SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________.
Commission file number 1-6732
DANIELSON HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-6021257
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1701 EAST MARKET STREET
JEFFERSONVILLE, INDIANA 47130
(Address of Principal Executive Offices) (Zip Code)
(812) 288-0100
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 2002
_____ ____________________________
Common Stock, $0.10 par value 30,817,297 shares
DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2002 JUNE 30, 2001
------------------------------- -------------------------------
OPERATING REVENUES
Marine Services Revenue $ 60,937 $ -- $ 60,937 $ --
Insurance Premiums Earned 17,550 20,254 36,588 39,396
Net Investment Income Applicable to Insurance Operations 5,429 2,254 6,915 4,943
Other Income Applicable to Insurance Operations 170 334 366 652
------------------------------- -------------------------------
TOTAL OPERATING REVENUES 84,086 22,842 104,806 44,991
OPERATING EXPENSES
MARINE SERVICES
Materials, Supplies and Other 24,728 -- 24,728 --
Restructuring Costs 134 -- 134 --
Rent 4,929 -- 4,929 --
Labor and Fringe Benefits 13,664 -- 13,664 --
Fuel 6,978 -- 6,978 --
Depreciation and Amortization 6,132 -- 6,132 --
Gain on Property Dispositions (89) -- (89) --
Taxes, other than income taxes 2,349 -- 2,349 --
------------------------------- -------------------------------
58,825 -- 58,825 --
INSURANCE SERVICES
Insurance Losses and Loss Adjustment Expenses 16,667 21,298 31,399 36,341
Policyholder Dividends -- 41 -- 83
Policy Acquisition Expenses 4,305 5,657 8,363 9,797
General and Administrative Expenses 1,307 1,811 2,788 3,696
------------------------------- -------------------------------
22,279 28,807 42,550 49,917
Parent Company Administrative Expenses 1,513 572 2,058 1,144
------------------------------- -------------------------------
TOTAL OPERATING EXPENSES 82,617 29,379 103,433 51,061
------------------------------- -------------------------------
OPERATING INCOME (LOSS) 1,469 (6,537) 1,373 (6,070)
OTHER EXPENSE (INCOME)
Interest Expense 4,989 -- 4,989 --
Parent Company Investment Income Related to
ACL Debt (8,402) -- (8,402) --
Other, Net 396 (1,015) 337 (1,471)
------------------------------- -------------------------------
Net Other Expense (Income) (3,017) (1,015) (3,076) (1,471)
------------------------------- -------------------------------
INCOME (LOSS) BEFORE TAXES 4,486 (5,522) 4,449 (4,599)
PROVISION FOR INCOME TAXES 145 57 162 93
------------------------------- -------------------------------
NET INCOME (LOSS) $ 4,341 $ (5,579) $ 4,287 $ (4,692)
=============================== ===============================
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
BASIC $ 0.18 $ (0.29) $ 0.20 $ (0.24)
=============================== ===============================
DILUTED $ 0.18 $ (0.29) $ 0.19 $ (0.24)
=============================== ===============================
The accompanying notes are an integral part of the consolidated financial
statements.
1
DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS)
JUNE 30, 2002 DECEMBER 31, 2001
---------------------------------
ASSETS (UNAUDITED)
CURRENT ASSETS
Cash and Cash Equivalents $ 26,457 $ 3,070
Restricted Cash 5,877 --
Accounts Receivable 56,843 --
Materials and Supplies 40,932 --
Investments 6,624 26,865
Other Current Assets 29,636 67
---------------------------------
Total Current Assets 166,369 30,002
PROPERTIES - Net 674,619 131
PENSION ASSETS 21,511 --
OTHER ASSETS 94,608 305
INSURANCE SERVICES ASSETS:
Cash and Cash Equivalents 15,295 14,794
Investments 101,399 121,647
Other Assets 37,601 41,992
---------------------------------
Total Insurance Services Assets 154,295 178,433
---------------------------------
Total Assets $ 1,111,402 $208,871
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 40,839 $ --
Accrued Payroll and Fringe Benefits 14,206 --
Deferred Revenue 16,435 --
Accrued Claims and Insurance Premiums 26,926 --
Accrued Interest 6,218 --
Short-Term Debt 37,721 --
Current Portion of Long-Term Debt 33,954 --
Other Current Liabilities 40,065 2,569
---------------------------------
Total Current Liabilities 216,364 2,569
LONG-TERM DEBT 589,251
OTHER LONG TERM LIABILITIES 52,698 --
INSURANCE SERVICES LIABILITIES:
Unpaid Losses and Loss Adjustment Expenses 100,617 105,745
Unearned Premiums and Reinsurance Premiums Payable 17,643 21,880
Other Insurance Services Liabilities 4,563 4,214
---------------------------------
Total Insurance Services Liabilities 122,823 131,839
---------------------------------
Total Liabilities 981,136 134,408
---------------------------------
STOCKHOLDERS' EQUITY:
Preferred Stock ($0.10 par value; authorized 10,000,000 shares;
none issued and outstanding) -- --
Common Stock ($.10 par value; authorized 150,000,000 shares;
issued 30,828,093 shares and 19,516,694; outstanding
30,817,297 shares and 19,505,952 shares) 3,083 1,952
Additional Paid-in Capital 116,494 63,115
Unearned Compensation (1,648) --
Accumulated Other Comprehensive Loss 4,370 5,716
Retained Earnings 8,033 3,746
Treasury Stock (Cost of 10,796 shares) (66) (66)
---------------------------------
Total Stockholders' Equity 130,266 74,463
---------------------------------
Total Liabilities and Stockholders' Equity $ 1,111,402 $208,871
=================================
The accompanying notes are an integral part of the consolidated financial
statements.
2
DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ACCUMULATED
ADDITIONAL OTHER
COMMON STOCK PAID-IN UNEARNED RETAINED COMPREHENSIVE TREASURY STOCK
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS INCOME (LOSS) SHARES AMOUNT TOTAL
------ ------ ---------- ------------ -------- ------------- ------ ------ -----
Balance at December 31, 2001 19,516,694 $1,952 $ 63,115 $ - $3,746 $ 5,716 10,742 $(66) $74,463
Exercise of Options to Purchase
Common Stock 264,582 26 1,061 1,087
Exercise of Warrants to Purchase
Common Stock 2,000,558 200 9,300 9,500
Common Stock Issued Pursuant to Rights
Offering, Net of Expenses 8,705,219 871 41,357 42,228
Restricted Common Stock Issued to ACL
Management 339,040 34 1,661 (1,695) -
Amortization of Unearned Compensation 47 47
Treasury Stock Repurchased During
the Period 54 -
Comprehensive Income:
Net Income 4,287 4,287
Net Unrealized Loss on Available
for Sale Securities (1,346) (1,346)
------ ------ ------
Total Comprehensive Income 4,287 (1,346) 2,941
---------- ------ -------- ------- ------ ------- ------ ---- --------
Balance at June 30, 2002 30,828,093 $3,083 $116,494 $(1,648) $8,033 $ 4,370 10,796 $(66) $130,266
========== ====== ======== ======= ====== ======= ====== ==== ========
3
DANIELSON HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2001
------------- -------------
OPERATING ACTIVITIES
Net Income (Loss) $ 4,287 $ (4,692)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used In Operating Activities:
Gain related to ACL Debt Contributed in Acquisition
of ACL (12,478) --
Depreciation and Amortization 6,132 --
Interest Accretion and Discount Amortization 798 431
Gain on Property Dispositions (89) --
Other Operating Activities 1,002 (851)
Changes in Operating Assets and Liabilities:
Accounts Receivable (11,004) --
Materials and Supplies (4,248) --
Accrued Interest 3,647 --
Other Current Assets 8,904 (4,997)
Other Current Liabilities (8,421) 10,033
------------- -------------
Net Cash Used in Operating Activities (11,470) (76)
INVESTING ACTIVITIES
Property Additions (2,072) (125)
Purchase of ACL, GMS and Vessel Leasing (42,665) --
Net Change in Restricted Cash 687 --
Proceeds from the Sale of Investment Securities 1,153 25,587
Matured or Called Investment Securities 10,202 10,488
Purchase of Investment Securities (5,783) (36,837)
Other Investing Activities (278) --
Proceeds from Property Dispositions 409 --
------------- -------------
Net Cash Used in Investing Activities (38,347) (887)
FINANCING ACTIVITIES
Long-Term Debt Issued 3,206 --
Long-Term Debt Repaid (1,246) --
Cash Overdrafts (2,900) --
Proceeds from Rights Offering, Net of Expenses 42,228 --
Proceeds from Exercise of Warrants for Common Stock 9,500 --
Proceeds from Exercise of Options for Common Stock 1,088 630
------------- -------------
Net Cash Provided by Financing Activities 51,876 630
------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,059 (333)
Cash and Cash Equivalents at Beginning of Period 39,693 12,545
------------- -------------
Cash and Cash Equivalents at End of Period $ 41,752 $ 12,212
============= =============
The accompanying notes are an integral part of the consolidated financial
statements.
4
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
(DOLLARS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Danielson Holding Corporation ("DHC") and subsidiaries (collectively with DHC,
"Danielson") have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the interim periods
are not necessarily indicative of the results that may be expected for the
fiscal year ended December 2002.
DHC is a holding company whose subsidiaries consisted principally of insurance
operations in the western United States, primarily California, prior to the
acquisitions described in Note 2. American Commercial Lines LLC ("ACL") is an
integrated marine transportation and service company. ACL provides barge
transportation and ancillary services throughout the inland United States and
Gulf Intracoastal Waterway Systems, which include the Mississippi, Illinois,
Tennessee and the Missouri Rivers and their tributaries and the Intracoastal
canals that parallel the Gulf Coast. In addition, ACL is the leading provider of
barge transportation services on the Orinoco River in Venezuela and the
Parana/Paraguay River System serving Argentina, Brazil, Paraguay, Uruguay and
Bolivia.
Danielson changed its presentation of its statement of financial position from
an unclassified to a classified statement with the insurance operating assets
and liabilities presented separately on a unclassified basis as long-term. The
change in the classification of Danielson's assets and liabilities is deemed to
be more meaningful in light of the significant changes in Danielson's operations
with the acquisition of ACL. Previously reported amounts of the Company's
insurance operations have been reclassified to conform to the current
classifications.
The accompanying statement of financial position at December 31, 2001 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
DHC's reporting periods are calendar month ends. ACL's reporting periods end on
the last Friday of the month. DHC is planning to conform its reporting periods
to ACL's. ACL has been consolidated in the accompanying condensed consolidated
financial statements using ACL's reporting periods described above.
For further information, refer to the consolidated financial statements and
footnotes thereto included in DHC's Annual Report on Form 10-K for the year
ended December 31, 2001, and in ACL's Annual Report on Form 10-K for the year
ended December 28, 2001.
