,308 OTHER EXPENSE (INCOME) Interest Expense....................... -- 70,813 -- -- 70,813 Interest Expense, Affiliate -- Net..... -- -- 6,029 (6,029) -- Equity in Net Loss of Subsidiaries..... 9,134 -- -- (9,134) -- Other, Net............................. -- (4,745) (234) 6,029 1,050 Gain on Sale of Watercom............... -- (11,418) -- -- (11,418) -------- -------- ------- ------- -------- 9,134 54,650 5,795 (9,134) 60,445 EARNINGS (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM..................... (9,134) 1,007 (5,144) 9,134 (4,137) INCOME TAXES............................. -- 176 4,087 -- 4,263 -------- -------- ------- ------- -------- EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM................................... (9,134) 831 (9,231) 9,134 (8,400) EXTRAORDINARY ITEM -- LOSS ON EARLY EXTINGUISHMENT OF DEBT................. -- (734) -- -- (734) -------- -------- ------- ------- -------- NET EARNINGS (LOSS)...................... (9,134) 97 (9,231) 9,134 (9,134) Preferred Members' Interest Accretion........................... (27,832) -- -- (27,832) -------- -------- ------- ------- -------- Net Loss Applicable to Common Members' Interest............................ $(36,966) $ 97 $(9,231) $ 9,134 $(36,966) ======== ======== ======= ======= ========
24 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS --------- ------------ ------------ ------------ -------- (DOLLARS IN THOUSANDS) OPERATING REVENUE...................... $ -- $699,072 $40,064 $ -- $739,136 OPERATING EXPENSE Materials, Supplies and Other........ -- 287,980 18,783 -- 306,763 Rent................................. -- 41,232 2,746 -- 43,978 Labor and Fringe Benefits............ -- 172,728 9,497 -- 182,225 Fuel................................. -- 50,782 2,525 -- 53,307 Depreciation and Amortization........ -- 45,066 6,156 -- 51,222 Loss on Property Dispositions, Net... -- 384 -- -- 384 Taxes, Other Than Income Taxes....... -- 25,910 755 -- 26,665 --------- -------- ------- ------- -------- -- 624,082 40,462 -- 664,544 --------- -------- ------- ------- -------- OPERATING INCOME (LOSS)................ -- 74,990 (398) -- 74,592 OTHER EXPENSE (INCOME) Interest Expense..................... -- 71,275 -- -- 71,275 Interest Expense, Affiliate -- Net... -- -- 4,861 (4,861) -- Equity in Net Earnings of Subsidiaries...................... (2,970) -- -- 2,970 -- Other, Net........................... -- (7,005) (904) 4,861 (3,048) --------- -------- ------- ------- -------- (2,970) 64,270 3,957 2,970 68,227 EARNINGS (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE............................... 2,970 10,720 (4,355) (2,970) 6,365 INCOME TAXES........................... -- 694 964 -- 1,658 --------- -------- ------- ------- -------- EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE.......... 2,970 10,026 (5,319) (2,970) 4,707 CUMULATIVE EFFECT OF ACCOUNTING CHANGE............................... -- (1,737) -- -- (1,737) --------- -------- ------- ------- -------- NET EARNINGS (LOSS).................... 2,970 8,289 (5,319) (2,970) 2,970 Preferred Members' Interest Accretion......................... (25,069) -- -- -- (25,069) --------- -------- ------- ------- -------- Net Loss Applicable to Common Members' Interest................. $ (22,099) $ 8,289 $(5,319) $(2,970) $(22,099) ========= ======== ======= ======= ========
25 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 28, 2001
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS --------- ------------ ------------ ------------ -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net Loss.......................... -- $ (1,263) $ (2,440) $ -- $ (3,703) Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization................. -- 54,777 5,133 -- 59,910 Gain on Property Dispositions................. -- (16,498) -- -- (16,498) Other Operating Activities..... -- (6,753) 2,901 -- (3,852) Changes in Operating Assets and Liabilities: Accounts Receivable.......... -- 6,349 (32,340) 13,981 (12,010) Materials and Supplies....... -- (1,119) (265) -- (1,384) Accrued Interest............. -- 413 -- -- 413 Other Current Assets......... -- (14,648) 9,650 -- (4,998) Other Current Liabilities.... -- (11,859) 18,569 -- 6,710 --------- -------- -------- ------- -------- Net Cash Provided by Operating Activities...... -- 9,399 1,208 13,981 24,588 INVESTING ACTIVITIES Property Additions................ -- (13,165) (6,607) -- (19,772) Investment in Vessel Leasing LLC............................ -- (6,808) -- -- (6,808) Proceeds from Property Dispositions................... -- 23,918 -- -- 23,918 Proceeds from Sale of Terminals... -- 7,818 -- -- 7,818 Proceeds from Property Condemnation................... -- 2,730 -- -- 2,730 Other Investing Activities........ -- (9,055) 1,846 2,615 (4,594) --------- -------- -------- ------- -------- Net Cash Provided by (Used in) Investing Activities................ -- 5,438 (4,761) 2,615 3,292 FINANCING ACTIVITIES Short-Term Borrowings............. -- 17,250 -- -- 17,250 Long-Term Debt Repaid............. -- (47,937) -- -- (47,937) Borrowing from Affiliates......... -- 567 (567) -- Affiliate Debt Repaid............. -- (567) 567 -- Outstanding Checks Net of Deposits....................... -- (6,670) -- -- (6,670) Debt Costs........................ -- (3,463) -- -- (3,463) Cash Dividends Paid............... -- (1,000) 1,000 -- Other Financing................... -- 625 3,615 (3,615) 625 --------- -------- -------- ------- -------- Net Cash (Used in) Provided by Financing Activities... -- (40,195) 2,615 (2,615) (40,195) Net Decrease in Cash and Cash Equivalents....................... -- (25,358) (938) 13,981 (12,315) Cash and Cash Equivalents at Beginning of Period............... -- 57,289 2,279 -- 59,568 --------- -------- -------- ------- -------- Cash and Cash Equivalents at End of Period............. -- $ 31,931 $ 1,341 $13,981 $ 47,253 ========= ======== ======== ======= ========
26 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 29, 2000
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS --------- ------------ ------------ ------------ -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net Earnings (Loss)............... -- $ 97 $ (9,231) $ -- $ (9,134) Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization................. -- 52,167 6,909 -- 59,076 Impairment of Barges........... -- 3,865 -- -- 3,865 Gain on Sale of Watercom....... -- (11,418) -- -- (11,418) Other Operating Activities..... -- (4,320) (2,260) -- (6,580) Changes in Operating Assets and Liabilities: Accounts Receivable.......... -- 4,925 (7,472) -- (2,547) Materials and Supplies....... -- 12,469 (265) -- 12,204 Accrued Interest............. -- 10,557 -- -- 10,557 Other Current Assets......... -- (6,939) 3,224 -- (3,715) Other Current Liabilities.... -- (23,612) 2,086 -- (21,526) --------- -------- -------- -------- -------- Net Cash Provided by (Used in) Operating Activities................ -- 37,791 (7,009) -- 30,782 INVESTING ACTIVITIES Property Additions................ -- (27,817) (2,737) -- (30,554) Purchase of Barging Assets........ -- (31,500) -- -- (31,500) Proceeds from Property Dispositions................... -- 4,089 -- -- 4,089 Proceeds from Sale of Watercom.... -- 13,600 -- -- 13,600 Proceeds from Sale of Restricted Investments.................... -- 25,288 -- -- 25,288 Other Investing Activities........ -- (15,537) (1,536) 11,958 (5,115) --------- -------- -------- -------- -------- Net Cash Used in Investing Activities................ -- (31,877) (4,273) 11,958 (24,192) FINANCING ACTIVITIES Short-Term Borrowings............. -- 66,750 -- -- 66,750 Short-Term Debt Issued............ -- (54,752) -- -- (54,752) Short-Term Debt Repaid............ -- -- -- -- Affiliate Debt Repaid............. -- -- (12,560) 12,560 -- Cash Dividends Paid............... -- -- (3,160) 3,160 -- Other Financing................... -- 10,139 1,694 (1,694) 10,139 Borrowing from Affiliates......... -- -- -- 25,984 (25,984) --------- -------- -------- -------- -------- Net Cash Provided by Financing Activities...... -- 22,137 11,958 (11,958) 22,137 Net Increase in Cash and Cash Equivalents....................... -- 28,051 676 -- 28,727 Cash and Cash Equivalents at Beginning of Period............... -- 29,238 1,603 -- 30,841 --------- -------- -------- -------- -------- Cash and Cash Equivalents at End of Period............. -- $ 57,289 $ 2,279 $ -- $ 59,568 ========= ======== ======== ======== ========
27 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS --------- ------------ ------------ ------------ -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net Earnings (Loss)............... -- $ 8,289 $ (5,319) $ -- $ 2,970 Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization................. -- 47,883 6,156 -- 54,039 Impairment of Barges........... -- 230 -- -- 230 Proceeds from the initial sale of accounts receivable....... -- 50,000 -- -- 50,000 Other Operating Activities..... -- 3,723 (2,039) -- 1,684 Changes in Operating Assets and Liabilities: Accounts Receivable.......... -- (1,983) 7,129 -- 5,146 Materials and Supplies....... -- (3,092) 189 -- (2,903) Accrued Interest............. -- (14,834) -- -- (14,834) Other Current Assets......... -- 10,890 (13,026) -- (2,136) Other Current Liabilities.... -- 3,934 (3,528) -- 406 --------- -------- -------- -------- -------- Net Cash Provided by (Used in) Operating Activities................ -- 105,040 (10,438) -- 94,602 INVESTING ACTIVITIES Property Additions................ -- (46,564) (9,316) -- (55,880) Proceeds from Property Dispositions................... -- 2,111 22 -- 2,133 Other Investing Activities........ -- (21,442) 279 15,754 (5,409) --------- -------- -------- -------- -------- Net Cash Used in Investing Activities................ -- (65,895) (9,015) 15,754 (59,156) FINANCING ACTIVITIES Partner Distribution.............. -- (541) -- -- (541) Long-Term Debt Repaid............. -- (53,046) (155) 155 (53,046) Cash Dividends Paid............... -- -- (6,700) 6,700 -- Other Financing Activities........ -- (374) 189 (189) (374) Borrowing from Affiliates......... -- -- 22,420 (22,420) -- --------- -------- -------- -------- -------- Net Cash (Used in) Provided by Financial Activities... -- (53,961) 15,754 (15,754) (53,961) Net Decrease in Cash and Cash Equivalents....................... -- (14,816) (3,699) -- (18,515) Cash and Cash Equivalents at Beginning of Period............... -- 44,054 5,302 -- 49,356 --------- -------- -------- -------- -------- Cash and Cash Equivalents at End of Period............. -- $ 29,238 $ 1,603 $ -- $ 30,841 ========= ======== ======== ======== ========
28 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 28, 2001
