** **

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**ý****QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

** **

**For the quarterly period ended March 31, 2003**

** **

**Commission File No. 1-12248**

** **

**KAISER GROUP HOLDINGS, INC.**

(successor issuer to Kaiser GroupInternational, Inc.)

(Exact name of registrant asspecified in its charter)

 

| **Delaware**                                                                |   | **54-2014870**                        |
|-----------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)             |   | (I.R.S. Employer  Identification No.) |
|                                                                        |   |                                  |
| **9302 Lee  Highway, Fairfax, Virginia**                                    |   | **22031-1207**                        |
| (Address of principal executive  offices)                                   |   | (Zip Code)                            |
|                                                                        |   |                                  |
| Registrant’s telephone number  including area code: **(703) 934-3600** |

 

Indicate by check mark whether the Registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 ý No o

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes o No ý

 

**APPLICABLEONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDINGFIVE YEARS:**

 

Indicate by check mark whether the registranthas filed all documents and reports required to be filed by Section 12, 13 or15(d) of the Securities Exchange Act of 1934 subsequent to the distribution ofsecurities under a plan confirmed by a court. Yes ý No o

 

The Plan of Reorganization of Kaiser GroupInternational, Inc. under Chapter 11 of the Bankruptcy Code became effective onDecember 18, 2000.  The Plan provides,among other things, that holders of shares of common stock of Kaiser GroupInternational, Inc. received shares of common stock of Kaiser Group Holdings,Inc. and that holders of specified outstanding debt obligations and otherspecified claimants received cash and shares of preferred stock and commonstock of Kaiser Group Holdings, Inc., all in accordance with the terms setforth in the Plan. The initial distribution of securities occurred as of April17, 2001.

 

As of May 12, 2003, there were 1,594,062shares of Kaiser Group Holdings, Inc. Common Stock, par value $0.01 per share,outstanding.

 

 

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**KAISER GROUP HOLDINGS, INC.**

 

**INDEX TO FORM 10-Q**

 
| **Part I -  Financial Information**                                                                 |
|-----------------------------------------------------------------------------------------------------|
|                                                                                                |   |
| Item 1. Financial Statements:                                                                       |
|                                                                                                |   |
|                                                                                                | Consolidated Balance Sheets -  March 31, 2003 and December 31, 2002. |
|                                                                                                |   |
|                                                                                                | Consolidated Statements of Operations and  Comprehensive Income  Three Months Ended March 31, 2003 and 2002. |
|                                                                                                |   |
|                                                                                                | Consolidated Statements of Cash Flows -  Three Months Ended March 31, 2003 and 2002. |
|                                                                                                |   |
|                                                                                                | Notes to Consolidated Financial Statements. |
|                                                                                                |   |
| Item 2. Management’s Discussion and  Analysis of Financial Condition and Results of Operations |
|                                                                                                |   |
| Item 3. Quantitative and Qualitative  Disclosures About Market Risk.                                |
|                                                                                                |   |
| Item 4. Controls and Procedures                                                                     |
|                                                                                                |   |
| **Part II - Other Information**                                                                     |
|                                                                                                |   |
| Item  1. Legal Proceedings                                                                          |
|                                                                                                |   |
| Item 2. Changes in Securities and Use of  Proceeds                                                  |
|                                                                                                |   |
| Item 3. Defaults Upon Senior Securities                                                             |
|                                                                                                |   |
| Item 4. Submission of Matters to a Vote of  Security Holders                                        |
|                                                                                                |   |
| Item  5. Other Information                                                                          |
|                                                                                                |   |
| Item 6. Exhibits and Reports on Form 8-K                                                            |
|                                                                                                |   |
| **Signatures**                                                                                      |

 

2

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**KAISERGROUP HOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCESHEETS**