NOTE 2. ACQUISITIONS
On May 29, 2002, Danielson completed an acquisition and recapitalization (the
"Danielson Recapitalization") of American Commercial Lines Holdings LLC ("ACL
Holdings"), the parent company of ACL. Holders of ACL Holdings' preferred units,
exchanged all of their preferred units, other than the preferred units held by
the management unitholders, for $7,000 in cash from Danielson. Danielson
contributed to ACL Holdings $58,493 principal amount of ACL's 10.25% senior
notes due June 30, 2008, (the "Old Senior Notes"), plus the interest obligations
thereon, if any, and $25,000 in cash in exchange for newly issued common units
of ACL Holdings. All common units held by the common unitholders, other than the
consenting common unitholders, were cancelled and extinguished. Members of ACL's
management, abandoned to ACL Holdings, all preferred units of ACL Holdings held
by them for no consideration and all those preferred units were deemed
cancelled.
Danielson paid $828,794 for 100% of the membership interests of ACL Holdings,
consisting of $82,256 in estimated fair value of consideration given by
Danielson in exchange for the net assets of ACL Holdings and $746,538 in
estimated fair value of assumed liabilities. The fair value of the consideration
given by Danielson includes the $7,000 in cash paid to preferred unitholders,
cash of $25,000 and the Old Senior Notes and accrued interest having an
estimated fair value of $43,650 contributed to ACL Holdings and $6,606 in costs
directly associated with the acquisition.
On May 29, 2002, Danielson also purchased a 50% equity interest of Vessel
Leasing LLC ("Vessel Leasing") for $2,769 and a 5.4% equity interest of Global
Material Services LLC ("GMS") for $1,290. ACL owns a 50% interest in Vessel
Leasing and GMS and, accordingly, these entities are consolidated herein. Vessel
Leasing leases barges to ACL's barge transportation operations and GMS owns and
operates terminal and warehouse facilities.
5
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 2. ACQUISITIONS - CONTINUED
The acquired companies operating results are included in Danielson's statement
of operations since the date of the Danielson Recapitalization, May 29, 2002.
Following is a condensed balance sheet disclosing the amounts preliminarily
assigned to assets and liabilities of the acquired companies at the date of the
acquisition.
ASSETS:
Current Assets $149,323
Property - Net 581,049
Pension Assets 21,391
Other Assets 81,090
--------
Total Assets $832,853
LIABILITIES:
Current Liabilities $142,224
Long-term Debt 571,813
Other Long-term Liabilities 32,501
--------
Total Liabilities $746,538
--------
Net Cost of Acquisitions $ 86,315
========
Danielson believes no significant intangibles were acquired in the Danielson
Recapitalization. The purchase price allocation has not been finalized as the
allocations are subject to revision once appraisals and other evaluations of the
fair value of the assets acquired and liabilities assumed are completed.
Accordingly, actual amounts assigned could differ from current estimates.
6
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 2. ACQUISITIONS - CONTINUED
Following are the pro forma unaudited results of operations for the quarters and
six months ended June 30, 2002 and June 30, 2001, assuming consummation of the
acquisitions and recapitalization of ACL Holdings as of January 1, 2001.
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Revenues $ 206,743 $ 226,465 $ 410,823 $ 432,767
Income (Loss) From Continuing Operations Before
Extraordinary Item and Cumulative Effect of Accounting Change $ (14,228) $ (5,407) $ (30,822) $ (32,465)
Per share of common stock - Basic $ (0.45) $ (0.18) $ (0.99) $ (1.07)
Per share of common stock - Fully Diluted $ (0.04) $ (0.18) $ (0.97) $ (1.06)
Net Loss $ (14,228) $ (3,522) $ (30,822) $ (31,070)
Per share of common stock - Basic $ (0.45) $ (0.12) $ (0.99) $ (1.02)
Per share of common stock - Fully Diluted $ (0.44) $ (0.12) $ (0.97) $ (1.01)
NOTE 3. PER SHARE DATA
Per share data is based on the weighted average number of shares of common stock
of DHC, par value $0.10 per share ("Common Stock"), outstanding during the
relevant period. Diluted earnings per share computations, as calculated under
the treasury stock method, include the average number of shares of additional
Common Stock issuable for stock options and warrants, whether or not currently
exercisable. Such average shares were 24,698,632 and 22,444,308 for the three
and six months ended June 30, 2002, respectively, and 19,571,593 and 19,579,349
for the three and six months ended June 30, 2001. Diluted earnings per share for
the three and six months ended June 30, 2001 do not include average shares
related to stock options and warrants because their effect is anti-dilutive.
Basic earnings per share are calculated using only the average number of
outstanding shares of common stock. Such average shares were 23,918,145 and
21,724,888 for the three and six months ended June 30, 2002, respectively, and
19,505,954 and 19,423,578 for the three and six months ended June 30, 2001,
respectively.
7
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 4. MATERIALS AND SUPPLIES
Materials and Supplies are carried at the lower of cost (average) or market and
consist of the following:
JUNE 30,
2002
-------
Raw Materials $ 7,339
Work in Process 17,641
Parts and Supplies 15,952
-------
$40,932
=======
NOTE 5. DEBT
DHC's Debt as of June 30, 2002 is as follows:
Revolving Credit Facility $ 37,721
Tranche A Term Loan 46,559
Tranche B Term Loan 134,046
Tranche C Term Loan 157,723
Senior Notes (New) 127,900
Senior Subordinated Notes 65,790
Senior Notes (Old) 4,864
Bonds guaranteed by the Maritime Administration 41,137
GMS Bank Note 35,852
Illinois Development Finance Authority 5,325
IFC Note 3,206
Other Notes 803
--------
660,926
Less short-term debt 37,721
Less, current portion long-term debt 33,954
--------
Long-term debt $589,251
========
As part of the Danielson Recapitalization, ACL's debt was restructured. ACL's
existing credit facility was amended and restated as of April 11, 2002 (the
amended and restated credit facilities are hereafter referred to as the "Senior
Credit Facilities") to, among other things, modify financial and restrictive
covenants thereunder, prepay $25,000 of term loans (the "Term Loans")
thereunder from the $25,000 in cash contributed by Danielson and convert
$50,000 of revolving credit loans thereunder into a new tranche of term loans
having an interest rate and other terms substantially similar to the revolving
credit loans under the senior credit facility.
ACL also completed an exchange offer (the "Exchange Offer") for Old Senior
Notes, pursuant to which $284,500 or approximately 96.4%, of the principal
amount of ACL's Old Senior Notes were tendered, with the $58,493 principal
amount of Old Senior Notes contributed by Danielson to ACL Holdings being
deemed tendered in the Exchange Offer. Holders of Old Senior Notes who tendered
their Old Senior Notes pursuant to the Exchange Offer received approximately
$134,700 aggregate principal amount of new 11.25% senior notes due January 1,
2008 ("Senior Notes") and approximately $112,900 aggregate principal amount of
new 12% pay-in-kind senior subordinated notes due July 1, 2008 ("PIK Notes").
Following the consummation of the Exchange Offer, a holder of $4,000 aggregate
principal amount of Old Senior Notes exchanged such notes and accrued interest
for approximately $2,400 of Senior Notes and approximately $2,000 of PIK Notes
as permitted by the indentures governing the notes, following which $6,500 of
the Old Senior Notes remained outstanding.
8
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 5. DEBT - CONTINUED
ACL's debt was adjusted to fair value as of the date of the Danielson
Recapitalization. The difference between the principal amount of the debt and
its fair value is being accreted as interest expense over the term of the debt
under the effective interest method.
ACL's revolving credit facility (the "Revolving Credit Facility"), which
provides for revolving loans and letters of credit not to exceed the aggregate
principal amount of $50,000, matures June 30, 2005, but each loan must be repaid
within one year. The Revolving Credit Facility bears interest at a rate equal to
the London InterBank Offered Rates ("LIBOR" or "LIBO Rates") plus a margin based
on ACL's performance. The interest rate as of June 30, 2002 was 5.73%.
Tranche A of the Term Loans matures June 30, 2005. Tranche B of the Term Loans
matures June 30, 2006. Tranche C of the Term Loans matures June 30, 2007. The
Term Loans bear interest at a rate equal to LIBOR plus a margin based on ACL's
performance. The annual interest rates as of June 30, 2002 were: Tranche A -
5.69%, Tranche B - 6.00% and Tranche C - 6.25%.
The new Senior Notes are due January 1, 2008 and bear interest at an annual rate
of 11.25%, payable semi-annually. The PIK Notes are due July 1, 2008 and bear
interest at an annual rate of 12%. ACL has the option of issuing new PIK Notes
in lieu of paying cash interest on such notes each June 30 and December 31 until
maturity. After 2 years from issuance, interest accretes at 13.5% per annum if
ACL elects to not pay the interest due in cash. The interest rate remains 12% if
the interest is paid in cash. The Old Senior Notes are due June 30, 2008 and
bear interest at annual rate of 10.25%.
In connection with the Exchange Offer, ACL completed a consent solicitation of
the holders of the Old Senior Notes, which resulted in the elimination or
amendment of substantially all the restrictive covenants contained in the
indenture governing the Old Senior Notes, the subordination of the subsidiary
guarantees of the Old Senior Notes to the subsidiary guarantees of the Senior
Credit Facilities, the Senior Notes and the PIK Notes and the waiver of any and
all defaults under the indenture governing the Old Senior Notes through the
effective date of the exchange offer, May 29, 2002. DHC does not guarantee the
debt of ACL.
ACL's receivables facility, which was administered by PNC Bank, N.A., the old
receivables facility, was replaced with a receivables facility administered by
Bank One, NA having substantially the same terms as the old receivables
facility. DHC does not guarantee any obligations under the receivables
facilities.
ACL's debt agreements include a number of covenants, including specified
financial ratios. ACL is currently addressing whether the consolidation of
Vessel Leasing has an effect on the debt covenant calculations. While ACL
management believes it should have no effect, ACL plans to obtain a waiver or
amendment to its Senior Credit Facilities. As previously disclosed, Marine
Services' (as defined) operating revenue has declined as a result of the broad
weakness in the entire inland river industry as a result of poor general
economic conditions. Additionally, the weak economy coupled with the
supply-demand imbalance in the inland river industry continues to put downward
pressure on rates for covered and open barges. Although ACL believes it is
currently in compliance with its debt covenants, there is a reasonable
possibility if economic conditions do not improve that ACL will not be able to
comply with covenant requirements in the future irrespective of the anticipated
favorable resolution of the Vessel Leasing matter. Management is working on
operating and financial plans to comply with its debt covenants, including a
possible sale-leaseback transaction and other financial transactions. Failure
to meet these covenants could have a material adverse effect on ACL since it is
highly leveraged.
The Senior Credit Facilities also contain mandatory prepayments of the Term
Loans with net proceeds from certain asset sales, equity issuances, incurrence
of indebtedness and sale and leaseback transactions, as well as excess cash
flow, as defined in the Senior Credit Facilities.