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS --------- ------------ ------------ ------------ --------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Cash and Cash Equivalents........ -- $ 45,912 $ 1,341 $ -- $ 47,253 Accounts Receivable -- Net....... -- 25,612 29,752 (13,981) 41,383 Accounts Receivable -- Related Parties....................... -- -- 13,402 -- 13,402 Materials and Supplies........... -- 30,180 1,155 -- 31,335 Other Current Assets............. -- 41,069 (11,436) -- 29,633 --------- --------- -------- --------- --------- Total Current Assets..... -- 142,773 34,214 (13,981) 163,006 PROPERTIES -- NET.................. -- 422,877 41,256 -- 464,133 PENSION ASSET...................... -- 26,067 -- -- 26,067 OTHER ASSETS....................... (142,943) 153,227 52,702 41,744 104,730 --------- --------- -------- --------- --------- Total Assets............. $(142,943) $ 744,944 $128,172 $ 27,763 $ 757,936 ========= ========= ======== ========= ========= LIABILITIES CURRENT LIABILITIES Accounts Payable................. -- $ 28,094 $ 1,643 $ -- $ 29,737 Accrued Payroll and Fringe Benefits...................... -- 17,206 -- -- 17,206 Deferred Revenue................. -- 11,890 -- -- 11,890 Accrued Claims and Insurance Premiums...................... -- 24,200 -- -- 24,200 Accrued Interest................. -- 18,659 -- -- 18,659 Short-term Debt.................. -- 84,000 -- -- 84,000 Current Portion of Long-Term Debt.......................... -- 608,519 -- -- 608,519 Other Current Liabilities........ -- 40,249 15,804 (13,981) 42,072 Other Current Liabilities -- Related Parties....................... -- -- 8,397 -- 8,397 --------- --------- -------- --------- --------- Total Current Liabilities............ -- 832,817 25,844 (13,981) 844,680 LONG-TERM NOTE PAYABLE TO AFFILIATE........................ -- -- 86,700 (86,700) -- LONG-TERM DEBT..................... -- -- -- -- -- PENSION LIABILITY.................. -- 18,907 -- -- 18,907 OTHER LONG-TERM LIABILITIES........ -- 36,163 1,129 -- 37,292 --------- --------- -------- --------- --------- Total Liabilities........ -- 887,887 113,673 (100,681) 900,879 --------- --------- -------- --------- --------- Preferred Members' Interest; Mandatory Redemption Value of $1,037,230.................... 311,292 -- -- -- 311,292 --------- --------- -------- --------- --------- MEMBERS' DEFICIT Common Members' Interest........... 4,463 220,074 -- (220,074) 4,463 Other Capital...................... 70,899 166,580 57,374 (223,954) 70,899 Retained Deficit................... (527,740) (527,740) (42,875) 570,615 (527,740) Accumulated Other Comprehensive Loss............................. (1,857) (1,857) -- 1,857 (1,857) --------- --------- -------- --------- --------- Total Members' Deficit...... (454,235) (142,943) 14,499 128,444 (454,235) --------- --------- -------- --------- --------- Total Liabilities, Preferred Members' Interest and Members' Deficit......... $(142,943) $ 744,944 $128,172 $ 27,763 $ 757,936 ========= ========= ======== ========= =========
29 AMERICAN COMMERCIAL LINES HOLDINGS LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 29, 2000
GUARANTOR OTHER COMBINED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS --------- ------------ ------------ ------------ --------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Cash and Cash Equivalents............ $ -- $ 57,288 $ 2,280 $ -- $ 59,568 Accounts Receivable -- Net........... -- 32,608 8,109 -- 40,717 Accounts Receivable -- Related Parties........................... -- -- 2,111 -- 2,111 Materials and Supplies............... -- 28,883 890 -- 29,773 Other Current Assets................. -- 24,823 (1,163) -- 23,660 --------- --------- -------- --------- --------- Total Current Assets......... -- 143,602 12,227 -- 155,829 PROPERTIES -- NET...................... -- 469,714 39,729 -- 509,443 PENSION ASSET.......................... -- 24,512 -- -- 24,512 OTHER ASSETS........................... (139,659) 141,534 51,128 44,751 97,754 --------- --------- -------- --------- --------- Total Assets................. $(139,659) $ 779,362 $103,084 $ 44,751 $ 787,538 ========= ========= ======== ========= ========= LIABILITIES CURRENT LIABILITIES Accounts Payable..................... $ -- $ 28,536 $ 1,194 $ -- $ 29,730 Accrued Payroll and Fringe Benefits.......................... -- 14,003 -- -- 14,003 Deferred Revenue..................... -- 12,011 -- -- 12,011 Accrued Claims and Insurance Premiums.......................... -- 21,047 -- -- 21,047 Accrued Interest..................... -- 18,246 -- -- 18,246 Short-term Debt...................... -- 66,750 -- -- 66,750 Current Portion of Long-Term Debt.... -- 44,579 -- -- 44,579 Other Current Liabilities............ -- 50,918 4,442 -- 55,360 Other Current Liabilities -- Related Parties........................... -- -- 1,457 -- 1,457 --------- --------- -------- --------- --------- Total Current Liabilities.... -- 256,090 7,093 -- 263,183 LONG-TERM NOTE PAYABLE TO AFFILIATE.... -- -- 86,700 (86,700) -- LONG-TERM DEBT......................... -- 613,476 -- -- 613,476 PENSION LIABILITY...................... -- 21,389 -- -- 21,389 OTHER LONG-TERM LIABILITIES............ -- 28,066 1,083 -- 29,149 --------- --------- -------- --------- --------- Total Liabilities............ -- 919,021 94,876 (86,700) 927,197 --------- --------- -------- --------- --------- Preferred Members' Interest; Mandatory Redemption Value of $1,037,230....... 280,393 -- -- -- 280,393 MEMBERS' DEFICIT Common Members' Interest............... 4,463 220,074 -- (220,074) 4,463 Other Capital.......................... 99,017 163,799 46,820 (210,619) 99,017 Retained Deficit....................... (523,048) (523,048) (38,612) 561,660 (523,048) Accumulated Other Comprehensive Loss... (484) (484) -- 484 (484) --------- --------- -------- --------- --------- Total Members' Deficit....... (420,052) (139,659) 8,208 131,451 (420,052) --------- --------- -------- --------- --------- Total Liabilities, Preferred Members' Interest and Members' Deficit........... $(139,659) $ 779,362 $103,084 $ 44,751 $ 787,538 ========= ========= ======== ========= =========
30 EX-99.4 6 y59743ex99-4.txt AUDITED FINANCIAL STATEMENTS Exhibit 99.4 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF UABL LIMITED
Page ---- Report of Independent Public Accountants...................... 2 Consolidated Balance Sheets as of December 31, 2001 and 2000.. 3 Consolidated Statements of Income (Loss) for the year ended December 31, 2001 and for the period of October 24 (Inception Date) to December 31, 2000........................ 4 Statements of Changes in Stockholders' Equity for the year ended December 31, 2001 and for the period of October 24 (Inception Date) to December 31, 2000........................ 5 Consolidated Statements of Cash Flows for the year ended December 31, 2001 and for the period of October 24 (Inception Date) to December 31, 2000........................ 6 Notes to Consolidated Financial Statements for the year ended December 31, 2001 and for the period of October 24 (Inception Date) to December 31, 2000........................ 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of UABL LIMITED: We have audited the accompanying consolidated balance sheets of UABL LIMITED and its subsidiaries, a company incorporated under Bahamas legislation (the Company), as of December 31, 2001 and 2000, and the related consolidated statements of income (loss), changes in stockholders' equity and cash flows for the year ended December 31, 2001 and for the period of October 24 (Inception date) to December 31, 2000. These statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing generally accepted standards in the United States of America. Those standards require that we plan and perform the audit 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 provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of UABL LIMITED as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the year ended December 31, 2001 and for the period of October 24 (Inception date) to December 31, 2000, in accordance with generally accepted accounting principles in the United States. PISTRELLI, DIAZ Y ASOCIADOS Member of Andersen /s/ MARIANA FILAS -------------------------------------- MARIANA FILAS Partner Buenos Aires, Argentina March 26, 2002 2 UABL LIMITED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000
2001 2000 --------- -------- (STATED IN THOUSANDS OF U.S. DOLLARS) ASSETS Current Assets Cash and cash equivalents................................. 106 1,896 Investments (note 2.d).................................... -- 607 Accounts receivable, net (note 2.e)....................... 3,691 4,203 Due from affiliates (note 7.)............................. 17,295 2,001 Inventories (note 2.g).................................... 1,465 1,561 Prepaid expenses (note 2.h)............................... 1,772 615 Other receivables (note 2.f).............................. 2,631 1,621 ------- ------ Total current assets.............................. 26,960 12,504 ------- ------ Noncurrent Assets Other receivables (note 2.f).............................. -- 2,270 Investment in affiliates (note 2.j)....................... 3,809 1,431 Property and equipment, net (notes 2.i and 3.)............ 77,883 64,048 ------- ------ Total noncurrent assets........................... 81,692 67,749 ------- ------ Total assets...................................... 108,652 80,253 ======= ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses (note 2.k).......... 3,040 5,371 Due to affiliates (note 7.)............................... 28,449 2,737 Other payables (note 2.l)................................. 809 1,339 Financial payables........................................ 1,366 -- ------- ------ Total current liabilities......................... 33,664 9,447 Noncurrent Liabilities -- Financial payables................ 8,464 -- ------- ------ Total Liabilities................................. 42,128 9,447 ------- ------ Commitments and Contingencies (note 5)...................... -- -- ------- ------ Stockholders' Equity Common stock, $1 par value, 10,000 shares authorized and issued (note 4.)....................................... 10 10 Paid-in capital........................................... 77,514 74,395 Retained earnings......................................... (11,000) (3,599) ------- ------ Total stockholders' equity........................ 66,524 70,806 ------- ------ Total liabilities, minority interests and stockholders' equity............................. 108,652 80,253 ======= ======
The accompanying notes to consolidated financial statements are an integral part of these statements. 3 UABL LIMITED CONSOLIDATED STATEMENTS OF INCOME (LOSS) FOR THE YEAR ENDED DECEMBER 31, 2001 AND FOR THE PERIOD OF OCTOBER 24 (INCEPTION DATE) TO DECEMBER 31, 2000
2001 2000 (365 DAYS) (69 DAYS) ---------- --------- (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA) Revenue Freight revenues.......................................... 35,933 3,993 Freight revenues from related parties (note 7.)........... 4,027 640 Management fee from related parties (note 7.)............. 15,055 1,947 Other services............................................ 1,566 -- -------- ------- Total revenue (Note 8)............................ 56,581 6,580 -------- ------- Operating Expenses Voyage expenses........................................... (14,078) (3,000) Voyage expenses from related parties (note 7.)............ (25,625) (2,944) Running costs............................................. (11,932) (2,723) Depreciation of property and equipment.................... (3,259) (688) Administrative expenses................................... (5,219) (643) -------- ------- Total operating expenses.......................... (60,113) (9,998) -------- ------- Operating loss............................................ (3,532) (3,418) Other Income (Expenses) Investment in affiliates.................................. (83) (86) Financial expense......................................... (282) -- Exchange gains............................................ 513 -- -------- ------- Total other income................................ 148 (86) -------- ------- Loss before income tax of the year........................ (3,384) (3,504) Income tax of the year (note 6.)....................... (725) (95) Settlement of tax contingency (note 5.)................ (3,292) -- -------- ------- Loss for the year......................................... (7,401) (3,599) ======== ======= Basic loss per share................................... $ (740.1) $(359.9) ======== =======
The accompanying notes to consolidated financial statements are an integral part of these statements. 4 UABL LIMITED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001 AND FOR THE PERIOD OF OCTOBER 24 (INCEPTION DATE) TO DECEMBER 31, 2000