**(Inthousands, except share amounts)**

 
|                                                                                                                                                                                                         |   | **March 31,  2003** |       | **December 31,****2002** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|--------------------------|------------|
|                                                                                                                                                                                                         |   | **(unaudited)**     |       |                     |       |
| **ASSETS**                                                                                                                                                                                                   |   |                |       |                     |       |
| Current Assets                                                                                                                                                                                               |   |                |       |                     |       |
| Cash and cash equivalents                                                                                                                                                                                    |   | $                   | 12,842     |                     | $          | 17,413 |   |
| Restricted cash and cash equivalents                                                                                                                                                                         |   | 9,421               |       | 18,679                   |       |
| Prepaid expenses and other current assets                                                                                                                                                                    |   | 1,458               |       | 2,404                    |       |
| Net assets of discontinued operations                                                                                                                                                                        |   | 6,000               |       | 6,000                    |       |
| Total Current Assets                                                                                                                                                                                         |   | 29,721              |       | 44,496                   |       |
|                                                                                                                                                                                                         |   |                |       |                     |       |
| Other Assets                                                                                                                                                                                                 |   |                |       |                     |       |
| Investments in and advances to affiliates                                                                                                                                                                    |   | 47,028              |       | 45,663                   |       |
| Notes receivable                                                                                                                                                                                             |   | 5,894               |       | 5,894                    |       |
| Other long-term assets                                                                                                                                                                                       |   | 130                 |       | 142                      |       |
|                                                                                                                                                                                                         |   | 53,052              |       | 51,699                   |       |
| Total Assets                                                                                                                                                                                                 |   | $                   | 82,773     |                     | $          | 96,195 |   |
|                                                                                                                                                                                                         |   |                | ** ** |                     | ** ** |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                |   |                | ** ** |                     | ** ** |
|                                                                                                                                                                                                         |   |                |       |                     |       |
| Current Liabilities                                                                                                                                                                                          |   |                |       |                     |       |
| Accounts payable                                                                                                                                                                                             |   | $                   | 390        |                     | $          | 922 |   |
| Post retirement benefit plan obligation                                                                                                                                                                      |   | 7,123               |       | 7,193                    |       |
| Other accrued expenses                                                                                                                                                                                       |   | 5,912               |       | 6,501                    |       |
| Preferred stock dividend payable                                                                                                                                                                             |   | 480                 |       | 654                      |       |
| Deferred tax liability                                                                                                                                                                                       |   | 7,675               |       | 6,538                    |       |
| Income taxes payable                                                                                                                                                                                         |   | 614                 |       | 640                      |       |
| Total Current Liabilities                                                                                                                                                                                    |   | 22,194              |       | 22,448                   |       |
|                                                                                                                                                                                                         |   |                |       |                     |       |
| Commitments and contingencies                                                                                                                                                                                |   |                |       |                     |       |
|                                                                                                                                                                                                         |   |                |       |                     |       |
| Preferred stock, par value $.01 per share:                                                                                                                                                                   |   |                |       |                     |       |
| Authorized—2,000,000 shares                                                                                                                                                                             |   |                |       |                     |       |
| Issued and Outstanding — 759,920 and  1,017,120 shares at March 31, 2003 and December 31, 2002, respectively, net  of 94,623 and 119,587 treasury shares; stated at liquidation value of $55 per  share |   | 41,796              |       | 55,942                   |       |
| Common stock, par value $.01 per share:                                                                                                                                                                      |   |                |       |                     |       |
| Authorized-3,000,000 shares                                                                                                                                                                                  |   |                |       |                     |       |
| Issued and outstanding-1,594,062 and  1,590,239 shares at  March 31, 2003 and December 31, 2002, respectively                                                                                                |   | 16                  |       | 16                       |       |
| Capital in excess of par                                                                                                                                                                                     |   | 8,410               |       | 8,606                    |       |
| Retained earnings                                                                                                                                                                                            |   | 10,322              |       | 9,215                    |       |
| Accumulated other comprehensive income  (loss)                                                                                                                                                               |   | 35                  |       | (32                      | )          |
| Total Shareholders’ Equity                                                                                                                                                                              |   | 18,783              |       | 17,805                   |       |
| Total Liabilities and Shareholders’ Equity                                                                                                                                                              |   | $                   | 82,773     |                     | $          | 96,195 |   |

 

See notes to consolidated financial statements

 

3

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**KAISERGROUP HOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME**

**(Inthousands, except per share amounts)**

 
|                                                                                                                 |   | **For the  Three Months ended  March 31,** |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                                 |   | **2003**                                   |   | **2002** |   |
|                                                                                                                 |   | **(Unaudited)**                            |   |
| Operating Expenses                                                                                                   |   |                                       |   |   |   |
| Administrative expenses                                                                                              |   | 1,446                                      |   | 2,628 |   |
| Operating Loss                                                                                                       |   | (1,446                                     | )      | (2,628 | ) |
| Other Income                                                                                                         |   |                                       |   |   |   |
| Equity income in earnings of affiliate, net  of amortization of $881 for quarters ended March 31, 2003 and 2002 |   | 4,365                                      |   | 3,644 |   |
| Gain on sale of securities                                                                                           |   | —                                     |   | 106 |   |
| Interest income                                                                                                      |   | 243                                        |   | 124 |   |
| Income from Continuing Operations Before  Income Tax                                                                 |   | 3,162                                      |   | 1,246 |   |
| Income tax expenses                                                                                                  |   | (1,243                                     | )      | (547 | ) |
| Income From Continuing Operations                                                                                    |   | 1,919                                      |   | 699 |   |
| Loss from discontinued operations, net of  tax                                                                       |   | —                                     |   | (70 | ) |
| Net Income                                                                                                           |   | 1,919                                      |   | 629 |   |
| Preferred stock dividends                                                                                            |   | (812                                       | )      | (1,078 | ) |
| Income (Loss) Applicable to Common  Shareholders                                                                     |   | $                                          | 1,107  |   | $ | (449 | ) |
|                                                                                                                 |   |                                       |   |   |   |
| Basic and Diluted Income (Loss) Per Common  Share:                                                                   |   |                                       |   |   |   |
| Continuing operations, net of tax                                                                                    |   | $                                          | 0.69   |   | $ | (0.24 | ) |
| Discontinued operations, net of tax                                                                                  |   | —                                     |   | (0.04 | ) |
| Net Income (Loss) Per Share                                                                                          |   | $                                          | 0.69   |   | $ | (0.28 | ) |
|                                                                                                                 |   |                                       |   |   |   |
| Weighted average shares for basic and diluted  earnings per common share                                             |   | 1,593                                      |   | 1,589 |   |
|                                                                                                                 |   |                                       |   |   |   |
| Comprehensive Income                                                                                                 |   |                                       |   |   |   |
| Net Income                                                                                                           |   | $                                          | 1,919  |   | $ | 629 |   |
| Other Comprehensive Income (Loss):                                                                                   |   |                                       |   |   |   |
| Realization of gain on securities, net of  tax                                                                       |   | —                                     |   | (393 | ) |
| Change in cumulative foreign translation  adjustments                                                                |   | 67                                         |   | (13 | ) |
|                                                                                                                 |   |                                       |   |   |   |
| Total Comprehensive Income                                                                                           |   | $                                          | 1,986  |   | $ | 223 |   |

 

See notes to consolidated financialstatements.