As of June 30, 2002, there were $41,137 in bonds (the "MARAD Bonds") issued by
Vessel Leasing. The MARAD Bonds are guaranteed by the U.S. Maritime
Administration. Neither DHC nor ACL guarantees payment of the MARAD Bonds. GMS
has bank loans outstanding of $35,852 as of June 30, 2002. These loans bear
interest at a rate equal to LIBOR plus a margin and mature on May 1, 2005. GMS
also has Illinois Development Finance Authority Bonds outstanding in the amount
of $5,325. These bonds bear interest at a variable rate based on a municipal
swap index and mature January 1, 2010. GMS has a revolving line of credit of
which $3,721 is outstanding as of June 30, 2002.
GMSV has $3,206 in loans outstanding from the International Finance Corporation
which bear interest at LIBOR plus a margin and mature May, 2007.
DHC does not guarantee the debt of GMS or GMSV.
Long term debt due during the next five fiscal years and thereafter and
unamortized debt discount are as follows:
2002 $10,259
2003 33,694
2004 49,906
2005 109,932
2006 87,776
Thereafter 391,568
--------
$683,135
--------
Unamortized debt discount (59,930)
--------
$623,205
========
9
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 6. REINSURANCE
DHC's principal operating insurance subsidiary, National American Insurance
Company of California, and its subsidiaries (collectively "NAICC") has
reinsurance under both excess of loss and quota share treaties. NAICC cedes
reinsurance on an excess of loss basis for workers' compensation risks in excess
of $500 prior to April 2000 and $200 thereafter. For risks other than workers'
compensation, NAICC cedes reinsurance on an excess of loss basis risks in excess
of $250.
In June 2002, NAICC paid approximately $1,200 as a result of an arbitration
decision related to certain loss adjustments costs for various claims made by a
policyholder (Hughes). These adjustment expenses are reinsured under various
contracts involving numerous reinsurance companies under which NAICC ceded about
$76. At this time, no proceedings are in progress relating to the cession of
these amounts. NAICC believes that the ultimate disposition of the adjustment
costs will not have a material adverse impact on the financial condition of DHC.
In February 2000, NAICC paid $1,000 in losses relating to settlement on an
environmental claim filed by Public Service of Indiana ("PSI Claim"). The PSI
Claim alleged that environmental damage occurred continuously over a period of
many years. NAICC assumed certain policyholder obligations of a general
liability policy issued to PSI for a portion of those years. The PSI Claim
liability is reinsured under various contracts involving numerous reinsurance
companies under which NAICC ceded $1,200, which includes loss adjustment
expenses not previously ceded of $295. To date, the reinsurers have paid
approximately $646. At this time, reinsurers have not disputed the unpaid amount
ceded in the submission, and no proceedings are in progress. NAICC believes that
the ultimate disposition of the PSI Claim will not have a material adverse
impact on the financial condition of DHC.
NOTE 7. INCOME TAXES
DHC files a Federal consolidated income tax return with its subsidiaries which
will include the taxable results of the acquired companies described in Note 2
subsequent to their acquisition. DHC's Federal consolidated return includes the
taxable results of certain grantor trusts established pursuant to a prior court
approved reorganization to assume various liabilities of certain present and
former subsidiaries of DHC. These trusts are not consolidated with DHC for
financial statement purposes. DHC records its interim tax provisions based upon
estimated effective tax rates for the year.
DHC has made provisions for certain state and other taxes. Tax filings for these
jurisdictions do not consolidate the activities of the trusts referred to above.
For further information, reference is made to Note 8 of the Notes to the
Consolidated Financial Statements included in DHC's Annual Report on Form 10-K
for the year ended December 31, 2001.
10
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 8. STOCKHOLDERS' EQUITY
As of June 30, 2002, there were 30,838,889 shares of common stock issued of
which 30,828,093 were outstanding; the remaining 10,796 shares of Common stock
issued but not outstanding are held as treasury stock. In connection with
efforts to preserve Danielson's net operating tax loss carryforwards, Danielson
has imposed restrictions on the ability of holders of five percent or more of
DHC Common Stock to transfer the Common Stock owned by them and to acquire
additional Common Stock, as well as the ability of others to become five percent
stockholders as a result of transfers of Common Stock.
During the second quarter of 2002, DHC consummated a rights offering to provide
funds for the acquisition of ACL and related entities as discussed in Note 2.
8,705,219 shares of Common Stock were issued at $5 per share pursuant to the
rights offering in exchange for $42,228 in net proceeds, net of expenses.
Expenses included a $1,000 backstop fee paid to SZ Investments LLC, a major
stockholder of DHC. In addition, 2,002,558 shares were issued pursuant to
warrants exercised that were previously held by SZ Investments LLC for proceeds
of $9,500 and 264,582 shares were issued pursuant to the exercise of options
for proceeds of $1,087.
In connection with the ACL acquisition, 339,040 shares of restricted common
stock were issued to ACL management for their continued employment. These
restricted shares which have been valued at fair value at the date of issuance
vest one-third annually over a three year period.
11
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 9. BUSINESS SEGMENTS
BARGING CONSTRUCTION TERMINALS INSURANCE OTHER TOTAL
------- ------------ --------- --------- ----- -----
QUARTER ENDED JUNE 30, 2002
Revenues from external customers $ 53,465 $ 1,358 $ 6,114 $ 23,149 $ -- $ 84,086
Segment earnings (loss) 1,836 (826) 1,101 870 (1,512) 1,469
QUARTER ENDED JUNE 30, 2001
Revenues from external customers $ -- $ -- $ -- $ 22,842 $ -- $ 22,842
Segment (loss) earnings -- -- -- (6,930) 443 (6,537)
SIX MONTHS ENDED JUNE 30, 2002
Revenues from external customers $ 53,465 $ 1,358 $ 6,114 $ 43,869 $ -- $ 104,806
Segment earnings (loss) 1,836 (826) 1,101 1,319 (2,057) 1,373
SIX MONTHS ENDED JUNE 30, 2001
Revenues from external customers $ -- $ -- $ -- $ 44,991 $ -- $ 44,991
Segment (loss) earnings -- -- -- (6,397) 327 (6,070)
The following is a reconciliation segment (loss) earnings to consolidated
totals.
QUARTER QUARTER SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Total segment earnings
(loss) $ 1,469 $ (6,537) $ 1,373 $ (6,070)
Unallocated amounts:
Gain on ACL bonds 8,402 -- 8,402 --
Interest expense (4,989) -- (4,989) --
Other, net (396) -- (337) --
--------- --------- --------- ---------
Net income (loss) $ 4,486 $ (6,537) $ 4,449 $ (6,070)
========= ========= ========= =========
Danielson's non-insurance service assets increased substantially since
December 31, 2001 due to the acquisition described in Note 2.
12
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 10. CHANGES IN ACCOUNTING STANDARDS
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 121 has been superceded by SFAS 144
which is described below. The adoption of SFAS 142 on January 1, 2002 has not
had a significant effect on Danielson's financial position or results of
operations.
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"). SFAS 144 addresses financial accounting and reporting for the impairment
or disposal of long-lived assets and 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). SFAS 144 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. Danielson adopted SFAS 144
in the first quarter 2002. The provisions of SFAS 144 did not have an impact on
Danielson's financial statements during the six month period ended June 30,
2002.
13
DANIELSON HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 11. COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2002 JUNE 30, 2001
------------- ------------- ------------- -------------
Net income (loss) $ 4,341 $ (5,579) $ 4,287 $ (4,692)
Unrealized holding gains arising during the
period 207 5,161 11,132 5,910
Less: Reclassification adjustment for net gains
included in net income (loss) (12,478) (35) (12,478) (851)
-------- -------- -------- --------
Net unrealized (losses) gains on securities (12,271) 5,126 (1,346) 5,059
-------- -------- -------- --------
Total comprehensive (loss) income $ (7,930) $ (453) $ 2,941 $ 367
======== ======== ======== ========
NOTE 12. GUARANTOR FINANCIAL STATEMENTS
Debt issued by ACL amounting to approximately $597,000 and the Revolving Credit
Facility which provides for revolving loans and the issuance of letters of
credit in an aggregate amount up to $50,000, are guaranteed by ACL's
wholly-owned domestic subsidiaries, other than ACL Capital Corp., 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 operations and
statements of cash flows for the Parent Company and Nonguarantor Subsidiaries
and the Guarantor Subsidiaries as of June 30, 2002 and for the quarter and six
months ended June 30, 2002.
Danielson acquired ACL in May 2002. The following supplemental financial
information also sets forth on a combined basis, combining statements of
operations and statements of cash flows for ACL and its Nonguarantor
Subsidiaries and the Guarantor Subsidiaries for periods prior to Danielson's
acquisition of ACL on May 29, 2002.