COMMON PAID-IN RETAINED BALANCE STOCK CAPITAL EARNINGS TOTAL - ------- ------ ------- -------- ------ (STATED IN THOUSANDS OF US DOLLARS) October 24, 2000......................................... 10 74,395 -- 74,405 Net loss for the period (69 days)........................ -- -- (3,599) (3,599) -- ------ ------- ------ December 31, 2000........................................ 10 74,395 (3,599) 70,806 Additional paid-in capital (note 5.)..................... -- 3,119 -- 3,119 Net loss for the year (365 days)......................... -- -- (7,401) (7,401) -- ------ ------- ------ December 31, 2001........................................ 10 77,514 (11,000) 66,524 == ====== ======= ======
The accompanying notes to consolidated financial statements are an integral part of these statements. 5 UABL LIMITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001 AND FOR THE PERIOD OF OCTOBER 24 (INCEPTION DATE) TO DECEMBER 31, 2000
2001 2000 (365 DAYS) (69 DAYS) ---------- --------- (STATED IN THOUSANDS OF U.S. DOLLARS) Cash Flows from Operating Activities Net loss for the year..................................... (7,401) (3,599) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation of property and equipment................. 3,259 688 Loss from investment in affiliates..................... 83 86 Income from sales of property and equipment............ (2) -- Changes in assets and liabilities, net: (Increase) decrease in assets: Accounts receivable.................................. 2,029 (3,150) Due from affiliates.................................. (16,811) (484) Inventories.......................................... 96 (1,561) Prepaid expenses..................................... (1,157) (615) Other receivables.................................... 1,260 2,349 Increase (decrease) in liabilities: Accounts payable and accrued expenses................ (4,055) 4,365 Due to affiliates.................................... 27,436 1,013 Other payables....................................... (530) (95) ------- ------ Net cash provided by (used in) operating activities....................................... 4,207 (1,003) ------- ------ Cash Flows from Investing Activities Sales of property and equipment........................... 53 -- Current investments....................................... 607 (607) Purchase of property and equipment........................ (17,145) -- Investment in affiliate................................... (2,461) -- ------- ------ Net cash used in investing activities............. (18,946) (607) ------- ------ Cash Flows from Financing Activities Increase in long term financial payables.................. 9,830 -- Partner capital investment................................ 3,119 -- ------- ------ Net cash provided by financing activities......... 12,949 -- ------- ------ Net decrease in cash and cash equivalents......... (1,790) (1,610) Cash and cash equivalents at beginning of year.... 1,896 3,506 ------- ------ Cash and cash equivalents at end of year.......... 106 1,896 ======= ====== Supplemental cash flow information: Interest paid............................................... 57 1 Income taxes paid........................................... 569 82
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 AND FOR THE PERIOD OF OCTOBER 24 (INCEPTION DATE) TO DECEMBER 31, 2000 (STATED IN THOUSANDS OF U.S. DOLLARS, EXCEPT OTHERWISE INDICATED) 1. CORPORATE ORGANIZATION AND NATURE OF OPERATIONS ACBL Hidrovias Ltd. ("ACBLH"), a subsidiary of American Commercial Lines LLC ("ACL"), and UP River (Holdings) Ltd. ("UP"), a Bahamian corporation and wholly owned subsidiary of Ultrapetrol (Bahamas) Limited ("Ultrapetrol"), individually and through their subsidiaries, own certain vessels, land based assets, permits and contracts of affreightment, which they use to operate a river transportation business on the Parana, Paraguay and Uruguay Rivers in Argentina, Bolivia, Brazil, Paraguay and Uruguay. The respective Boards of Directors of ACBLH and UP decided to combine businesses of ACBLH and UP into a new business entity, UABL Limited ("UABL" or "the Company"), and for that purpose, executed a Consolidation Agreement (the "Consolidation Agreement") on October 18, 2000 (the "Closing Date"). As a result of the business combination, the Company was organized and registered as a Bahamian Corporation on October 18, 2000. The Company has an authorized capital stock of 10,000 shares, with a par value of $1 per share. The company is owned equally by UP and ACBLH and its affiliates. These contributions were recorded at historical cost basis of the related entities or assets. On the Closing Date and in accordance with the Consolidation Agreement, UABL S.A. ("UABL SA"; formerly ACBL Hidrovias S.A.), under Argentinean legislation, and UP River Ltd. ("UP River"), under Bahamian legislation, were contributed by ACBLH and UP to the Company respectively. Additionally, the parties contributed equipment, cash and certain time charter contracts involving certain vessels to the Company on the Closing Date. Lonehort S.A. ("Lonehort"), a ship management company serving the boats, barges and other marine equipment of the Company, was created in October 2000. The Company is its sole shareholder (100% interest). UP River has the following subsidiaries:
COMPANY ORIGIN 2001 2000 - ------- ---------- ---- ---- Thurston Shipping Inc. ("Thurston")........................ Panamanian 100% 100% UABL International Ltd. ("UABL International"; formerly Sunrose Investment Ltd.)................................. Panamanian 100% 100% Sernova S.A. ("Sernova")................................... Argentinian 100% 100% UABL Paraguay S.A. ("UABL Paraguay"; formerly Parpetrol S.A)..................................................... Paraguayan 100% 100% Riverpar S.A. ("Riverpar")................................. Paraguayan 100% -- Yataiti S.A. ("Yataiti")................................... Paraguayan 100% -- ACBL del Paraguay S.A. ("ACBL del Paraguay")............... Paraguayan 100% --
Riverpar was organized in July 2001. Riverpar's shareholders are Thurston Shipping Inc. (2.5% interest) and UABL International (97.5% interest). Riverpar acquired eleven tanker barges from ACL for the purpose of attaining an increased penetration in the fuel transportation market. Yataiti was organized in August 2001. Yataiti's shareholders are Thurston Shipping Inc. (2.5% interest) and UABL International (97.5% interest). Yataiti provides shipping agency services to the river transportation business of the Company, and its affiliated and subsidiary entities, which enables certain cost reductions in the Company's business. ACBL del Paraguay was organized in November 2001. Its shareholders are Thurston Shipping Inc. (2.5% interest) and UABL International (97.5% interest). ACBL del Paraguay acquired a towboat (the 7 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Epiritu Paraguay) and barges (AF 37 - AF 60) from Transamerica Leasing Inc. in November 2001, which are now operated in the Company's river transportation business. Since early December 2001, Argentine authorities implemented a number of monetary and exchange control measures that mainly included restrictions on the free disposition of funds deposited with banks and the practical impossibility of making transfers abroad, with the exception of transfers related to foreign trade. Later, the Federal Government declared the official default on foreign debt payments and, on January 6, 2002, the Argentine Congress approved Law No. 25,561 on Public Emergency and Exchange System Reform that introduced important changes to the economic model implemented until that date and that amended the Convertibility Law (the currency board that pegged the Argentine peso at parity with the US dollar) approved in March 1991. As of the date of issuance of these financial statements the exchange rate ranged from 2.30 to 2.40 pesos to 1 US dollar (selling rate). Since early December 2001, Argentine authorities implemented a number of monetary and exchange control measures that mainly included restrictions on the free disposition of funds deposited with banks and the practical impossibility of making transfers abroad, with the exception of transfers related to foreign trade. Later, the Federal Government declared the official default on foreign debt payments and, on January 6, 2002, the Argentine Congress approved Law No. 25,561 on Public Emergency and Exchange System Reform that introduced important changes to the economic model implemented until that date and that amended the Convertibility Law (the currency board that pegged the Argentine peso at parity with the US dollar) approved in March 1991. As of the date of issuance of these financial statements the exchange rate ranged from 2.30 to 2.40 pesos to 1 US dollar (selling rate). 2. SIGNIFICANT ACCOUNTING POLICIES a) BASIS OF PRESENTATION The financial statements have been prepared in accordance with generally accepted accounting principles as applied in the United States ("US GAAP") The consolidated financial statements of the Company for the year ended December 31, 2001 and for the period of October 24 (Inception date) to December 31, 2000, have been based upon the financial statements of UABL and its subsidiaries, UABL SA, UP River and Lonehort for the above mentioned periods. Certain reclassifications have been made to December 31, 2000 amounts to conform with December 31, 2001 presentation. b) PRINCIPLES OF CONSOLIDATION AND COMBINATION All significant intercompany balances and transactions have been eliminated in consolidation. The balance sheet balances and significant income (loss) originating in transactions among UABL SA, Lonehort SA and UP River and its subsidiaries have been eliminated. c) FOREIGN CURRENCY TRANSLATION The Company uses the U.S. dollar as its functional currency. Transactions involving other currencies during the years were converted into U.S. dollars using the exchange rates in effect at transaction date. At the balance sheets date, assets and liabilities denominated in other currencies were translated using year-end exchange rates. For the balance sheets of UABL SA and Sernova SA as of December 31, 2001, assets and liabilities denominated in Argentine pesos were translated 8 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) using the exchange rate in effect as of January 11, 2002, date the foreign currency market re-opened . Gains or losses resulting from foreign currency measurements were recognized in the income statement for each years. d) INVESTMENTS As of December 31, 2000, this account includes deposit accounts plus the interest accrued up to such date. e) ACCOUNTS RECEIVABLE, NET Receivables are recorded and carried at face value less allowances for uncollectible accounts estimated by the Company, in order to write them down to estimated realizable values. The amounts of each item, were as follows:
2001 2000 ----- ----- Accounts receivable......................................... 4,003 4,558 Allowance for uncollectible accounts........................ (312) (355) ----- ----- Accounts receivable, net.................................... 3,691 4,203 ===== =====
f) OTHER RECEIVABLE This account mainly includes claim insurance, tax credits for VAT and income tax retention as of December 31, 2001 and tax credit for VAT and income tax retention as of December 31, 2000. g) INVENTORIES This account includes fuel, lubricants and spare parts, which were accounted for under the lower of cost or market. The amounts of each item, were as follows:
2001 2000 ----- ----- Spare parts (at stores)..................................... 995 1,033 Fuel and lubricants......................................... 470 528 ----- ----- Total............................................. 1,465 1,561 ===== =====
h) PREPAID EXPENSES This account includes prepaid insurance and charter expenses and prepayments to vendors. i) PROPERTY AND EQUIPMENT Property and equipment, which is principally comprised of river barges, tugboats and river equipment is stated at acquisition cost. This cost comprises the purchase price and all directly attributable cost to put the asset into working condition. Maintenance and repair costs are expensed as incurred. The river barges and tugboats are considered to have useful lives of 35 years from built date. The depreciable amount is calculated net from the scrap value of the barge convoy and is recorded by the straight-line method over the estimated useful lives of the related assets. The scrap value is estimated at the 5% of the acquisition cost of the barges. 9 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) j) INVESTMENT IN AFFILIATES This account includes the Company's participation of 50% on Obras Terminales y Servicios S.A. ("OTS"), and 50% on Puertos del Sur S.A., through UABL Paraguay as of December 31, 2001 and the Company's participation on Obras Terminales y Servicios S.A. ("OTS"), through UABL Paraguay as of December 31, 2000. These investments are accounted for by the equity method. k) ACCOUNTS PAYABLE AND ACCRUED EXPENSES This account mainly includes debts to agents and suppliers and director's fees. l) OTHER PAYABLES This account includes mainly payroll, social security liabilities, tax debts and provisions. m) NATURE OF OPERATIONS AND REVENUE RECOGNITION Revenues are recognized daily as earned under both freight and time charters over the lives of the respective agreements. Under the charter agreements entered into by the parties, both UP and ACBLH lease certain vessels which were not contributed to the Company through the Consolidation Agreement, which are operated together with the rest of the UABL Limited fleet. n) USE OF ESTIMATES In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that effect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual income (loss) could differ from those estimates. o) COMPREHENSIVE INCOME: According to SFAS No. 130, the Company is required to separately disclose the changes in the stockholders' equity, other than net income (loss) and transactions with stockholders, defined as other comprehensive income. The Company has no items of other comprehensive income to report. The comprehensive income item only includes the net income (loss) for the years. p) FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of the Company's financial instruments, which include cash, and financial payables, approximates carrying value. q) CASH AND CASH EQUIVALENTS: Cash and cash equivalents include highly liquid, temporary cash investments with original maturities of three months or less when purchased. 10 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 3. PROPERTY AND EQUIPMENT The capitalized cost of all vessels and other fixed assets and the related accumulated depreciation as of December 31, 2001 and 2000 is as follows:
2001 2000 ---------------------------------------------------------- -------- ORIGINAL ACCUMULATED NET BOOK NET BOOK SUBSIDIARY VALUE DEPRECIATION VALUE VALUE --------------------- -------- ------------ -------- -------- ACBLH Barges.................... UABL International 5,767 567 5,200 5,638 Rodeo 1 to 4 barges............. UABL International 531 131 400 485 Matador LXIII to CVI barges..... UABL International 9,287 904 8,383 9,066 Matador CVII to CXXVII barges... UABL International 7,343 455 6,888 7,095 Barges RA 01 to 05 and equipment..................... Sernova SA 1,171 128 1,043 1,133 Saturno Tug-Boat................ UABL Paraguay 468 21 447 341 UT 3001/4 Ponton barges......... UABL Paraguay 321 69 252 295 NP 1501/1512 and SPN 003-004.... UABL Paraguay 1,434 360 1,074 1,300 Vehicles........................ UABL SA 82 45 37 58 Boats........................... UABL SA 1,613 312 1,301 1,331 Barges.......................... UABL SA 40,177 6,537 33,640 34,663 Tugboat Espiritu Paraguayo...... ACBL del Paraguay 3,104 15 3,089 -- Barges AF 37 to 60.............. ACBL del Paraguay 8,016 39 7,977 -- Barges CMI 21/27................ UABL Paraguay 2,100 5 2,095 -- Barges River 824-834............ Riverpar 1,498 21 1,477 -- Land, facilities and machinery..................... UABL SA, Yataiti, 3,317 789 2,528 2,335 UABL Paraguay and Sernova UABL SA, UABL Office.......................... Paraguay and Yataiti 963 699 264 308 Work in progress (mainly Alianza G-2).......................... Sernova and UABL LTD 1,788 -- 1,788 -- ------ ------ ------ ------ Total 2001...................... 88,980 11,097 77,883 ====== ====== ====== Total 2000...................... 72,145 8,097 64,048 ====== ====== ======
4. COMMON STOCK As discussed in note 1, effective December 31, 2001 and 2000, the Company has an authorized capital of $10 comprising 10,000 common shares with a par value of $1 each. 5. COMMITMENTS AND CONTINGENCIES a) CONSOLIDATION AGREEMENT According to the provisions of the Consolidation Agreement the Company shall not be obligated or become liable for any obligation or liability, known or unknown, fixed, contingent or otherwise of UP, UP River or the Subsidiaries of UP and ACBLH, UABL SA, or arising prior to October 24, 2000 in connection with any vessel, or any vessel chartered to UABL Limited, in connection with or arising out of or resulting from events occurring prior to that date, without limitation, any liability arising in connection with any environmental liabilities, legal violations, litigation, employee claims, loan agreements or other indebtedness, 11 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) any tax, or any other liabilities, obligations, or exception to any representation or warranty. UABL Limited shall not assume, and UP and ACBLH shall severally indemnify UABL Limited against such liabilities. In addition, pursuant to the Consolidation Agreement, all claims, severance benefits, costs, and other expenses, social security taxes, charges and contributions and other costs incurred by UABL SA or UP River, or subsidiary of UP River, in connection with an employee employed by the Company and subsequently terminated by the Company shall be paid by the Company to, or on behalf of ACBLH or UP, as the case may be; provided, that the maximum amount that the Company shall be required to pay to or on behalf of the parent companies in respect of any of the mentioned costs in the aggregate, shall be $1,800. ACBLH and UP agreed to fully indemnify the Company against such liabilities over the mentioned amount. During 2000 the Argentine tax authority served a notice to UABL SA with the purpose of verifying the latter's compliance with the transfer pricing regulations for transactions with related companies for the period prior to the formation of UABL Limited, i.e. during 1996, 1997, 1998 and 1999, among other things. In light of the above, the Company amended its income tax returns for the above-mentioned years charging a loss of 3,292 to UABL SA income statement (consisting of a tax loss of 2,270, interest expense for 1,487 and a gain on the sale of government bounds of 465). In compliance with the contract provision described above, ACBLH compensated UABL Limited in the amount of 3,119 causing a net decrease of 173, in the shareholders net worth. According to US GAAP, this compensation had to be considered as paid-in capital and thus could not be netted out with the loss generated by the tax liability. b) TEMPORARY IMPORT OF GOODS As of December 31, 2001, the Company had assets imported temporarily into Argentina for $29.294. In accordance with the prevailing tax legislation in Argentina, the deadline and time limit for paying the applicable import duties definitively expires three years after goods, including marine equipment, brought into the country. The Company obtained an extension from the Argentinian tax authority for the assets imported in 1996, 1997 and 1998, which will expire during the year 2002. The Company's intention is to extend the life of these contracts provided that when the extension is to be formalized, the temporary importation system remains in effect. Otherwise, these assets will be reexported. 6. INCOME TAXES As the earnings from shipping operations of UABL International and Thurston are derived from sources outside of Panama, such earnings are not subject to Panamanian taxes. UABL Paraguay, ACBL del Paraguay, Yataiti and Riverpar are subject to Paraguayan corporate income taxes, UABL SA and Sernova to Argentine corporate income taxes. In Argentina the tax on minimum presumed income supplements income tax since it applies a minimum levy on the potential income from certain income generating assets at 1% tax rate. The Company's tax obligation in any given year will be the higher of these two tax amounts. However, if, in any given tax year, tax on minimum presumed income exceeds income tax, such excess may be computed as payment on account of any excess of income tax over tax on minimum presumed income that may arise in any of the ten following years. The Company accounts for income taxes under the liability method in accordance with SFAS N(LOGO) 109 "Accounting for income taxes". Under this method, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at each year -- end. 12 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred tax assets are recognized for all temporary items and an offsetting valuation reserve is only recorded if it is determined to be probable that the asset will not be realized. As of December 31, 2001, the Company recognized a deferred tax asset of 4,061 and an offsetting valuation reserve of the same amount. The provision (benefit) for income taxes is comprised of:
FOR THE YEAR ENDED DECEMBER 31, ------------------- 2001 2000 -------- -------- Currently payable........................................... -- -- Deferred.................................................... -- -- ------ ------ -- -- ====== ======
Reconciliation of tax provision to statutory rate and the structure of deferred assets (liabilities) is a follows:
FOR THE YEAR ENDED DECEMBER 31, ------------------- 2001 2000 -------- -------- Pre-tax (loss) income....................................... (5,131) (3,599) Sources not subject to income tax........................... 3,598 (5,303) Income derived from permanent differences................... (110) 102 ------ ------ Statutory tax rate (average)................................ (1,643) (8,800) 35% 35% ------ ------ Tax benefit................................................. (575) (3,080) Increase (decrease) in valuation allowances................. 575 (3,080) ------ ------ -- -- ====== ======
As of December 31, 2001 and 2000 the net deferred tax assets (liability) is a follows:
AS OF DECEMBER 31, ------------------- 2001 2000 -------- -------- Deferred tax assets......................................... 5,165 11,088 Deferred tax liabilities.................................... (1,104) (284) ------- ------- Net deferred tax assets........................... 4,061 10,804 Offsetting valuation reserve arising from prior year tax credits................................................... (10,804) (11,372) Offsetting valuation reserve current year................... 6,743 568 ------- ------- Net recognized deferred........................... -- -- ======= =======