 

4

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**KAISER GROUPHOLDINGS, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

**(Inthousands)**

 
|                                                                           |   | **For the  Three Months ended  March 31,** |   |
|--------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                           |   | **2003**                                   |   | **2002** |   |
|                                                                           |   | **(Unaudited)**                            |   |
| Operating Activities:                                                          |   |                                       |   |   |   |
| Net income                                                                     |   | $                                          | 1,919  |   | $ | 629 |   |
| Adjustments to reconcile net income to net  cash used in operating activities: |   |                                       |   |   |   |
| Loss of discontinued operations, net of tax                                    |   | —                                     |   | 70 |   |
| Deferred taxes related to continuing  operating activities                     |   | 1,136                                      |   | (2,227 | ) |
| Gain on sale of stock                                                          |   | —                                     |   | (106 | ) |
| Equity in earnings of affiliate                                                |   | (4,365                                     | )      | (3,644 | ) |
| Changes in operating assets and liabilities:                                   |   |                                       |   |   |   |
| Prepaid expenses and other current assets                                      |   | 946                                        |   | (124 | ) |
| Accounts payable and accrued expenses                                          |   | (1,058                                     | )      | 503 |   |
| Income taxes payable                                                           |   | (25                                        | )      | 2,249 |   |
| Other operating activities                                                     |   | 95                                         |   | (48 | ) |
| Net Cash Used in Operating Activities                                          |   | (1,352                                     | )      | (2,698 | ) |
| Investing Activities:                                                          |   |                                       |   |   |   |
| Distributions from affiliate                                                   |   | 3,000                                      |   | 2,600 |   |
| Proceeds from sale of stock                                                    |   | —                                     |   | 5,961 |   |
| Net Cash Provided by Investing Activities                                      |   | 3,000                                      |   | 8,561 |   |
| Financing Activities:                                                          |   |                                       |   |   |   |
| Transfer to restricted cash                                                    |   | —                                     |   | (626 | ) |
| Transfer from restricted cash for the  redemption of preferred stock           |   | 8,913                                      |   | — |   |
| Payment of preferred stock dividends                                           |   | (986                                       | )      | (1,103 | ) |
| Redemption of preferred stock                                                  |   | (14,146                                    | )      | — |   |
| Purchase of preferred treasury stock                                           |   | —                                     |   | (77 | ) |
| Net Cash Used in Financing Activities                                          |   | (6,219                                     | )      | (1,806 | ) |
| Increase (decrease) in Cash and Cash  Equivalents                              |   | (4,571                                     | )      | 4,057 |   |
| Cash and Cash Equivalents at Beginning of  Period                              |   | 17,413                                     |   | 8,848 |   |
| Cash and Cash Equivalents at End of Period                                     |   | $                                          | 12,842 |   | $ | 12,905 |   |

 

See notes to consolidated financialstatements.

 

5

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**KAISER GROUP HOLDINGS, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**(Unaudited)**

 

1.             Basisof Presentation

 

The accompanyingconsolidated financial statements of Kaiser Group Holdings, Inc. andsubsidiaries (the Company), except for the December 31, 2002 balance sheet(derived from audited financial statements), are unaudited and have beenprepared in accordance with generally accepted accounting principles in theUnited States of America (GAAP) for interim financial information.  Accordingly, they do not include all of theinformation and footnotes required by GAAP for complete financial statements.  In the opinion of management, alladjustments considered necessary for a fair presentation have been included.

 

These statementsshould be read in conjunction with the Company’s audited consolidated financialstatements and footnotes and the other information included in the Company’sAnnual Report on Form 10-K for the year ended December 31, 2002.  Certain reclassifications have been made tothe prior period financial statements to conform them to the presentation usedin the March 31, 2003 financial statements.

 

Kaiser GroupHoldings, Inc. is a Delaware holding company that was formed on December 6,2000 for the purpose of owning all of the outstanding stock of Kaiser GroupInternational, Inc. (Old Kaiser), which in turn continues to own the stock ofits remaining subsidiaries. On June 9, 2000, Old Kaiser and 38 of its domesticsubsidiaries voluntarily filed for protection under Chapter 11 of the UnitedStates Bankruptcy Code in the District of Delaware (case nos. 00-2263 to00-2301). Old Kaiser emerged from bankruptcy with an approved plan ofreorganization (the Second Amended Plan of Reorganization (the Plan)) that waseffective on December 18, 2000 (the Effective Date). The Company is deemed a“successor issuer” to Old Kaiser by virtue of rule 12g-3(a) under theSecurities Exchange Act of 1934. References to the “Company” or “KaiserHoldings” in this report refer to Kaiser Group Holdings, Inc. and itsconsolidated subsidiaries. A summary of the Plan for Old Kaiser can be found ina Current Report on Form 8-K dated December 5, 2000 filed by Old Kaiser.