14
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENTS OF OPERATIONS
OF DANIELSON HOLDING CORPORATION FOR THE THREE MONTHS ENDED JUNE 30, 2002
PARENT COMPANY
AND NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING REVENUES
Marine Services Revenue $ 10,538 $ 50,684 $ (285) $ 60,937
Insurance Premiums Earned 17,550 -- -- 17,550
Net Investment Income Applicable to
Insurance Operations 5,429 -- -- 5,429
Other Income Applicable to
Insurance Operations 170 -- -- 170
-------- -------- -------- --------
TOTAL OPERATING REVENUES 33,687 50,684 (285) 84,086
OPERATING EXPENSES
MARINE SERVICES
Materials, Supplies and Other 3,379 21,634 (285) 24,728
Restructuring Costs -- 134 -- 134
Rent 687 4,242 -- 4,929
Labor and Fringe Benefits 2,055 11,609 -- 13,664
Fuel 146 6,832 -- 6,978
Depreciation and Amortization 1,062 5,047 23 6,132
Gain on Property Dispositions 6 (95) -- (89)
Taxes, other than Income Taxes 76 2,273 -- 2,349
-------- -------- -------- --------
7,411 51,676 (262) 58,825
INSURANCE SERVICES
Insurance Losses and Loss
Adjustment Expenses 16,667 -- -- 16,667
Policyholder Dividends -- -- -- --
Policy Acquisition Expenses 4,305 -- -- 4,305
General and Administrative Expenses 1,307 -- -- 1,307
-------- -------- -------- --------
22,279 -- -- 22,279
Parent Company Administrative
Expenses 1,513 -- -- 1,513
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 31,203 51,676 (262) 82,617
-------- -------- -------- --------
OPERATING INCOME (LOSS) 2,484 (992) (23) 1,469
OTHER EXPENSE (INCOME)
Interest Expense 530 4,459 -- 4,989
Parent Company Investment Income
Related to ACL Debt (7,819) -- -- (7,819)
Other, Net 4,248 (760) (3,675) (187)
-------- -------- -------- --------
Net Other Expense (Income) (3,041) 3,699 (3,675) (3,017)
INCOME BEFORE TAXES 5,525 (4,691) 3,652 4,486
PROVISION FOR INCOME TAXES 126 19 -- 145
-------- -------- -------- --------
NET INCOME (LOSS) $ 5,399 $ (4,710) $ 3,652 $ 4,341
======== ======== ======== ========
15
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENTS OF OPERATIONS
OF DANIELSON HOLDING CORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 2002
PARENT COMPANY
AND NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING REVENUES
Marine Services Revenue $ 10,538 $ 50,684 $ (285) $ 60,937
Insurance Premiums Earned 36,588 -- -- 36,588
Net Investment Income Applicable
to Insurance Operations 6,915 -- -- 6,915
Other Income Applicable to
Insurance Operations 366 -- -- 366
--------- --------- --------- ---------
TOTAL OPERATING REVENUES 54,407 50,684 (285) 104,806
OPERATING EXPENSES
MARINE SERVICES
Materials, Supplies and Other 3,379 21,634 (285) 24,728
Restructuring Costs -- 134 -- 134
Rent 687 4,242 -- 4,929
Labor and Fringe Benefits 2,055 11,609 -- 13,664
Fuel 146 6,832 -- 6,978
Depreciation and Amortization 1,062 5,047 23 6,132
Gain on Property Dispositions 6 (95) -- (89)
Taxes, other than Income Taxes 76 2,273 -- 2,349
--------- --------- --------- ---------
7,411 51,676 (262) 58,825
INSURANCE SERVICES
Insurance Losses and Loss
Adjustment Expenses 31,399 -- -- 31,399
Policyholder Dividends -- -- -- --
Policy Acquisition Expenses 8,363 -- -- 8,363
General and Administrative Expenses 2,788 -- -- 2,788
--------- --------- --------- ---------
42,550 -- -- 42,550
Parent Company Administrative
Expenses 2,058 -- -- 2,058
TOTAL OPERATING EXPENSES 52,019 51,676 (262) 103,433
OPERATING INCOME (LOSS) 2,388 (992) (23) 1,373
OTHER EXPENSE (INCOME)
Interest Expense 530 4,459 -- 4,989
Parent Company Investment Income
Related to ACL Debt (7,819) -- -- (7,819)
Other, Net 4,189 (760) (3,675) (246)
--------- --------- --------- ---------
Net Other Expense (Income) (3,100) 3,699 (3,675) (3,076)
INCOME BEFORE TAXES 5,488 (4,691) 3,652 4,449
PROVISION FOR INCOME TAXES 143 19 -- 162
--------- --------- --------- ---------
NET INCOME (LOSS) $ 5,345 $ (4,710) $ 3,652 $ 4,287
========= ========= ========= =========
16
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENTS OF FINANCIAL POSITION
OF DANIELSON HOLDING CORPORATION AT JUNE 30, 2002
PARENT COMPANY
AND NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
CURRENT ASSETS
Cash and Cash Equivalents $ 11,837 $ 14,620 $ -- $ 26,457
Restricted Cash 5,877 -- -- 5,877
Accounts Receivable, Net 36,578 31,623 (11,358) 56,843
Materials and Supplies 1,168 39,764 -- 40,932
Investments 84 -- (425) (341)
Other Current Assets 1,395 37,281 (2,075) 36,601
----------- ----------- ----------- -----------
Total Current Assets 56,939 123,288 (13,858) 166,369
PROPERTIES - Net 135,213 538,139 1,267 674,619
PENSION ASSETS -- 21,511 -- 21,511
OTHER ASSETS 168,294 120,527 (194,213) 94,608
INSURANCE SERVICES' ASSETS:
Cash and Cash Equivalents 15,295 -- -- 15,295
Investments 101,399 -- -- 101,399
Other Assets 37,601 -- -- 37,601
----------- ----------- ----------- -----------
Total Insurance Services' Assets 154,295 -- -- 154,295
----------- ----------- ----------- -----------
Total Assets $ 514,741 $ 803,465 $ (206,804) $ 1,111,402
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 4,476 $ 36,349 $ 14 $ 40,839
Accrued Payroll and Fringe Benefits 1,513 12,693 -- 14,206
Deferred Revenue 2,603 15,907 (2,075) 16,435
Accrued Claims and Insurance Premiums -- 26,926 -- 26,926
Accrued Interest 506 5,712 -- 6,218
Short-Term Debt -- 34,000 -- 34,000
Current Portion of Long-Term Debt 8,954 25,000 -- 33,954
Other Current Liabilities 19,257 33,343 (12,535) 40,065
----------- ----------- ----------- -----------
Total Current Liabilities 37,309 189,930 (14,596) 212,643
-- --
LONG-TERM NOTE PAYABLE TO AFFILIATE 92,569 -- (91,714) 855
LONG-TERM DEBT 80,235 501,577 10,305 592,117
OTHER LONG TERM LIABILITIES 16,374 37,293 (969) 52,698
INSURANCE SERVICES' LIABILITIES:
Unpaid Losses and Loss Adjustment Expenses 100,617 -- -- 100,617
Unearned Premiums and Reinsurance Premiums Payable 17,643 -- -- 17,643
Other Insurance Services' Liabilities 4,563 -- -- 4,563
----------- ----------- ----------- -----------
Total Insurance Services' Liabilities 122,823 -- -- 122,823
----------- ----------- ----------- -----------
Total Liabilities 226,487 728,800 (96,974) 981,136
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock ($0.10 par value; authorized
10,000,000 shares; none issued and outstanding) -- -- -- --
Common Stock ($.10 par value; authorized
150,000,000 shares; issued 30,828,093 shares
and 19,516,694; outstanding 19,505,898 shares
and 19,505,952 shares) 28,419 78,217 (103,553) 3,083
Additional Paid-in Capital 173,868 1,695 (59,069) 116,494
Unearned Compensation (1,695) (1,648) 1,695 (1,648)
Accumulated Other Comprehensive Loss 1,258 97 3,015 4,370
Retained Earnings (36,353) (3,696) 48,082 8,033
Treasury Stock (Cost of 10,796 shares) (66) -- -- (66)
----------- ----------- ----------- -----------
Total Stockholders' Equity 165,431 74,665 (109,830) 130,266
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 391,918 $ 803,465 $ (206,804) $ 1,111,402
=========== =========== =========== ===========
17
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENTS OF CASH FLOWS OF
DANIELSON HOLDING CORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 2002
PARENT COMPANY
AND NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING ACTIVITIES
Net Income (Loss) $ 8,526 $ (4,239) $ -- $ 4,287
Adjustments to Reconcile Net Income (Loss) to Net Cash
Used In Operating Activities:
Unrealized Gain Related to ACL Debt Contributed in
Acquisition of ACL (12,478) -- -- (12,478)
Depreciation and Amortization 1,640 4,492 -- 6,132
Interest Accretion and Discount Amortization 314 484 -- 798
Gain on Property Dispositions 6 (95) -- (89)
Other Operating Activities 1,640 (638) -- 1,002
Changes in Operating Assets and Liabilities:
Accounts Receivable (8,776) (2,228) -- (11,004)
Materials and Supplies 197 (4,445) -- (4,248)
Accrued Interest (640) 4,287 -- 3,647
Other Current Assets 4,483 4,421 -- 8,904
Other Current Liabilities (5,820) (2,601) -- (8,421)
-------- -------- -------- --------
Net Cash Used in Operating Activities (10,908) (562) -- (11,470)
INVESTING ACTIVITIES
Property Additions (1,334) (738) -- (2,072)
Purchase of ACL, GMS and Vessel Leasing (42,665) -- -- (42,665)
Net Change in Restricted Cash 687 -- -- 687
Proceeds from the Sale of Investment Securities 1,153 -- -- 1,153
Matured or Called Investment Securities 10,202 -- -- 10,202
Purchase of Investment Securities (5,783) -- -- (5,783)
Other Investing Activities 32 (310) -- (278)
Proceeds from Property Dispositions 6 403 -- 409
-------- -------- -------- --------
Net Cash Used in Investing Activities (37,702) (645) -- (38,347)
FINANCING ACTIVITIES
Long-Term Debt Issued 3,206 -- -- 3,206
Long-Term Debt Repaid (1,246) -- -- (1,246)
Cash Overdrafts -- (2,900) -- (2,900)
Proceeds from Rights Offering, Net of Expenses 42,228 -- -- 42,228
Proceeds from Exercise of Warrants for Common Stock 9,500 -- -- 9,500
Proceeds from Exercise of Options for Common Stock 1,088 -- -- 1,088
-------- -------- -------- --------
Net Cash Provided by Financing Activities 54,776 (2,900) -- 51,876
Net Increase (Decrease) in Cash and Cash Equivalents 6,166 (4,107) -- 2,059
Cash and Cash Equivalents at Beginning of Period 20,966 18,727 -- 39,693
-------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 27,132 $ 14,620 $ -- $ 41,752
======== ======== ======== ========
18
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENTS OF OPERATIONS
OF AMERICAN COMMERCIAL LINES LLC
FOR THE PERIOD MARCH 30 THROUGH MAY 28, 2002
ACL AND
NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING REVENUE $ 6,321 $ 107,616 $ -- $ 113,937
OPERATING EXPENSE
Materials, Supplies and Other 4,872 54,729 -- 59,601
Restructuring Cost -- 9,938 -- 9,938
Rent 232 9,199 -- 9,431
Labor and Fringe Benefits 742 23,926 -- 24,668
Fuel 76 13,035 -- 13,111
Depreciation and Amortization 998 7,763 -- 8,761
Gain on Property Dispositions, Net -- (450) -- (450)
Taxes, Other Than Income Taxes 2 4,450 -- 4,452
--------- --------- --------- ---------
6,922 122,590 -- 129,512
--------- --------- --------- ---------
OPERATING LOSS (601) (14,974) -- (15,575)
OTHER EXPENSE (INCOME)
Interest Expense 21 9,264 -- 9,285
Interest Expense, Affiliate - Net 1,108 -- (1,108) --
Other, Net (188) 687 1,108 1,607
--------- --------- --------- ---------
941 9,951 -- 10,892
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (1,542) (24,925) -- (26,467)
INCOME TAXES 30 44 -- 74
--------- --------- --------- ---------
NET LOSS $ (1,572) $ (24,969) $ -- $ (26,541)
========= ========= ========= =========
19
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF OPERATIONS
OF AMERICAN COMMERCIAL LINES LLC
FOR THE PERIOD DECEMBER 29, 2001 THROUGH MAY 28, 2002
ACL AND
NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING REVENUE $ 11,742 $ 273,063 $ -- $ 284,805
OPERATING EXPENSE
Materials, Supplies and Other 9,729 128,363 -- 138,092
Restructuring Cost -- 13,493 -- 13,493
Rent 594 22,527 -- 23,121
Labor and Fringe Benefits 1,588 64,172 -- 65,760
Fuel 118 30,316 -- 30,434
Depreciation and Amortization 2,411 19,413 -- 21,824
Gain on Property Dispositions, Net (3) (452) -- (455)
Taxes, Other Than Income Taxes 24 10,902 -- 10,926
--------- --------- --------- ---------
14,461 288,734 -- 303,195
--------- --------- --------- ---------
OPERATING LOSS (2,719) (15,671) -- (18,390)
OTHER EXPENSE (INCOME)
Interest Expense 21 25,691 -- 25,712
Interest Expense, Affiliate - Net 2,801 -- (2,801) --
Other, Net (501) (1,473) 2,801 827
--------- --------- --------- ---------
2,321 24,218 -- 26,539
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (5,040) (39,889) -- (44,929)
INCOME TAXES (BENEFIT) 57 (976) -- (919)
--------- --------- --------- ---------
NET LOSS $ (5,097) $ (38,913) $ -- $ (44,010)
========= ========= ========= =========
20
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF OPERATIONS
OF AMERICAN COMMERCIAL LINES LLC FOR THE QUARTER ENDED JUNE 29, 2001
ACL AND
NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING REVENUE $ 8,873 $ 184,011 $ -- $ 192,884
OPERATING EXPENSE
Materials, Supplies and Other 4,975 81,407 -- 86,382
Rent 431 13,827 -- 14,258
Labor and Fringe Benefits 1,006 40,132 -- 41,138
Fuel 136 23,794 -- 23,930
Depreciation and Amortization 1,301 12,875 -- 14,176
Gain on Property Dispositions, Net -- (11,033) -- (11,033)
Taxes, Other Than Income Taxes 3 6,836 -- 6,839
--------- --------- --------- ---------
7,852 167,838 -- 175,690
--------- --------- --------- ---------
OPERATING INCOME 1,021 16,173 -- 17,194
OTHER EXPENSE (INCOME)
Interest Expense -- 18,529 -- 18,529
Interest Expense, Affiliate - Net 1,611 -- (1,611) --
Other, Net (1,170) (2,366) 1,611 (1,925)
--------- --------- --------- ---------
441 16,163 -- 16,604
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 2 10 -- 12
INCOME TAXES (BENEFIT) (26) 185 -- 159
--------- --------- --------- ---------
(LOSS) EARNINGS BEFORE EXTRAORDINARY ITEM 28 (175) -- (147)
EXTRAORDINARY ITEM - GAIN ON EARLY
EXTINGUISHMENT OF DEBT -- 1,885 -- 1,885
--------- --------- --------- ---------
NET EARNINGS $ 28 $ 1,710 $ -- $ 1,738
========= ========= ========= =========
21
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF OPERATIONS
OF AMERICAN COMMERCIAL LINES LLC FOR THE SIX MONTHS ENDED JUNE 29, 2001
ACL AND
NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING REVENUE $ 14,845 $ 351,137 $ -- $ 365,982
OPERATING EXPENSE
Materials, Supplies and Other 9,727 161,278 -- 171,005
Rent 792 27,724 -- 28,516
Labor and Fringe Benefits 1,832 79,491 -- 81,323
Fuel 64 47,627 -- 47,691
Depreciation and Amortization 2,572 25,794 -- 28,366
Gain on Property Dispositions, Net -- (11,074) -- (11,074)
Taxes, Other Than Income Taxes 6 13,389 -- 13,395
--------- --------- --------- ---------
14,993 344,229 -- 359,222
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (148) 6,908 -- 6,760
OTHER EXPENSE (INCOME)
Interest Expense -- 38,080 -- 38,080
Interest Expense, Affiliate - Net 3,165 -- (3,165) --
Other, Net (948) 3,730) 3,165 (1,513)
--------- --------- --------- ---------
2,217 34,350 -- 36,567
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (2,365) (27,442) -- (29,807)
INCOME TAXES 51 211 -- 262
--------- --------- --------- ---------
LOSS BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,416) (27,653) -- (30,069)
EXTRAORDINARY ITEM - GAIN ON EARLY
EXTINGUISHMENT OF DEBT -- 1,885 -- 1,885
CUMULATIVE EFFECT OF ACCOUNTING CHANGE -- (490) -- (490)
--------- --------- --------- ---------
NET LOSS $ (2,416) $ (26,258) $ -- $ (28,674)
========= ========= ========= =========
22
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
OF AMERICAN COMMERCIAL LINES LLC
FOR THE PERIOD DECEMBER 29, 2001 THROUGH MAY 28, 2002
ACL AND
NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING ACTIVITIES
Net Loss $ (5,088) $(38,922) $ -- $(44,010)
Adjustments to Reconcile Net Loss to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 2,420 19,404 -- 21,824
Interest Accretion and Discount Amortization (10) 1,255 -- 1,245
Gain on Property Dispositions (3) (452) -- (455)
Other Operating Activities (782) (4,640) -- (5,422)
Changes in Operating Assets and Liabilities:
Accounts Receivable 2,958 (18,565) 12,367 (3,240)
Materials and Supplies (21) (5,139) -- (5,160)
Accrued Interest 1 10,331 -- 10,332
Other Current Assets 1,278 (4,427) -- (3,149)
Other Current Liabilities 695 20,029 (12,367) 8,357
-------- -------- -------- --------
Net Cash (Used in) Provided by
Operating Activities 1,448 (21,126) -- (19,678)
INVESTING ACTIVITIES
Property Additions (51) (5,554) -- (5,605)
Proceeds from Property Dispositions 3 985 -- 988
Other Investing Activities 5 (2,276) (588) (2,859)
-------- -------- -------- --------
Net Cash Used in Investing Activities (43) (6,845) (588) (7,476)
FINANCING ACTIVITIES
Danielson Holding Corporation Investment -- 25,000 -- 25,000
Cash Dividends Paid (588) (25,190) 588 (25,190)
Bank Overdrafts -- 1,149 -- 1,149
Other Financing -- (173) -- (173)
-------- -------- -------- --------
Net Cash Provided by (Used in)
Financing Activities (588) 786 588 786
Net (Decrease) Increase in Cash and Cash Equivalents 817 (27,185) -- (26,368)
Cash and Cash Equivalents at Beginning of Period 1,341 45,912 -- 47,253
-------- -------- -------- --------
Cash and Cash Equivalents at
End of Period $ 2,158 $ 18,727 $ -- $ 20,885
======== ======== ======== ========
23
DANIELSON HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CONDENSED COMBINING STATEMENT OF CASH FLOWS
OF AMERICAN COMMERCIAL LINES LLC FOR THE SIX MONTHS ENDED JUNE 29, 2001
ACL AND
NONGUARANTOR GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------
OPERATING ACTIVITIES
Net Loss $ (1,823) $(26,258) $ -- $(28,081)
Adjustments to Reconcile Net Loss
to Net Cash Provided by (Used in)
Operating Activities:
Depreciation and Amortization 2,572 27,783 -- 30,355
Gain on Property Dispositions -- (11,074) -- (11,074)
Other Operating Activities (2,674) (1,743) -- (4,417)
Changes in Operating Assets and
Liabilities:
Accounts Receivable (12,936) 555 -- (12,381)
Materials and Supplies (426) (1,968) -- (2,394)
Accrued Interest -- 385 -- 385
Other Current Assets 3,765 (9,342) -- (5,577)
Other Current Liabilities 6,012 22,010 -- 28,022
-------- -------- -------- --------
Net Cash Provided by (Used in)
Operating Activities (5,510) 348 -- (5,162)
INVESTING ACTIVITIES
Property Additions (1,729) (7,279) -- (9,008)
Proceeds from Property Dispositions -- 16,683 -- 16,683
Proceeds from Sale of Terminals -- 8,241 -- 8,241
Other Investing Activities 7,056 (7,062) (954) (960)
-------- -------- -------- --------
Net Cash Provided by Investing
Activities 5,327 10,583 (954) 14,956
FINANCING ACTIVITIES
Short-Term Borrowings -- 8,250 -- 8,250
Long-Term Debt Repaid -- (34,007) -- (34,007)
Cash Dividends Paid (1,000) -- 1,000 --
Bank Overdrafts -- (9,656) -- (9,656)
Debt Costs -- (3,462) -- (3,462)
Other Financing 46 103 (46) 103
-------- -------- -------- --------
Net Cash Used in Financing
Activities (954) (38,772) 954 (38,772)
Net Decrease in Cash and Cash Equivalents (1,137) (27,841) -- (28,978)
Cash and Cash Equivalents at
Beginning of Period 2,279 57,289 -- 59,568
-------- -------- -------- --------
Cash and Cash Equivalents at
End of Period $ 1,142 $ 29,448 $ -- $ 30,590
======== ======== ======== ========
24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This Quarterly Report contains certain forward-looking statements about
the financial position and results of operations of Danielson Holding
Corporation ("DHC") and its subsidiaries (collectively with DHC, "Danielson").
These statements include words such as believe, expect, anticipate, intend,
estimate or other similar words. Any statements that express or involve
discussions as to expectations, beliefs or plans are not historical facts and
involve known and unknown risks, uncertainties and other important factors that
may cause the actual results to materially differ from those considered by the
forward-looking statements. Such important factors include:
- natural catastrophes, reinsurer insolvencies or possible loss
reserve deficiencies due to adverse loss experience;
- substantial leverage and ability to service debt;
- changing market, labor, legal and regulatory conditions and trends
in the barge and inland shipping industries;
- general economic and business conditions, including a prolonged or
substantial recession in the United States or certain international
commodity markets such as the market for grain exports;
- annual worldwide weather conditions, particularly those affecting
North and South America.
Although we believe that our plans, intentions and expectations reflected
in or suggested by such forward-looking statements are reasonable, actual
results could differ materially from a projection or assumption in any of our
forward-looking statements. Our future financial condition and results of
operations, as well as any forward-looking statements, are subject to change and
inherent risks and uncertainties. The forward-looking statements contained in
this Quarterly Report on Form 10-Q are made only as of the date hereof and
Danielson does not have or undertake any obligation to update or revise any
forward-looking statements whether as a result of new information, subsequent
events or otherwise, unless otherwise required by law.
OVERVIEW
DHC is organized as a holding company with substantially all of its
operations conducted by subsidiaries. DHC, on a parent-only basis, has limited
continuing expenditures for rent and administrative expenses and derives
revenues primarily from investment returns on portfolio securities. Therefore,
the analysis of Danielson's financial condition is generally done on an
operating subsidiary basis.
On May 29, 2002, Danielson consummated a transaction (the "Danielson
Recapitalization") to acquire 100% of the membership interest of ACLines LLC
("ACLines"), the single member owner of American Commercial Lines Holdings LLC
("ACL Holdings"), which is the single member owner of American Commercial Lines
LLC ("ACL"). ACL is an integrated marine transportation and service company,
operating approximately 5,100 barges and 200 towboats on the inland waterways of
North and South America. ACL transports more than 70 million tons of freight
annually. Additionally, ACL operates marine construction, repair and service
facilities and river terminals.