Deferred tax assets as of December 31, 2001 is mainly comprised of the loss carry forwards which may be offset against income thought 2005. Deferred tax liabilities are primarily attributable to accelerate depreciation for tax purpose. 13 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. RELATED PARTY TRANSACTIONS As of December 31, 2001 and 2000 the balances from related parties were as follows:
2001 2000 ------ ----- ACCOUNTS RECEIVABLE FROM RELATED PARTIES Ultrapetrol S.A. ......................................... 134 214 Ultrapetrol (Bahamas) Ltd. ............................... 1,087 174 Parfina S.A. ............................................. 14 99 Oceanmarine............................................... 331 -- ACBLH..................................................... 9,207 1,498 Oceanpar.................................................. 2 -- Princely International Finance Corp. and its wholly owned subsidiaries........................................... 6,449 16 ------ ----- 17,224 2,001 ====== ===== LOANS GRANTED TO RELATED PARTIES OTS S.A. ................................................. 71 -- ------ ----- 71 -- ------ ----- Total Due from affiliates................................... 17,295 2,001 ====== ===== ACCOUNTS PAYABLE TO RELATED PARTIES Mansan S.A. .............................................. 1,518 224 Ultrapetrol S.A. ......................................... 57 149 Princely International Finance Corp. and its wholly owned subsidiaries........................................... 9,729 -- ACBL H. .................................................. 13,150 2,089 Oceanpar S.A. ............................................ -- 57 Parfina................................................... 569 218 Louisiana Dock Company LLC................................ 355 -- ------ ----- 25,378 2,737 ====== ===== LOANS RECEIVED FROM RELATED PARTIES ACBLH..................................................... 1,350 -- Ultrapetrol (Bahamas) Ltd. ............................... 1,721 -- ------ ----- 3,071 -- ------ ----- TOTAL DUE TO AFFILIATES..................................... 28,446 2,737 ====== =====
14 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For the year ended December 31, 2001 and for the period of October, 24 (Inception date) to December 31, 2000, the transactions with related parties were as follows:
2001 2000 (365 DAYS) (69 DAYS) ---------- --------- FREIGHT REVENUES Parfina SA................................................ 1,777 266 Oceanpar SA............................................... 1,470 199 Ultrapetrol SA............................................ 449 30 ACBLH..................................................... -- 145 Oceanmarine............................................... 331 -- ------ ----- Total............................................. 4,027 640 ------ ----- MANAGEMENT FEE REVENUES ACBLH..................................................... 7,709 1,457 UP Shipping (Bahamas) and its wholly owned subsidiaries... 913 173 Princely International Finance Corp. and its wholly owned subsidiaries........................................... 6,433 -- Ultrapetrol S.A. ......................................... -- 317 ------ ----- Total............................................. 15,055(1) 1,947 ------ ----- Total revenues from related parties............... 19,082 2,587 ====== ===== VOYAGES EXPENSES FROM RELATED PARTIES ACBLH..................................................... 11,539 2,089 Oceanpar S.A. ............................................ 107 329 UP Shipping (Bahamas) and its wholly owned subsidiaries... 1,432 224 Ultrapetrol S.A. ......................................... 154 134 Parfina S.A. ............................................. 800 168 Lousiana Dock............................................. 355 -- Oceanmarine S.A. ......................................... 318 -- Princely International France Corp. and its wholly owned subsidiaries........................................... 10,920 -- ------ ----- Total............................................. 25,625(2) 2,944 ====== ===== LOANS RECEIVED FROM RELATED PARTIES Ultrapetrol (Bahamas) Ltd................................. 1,721 -- ACBLH..................................................... 1,950 -- ------ ----- Total............................................. 3,671 -- ====== ===== LOANS GRANTED TO RELATED PARTIES OTS....................................................... 71 -- ------ ----- Total............................................. 71 -- ====== ===== PROPERTY AND EQUIPMENT ACQUISITIONS FROM RELATED PARTIES ACBL Hidrovias Ltd. ...................................... 790 -- ------ ----- Total............................................. 790 -- ====== =====
15 UABL LIMITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - --------------- (1) Corresponds to the management compensation for crew, maintenance and operation of certain vessels according to the terms of the Ship Management Agreements dated as of October 24, 2000, between Lonehort S.A., ACBLH and Ultrapetrol Bahamas Ltd. (2) Includes 22,492 corresponding to the hire of certain vessels according to the Charter Party Agreement dated as of October 24, 2000. 8. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION The Company's operations are comprise solely of river transportation services in South America. For such reason, as of December 31, 2001 and 2000, no business or geographic segment information is disclosed. 9. PURCHASE OF BARGES AND RESTRICTED ASSETS In November 2001, the Company acquired, through its Paraguayan subsidiary named ACBL del Paraguay from Transamerica Ltd. twenty-four dry-cargo barges with Paraguayan flag registered under the names AF 37 through AF 60 with a gross tonnage of 1,500 tons each. The barges were built in 1998 and 1999. Together with the barges the Company also acquired a tugboat called Espiritu Paraguayo. The tugboat has Paraguayan flag, 5400 HP and was built in 1999. The transaction was closed in the total amount of $11,100 payable as follows: a down payment of $3,100 and $8,000 with a Transamerica Ltd. loan repayable in 60 monthly installments of $161, which include interest at a 7.94% annual rate. The transaction was secured with a mortgage for the benefit of Transamerica Ltd. covering the full value of the assets acquired. ACBL del Paraguay and UABL Limited committed, among other things, to preserve its corporate existence, to respect all the laws and applicable regulations, to maintain and preserve all its properties, not to enter into any transaction of merger, consolidation or liquidation, not to change the terms and conditions of the vessels' management, not to dispose of a significant part of it assets or business, not to assume any debt, excluding those related with the ordinary course of business, to be responsible for the management and operation of the vessels and to limit the distribution of dividends in the event of default. In December 2001, the Company acquired, through its Paraguayan subsidiary named UABL Paraguay, from Citibank N.A. Paraguay seven dry-cargo barges with Paraguayan flag registered under the name CMI 21/CMI27 with a gross tonnage of 1,500 tons each. The barges were built in 1997 and 1998. The transaction was closed in the total amount of $2,100, payable in 17 semiannual installments. The first installment is payable in December 2002. Interest accrues at LIBOR (London Interbank Offered Rate) plus 2.75 bp. This transaction was secured with a mortgage for the benefit of Citibank N.A. Paraguay on the assets acquired and on barges NP 1501 through 1507 owned by UABL Paraguay S.A. as a credit enhancement. 10. MAJOR CUSTOMERS Revenues from three customers of the Company represented approximately $6,433, $7,709 and $10,304, respectively, of UABL's consolidated revenues for the year ended December 31, 2001. 16 EX-99.5 7 y59743ex99-5.txt AUDITED FINANCIAL STATEMENTS Exhibit 99.5 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ------ Report of Independent Accountants 1 Consolidated Statements of Financial Position as of December 31, 2001 and 2000 2 Consolidated Statements of Income for the years ended December 31, 2001 and 2000 3 Consolidated Statements Of Changes In Members' Equity and Comprehensive Income for the years ended December 31, 2001 and 2000 4 Consolidated Statements of Cash Flows for the years ended December 31, 2001 and 2000 5 Notes To Consolidated Financial Statements December 31, 2001 And 2000 6-16
REPORT OF INDEPENDENT ACCOUNTANTS To the Members of Global Materials Services LLC (formerly Mid-South Terminal Company) In our opinion, based on our audits and the report of other auditors, the accompanying consolidated statements of financial position and the related consolidated statements of income, changes in members' equity and comprehensive income, and cash flows present fairly, in all material respects, the financial position of Global Materials Services LLC (the Company) and its subsidiaries at December 31, 2001 and December 31, 2000, and the results of their operations and their cash flows for the years then ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Arrow Terminals BV, Vlissingen (Arrow BV), a wholly-owned subsidiary, which statements reflect total assets of 1 percent and 8 percent of the related consolidated totals as of December 31, 2001 and December 31, 2000, and total revenues of 7 percent and 6 percent of the related consolidated totals for the years then ended. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Arrow BV, is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. PRICEWATERHOUSECOOPERS LLP Memphis, Tennessee February 13, 2002 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2001 AND 2000
2001 2000 ----------------- ------------------ ASSETS Current assets: Cash and cash equivalents $ 820,661 $ 634,168 Accounts receivable, net of allowance for doubtful accounts of $328,000 in 2001 and $175,000 in 2000 5,987,424 5,799,259 Other current assets 2,648,110 2,607,131 Deferred income taxes 165,782 79,404 Due from affiliate 524,487 - ----------------- ------------------ Total current assets 10,146,464 9,119,962 Property and equipment, net 38,197,956 32,393,540 Other assets: Investment in joint ventures 598,920 373,119 Favorable leaseholds, net 3,369,363 3,499,611 Goodwill, net 24,970,170 25,919,743 Deferred financing costs and other, net 589,403 572,571 ----------------- ------------------ 29,527,856 30,365,044 ----------------- ------------------ Total assets $ 77,872,276 $ 71,878,546 ================= ================== LIABILITIES AND MEMBERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,600,388 $ 4,377,630 Current portion of capitalized lease obligation 279,069 297,232 Accounts payable 1,434,084 1,282,753 Accrued expenses 2,986,048 2,976,749 Interest rate swap liability - current 769,163 - Due to member 74,818 - Deferred revenue 361,298 500,402 ----------------- ------------------ Total current liabilities 10,504,868 9,434,766 Long-term debt, net of current portion 41,168,251 39,702,671 Capitalized lease obligation, net of current portion 1,615,643 1,679,879 Interest rate swap liability 1,382,440 - Deferred compensation 60,000 - Deferred revenue, net of current portion 210,648 404,250 Deferred income taxes 1,922,882 2,004,930 ----------------- ------------------ Total liabilities 56,864,732 53,226,496 Commitments and Contingencies (Note 9) Members' equity 21,007,544 18,652,050 ----------------- ------------------ Total liabilities and members' equity $ 77,872,276 $ 71,878,546 ----------------- ------------------