 

Currently, apart from resolving remaining bankruptcy claims, the Company has only a limited number ofactivities, assets and liabilities, primarily consisting of:

 

•                  theownership of a 50% interest in Kaiser-Hill Company, LLC (Kaiser-Hill), whichserves as the general contractor at the U.S. Department of Energy’s Rocky FlatsEnvironmental Technology Site near Denver, Colorado, for the performance of acontract for the closure of the site (the Closure Contract). (See note 4 forsummarized financial information.)

•                  thecloseout and resolution of a completed contract for the engineering andconstruction of a steel mini-mill for Nova Hut in the Czech Republic (Nova Hutproject).

•                  theholding of an interest-bearing promissory note from ICF Consulting Group, Inc.(ICF Consulting), a division that Old Kaiser sold in 1999.

•                  a wholly ownedcaptive insurance company that is no longer issuing new policies and is simplyinvolved in resolving remaining claims.

•                  an ongoingobligation to fund a capped, post-employment medical benefit plan for a fixedgroup of retirees.

 

The Company adopted fresh start reporting in its consolidated balancesheet as of December 31, 2000. The American Institute of Certified PublicAccountants’ Statement of Position 90-7, “Financial Reporting by Entities inReorganization Under the Bankruptcy Code” (SOP 90-7), requires that undercertain circumstances resulting from a bankruptcy, a new entity is created forfinancial reporting purposes upon the emergence of that entity from bankruptcy.  Accordingly, the value of the reorganizedenterprise becomes the established amount for the emerging balance ofshareholders’ equity, and any accumulated deficit of the predecessor entity isoffset against available paid-in-capital to result in an emerging retainedearnings of zero.  Additionally, assetsand liabilities are recorded at their fair values.

 

The value of the emerged enterprise used for freshstart reporting as of December 31, 2000 was $87.5 million and was determined bymanagement with the assistance of independent advisors.  The methodology employed involved estimationof the enterprise value taking into consideration a discounted cash flowanalysis.  The discounted cash flowanalysis was based on a seven-year cash flow projection prepared by management,taking into consideration the terminal value of its assets and liabilities asof immediately prior to its emergence from bankruptcy on December 18,2000.  Terminal values of assets andliabilities were determined based either on contracted amounts, actuarial presentvalues and/or management’s estimates of the outcome of certain operatingactivities. Net after-tax cash flows, assuming a 40% effective tax rate, werediscounted at 17% in order to take into consideration the risks anduncertainties inherent in such projections. The cash flow projections were based on estimates and assumptions aboutcircumstances and events that had not yet taken place.  Estimates and assumptions 

 

6

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regarding individual retained matters which form thecollective composition of the overall enterprise value as of December 18, 2000are inherently subject to significant economic and competitive uncertaintiesand contingencies beyond the control of the Company.  Accordingly, there may be differences between projections andactual results because events and circumstances frequently do not occur asexpected and may be significant.  Morespecifically, assumptions within the valuation related to the amount and timingof the ultimate performance and related cash flows of the Company’s investmentin Kaiser-Hill have the greatest impact on the overall enterprise valuation.

 

2.             GeneralTerms of Plan and Status of Bankruptcy Distributions

 

The effectivenessof the Old Kaiser Plan of Reorganization as of December 18, 2000 did not, inand of itself, complete the bankruptcy process. The process of resolving inexcess of $500 million of claims initially filed in the bankruptcy is ongoing.Old Kaiser objected to the majority of the unresolved claims, and if suchclaims are not settled via the objection or dispute resolution processes orother means, they will ultimately be heard and determined by the BankruptcyCourt. Once a claim is resolved with an amount due to the creditor, suchportion of the claim is deemed to be an allowed claim by the Bankruptcy Court(an allowed claim). The Company cannot predict with accuracy when the claimsresolution process will be complete or what the total amount of allowed claimswill be upon completion.

 

In general terms,the Plan contemplated three basic classes of creditors:

 

•                  Allowed“Class 3 claims” against the Old Kaiser bankruptcy estate generally consistedof trade and similar creditors’ claims of $20,000 or less.  Holders of allowed Class 3 claims receivedcash for their claims.

 

•                  Allowed“Class 4 claims”, the largest class of claims against the Old Kaiser bankruptcyestate, is made up of creditor claims other than Class 3 claims and equityclaims. Class 4 claims included holders of Old Kaiser senior subordinated notesdue 2003 (Old Subordinated Notes). Holders of allowed Class 4 claims received acombination of cash and Kaiser Holdings preferred and common stock in respectof their claims. Such holders received one share of Kaiser Holdings’ preferredstock (New Preferred) and one share of Kaiser Holdings’ common stock (NewCommon) for each $100 of claims. However, the number of shares of New Preferredissued was reduced by one share for each $55.00 of cash received by the holderof an allowed Class 4 claim.