Also on May 29, 2002, DHC acquired a 5.4% interest in Global Material
Services LLC ("GMS"), an entity in which ACL has a 50% ownership interest. GMS
is an owner and operator of 27 marine terminal and warehouse facilities located
in the United States and the Netherlands. In addition, GMS has a 20% equity
interest in Global Material Services Venezuela, C.A. ("GMSV"), a newly formed
entity engaged in the unloading of barges in Venezuela. ACL has a 32% direct
ownership interest in GMSV. Danielson, through its ownership of ACL and GMS, has
a 43% ownership interest in GMSV and voting control over GMSV indirectly through
other entities. Danielson consolidates the financial statements of GMS and GMSV
as a result of this structure in its financial statements.
25
Simultaneously with the Danielson Recapitalization on May 29, 2002, DHC
also acquired a 50% ownership interest in Vessel Leasing LLC ("Vessel Leasing"),
an entity in which ACL has a 50% ownership interest. Vessel Leasing is an owner
of marine equipment, which is leased to ACL. Vessel Leasing is considered a
special purpose entity under generally accepted accounting principles and is
consolidated by ACL.
Revenues and operating expenses of ACL, GMS and GMSV are combined
beginning May 29, 2002 in the accompanying Condensed Consolidated Statement of
Operations contained herein and are referred to as "Marine Services". DHC also
has 100% ownership of National American Insurance Company of California and its
subsidiaries ("NAICC"). Revenues and operating expenses of NAICC are referred to
as "Insurance Services" in the accompanying Condensed Consolidated Statement of
Operations. The assets and liabilities of NAICC are presented on the Condensed
Consolidated Statement of Financial Position contained herein on an unclassified
basis and the assets and liabilities of the parent company, DHC, and the Marine
Services group are combined on a classified basis.
RESULTS OF OPERATIONS - MARINE SERVICES
Since the Marine Services group's operating revenues and expenses included
in the accompanying Condensed Consolidated Statement of Operations on a
historical basis are only for the period from May 29, 2002, the date of the
Danielson Recapitalization, to June 28, 2002, the comparisons of the Marine
Services group's operating results are in reference to the pro forma operating
results of the companies in that group presented for the periods indicated as if
the Danielson Recapitalization had occurred as of January 1, 2001.
DHC CONSOLIDATED
PRO FORMA OPERATING INFORMATION
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
QUARTER ENDED SIX MONTHS ENDED
-------------------- -----------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2002 2001 2002 2001
-------- -------- -------- --------
OPERATING REVENUE
Domestic Barging $140,018 $155,398 $280,060 $295,707
International Barging 11,864 8,873 17,285 14,845
Construction 15,706 25,515 39,017 48,886
Terminals 16,006 13,837 30,592 28,338
Other
-------- -------- -------- --------
MARINE SERVICES REVENUE 183,594 203,623 366,954 387,776
Insurance Premiums Earned 17,550 20,254 36,588 39,396
Investment and Other Income Applicable to Insurance Operations 5,599 2,588 7,281 5,595
-------- -------- -------- --------
TOTAL OPERATING REVENUE 206,743 226,465 410,823 432,767
OPERATING EXPENSE
Domestic Barging 148,156 146,040 289,947 299,882
International Barging 10,353 7,436 18,243 14,659
Construction 16,919 22,896 38,556 45,406
Terminals 13,771 11,373 25,862 24,518
Other - DHC parent 1,513 572 2,058 1,144
-------- -------- -------- --------
MARINE SERVICES OPERATING EXPENSE 190,712 188,317 374,666 385,609
Expenses Related to Insurance Services 22,279 28,807 42,550 49,917
-------- -------- -------- --------
TOTAL OPERATING EXPENSE 212,991 217,124 417,216 435,526
-------- -------- -------- --------
OPERATING (LOSS) INCOME $ (6,248) $ 9,341 $ (6,393) $ (2,759)
======== ======== ======== ========
</Table>
QUARTER ENDED JUNE 2002 COMPARED WITH QUARTER ENDED JUNE 2001
Operating Revenue. Marine Services revenue for the second quarter 2002 was
$60.9 million compared to no revenue in the second quarter of 2001, due to the
acquisitions described above. On a pro forma basis, Marine Services' revenue
declined $20.0 million or 9.8% in the second quarter of 2002 as compared to the
second quarter of 2001. The decrease in revenue was primarily due to lower
domestic barging freight rates and volume, lower construction revenue due to a
strike at ACL's Jeffboat LLC ("Jeffboat") subsidiary, partially offset by higher
revenue from international barging and terminals.
Domestic barging revenue decreased $15.4 million or 9.9% due to lower
barging rates for grain freight and other commodities, lower other bulk freight
volume, lower liquid freight volume and lower towing and demurrage revenue,
partially offset by increased volume as a result of better operating conditions.
International barging revenues increased $3.0 million or 33.7% due to a new
operation in Venezuela to move bauxite tonnage during the low water navigation
season, the sale of logistics services to a third party barge operator in
Venezuela to transport equipment from the United States to Venezuela and revenue
from ACL's Dominican Republic unit, which began operation in the third quarter
of 2001. Revenue at Jeffboat decreased $9.8 million or 38.4% primarily due to
lower volume of hopper and tank barge production as a result of the strike.
Terminal revenue was higher due to the start of GMSV operations partially offset
by reduced alloy storage revenue from GMS.
Operating Expense. Marine Services expense was $59.0 million for the
second quarter 2002 compared to no expense in the second quarter of 2001, due to
the acquisitions described above. On a pro forma basis, Marine Services
operating expense increased $2.4 million or 1.3%. Consulting and legal fees of
$10.1 million incurred by the Marine Services' operations in the second quarter
of 2002 as a result of the Danielson Recapitalization are included in the pro
forma results.
Domestic barging expense increased $2.1 million or 1.4% due to lower gains
on property dispositions and higher equipment repair expense partially offset by
lower barge freight volume, reduced fuel prices and better operating conditions.
Fuel price before the effect of user tax and hedging was 69 cents per gallon in
the second quarter of 2002 on a volume of 27.4 million gallons, compared to 84
cents per gallon in the first quarter of 2001. Barge freight contract adjustment
clauses for changes in fuel price currently protect approximately 50% of ACL's
fuel price risk exposure.
International barging expenses increased $2.9 million or 39.2% primarily
due to expenses associated with establishing a new operation in Venezuela to
move bauxite tonnage during the low water navigation season and the cost of
logistics services provided to a third party barge operator in Venezuela to
transport equipment from the United States to Venezuela.
26
Jeffboat's construction expenses decreased $6.0 million or 26.1% due to
lower volume of hopper and tank barge construction as a result of the strike,
partially offset by declines in productivity also attributable to the strike.
SIX MONTHS ENDED JUNE 2002 COMPARED WITH SIX MONTHS ENDED JUNE 2001
Operating Revenue. Marine Services revenue for the first six months 2002
was $60.9 million compared to no revenue in the first six months of 2001, due to
the Danielson Recapitalization. On a pro forma basis, Marine Services' revenue
declined $20.8 million or 5.4% in the first six months of 2002 as compared to
the first six months of 2001. The decrease in revenue was primarily due to lower
domestic barging freight rates and volume, lower manufacturing revenue due to a
strike at Jeffboat partially offset by higher revenue from international barging
and terminals.
Domestic barging revenue decreased $15.6 million or 5.3% due to lower
barging rates for grain freight and other commodities, lower liquid freight
volume, lower towing revenue and lower other bulk freight volume, partially
offset by increased volume as a result of better operating conditions.
International barging revenue increased $2.4 million or 16.4% due to a
new operation in Venezuela to move bauxite tonnage during the low water
navigation season, revenue from ACL's Dominican Republic unit, which began
operation in the third quarter of 2001, and the sale of logistics services to a
third party barge operator in Venezuela to transport equipment from the United
States to Venezuela. The increase was partially offset by the absence of
payments for minimum contract tonnage in Venezuela.
Construction revenue at Jeffboat decreased $9.9 million or 20.2% primarily
due to lower volume of hopper and tank barge production as a result of the
strike.
Operating Expense. Marine Services expense was $59.0 million for the first
six months of 2002 compared to no expense in the second quarter of 2001, due to
the Danielson Recapitalization. On a pro forma basis, Marine Services operating
expense decreased $10.9 million or 2.8%. Consulting and legal fees of $13.5
million incurred by the Marine services' operations in the first six months of
2002 as a result of the Danielson Recapitalization are included in the pro forma
results.
Domestic barging expense decreased $9.9 million or 3.3% due to reduced
fuel prices, better operating conditions, lower barge freight volume, partially
offset by lower gains on property dispositions and higher equipment repair
expense. Fuel price before the effect of fuel user tax and hedging was 66 cents
per gallon in the first six months of 2002 on a volume of 53.5 million gallons,
compared to 86 cents per gallon in the first six months of 2001.
International barging expenses increased $3.6 million or 24.4% primarily
due to additional expenses associated with establishing the low water operation
in Venezuela, certain logistics services provided to a third party barge
operator in Venezuela to transport equipment from the United States to
Venezuela, and an increase in fees for start up activities and expenses from
ACL's Dominican Republic unit, which began operation in the third quarter of
2001.
Jeffboat's construction expenses decreased $6.8 million or 15.0% due to
lower volume of hopper and tank barge construction as a result of the strike in
the second quarter and due to a lower volume of hopper barge construction during
the first quarter of 2002 compared to the first quarter of 2001.
RESULTS OF OPERATIONS - INSURANCE SERVICES
The operations of Danielson's insurance subsidiary, NAICC, is primarily
property and casualty insurance. The results discussed below exclude NAICC's
share of any undistributed earnings related to its proportional ownership of
ACLines.
Net premiums earned were $17.6 million and $36.6 million for the three and
six months ended June 30, 2002. Net premiums earned were $20.2 million and $39.4
million for the three and six months ended June 30, 2001. The decrease in net
premiums earned is only indirectly related to the change in net written premiums
in 2002, and is primarily attributable to the run-off policies written in 2001,
especially commercial automobile. Net written premiums were
27
$16.9 million and $32.8 million for the three and six months ended June 30,
2002. Net written premiums were $23.1 million and $43.4 million for the three
and six months ended June 30, 2001.
The overall decrease in net written premiums for the first six months of
2002 over the comparable periods in 2001 is primarily attributable to reduced
production resulting from the decision in 2001 to exit certain lines of business
by eliminating unprofitable lines and by enforcing stricter underwriting
standards both of which would lead to an increase in overall profitability, but
that would, in turn, result in an overall reduction in net written premiums. Net
written premiums in non-standard commercial automobile decreased by $8.2 million
or 39% during 2002 over the comparable year to date period in 2001. The decrease
in commercial automobile net written premiums is due to production limitations
mentioned above. Workers' compensation net written premiums decreased by $5.3
million or 47% during 2002 over the comparable year to date period in 2001. This
decrease is due primarily to the reduced premium production in California
resulting from the decision in 2001 to exit this line of insurance.