The accompanying notes are an integral part of these consolidated financial statements. 2 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000 ----------------- ------------------ Revenues: Transfer and handling $23,324,975 $19,571,555 Storage and space rental 11,460,598 10,848,500 Materials processing 6,247,815 6,637,117 Equipment rental and contract labor 1,368,064 1,537,721 Other 4,197,460 7,254,874 ----------------- ------------------ Total revenues 46,598,912 45,849,767 ----------------- ------------------ COSTS AND EXPENSES: Cost of sales and services 28,092,517 27,926,010 Selling, general and administrative 6,504,768 5,944,637 Depreciation and amortization 5,331,985 4,730,767 ----------------- ------------------ Total costs and expenses 39,929,270 38,601,414 ----------------- ------------------ Income from operations 6,669,642 7,248,353 ----------------- ------------------ Other income and (expenses): Interest income 27,343 37,204 Interest expense (4,384,325) (4,297,212) Equity in earnings of joint ventures 163,383 198,525 Foreign exchange gain 14,102 30,938 Loss on disposal of equipment (28,764) (20,031) Other 20,523 - ----------------- ------------------ Total other income and (expenses) (4,187,738) (4,050,576) ----------------- ------------------ Income before income taxes 2,481,904 3,197,777 Income taxes 71,118 771,889 ----------------- ------------------ Net Income $ 2,410,786 $ 2,425,888 ================= ==================
The accompanying notes are an integral part of these consolidated financial statements. 3 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
MID-SOUTH AMERICAN Terminal Commercial Company, Terminals-Memphis, 399 Venture LP LLC Partners, Inc. Total ------------ ------------ ------------ ------------ Balance, December 31, 1999 6,817,607 6,817,607 -- 13,635,214 Net income 1,212,944 1,212,944 -- 2,425,888 Currency translation adjustment (204,526) (204,526) -- (409,052) ------------ ------------ ------------ ------------ Total comprehensive income 1,008,418 1,008,418 -- 2,016,836 Contributions from members 1,500,000 1,500,000 -- 3,000,000 ------------ ------------ ------------ ------------ Balance, December 31, 2000 9,326,025 9,326,025 -- 18,652,050 Transition adjustment for adoption of SFAS 133 (294,038) (329,639) (35,601) (659,278) Net income 1,075,211 1,205,393 130,182 2,410,786 Currency translation adjustment (161,234) (180,756) (19,522) (361,512) Net loss on interest rate swaps designated as cash flow hedges, net of tax (639,788) (717,251) (77,463) (1,434,502) ------------ ------------ ------------ ------------ Total comprehensive loss (19,849) (22,253) (2,404) (44,506) Contributions from members -- 1,200,000 1,200,000 2,400,000 ------------ ------------ ------------ ------------ Balance, December 31, 2001 $ 9,306,176 $ 10,503,772 $ 1,197,596 $ 21,007,544 ============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000 -------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,410,786 $ 2,425,888 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,331,985 4,730,767 Provision for bad debts 158,180 99,785 Equity in earnings of joint ventures (163,383) (198,525) Deferred income tax provision (110,180) 276,154 Loss on disposal of equipment 28,764 20,031 Deferred compensation 60,000 - Other operating (20,523) - Changes in: Accounts receivable (385,088) 62,592 Other current assets (52,692) (525,769) Due from affiliate (524,487) - Accounts payable and accrued expenses 170,965 (541,896) Deferred revenue (332,706) (23,529) Due to member 74,818 - -------------- ---------------- Net cash provided by operating activities 6,646,439 6,325,498 -------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (2,969,781) (1,149,846) Proceeds from sales of equipment 85,085 5,225 Investment in joint venture (337,418) - Purchase of terminal assets (7,261,239) - Purchases of businesses, net of cash acquired - (9,007,459) Distributions from joint venture 275,000 200,000 -------------- ---------------- Net cash used in investing activities (10,208,353) (9,952,080) -------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term debt 6,497,317 9,340,394 Principal payments on long-term debt and capital lease obligations (4,699,026) (7,364,757) Loan costs paid (185,000) (145,000) Contributions from members 2,400,000 1,000,000 -------------- ---------------- Net cash (used in) provided by financing activities 4,013,291 2,830,637 -------------- ---------------- Effect of cash rate changes on cash (264,884) (51,086) Increase (decrease) in cash and cash equivalents 186,493 (847,031) Cash and cash equivalents: Beginning of the year 634,168 1,481,199 -------------- ---------------- End of the year $ 820,661 $ 634,168 ============== ================
The accompanying notes are an integral part of these consolidated financial statements. 5 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Global Materials Services LLC (the "Company"), formerly Mid-South Terminal Company, is a Tennessee Limited Liability Company. The purpose of the Company is to own, lease and operate river, rail, truck, transfer and storage facilities. The Company was formed through contributions from Mid-South Terminal Company, L.P. ("MSTC LP") and American Commercial Terminals-Memphis, Inc. ("ACT"). ACT is a wholly owned subsidiary of American Commercial Lines, LLC ("ACL"). On May 18, 2000, the Company purchased substantially all of the operating assets of Hill Marine Enterprises, Inc. (subsequently renamed GMS of Decatur, Inc.) and H&L, Inc. for approximately $11.7 million. The purchase was funded by a $1,137,530 note payable to the former owner and external borrowings. The components of the net assets purchased were as follows: Current assets $ 2,544,834 Property and equipment 1,950,680 Goodwill 9,106,549 Current liabilities (567,036) Other liabilities (734,000) Deferred taxes (626,383) ----------- $11,674,644 ===========
On May 25, 2001, the Company entered into an agreement to purchase substantially of all of the terminals of ACT (subsequently renamed Global American Terminals LLC) from ACL for approximately $8,000,000, including transaction costs. The purchase was funded through a $1,200,000 contribution from ACL, a $1,200,000 contribution by 399 Venture Partners, Inc. for a 5.4% interest in the Company and $5,620,523 in external borrowings. CONSOLIDATION The accompanying consolidated financial statements include the accounts of Global Materials Services LLC and its wholly-owned subsidiaries, River Terminal Properties, L.P., Global American Terminals LLC, GMS of Decatur, Inc., H&L, Inc., Arrow Terminals L.P., Arrow Terminals B.V., Arrow Terminal Holdings, Inc., Tajon Holdings, Inc., Arrow Terminals Canada Company, and Arrow Terminals Canada B.V. All significant intercompany balances and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS Temporary investments with an original maturity of three months or less are treated as cash equivalents and are stated at historical cost, which approximates fair value. 6 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 REVENUE RECOGNITION The Company recognizes revenue for transfer and handling and for material processing activity when the service is complete. The Company recognizes revenue for storage and space rental and for equipment rental and contract labor when it is due from customers. INVESTMENT IN JOINT VENTURES The Company and Builders Transportation Company ("Builders") operate a joint venture that provides local trucking services, Mid-South Port Transportation, LLC ("MSPT"). Profits and losses are allocated to the Company and Builders in proportion to their respective ownership interests (each partner holds a 50% interest). During 2001, the Company entered into a joint venture that provided them a 33% ownership interest in Global Materials Services Venezuela C.A. ("GMSV"). GMSV is still in the start up phase and has not begun operations. The Company accounts for these investments using the equity method of accounting. FAVORABLE LEASEHOLDS Assets contributed or acquired subject to favorable operating leases are amortized over the life of related lease agreements. Accumulated amortization was approximately $857,479 and $727,000 at December 31, 2001 and 2000, respectively. GOODWILL Goodwill is the excess of the purchase price over the fair value of assets acquired through acquisitions. Goodwill is amortized on a straight-line basis over 30 years. Accumulated amortization totaled approximately $2,344,000 and $1,358,000 at December 31, 2001 and 2000, respectively. IMPAIRMENT Long-lived assets, including goodwill, associated with assets acquired in a purchase business combination, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. DEFERRED FINANCING COSTS Costs incurred in obtaining financing are deferred and amortized over the life of the related debt. Accumulated amortization was approximately $409,000 and $262,000 at December 31, 2001 and 2000, respectively. 7 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 DEFERRED COMPENSATION Effective January 1, 2000, the Company's Members approved a long-term incentive compensation plan (the "Plan"). The Plan provides for incentive compensation equal to 5.0% of the increase in enterprise value, as defined in the Plan, to be allocated to key executives of the Company at the percentages stated in the Plan. Vesting occurs over five years, with 33.3% of the benefit accruing to participants at the end of each of years 3, 4, and 5. Participants will receive payments of their vested benefit in seven equal annual installments beginning May 1 following the year of the participant's termination of employment with the Company. Interest will accrue on the unpaid balances at the rate stated in the Plan to be paid ten days following each quarter. INCOME TAXES Certain of the Company's subsidiaries are corporations and therefore are subject to income taxes. Deferred income taxes are recorded to reflect the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. FINANCIAL INSTRUMENTS The Company has certain financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable. The carrying amounts of these financial instruments approximate their fair value. CONCENTRATION OF CREDIT RISK Accounts receivable as of December 31, 2001 and 2000 are primarily (74% and 84%) concentrated with customers in the metals industry. Credit is extended based upon an evaluation of the customer's financial condition, and generally, collateral is not required; however, the Company maintains a warehousing lien on most customer inventory. The Company recognized revenue of approximately $4,621,000 and $4,591,000 in 2001 and 2000, respectively, on services provided to one customer. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. 8 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 COMPREHENSIVE INCOME Accumulated other comprehensive loss consists of the following at December 31, 2001 and 2000:
2001 2000 ---------------- --------------- Transition adjustment for adoption of SFAS 133 $ (659,278) $ - Cumulative translation adjustment (1,444,997) (1,083,485) Net loss on interest rate swaps designated as cash flows hedges, net of tax (1,434,502) - ---------------- --------------- $ (3,538,777) $ (1,083,485) ================ ===============
RECLASSIFICATIONS Certain reclassifications have been made to the 2000 financial statements to conform to the 2001 presentation with no effect on previously reported net income, assets, liabilities or members' equity. NOTE 2 - PROPERTY AND EQUIPMENT Property and equipment are stated at historical cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives. Leasehold improvements are depreciated over the lesser of the lease term or estimated useful lives. Normal repairs and maintenance costs are expensed; major expenditures which extend the estimated useful lives of the assets are capitalized. Property and equipment consisted of the following at December 31, 2001 and 2000:
USEFUL LIVES 2001 2000 ------------------- ----------------- ----------------- Land $ 4,269,779 $ 2,718,599 Buildings 10-40 years 21,441,053 19,121,918 Machinery and equipment 1-20 years 18,395,629 15,148,376 Leasehold improvements 7-20 years 4,522,900 3,698,599 Furniture, fixtures and automobiles 5 years 1,994,466 1,109,405 Construction in progress 1,325,461 550,446 ----------------- ----------------- 51,949,288 42,347,343 Less accumulated depreciation (13,751,332) (9,953,803) ----------------- ----------------- Property and equipment, net $ 38,197,956 $32,393,540 ================= =================
9 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 and 2000 - -------------------------------------------------------------------------------- NOTE 3 -- DEBT Long-term debt consisted of the following as of December 31, 2001 and 2000:
2001 2000 ----------------- ------------------ Bonds payable: Series 1990A and 1990B Illinois Development Finance Authority Adjustable Rate Industrial Development Revenue Bonds, interest payable quarterly at the BMA municipal swap index (1.61% and 4.84% at December 31, 2001 and 2000, respectively), principal due January 1, 2010, collateralized by first mortgage on assets of the Chicago operation and third mortgage on assets of the Pennsylvania operation. $ 5,325,000 $ 5,325,000 Note payable to Warehouse Plus: Note bears interest at 8.5%, interest and principal amounts due monthly in the amount of $2,281 commencing January 1, 2000 and continuing to maturity at December 1, 2010, collateralized by a mortgage on land. 157,735 171,082 Notes payable to bank: Interest due monthly at LIBOR plus a percentage ranging from 2.0% to 3.25% based on the Company's performance (weighted average interest of 7.68% and 9.21% during 2001 and 2000, respectively) payable quarterly in escalating amounts until maturity at May 1, 2005, collateralized by all assets of the Company. 38,052,375 36,702,375 Revolving Credit Facility: $6,000,000 revolving line of credit, interest on used and unused portion due monthly at the prime rate plus 1.25% (6.09% and 10.75% at December 31, 2001 and 2000, respectively), continuing until May 1, 1,397,066 744,314 2005, collateralized by all assets of the Company. Note payable to third-party: Interest due monthly at 8.5%, principal of $114,284 payable annually beginning May 18, 2001 and escalating $114,284 per year with all remaining principal due at maturity on May 18, 2004. 836,463 1,137,530 ----------------- ------------------ Total long-term debt 45,768,639 44,080,301 Less current portion (4,600,388) (4,377,630) ----------------- ------------------ Total long-term debt, net of current portion $ 41,168,251 $ 39,702,671 ================= ==================
10 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 The scheduled annual maturities of bonds and notes payable subsequent to 2001 are as follows:
YEAR AMOUNT - ---- ------------------ 2002 $ 4,600,388 2003 5,094,603 2004 5,589,014 2005 25,068,169 2006 20,384 Thereafter 5,396,081 ------------------ $45,768,639 ------------------
The notes payable to the bank cause the Company to be subject to certain financial covenants, the most restrictive of which requires the Company to maintain minimum levels of tangible net worth and certain financial ratios. The Company was in compliance with all debt covenants at December 31, 2001. NOTE 4 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION During 2001, 2000 and 1999, the Company paid $4,492,650, $4,354,400 and $2,991,000 in interest expense, respectively. During 2001, the Company paid $152,950 for income taxes. During 2000, the Company paid $1,490,000 for income taxes relating to the 1999 and 2000 tax years. These tax payments were associated with taxes payable on the Hill Marine Enterprises, Inc. acquisition, taxable income at Tajon Holdings, Inc., Arrow Terminals Holdings, Inc., Arrow Terminals L.P., Global Materials Services LLC, Arrow Terminals Canada Company, and Arrow Terminals B.V. Also, during 2000, the Company charged the deferred compensation balance of $240,000 against goodwill related to the Arrow acquisition since these amounts are to be paid out of an escrow account and the Company converted $2,000,000 of notes payable to members' equity. NOTE 5 - OFF-BALANCE SHEET FINANCIAL INSTRUMENTS RISKS Credit risk represents the maximum potential loss due to possible non-performance by counterparties under the terms of the contracts. The Company manages credit risk by entering into financial instrument transactions with approved counterparties to limit potential exposure. Credit risk may occur when there is a gain in the fair value of the financial instrument and the counterparty fails to perform according to the terms of the contract and/or when the collateral proves to be of insufficient value. Market risk is the possibility that future changes in markets or prices might decrease the value of the Company's position. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on and off-balance sheet hedges or positions are aggregated, and the resulting net positions are identified. 11 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 INTEREST RATE SWAP AGREEMENTS The Company has certain interest rate swap agreements, which are hedge instruments accounted for under Statement of Financial Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," adopted by the Company on January 1, 2001. SFAS No. 133, as amended, requires the recognition of all derivative instruments on the balance sheet at fair value. The Company's interest rate swap agreements have been designated as cash-flow hedges used to convert a portion of the Company's variable-rate bank debt to fixed rates and thereby minimize earnings fluctuations caused by interest rate volatility. Changes in fair vale of interest-rate swaps are recorded in other comprehensive loss, until earnings are affected by the variability of actual cash flows. The Company has four interest rate swaps with a total notional amount of $35,625,869 at December 31, 2001. As of December 31, 2001, deferred losses on interest rate swaps, net of $57,823 in deferred taxes, totaled $2,093,780 and were included in other comprehensive loss. At the end of 2001, amounts to be included in the statement of income within the next twelve months associated with the provisions of SFAS No. 133 are not expected to be material. NOTE 6 - CAPITALIZED LEASE OBLIGATION The Company leases its Memphis port facility under an agreement accounted for as a capital lease. The lease is for 24 years and expires in 2017. Future minimum capital lease payments for this lease and six equipment leases as of December 31, 2001 are as follows:
YEAR AMOUNT - ---- ---------------- 2002 $ 442,281 2003 388,306 2004 255,164 2005 197,312 2006 170,822 Thereafter 1,830,581 ---------------- 3,284,466 Less amounts representing interest (1,389,754) ---------------- Present value of minimum capital lease payments 1,894,712 Less current portion of capital lease obligation (279,069) ---------------- $1,615,643 ----------------
12 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 7 - INCOME TAXES The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes" for the Company's subsidiaries that are corporations. SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the Company's income tax expense (benefit) are as follows:
2001 2000 ---------------- -------------- CURRENTLY PAYABLE: Federal $ (298,692) $101,330 State 165,125 157,792 Foreign 315,288 172,392 ---------------- -------------- 181,721 431,514 ---------------- -------------- DEFERRED: Federal (98,093) 201,930 State (12,510) 138,445 ---------------- -------------- (110,603) $ 340,375 ---------------- -------------- Total $ 71,118 $771,889 ---------------- --------------
Income tax expense (benefit) computed at the federal statutory rate reconciled to income tax expense (benefit) is as follows:
2001 2000 ---------------- ---------------- Tax at federal statutory rate $ - $ - State income taxes, net 165,125 157,792 Foreign operations, net 315,288 172,392 Income tax expense (benefit) for domestic corporate subsidiaries (409,295) 441,705 ---------------- ---------------- $ 71,118 $ 771,889 ---------------- ----------------
The significant components of the Company's deferred tax asset and liability are as follows:
2001 2000 ---------------- ---------------- Accounts receivable $ 129,395 $ 48,396 Other current assets (165,645) (193,017) Accrued expenses 202,032 224,025 ---------------- ---------------- Current deferred tax asset 165,782 79,404 ---------------- ---------------- Property and equipment 2,088,479 2,004,930 Goodwill 87,234 - Minimum tax credit carryforward (99,332) - Other comprehensive loss (57,823) - Net operating loss carryforward (95,676) - ---------------- ---------------- Noncurrent deferred tax liability 1,922,882 2,004,930 ---------------- ---------------- Net deferred tax (liability) asset $ (1,757,100) $ (1,925,526) ---------------- ----------------
13 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 At December 31, 2001, the Company has $256,204 in net operating loss carryforwards that expire in various amounts through 2021. NOTE 8 - EMPLOYEE BENEFIT PLANS The Company has two defined contribution plans, the Mid-South Terminal Company 401(k) Plan through (the "Rivterm Plan") and the Arrow Terminals 401(k) Plan (the "Arrow Plan"). Under the Rivterm Plan, all Global Material Services LLC employees are eligible to participate in the plan on the first day of each plan quarter following the completion of one year of service. Participants may contribute up to 15% of annual pre-tax compensation. Effective January 1, 2001, the Company matched 50% of up to the first 6% of contributed compensation. In 2000, the Company matched 50% of each participant's contribution up to the first 4% of contributed compensation. The Company also makes additional discretionary contributions to the plan. Participants vest in Company contributions ratably over four years of service. The Company made contributions to the Plan of approximately $59,000 and $85,000 in 2001 and 2000, respectively. The Arrow Plan covers all Arrow Terminals L.P. full-time employees with one or more years of service, who work more than one thousand hours per year. Contributions are made at the rate of $55 per month for each full-time employee. Vesting begins at 20% after one year and increases by 20% each succeeding year until full vesting occurs. The Company made contributions to the Arrow Plan of approximately $67,000 and $71,000 in 2001 and 2000, respectively. NOTE 9 - COMMITMENTS AND CONTINGENCIES COMMITMENTS The Company leases four port facilities in Arkansas under noncancellable operating lease agreements. The lease terms range from 15 to 42 years. The leases require contingent rental payments based on defined rates per ton of commodity handled. The Company also leases vehicles, equipment, buildings and land under operating leases with remaining noncancellable lease terms in excess of one year at December 31, 2001. Future minimum payments under these leases and the Company's Arkansas port facility leases are as follows:
YEAR AMOUNT - ---- ------ 2002 $ 1,723,738 2003 1,427,003 2004 1,278,169 2005 947,918 2006 879,497 Thereafter 6,237,553 ------------------ $12,493,878 ------------------