 

•                  Thethird class of claims recognized in the Old Kaiser bankruptcy are equityclaims, consisting of holders of Old Kaiser common stock (Old Common) and other“Equity Interests” as defined in the Plan. Under the Plan, holders of EquityInterests will receive a number of shares of New Common equal to 17.65% of thenumber of shares of such common stock issued to holders of allowed Class 4Claims. In the initial distribution, one share of New Common was issued foreach 96 shares of previously outstanding Old Common. Additional distributionsof New Common may be made in the future as additional shares of New Common areissued to holders of newly allowed Class 4 claims, if any. Apart from holdersof Old Common, the only holders of Equity Interests of which the Company is awareare the former shareholders of ICT Spectrum Constructors, Inc., a corporationacquired by merger with a subsidiary of Old Kaiser in 1998. The BankruptcyCourt confirmed the equity nature of those claims.

 

Pursuant to theterms of Old Kaiser’s Plan, the Company was required to complete its initialbankruptcy distribution within 120 days of the effective date of the Plan.  Accordingly, on April 17, 2001, the Companyeffected its initial distribution.  Atthat time, there were approximately $136.8 million of Class 4 claims that hadbeen allowed in the bankruptcy process. The amount of unresolved claims remaining at April 17, 2001 wasapproximately $130.5 million.

 

To address theremaining unresolved claims, the Bankruptcy Court issued an order on March 27,2001 establishing an Alternative Dispute Resolution (ADR) procedure whereby theremaining claimants and Old Kaiser produce limited supporting data relative totheir respective positions and engage in initial negotiation efforts in anattempt to reach an agreed claim determination.  If necessary, the parties are thereafter required to participatein a non-binding mediation before a mediator pre-selected by the BankruptcyCourt.  All unresolved claims as ofMarch 27, 2001 are subject to the ADR process. Since April 17, 2001, the dateof the initial distribution, $109.2 million of asserted claims have beenwithdrawn, negotiated or mediated to an agreed amount, resulting in cashpayments approximating $1.4 million and issuances of 683 shares of New Preferredand 823 shares of New Common. As of May 8, 2003, the amount of unresolvedclaims was approximately $30.2 million. The Company expects that substantialprogress will continue to be made in the resolution of claims over the balanceof 2003.  The Company currently believesthat the amount of Class 4 claims ultimately to be allowed in the Old Kaiserbankruptcy proceeding will not exceed $145.0 million.  As demonstrated by the claim settlements completed since April17, 2001, and based on the belief that it is in the best interest of theCompany and its current shareholders, the Company has been settling certainremaining Class 4 claims entirely for cash payments in lieu of the combinationof cash and New Preferred and New Common as contemplated in the Plan.  The Company intends to continue to use thissettlement alternative during its resolution 

 

7

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of remaining Class4 claims, but has no ability to determine the effect of the outcome on itsoverall financial condition in the event such settlements are accepted in thefuture.

 

With respect tothe unresolved claims, the Plan required that, at the date of the initialdistribution, sufficient cash reserves be retained by the Company such that, ifall remaining unresolved claims were ultimately deemed allowed at theoriginally claimed amount, the Company would be able to satisfy the allowedclaims, including dividends accruing on related preferred stock, since April17, 2001.  The cash reserve requirement,and the fact that the Company had not yet received a substantial cash paymentthe Company asserted it was due from Nova Hut, limited the amount of cashavailable at the time of the initial distribution to the holders of allowedClass 4 claims. The Company determined that an aggregate of $25.0 million, orapproximately $0.09347 per $1.00 of allowed and “deemed allowed” Class 4claims, was available at the time of the initial distribution to allowed Class4 claim holders.  Thus, more shares ofNew Preferred were issued than would have been had the claims resolutionprocess advanced more quickly and had more cash been available from the NovaHut project and/or other sources.  Dueto the proportion of remaining unresolved Class 4 claims in relation to thetotal of all resolved and unresolved claims, approximately $12.3 million of the$25.0 million in available cash was reserved and classified as Restricted Cashon April 17, 2001.

 

From time to timein the future, as remaining unresolved claims are resolved, excess cash from the“reserve” fund (including cash added to “reserve” fund in payment of pro formadividends on retained shares of New Preferred) must be used to redeemoutstanding shares of New Preferred.

 

3.             EarningsPer Share

 

Basic earnings per share (EPS) is computed bydividing net income (loss) by the weighted average number of common sharesoutstanding for the period.  Theweighted average shares outstanding for the period ended March 31, 2003retroactively adjusts for the conversion of the Old Common to New Common effectivewith the adoption of fresh-start reporting. As additional distributions of New Common are made to holders of newlyallowed Class 4 claims, the conversion ratio of 96 shares to one share may beadjusted to reflect the final total number of shares of New Common (asdiscussed in Note 2).

 

Diluted EPS normally includes theweighted-average effect of dilutive securities outstanding during theperiod.  Pursuant to the Plan that waseffective as of December 18, 2000, all then outstanding common stock equivalentswere cancelled.  Accordingly, noanti-dilutive information is presented herein.

 

The effect of preferred dividends of $0.8million and $1.1 million has been included in continuing operations in thecalculation of basic and diluted earnings per share for the three months endedMarch 31, 2003 and 2002, respectively.