Net written premiums for private passenger automobile increased during the
first six months of 2002 over the comparable year to date period in 2001 by $3.8
million or 37%. The increase in private passenger net written premiums is
attributable to the growth in the non-standard California program which more
that offset the reduction from the termination of the non-standard automobile
program outside of California.
Net investment income (excluding realized gains) was $1.5 million and $3.1
million for the three and six months ended June 30, 2002. Net investment income
(excluding realized gains) was $2.3 million and $4.2 million for the three and
six months ended June 30, 2001. The reduction in investment income is
attributable to decreased cash flow of $4.9 million over the comparable
year-to-date period in 2001 caused by the aforementioned decrease in written
premiums and an decrease in overall annualized investment yield from 8.41% in
2001 to 6.20% in 2002. Realized gains were $3.9 million and $3.9 million for the
three and six months ended June 30, 2002. Realized gains (losses) were $(0.07)
million and $0.73 million for the three and six months ended June 30, 2001.
Realized gains increased $3.2 million during 2002. The 2002 gain includes a gain
of $5.2 million related to the ACL notes converted to equity as a result of
ACL's reorganization in May 2002. All other gains (losses) were recognized
almost exclusively from the sale of equity securities.
Net losses and loss adjustment expenses ("LAE") were $16.7 million and
$31.4 million for the three and six months ended June 30, 2002. Net losses and
LAE were $21.3 million and $36.3 million for the three and six months ended June
30, 2001. The resulting loss and LAE ratios for the corresponding year to date
periods were 85.8 percent and 92.2 percent, respectively. The loss and LAE ratio
decreased in 2002 over 2001 due to increase in production of California
non-standard private passenger automobile that has a lower loss ratio than
commercial lines.
Policy acquisition costs were $4.3 million and $8.4 million for the three
and six months ended June 30, 2002. Policy acquisition costs were $5.7 million
and $9.8 million for the three and six months ended June 30, 2001. As a percent
of net premiums earned, policy acquisition expenses were 22.9 percent and 24.9
percent, for the six months ended June 30, 2002 and 2001, respectively. The
slight decrease in the policy acquisition expense ratio in 2002 is due primarily
to the slight increase in the deferral percentage relating to growth in
non-standard private passenger auto in California that has a higher acquisition
rate than other auto lines.
General and administrative expenses were $1.3 million and $2.8 million for
the three and six months ended June 30, 2002. General and administrative
expenses were $1.8 million and $3.7 million for the three and six months ended
June 30, 2001. General and administrative expenses decreased in 2002 compared to
2001 due to cost reduction efforts initiated in the third and fourth quarters of
2001. As a percent of net premiums written, general and administrative expenses
were 8.9 percent and 8.3 percent for the six months ended in June 30, 2002 and
2001, respectively.
Combined underwriting ratios were 116.6 percent and 126.7 percent for the
six months ended in June 30, 2002 and 2001, respectively. Net Income (loss) from
insurance operations for the six months ended June 30, 2002 and 2001 was $1.3
million and ($4.9) million, respectively. The increase in income from insurance
operations during the first six months of 2002 compared to the same period for
2001 is primarily attributable to decreased losses incurred and increased
realized gains.
28
Parent company administrative expense increased to $1.5 million and $2.1
million for the three and six month periods ending June 30, 2002 as compared to
$0.6 million and $1.1 million for the three and six month periods ending June
30, 2001 due to one time increases in management compensation related to the
resignation of certain DHC management in connection with its acquisition of ACL.
Interest expense increased to $5.0 million for the three and six month
periods ending June 30, 2002 as compared to no expense for the for the three and
six month periods ending June 30, 2001 due to ACL's interest expense after the
acquisition.
Parent company investment income increased to $8.4 million for the three
and six month periods ending June 30, 2002 as compared to no income for the
three and six month periods ending June 30, 2001 due to recognition of $8.4
million in gain on ACL bonds owned by DHC that were contributed as part of the
purchase price of ACL Holdings.
LIQUIDITY AND CAPITAL RESOURCES
On May 29, 2002, Danielson completed the Danielson Recapitalization
through which it acquired and recapitalized ACL Holdings, the parent company of
ACL. Holders of ACL Holdings' preferred units exchanged all of their preferred
units, other than the preferred units held by management unitholders, for $7.0
million in cash from Danielson. Danielson contributed to ACL Holdings $58.493
million principal amount of ACL's 10.25% senior notes due June 30, 2008, ("Old
Senior Notes") plus the interest obligations thereon, if any, and $25.0 million
in cash in exchange for newly issued common units of ACL Holdings. All common
units held by the common unitholders, other than the consenting common
unitholders, were cancelled and extinguished. Members of ACL's management
abandoned to ACL Holdings all preferred units of ACL Holdings held by them for
no consideration and all those preferred units were deemed cancelled and
extinguished.
Danielson acquired 100% of the membership interests of ACL Holdings for
$828.8 million, consisting of $82.3 million in estimated fair value of
consideration given by DHC in exchange for the net assets of ACL Holdings and
$746.5 million in estimated fair value of assumed liabilities. The fair value of
the consideration given by DHC includes the $7.0 million in cash paid to
preferred unitholders, cash of $25.0 million and Old Senior Notes and accrued
interest having an estimated fair value of $43.7 million contributed to ACL
Holdings and $6.6 million in costs directly associated with the Old Senior
Notes.
Concurrent with the recapitalization of ACL Holdings, ACL reduced its
outstanding term loan debt by $25.0 million.
On May 29, 2002, DHC also purchased the 50% equity interest of Vessel
Leasing for $2.8 million and a 5.4% equity interest in GMS for $1.3 million.
The net proceeds of $42.2 million from the rights offering and proceeds
of $9.5 million from the exercise of stock purchase warrants during the second
quarter of 2002 provided the funds for the acquisitions noted above.
As of June 30, 2002, Danielson and its subsidiaries had outstanding
indebtedness of $719.8 million, including $338.3 million drawn under ACL's term
loans (the "Term Loans"), $34.0 million drawn under ACL's revolving credit
facility, $137.1 million aggregate principal amount of Senior Notes, $114.9
million of new 12% pay-in-kind senior subordinate notes (the "PIK Notes") and
$6.5 million of Old Senior Notes. Long-term debt also includes $41.1 million in
Vessel Leasing bonds guaranteed by the U.S. Maritime Administration, $43.8
million in GMS bank debt, and $4.1 million in GMSV bank debt. The ACL debt
assumed by Danielson as part of the acquisition was adjusted to fair value at
the acquisition date. The total amount of the unamortized discount is $59.5
million and the fair value of total Danielson indebtedness is $720.3 million.
The difference between the principal amount of the debt and its fair value is
being accreted as interest expense over the term of the debt under the effective
interest method. Accordingly, as of June 30, 2002, the carrying value of the
Senior Notes was $127.9 million, the carrying value of the PIK Notes was $65.8
million and the carrying value of the Old Senior Notes was $4.9 million.
Danielson does not guarantee the debt of ACL, Vessel Leasing, GMS or GMSV.
ACL's debt agreements include a number of covenants, including specified
financial ratios. ACL is currently addressing whether the consolidation of
Vessel Leasing has an effect on the debt covenant calculations. While ACL
management believes it should have no effect, ACL plans to obtain a waiver or
amendment to its Senior Facilities. Although ACL believes it is currently in
compliance with its debt covenants, there is a reasonable possibility that ACL
will not be able to comply with covenant requirements in the future irrespective
of the anticipated favorable resolution of the Vessel Leasing matter. Management
is working on operating and financial plans to comply with it debt covenants,
including a possible sale-leaseback transaction and other financial
transactions. Failure to meet these covenants could have a material adverse
effect on ACL since it is highly leveraged.
ACL's senior secured credit facility was amended and restated on April 11,
2002 (the "Senior Credit Facilities") in connection with the Danielson
Recapitalization and contains mandatory prepayments of the Term Loans with net
proceeds from certain asset sales, equity issuances, incurrence of indebtedness
and sale and leaseback transactions, as well as excess cash flow, as defined in
the Senior Credit Facilities.
Net cash used in operating activities for the six months ending June 30,
2002 increased to $11.5 million from $0.1 million for the six months ended June
30, 2001 due to the decrease in cash provided by insurance operations, discussed
below, and a decrease in cash provided by Marine Services principally due to
the costs incurred for consulting and legal fees associated with the Danielson
Recapitalization and the adverse effects of the Jeffboat strike on operations.
29
Capital expenditures were $2.1 million for the six months ending June 28,
2002 as compared to $0.1 million for the six months ending June 30, 2001.
Management expects capital expenditures to be 25.3 million in 2002, primarily
for equipment maintenance.
ACL is highly leveraged, which makes it vulnerable to changes in general
economic conditions and to worldwide weather conditions, particularly those
affecting North and South America, given the nature of ACL's business. ACL's
ability to repay or refinance its debt will depend on, among other things,
financial, business, market, competitive and other conditions, many of which
are beyond ACL's control. Management believes that its cash and cash generated
from operations will be sufficient to fund its cash requirements, including
capital expenditures for fleet maintenance, working capital, interest payments
and scheduled principal payments. Management is evaluating alternatives for
reducing outstanding indebtedness under the Senior Credit Facilities, including
the sale and lease-back of property, plant and equipment. ACL will, from time
to time, borrow under the Revolving Credit Facility.
INSURANCE SERVICES
Cash (used)/provided by insurance operations was ($7.2) million and $1.6
million for the six months ended June 30, 2002 and 2001, respectively. The
decrease in cash provided by insurance operations of $8.8 million is primarily
attributable to reduced premium production during 2002. Overall cash and
invested assets, at market value, at June 30, 2002 were $130.4 million compared
to $136.2 million at December 31, 2001.
Danielson's insurance subsidiaries require both readily liquid assets and
adequate capital to meet ongoing obligations to policyholders and claimants, as
well as to pay ordinary operating expenses. The primary sources of funds to meet
these obligations are premium revenues, investment income, recoveries from
reinsurance, and, if required, the sale of invested assets. NAICC's investment
policy guidelines require that all liabilities be matched by a comparable amount
of investment grade assets. Management believes that NAICC has both adequate
capital resources and sufficient reinsurance to meet any unforeseen events such
as natural catastrophes, reinsurer insolvency, or possible reserve deficiencies.