The Company recorded approximately $1,736,000 and $1,423,000 of rent expense under operating leases during 2001 and 2000, respectively. 14 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 During October of 1998, Arrow entered into a five-year agreement with a customer to provide services in connection with the unloading of iron ore pellets at the customer's facility. As part of Arrow's obligation under the terms of the agreement, Arrow agreed to construct and install at its own cost and expense the necessary machinery and equipment to perform the agreed upon unloading activities. Additionally, Arrow agreed to provide certain managerial and supervisory services in connection with the operation of the equipment. In return for these services, Arrow received an advanced payment in the amount of $990,000, which was recorded as deferred revenue and is being amortized into income over the life of the agreement. Arrow has capitalized approximately $2,655,000 of costs associated with the construction of the machinery and equipment discussed above. CONTINGENCIES The Company is subject to certain claims, assessments and litigation arising in the normal course of business. Management believes that the ultimate outcome of all such matters will not have a materially adverse effect on the Company's consolidated financial position or consolidated results of operations. NOTE 10 - RELATED PARTY TRANSACTIONS Rivergate Terminals Company, L.P. is owned by the partners of MSTC LP. The Company provides administrative services to Rivergate Terminal Company, L.P., for which it receives a management fee. Fees received from Rivergate approximated $30,000 and $32,500 in 2001 and 2000, respectively. In connection with the MSPT joint venture, the Company leases assets and provides administrative services to MSPT, for which the Company is reimbursed the cost of these services. During 2001 and 2000, the Company received approximately $24,000 and $28,000, respectively, for services provided to MSPT by the Company. At December 31, 2001, the Company has a receivable from the GMSV joint venture totaling $524,487 that relates to expenditures for startup costs. The compensation and responsibilities of the Company's president/chief executive officer and executive vice president/chief financial officer are shared between the Company and another company in which certain owners of MSTC LP have an interest. These compensation expenses are charged to the Company at actual cost. The Company has a relationship with one of its owners whereby the Company shares costs of certain software licensing and maintenance. The Company makes payments for these costs and subsequently bills those owners for their portion of such fees. At December 31, 2001 and 2000, approximately $13,000 and $48,000, respectively, in receivables were outstanding at year-end as a result of this relationship. At December 31, 2001, the Company has a liability of approximately $75,000 to ACL. ACL is the parent company of ACT. 15 GLOBAL MATERIALS SERVICES LLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 AND 2000 NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs my be necessary. The Company will apply the provisions of SFAS No. 141 to any future business combinations. In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 changes the accounting for goodwill and other indefinite-lived intangible assets from an amortization method to an impairment-only approach. Amortization of goodwill and other indefinite-lived intangible assets will cease upon adoption of this statement. Management of the Company is currently analyzing the impact of SFAS No. 142 and cannot estimate the impact of adoption at this time. In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets effective for years beginning after December 15, 2001. This Statement supersedes SFAS 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed of, but retains the fundamental provision of SFAS 121 for recognition and measurement of the impairment of long-lived assets to be held and used and measurement of long-lived assets to be held for sale. The statement requires that whenever events or changes in circumstances indicate that a long-lived asset's carrying value may not be recoverable, the asset should be tested for recoverability. The statement also requires that a long-lived asset classified as held for sale should be carried at the lower of its carrying value or fair value, less cost to sell. Management of the Company is currently analyzing the impact of SFAS No. 121 and cannot estimate the impact of adoption at this time. 16 EX-99.6 8 y59743ex99-6.txt UNAUDITED FINANCIAL STATEMENTS Exhibit 99.6 INDEX TO UNAUDITED VESSEL LEASING LLC FINANCIAL STATEMENTS Page ---- Statement of Cash Flows for the year ended December 28, 2001 1 Statement of Operations for the year ended December 28, 2001 2 Statement of Financial Position as of December 28, 2001 3 Notes to Vessel Leasing LLC Financial Statements 4-5 VESSEL LEASING LLC STATEMENT OF CASH FLOWS DECEMBER 28, 2001 (DOLLARS IN THOUSANDS) (UNAUDITED) OPERATING ACTIVITIES Net Loss $ (76) Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 773 Other Operating Activities 14 Unearned Revenues 2,830 Accrued Interest 161 -------- Net Cash Provided by Operating Activities 3,702 INVESTING ACTIVITIES Property Additions (47,757) FINANCING ACTIVITIES Long Term Debt Issued 43,251 Common Stock Issued 5,236 Preferred Stock 4,190 Long Term Debt Repaid (671) Debt Issuance Costs (164) Prepaid Guaranty Fee (1,974) Restricted Cash (5,801) -------- Net Cash Provided by Financing Activities 44,067 Net Increase in Cash and Cash Equivalents 13 Cash and Cash equivalents at Beginning of Period -- -------- Cash and Cash equivalents at End of Period $ 13 ======== Supplemental disclosure of cash flow information: Cash paid for interest 907 Non-cash activities: Capital Leases 3,924
The accompanying notes are an integral part of the financial statements. 1 VESSEL LEASING LLC STATEMENT OF OPERATIONS FISCAL YEAR ENDED DECEMBER 28, 2001 (DOLLARS IN THOUSANDS) (UNAUDITED) OPERATING REVENUE $ 1,705 OPERATING EXPENSE Depreciation and Amortization 731 Other 5 ------- 736 ------- OPERATING INCOME 969 OTHER EXPENSE (INCOME) Interest Income (64) Interest Expense 1,109 ------- 1,045 ------- NET LOSS $ (76) =======
The accompanying notes are an integral part of the financial statements. 2 VESSEL LEASING LLC STATEMENT OF FINANCIAL POSITION DECEMBER 28, 2001 (DOLLARS IN THOUSANDS) (UNAUDITED) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 12 Restricted Cash 5,801 Capital Lease Receivable - Short Term 86 -------- Total Current Assets 5,899 PROPERTIES-Net 43,101 CAPITAL LEASE RECEIVABLE - Long Term 3,825 OTHER ASSETS 2,096 -------- Total Assets $ 54,921 ======== LIABILITIES CURRENT LIABILITIES Current Portion of Long-Term Debt $ 2,885 Accrued Interest Payable - MARAD 161 Unearned Charter Revenue - Short Term 2,517 -------- Total Current Liabilities 5,563 LONG-TERM DEBT 39,695 UNEARNED CHARTER REVENUE - Long Term 313 -------- Total Liabilities 45,571 MEMBERS' EQUITY Members' Interest 5,236 Preferred Members' Interest 4,190 Retained Earnings (76) -------- Total Members' Equity 9,350 -------- Total Liabilities and Members' Equity $ 54,921 ========
The accompanying notes are an integral part of the financial statements. 3 VESSEL LEASING LLC NOTES TO FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The operations of Vessel Leasing LLC ("Vessel Leasing") began in 2001 and include the charter of equipment involved in barge transportation along inland waterways. All of Vessel Leasing's equipment is chartered to American Commercial Barge Line LLC ("ACBL"), a subsidiary of American Commercial Lines LLC ("ACL"). Vessel Leasing is a limited liability company owned 50% by Vectura Group, Inc. ("Vectura") and 50% by ACL. FISCAL YEAR Vessel Leasing follows an annual fiscal reporting period, which ends on the last Friday in December. Financial statements are for the period ending December 28, 2001. CASH AND CASH EQUIVALENTS Cash on hand is restricted by amounts held in a depository account to repay one year of principal and interest on debt. The amount currently restricted is $5,801. CAPITAL LEASE RECEIVABLE In December, 2001 Vessel Leasing entered into a $3,924 capital lease agreement with ACBL which will expire in 2016. In 2001, a payment of $13 was made. Future payments are $432 in 2002, $586 in 2003, $568 in 2004, $455 in 2005, $455 in 2006 and $5,087 thereafter. PROPERTIES Properties, at cost, consist of the following: Barges $43,832 Less Accumulated Depreciation 731 --------- $43,101 =========
Provisions for depreciation of properties are based on the estimated useful lives computed on the straight-line method. Barges are depreciated over 25 years. DEBT AMORTIZATION Vessel Leasing amortizes debt costs over the term of the debt. Amortization expense includes underwriting and guarantee fees. Amortization expense for 2001 was $42. REVENUE RECOGNITION Revenue from charter of barges is recognized proportionately as it is earned. NOTE 2. DEBT 4 Debt consists of the following: Title XI Series A $19,424 Title XI Series B 7,388 Title XI Series C 15,768 ------------- 42,580 Current portion of long term debt 2,885 ------------- Non-current portion long-term debt $ 39,695 =============
Vessel Leasing is financed by the United States of America Secretary of Transportation Maritime Administration ("MARAD"). Interest is fixed at 6.14% on the Series A loan and 5.65% on the Series B loan. Interest on the Series C loan varies with the LIBOR rate plus 0.4% which was 2.39% at December 28, 2001. Principal and interest payments are due semi-annually on the anniversary date of the loan. NOTE 3. RELATED PARTIES Vessel Leasing is a limited liability company owned 50% by ACL and 50% by Vectura. Each partner contributed $2,618 in common stock during 2001. ACL also contributed $4,190 in preferred stock in 2001. All of Vessel Leasing's 2001 revenue of $1,705 was earned from ACBL, a subsidiary of ACL. 5 EX-99.7 9 y59743ex99-7.txt CONSENT OF KPMG LLP Exhibit 99.7 INDEPENDENT AUDITORS' CONSENT The Board of Directors Danielson Holding Corporation: We consent to the incorporation by reference in the Prospectus Supplement to Prospectus dated May 2, 2001 on Form S-3 of Danielson Holding Corporation of our report dated March 5, 2002, expect for note 15, which is as of March 15, 2002, with respect to the consolidated balance sheets of Danielson Holding Corporation as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2001, and all related financial statement schedules, which report appears in the December 31, 2001, annual report on Form 10-K of Danielson Holding Corporation. We also consent to the reference to our firm under the heading "Experts" in the Prospectus Supplement to Prospectus dated May 2, 2001. KPMG LLP New York, New York April 18, 2002 EX-99.8 10 y59743ex99-8.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 99.8 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-39144) of Danielson Holding Corporation ("Danielson") of our report dated April 19, 2002 relating to the consolidated financial statements of American Commercial Lines Holdings LLC and Subsidiaries, which appears in the Current Report on Form 8-K of Danielson dated April 19, 2002. PricewaterhouseCoopers LLP Louisville, Kentucky April 19, 2002 EX-99.9 11 y59743ex99-9.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 99.9 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-39144) of Danielson Holding Corporation ("Danielson") of our report dated February 13, 2002 relating to the consolidated financial statements of Global Materials Services LLC and Subsidiaries, which appears in the Current Report on Form 8-K of Danielson dated April 19, 2002. PricewaterhouseCoopers LLP Memphis, Tennessee April 19, 2002 EX-99.10 12 y59743ex99-10.txt CONSENT OF PISTRELLI, DIAZ Y ASOCIADOS Exhibit 99.10 [ANDERSEN LOGO] CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants we hereby consent to use of our report of UABL Limited dated March 26, 2002 included in or made part of the Form 8-K of Danielson Holding Corporation. PISTRELLI, DIAZ Y ASOCIADOS Member of Andersen By: /s/ Mariana Filas ---------------------------------- Name: Mariana Filas Title: Partner Buenos Aires, Argentina Date: 19/4/02 -----END PRIVACY-ENHANCED MESSAGE-----