 

4.             SummarizedFinancial Information of Unconsolidated Affiliate

 

Kaiser Group owns 50% of Kaiser-Hill Company LLC.  Summarized, unaudited financial informationof Kaiser-Hill is as follows for the three months ended March 31, 2003 and 2002(in thousands):

 
|                     |   | **2003** |   | **2002** |   |
|--------------------------|--------|----------|--------|----------|--------|
|                     |   |     |   |     |   |
| Current assets           |   | 116,703  |   | 168,952  |   |
| Non-current  assets      |   | 85,659   |   | 17,419   |   |
| Current  liabilities     |   | 111,692  |   | 149,802  |   |
| Non-current  liabilities |   | 28,644   |   | 12,800   |   |
| Gross revenue            |   | 175,855  |   | 142,530  |   |
| Net income               |   | 10,492   |   | 9,049    |   |

 

5.             PreferredStock

 

Kaiser Holdings’ certificate of incorporationauthorizes the issuance of 2,000,000 shares of New Preferred. The Company hadNew Preferred outstanding with a liquidation preference of $41.8 million and$55.9 million, respectively, as of March 31, 2003 and December 31, 2002 (net oftreasury stock of $4.6 million and $6.6 million, respectively).  The New Preferred is a series of authorizedpreferred stock designated as “Series 1 Redeemable Cumulative Preferred Stock,”and has a par value of $0.01 per share and a liquidation preference of $55 pershare. The New Preferred ranks ahead of Kaiser Holdings’ New Common.

 

Pursuant to approval by the Company’s Boardof Directors, in 2002 the Company purchased 119,587 shares of outstanding NewPreferred at prices ranging from $25.62 to $34.02 per share.  The purchase of the treasury shares wasrecorded as a reduction to preferred stock equal to the $55 per shareliquidation preference with the remaining difference between cost and 

 

8

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the liquidation preference recorded as anincrease to paid-in capital.

 

The certificate of incorporation of KaiserHoldings and Delaware law permit the Board of Directors to issue additionalseries of preferred stock, except that the Board of Directors may not authorizethe issuance of any securities that rank senior to or on a parity with the NewPreferred without the consent of holders of at least two-thirds of the NewPreferred.

 

Cumulative dividends on the New Preferred arepayable on a quarterly basis, as of April 30, July 31, October 31 and January31, either in cash at an annual rate of 7% of the liquidation preference pershare or in additional shares of New Preferred at an annual rate of 12% of theper share liquidation preference. Dividends accrue on the New Preferredcommencing with the initial distribution date, April 17, 2001. Dividends willnot be paid to any affiliate of Kaiser Holdings on account of that affiliate’sownership of shares of preferred stock. If Kaiser Holdings fails to pay aquarterly dividend when due, holders of New Preferred will have the right toelect an additional director for each dividend payment missed, up to a maximum oftwo additional directors, but only until such dividend is paid or provided forin full.   The dividend due to holdersof record on April 30, 2003, totaling approximately $0.8 million, was paid onMay 7, 2003.  At March 31, 2003, inaddition to the $4.5 million of cash reserves for unresolved claims, theCompany had $2.0 million in cash reserved for the payment of accrued dividendson any future issuances of New Preferred issued as a result of remainingbankruptcy claim resolutions (any New Preferred issued as a result of claimresolutions also carries the right to dividends retroactively from April 17,2001).

 

The New Preferred has a liquidationpreference of $55 per share plus the amount of unpaid dividends, if any. Uponthe liquidation or dissolution of Kaiser Holdings, each holder of New Preferred(other than an affiliate of Kaiser Holdings) is entitled to this per shareliquidation preference before any holders of New Common or any other juniorsecurities of Kaiser Holdings receive any payment for their shares. If, in aliquidation or dissolution setting, assets remaining after distribution toholders of debt and other obligations are insufficient to pay all holders ofNew Preferred the per share liquidation preference, then such assets will bedistributed on a proportionate basis to the holders of New Preferred (otherthan affiliates of Kaiser Holdings) and any securities ranking on a parity withthe New Preferred.

 

The Company has the option to redeem the NewPreferred at any time, in whole or in part, at a redemption price of 100% ofthe liquidation preference per share plus all accrued and unpaid dividends. Inaddition, any net proceeds in excess of $3 million in a calendar year receivedby the Company or any of its direct or indirect subsidiaries from thedisposition of assets to an unaffiliated party outside of the ordinary courseof business must be used to redeem New Preferred at a redemption price of 100%of the liquidation preference per share plus all accrued and unpaid dividends.Furthermore, to the extent that certain categories of cash are received fromNova Hut, it must be used to redeem New Preferred at a redemption price of 100%of the liquidation preference per share plus all accrued and unpaid dividends.

 

All outstanding shares of New Preferred arerequired to be redeemed by the Company on or before December 31, 2007, and ifsuch redemption does not occur, holders of New Preferred will be entitled toelect two-thirds of the directors of the Company. If shares of preferred stockare held by any affiliate of the Company, those shares may not be redeemedpursuant to any of the redemption provisions otherwise applicable to the NewPreferred.

 

Holders of New Preferred generally are entitled to vote with holders ofNew Common on all matters submitted to a vote of shareholders, with each shareof New Preferred being entitled to one-tenth of a vote. In addition, holders ofNew Preferred have the right to vote separately as a class to exercise theirright to elect an additional director due to a failure to pay a quarterlydividend, to elect two-thirds of the directors if the New Preferred is notredeemed by December 31, 2007, and to consent to the issuance of any senior orparity securities. The terms of the New Preferred may not be materially or adverselymodified without the consent of holders of at least two-thirds of the NewPreferred. If the Company or any of its affiliates holds any New Preferred,they will not be entitled to vote that New Preferred.