The two most common measures of capital adequacy for insurance companies
are premium-to-surplus ratios (which measure current operating risk) and
reserves-to-surplus ratios (which measure financial risk related to possible
changes in the level of loss and loss adjustment expense reserves). A commonly
accepted standard of net written premium-to-surplus ratio is 3 to 1, although
this varies with different lines of business. NAICC's annualized
premium-to-surplus ratio of 1.79 to 1 and 1.80 to 1 for the six months ended
June 30, 2002 and June 30, 2001, respectively, remains well under current
industry standards. A commonly accepted standard for the ratio of losses and
loss adjustment expense reserves-to-surplus is 5 to 1, compared with NAICC's
ratio of 2.34 to 1 at June 30, 2002.
OUTLOOK
With regards to Marine Services, management expects lower freight tariff
rates and volumes in the third quarter of 2002 compared to the third quarter of
2001 due to continued weakness in the general economy.
Management also expects the average price of fuel consumed by ACL vessels
to remain consistent with current market prices resulting in a price per gallon
in the third quarter of 2002 of approximately 72 cents, 9 cents lower than the
price in the third quarter of 2001. Management expects that ACL's vessels will
consume approximately 110 million gallons annually and generally ratably
throughout the year. ACL has barge freight contract price adjustment clauses
which currently provide protection for approximately 50% of gallons consumed.
Contract adjustments are deferred one quarter.
CHANGES IN ACCOUNTING STANDARDS
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 121 has been superceded
by SFAS 144 which is described below. The adoption of SFAS 142 on January 1,
2002 has not had a significant effect on Danielson's financial position or
results of operations.
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"). SFAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets and 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). SFAS 144 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. Danielson adopted
SFAS 144 in the first quarter 2002. The provisions of SFAS 144 did not have an
impact on Danielson's financial statements during the six month period ended
June 28, 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ACL is exposed to certain market risks which are inherent in its financial
instruments and which arise from transactions entered into in the normal course
of business. There have been no material changes to ACL's exposure to market
risks discussed in Item 7A of ACL's 2001 Annual Report on Form 10-K for the year
ended December 28, 2001.
FUEL PRICE RISK
At June 30, 2002, ACL had forward fuel purchase contracts outstanding with
an aggregate notional amount of approximately $.63 million and a fair value of
approximately $.020 million loss, which has been recorded in other current
liabilities with the offset to other comprehensive income and an additional fair
value gain of $.056 million which has been recorded as receivable with an offset
to the allowance for doubtful accounts in the condensed consolidated statement
of financial position. The $.020 million loss will be recognized in earnings in
July 2002. Under these agreements, ACL will pay fixed prices ranging from 61
cents to 86 cents per gallon. There were 1.0 million gallons remaining on the
contracts at June 30, 2002. 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 recognized the mark-to-market gain of $.056 million
but has fully reserved for the amount. Management believes that the other
trading partner does not present a credit risk to ACL.
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INTEREST RATE RISKS
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 $202.0 million and a fair value
of $.001 million as of June 30, 2002 and is effective through August 11, 2003.
ACL 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 condensed 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 is recorded as other comprehensive income.
The remaining change in fair value is recorded as other expense (income) in the
condensed consolidated statement of operations.
PART II
OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Recapitalization Agreement dated as of March 15, 2002 by and among
American Commercial Lines Holdings LLC, American Commercial Lines LLC,
Danielson Holding Corporation, the Preferred Unitholders (as defined
therein) party thereto and the Management Unitholders (as defined
therein) party thereto (Incorporated herein by reference to Exhibit
10.23 filed with American Commercial Lines LLC's Current Report on
Form 8-K dated March 15, 2002 and filed with the Securities and
Exchange Commission on March 27, 2002).
2.2 First Amendment to Recapitalization Agreement dated as of May 29, 2002
by and among Danielson Holding Corporation, ACLH Acquisition LLC,
American Commercial Lines Holdings LLC, American Commercial Lines LLC,
the Preferred Unitholders (as defined therein) party thereto, the
Management Unitholders (as defined therein) party thereto and the
Consenting Common Unitholders (as defined therein) party thereto
(Incorporated herein by reference to Exhibit 10.23 filed with American
Commercial Lines LLC's Current Report on Form 8-K dated May 29, 2002
and filed with the Securities and Exchange Commission on June 10,
2002).
3.1 Amendment to Amended and Restated Limited Liability Company Agreement
of American Commercial Lines Holdings LLC dated as of May 29, 2002, by
and among the parties signatory thereto (Incorporated herein by
reference to Exhibit 3.1 filed with American Commercial Lines LLC's
Quarterly Report on Form 10-Q for the quarter ended June 28, 2002 and
filed with the Securities and Exchange Commission on August 13, 2002).
3.2 Amended and Restated Limited Liability Company Agreement of American
Commercial Lines Holdings LLC dated as of May 29, 2002 (Incorporated
herein by reference to Exhibit 3.2 filed with American Commercial
Lines LLC's Quarterly Report on Form 10-Q for the quarter ended June
28, 2002 and filed with the Securities and Exchange Commission on
August 13, 2002).
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4.1 Supplemental Indenture dated as of May 29, 2002 by and among American
Commercial Lines LLC, ACL Capital Corp. and The Bank of New York (as
successor trustee to United States Trust Company of New York) as
Trustee (Incorporated herein by reference to Exhibit 4.1 filed with
American Commercial Lines LLC's Quarterly Report on Form 10-Q for the
quarter ended June 28, 2002 and filed with the Securities and Exchange
Commission on August 13, 2002).
4.2 Indenture dated May 29, 2002 for 11-1/4% Senior Notes due 2008 by and
among American Commercial Lines LLC, ACL Capital Corp., the Subsidiary
Guarantors (defined therein) party thereto and The Bank of New York,
as Trustee (Incorporated herein by reference to Exhibit T3C filed with
Amendment No. 1 to American Commercial Lines LLC's Application for
Qualification of Indenture Under the Trust Indenture Act of 1939 on
Form T-3, filed with the Securities and Exchange Commission on May 29,
2002 (No. 022-28597)).
4.3 Indenture dated May 29, 2002 for 12% Pay-In-Kind Senior Subordinated
Notes due 2008 by and among American Commercial Lines LLC, ACL Capital
Corp., the Subsidiary Guarantors (defined therein) party thereto and
The Bank of New York, as Trustee (Incorporated herein by reference to
Exhibit T3C filed with Amendment No. 1 to American Commercial Lines
LLC's Application for Qualification of Indenture Under the Trust
Indenture Act of 1939 on Form T-3, filed with the Securities and
Exchange Commission on May 29, 2002 (No. 022-28598)).
10.1 Amendment Agreement dated as of April 11, 2002 among
American Commercial Lines LLC, American Commercial Lines
Holdings LLC, the Lenders (as defined therein) party thereto and The
JPMorgan Chase Bank, as issuing bank, as administrative agent, as
security trustee and as collateral agent (Incorporated herein by
reference to Exhibit 10.1 filed with American Commercial Lines LLC's
Quarterly Report on Form 10-Q for the quarter ended June 28, 2002 and
filed with the Securities and Exchange Commission on August 13, 2002).
10.2 Credit Agreement dated as of June 30, 1998, as Amended and
Restated as of April 11, 2002, among American Commercial
Lines LLC, American Commercial Lines Holdings LLC, the Lenders (as
defined therein) party thereto and The JPMorgan Chase Bank, as
issuing bank, as administrative agent, as security trustee and as
collateral agent (Incorporated herein by reference to Exhibit 10.2
filed with American Commercial Lines LLC's Quarterly Report on Form
10-Q for the quarter ended June 28, 2002 and filed with the
Securities and Exchange Commission on August 13, 2002).
10.3 Receivables Purchase Agreement between American Commercial Lines
Funding Corporation, as Seller, American Commercial Barge Line LLC,
as Servicer, Jupiter Securitization Corporation, as a Purchaser, The
Financial Institutions from time to time Party thereto, as
Purchasers and Bank One, NA (Main Office Chicago), as Agent, dated
as of May 24, 2002 (Incorporated herein by reference to Exhibit 10.3
filed with American Commercial Lines LLC's Quarterly Report on Form
10-Q for the quarter ended June 28, 2002 and filed with the Securities
and Exchange Commission on August 13, 2002).
10.4 Receivables Sales Agreement between American Commercial Barge Line
LLC, as an Originator, American Commercial Terminals LLC, as an
Originator, and American Commercial Lines Funding Corporation, as
Buyer, dated as of May 24, 2002 (Incorporated herein by reference to
Exhibit 10.4 filed with American Commercial Lines LLC's Quarterly
Report on Form 10-Q for the quarter ended June 28, 2002 and filed with
the Securities and Exchange Commission on August 13, 2002).
10.5 Management Agreement between American Commercial Lines LLC and
Michael C.
32
Hagan dated May 29, 2002 (Incorporated herein by reference to
Exhibit 10.5 filed with American Commercial Lines LLC's Quarterly
Report on Form 10-Q for the quarter ended June 28, 2002 and filed with
the Securities and Exchange Commission on August 13, 2002).
10.6 Management Agreement between American Commercial Lines LLC and James
J. Wolff dated May 29, 2002 (Incorporated herein by reference to
Exhibit 10.6 filed with American Commercial Lines LLC's Quarterly
Report on Form 10-Q for the quarter ended June 28, 2002 and filed with
the Securities and Exchange Commission on August 13, 2002).
10.7 Amendment of the Special Retirement Plan of American Commercial
Lines LLC dated May 22, 2002 (Incorporated herein by reference to
Exhibit 10.7 filed with American Commercial Lines LLC's Quarterly
Report on Form 10-Q for the quarter ended June 28, 2002 and filed with
the Securities and Exchange Commission on August 13, 2002).
10.8 Amendment of the Supplemental Savings Plan of Eligible Executives of
American Commercial Lines LLC dated May 22, 2002 (Incorporated
herein by reference to Exhibit 10.8 filed with American Commercial
Lines LLC's Quarterly Report on Form 10-Q for the quarter ended June
28, 2002 and filed with the Securities and Exchange Commission on
August 13, 2002).
REPORTS ON FORM 8-K
DHC filed Current Reports on Form 8-K on:
- - April 19, 2002 (Item 2 -- Acquisition or Disposition of Assets, Item 5
-- Other Events and Item 7 -- Financial Statements, Pro Forma Financial
Information and Exhibits);
- - April 24, 2002 (Item 9 -- Regulation FD Disclosure);
- - June 5, 2002 (Item 5 -- Other Events and Item 7 -- Financial
Statements, Pro Forma Financial Information and Exhibits); and
- - August 1, 2002 (Item 4 -- Changes in Registrant's Certifying Accountant,
Item 5 -- Other Events and Item 7 -- Financial Statements, Pro Forma
Financial Information and Exhibits).
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Danielson Holding Corporation has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DANIELSON HOLDING CORPORATION
(Registrant)
Date: August 13, 2002 By: /s/ James J. Wolff
-------------------------
Name: James J. Wolff
Title: Chief Financial Officer and Treasurer
(Principal Accounting Officer)
34