 

The Plan provides that Major Stockholders(defined as holders of 10% or more of the outstanding shares of New Preferredor New Common, or a person who is an “affiliate” of Kaiser Holdings as definedunder the Federal securities laws) have certain registration rights. Ingeneral, a Major Stockholder may request Kaiser Holdings to register under theSecurities Act of 1933 for the sale of all, but not less than all, of the NewPreferred and/or New Common owned by the Major Stockholder. Upon request forsuch a registration from a Major Stockholder, Kaiser Holdings is required togive notice to other Major Stockholders and use its best efforts to cause aregistration statement to become effective as expeditiously as possible andmaintain such registration statement current for a period of 12 months. Major Stockholdersare not entitled to request registration until one year after the effectivedate of the Plan, and Kaiser Holdings is not obligated to file a registrationstatement in response to a request from a Major Stockholder until such time asKaiser Holdings is eligible to use Form S-3 under the Securities Act of 1933for such an offering. Kaiser Holdings is not required to effect more than oneregistration for Major Stockholders during any twelve-month period. Theseregistration rights expire on December 31, 2007. The Plan also contemplatesthat Major Stockholders will have “piggyback” registration rights in connectionwith a proposed underwritten 

 

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public offering of Kaiser Holdings New Commonor New Preferred solely for cash and for its own account.

 

Kaiser Government Programs, Inc.’s (“KGP”)Put Rights 

 

KGP is the Company subsidiary that owns(through a wholly owned subsidiary of KGP) the 50% interest in Kaiser-HillCompany LLC.  KGP has outstanding putrights, expiring on December 31, 2007, that obligate it to purchase NewPreferred owned by a holder of the put right, at the holder’s option, underthree circumstances:

 

•              if KGP receives net after-taxproceeds from any cash distributions from Kaiser-Hill that, on a quarterlybasis, exceed 2.8 times the amount of cash required to pay all past accrued butunpaid cash dividends on the New Preferred, plus the next scheduled quarterlycash dividend on New Preferred;

•              if KGP receives netafter-tax proceeds from any director indirect disposition of any interest in Kaiser-Hill; or

•              if KGP receives net after-tax proceeds from anextraordinary distribution from Kaiser-Hill.

 

Upon exercise of a put, KGP will pay anexercising holder 100% of the liquidation preference of the preferred stockthat is the subject of the KGP put rights, plus all accrued and unpaiddividends on the preferred stock. KGP will purchase shares of preferred stockon a pro rata basis based upon the number of shares of preferred stock as to whichputs have been properly exercised, but only up to the amount of the availablenet after-tax proceeds from triggering events. KGP will not purchase anyfractional shares. KGP put rights will not become exercisable more frequentlythan every 12 months unless the cumulative amount of available net after-taxproceeds from triggering events is at least $3 million.  KGP put rights are transferable except thatputs shall cease to be transferable if KGP determines that any further transferwould require registration of the puts as a class of securities under theSecurities Exchange Act of 1934. Kaiser Holdings does not presently plan toarrange for trading of the KGP put rights on the NASD electronic bulletin boardor otherwise.

 

The Companyreceived distributions from Kaiser-Hill during the fourth quarter of 2002 in anamount that resulted in a trigger of the put rights – effectively requiring anoffer by the Company to redeem certain New Preferred.  In addition, the Company had certain restricted cash balances available,which pursuant to the terms of its Plan of Reorganization, are required to beused to redeem outstanding New Preferred. Rather than using the mechanism of the put rights to satisfy theCompany’s obligations to holders of the put rights after a trigger, the Companyobserved the requirement in the Plan of Reorganization to use certainrestricted cash balances for preferred redemptions and redeemed a total of$15.5 million of New Preferred, or 307,128 shares, as of January 31, 2003.  The Company believes this was a morecost-efficient manner of satisfying the obligations associated with the KGP putrights and plans to continue to use this redemption process to satisfy suchobligations in the future.

 

6.             OtherContingencies

 

Kaiser Holdings has various obligations and liabilities from itscontinuing operations, including general overhead expenses in connection withmaintaining, operating and winding down the various entities and net assetscomprising Kaiser Holdings. Additionally, the Company believes contingent liabilities may exist inthe following areas:

 

Nova Hut

 

Although Old Kaiser sold its Metals, Mining and Industry business unitin August, 2000, it retained its Netherlands subsidiary, Kaiser Netherlands,B.V., which had been responsible for a turnkey engineering and constructionservices contract for the Nova Hut project. After construction of the steel mini-mill was complete in 2000, thecontract with Nova Hut provided for a maximum of three possible performancetests. The first performance test was completed on November 13, 2000. KaiserNetherlands believes that the first performance test was successful and thatNova Hut should have agreed to final acceptance of the mini-mill and made finalpayment of amounts accrued by Kaiser Netherlands throughout the project.  Instead, Nova Hut asserted that the firsttest was not successful.  To date, thisdispute has not been resolved, and the Company has resorted to legal proceedingsto enforce its rights and those of its subsidiary.  The primary legal venue at this time is the Delaware bankruptcyproceedings for Old Kaiser, where Old Kaiser has asserted claims against NovaHut and the International Finance Corporation (IFC), while rejectingsubstantial claims involving contract breach from Nova Hut and the IFC.  The claims filed by Nova Hut and the IFC inthe Delaware bankruptcy court have been withdrawn.  The Company’s claims remain active.  The cost of the litigation of this dispute, as well as the costof maintaining an ongoing presence in Ostrava, Czech Republic, has had, and maycontinue to have, a negative impact on the cash flow of Kaiser Netherlands andthe Company.

 

In February 2002, representatives of theCompany, Nova Hut and the IFC met under the auspices of a Delaware bankruptcycourt-sponsored mediation.  The detailsof these discussions are subject to a confidentiality agreement.  At the date of this Report, the Companycontinues to pursue claims against Nova Hut and the IFC through the Delawarebankruptcy court 

 

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proceedings and the court-sponsoredmediation.  However, there are still noassurances that settlement will ultimately be achieved in this matter.

 

The components of the “Net Assets ofDiscontinued Operations” consist entirely of the carrying value of the netassets of the Nova Hut project.  Basedon the Company’s continued concern over Nova Hut’s financial difficulties, theuncertainties of a possible settlement arising out of the bankruptcycourt-sponsored mediation and the uncertainties of a possible settlement orruling in the context of a possible future international arbitrationproceeding, in the fourth quarter of 2001, the Company established additionalreserves at December 31, 2001 to reduce the net carrying value of the remainingNova Hut project to $6.0 million.

 

Kaiser Hill

 

Under Kaiser-Hill’s contract with the DOE, Kaiser-Hill is notresponsible for, and the DOE pays all costs associated with, any liability,including, without limitation, any claims involving strict or absoluteliability and any civil fine or penalty, expense, or remediation cost, butlimited to those of a civil nature, which may be incurred by, imposed on, orasserted against Kaiser-Hill arising out of any act or failure to act,condition, or exposure which occurred before Kaiser-Hill assumed responsibilityon July 1, 1995 (pre-existing conditions). To the extent the acts or omissionsof Kaiser-Hill constitute willful misconduct, lack of good faith, or failure toexercise prudent business judgment on the part of Kaiser-Hill’s managerialpersonnel and cause or add to any liability, expense, or remediation costresulting from pre-existing conditions, Kaiser-Hill is responsible, but onlyfor the incremental liability, expense, or remediation caused by Kaiser-Hill.

 

The Kaiser-Hill contract further provides that Kaiser-Hill will bereimbursed for the reasonable cost of bonds and insurance allocable to theRocky Flats contract and for liabilities and expenses incidental to theseliabilities, including litigation costs, to third parties not compensated byinsurance or otherwise. There is an exception to this reimbursement provisionapplicable to liabilities caused by the willful misconduct, lack of good faithor failure to exercise prudent business judgment by Kaiser-Hill’s managerialpersonnel.

 

The clean-up and closure of the DOE’s Rocky Flats site involvesubstantial performance risks.  Amongother things, Kaiser-Hill’s activities at the Rocky Flats site involve theclean-up, packaging and transportation of nuclear waste, and the demolition anddestruction of facilities where nuclear weapons components were previouslyproduced.  Some of the activities havenot been previously performed elsewhere, and therefore require the developmentof innovative and untested approaches. Kaiser-Hill emphasizes safety in its performance, but the nature of theRocky Flats site and the activities of Kaiser-Hill and its subcontractors atthe site are such that serious injuries, or even deaths, are possible.  Significant safety incidents at the sitecould stop or significantly impede the progress of work being performed at thesite by Kaiser-Hill and its subcontractors. The DOE contract contemplates that all, or substantially all, of thenuclear waste at Rocky Flats will be transported to other sites operated ormanaged by the DOE.  The appropriatesites for storage of certain of those nuclear wastes have not yet beenidentified.  In addition, objections havearisen from time to time with regard to the transportation and storage of nuclearwaste at certain sites previously scheduled by the DOE to receive waste fromRocky Flats, including the DOE’s Savannah River site in South Carolina.  Deliveries of waste to the Savannah Riversite were delayed as a result of objections interposed by the Governor of SouthCarolina.  Deliveries to the SavannahRiver site have begun, but it is possible that similar objections will beraised with respect to the transportation and storage of waste from Rocky Flatsat other DOE sites.  Although the DOEcontract contemplates that the DOE is responsible for providing transportationand storage sites for nuclear waste from Rocky Flats, an inability to shipplutonium and other nuclear waste to DOE sites would pose a substantial risk tothe timely closure of the Rocky Flats site, and could interfere withKaiser-Hill’s ability to earn fees to which Kaiser-Hill believes it should beentitled.

 

As the contract between Kaiser-Hill and the DOE is cost-reimburseablein nature, the costs invoiced by Kaiser-Hill for reimbursement by the DOE aresubject to audit by the U.S. government. Also since the inception of Kaiser-Hill, the Company invoiced certainmanagement oversight costs to Kaiser-Hill. Government audits at Kaiser-Hill are in process for the years of thepredecessor contract, which ran from 1995 until January 2000.  Although Kaiser-Hill and the Company havehistorically provided for their estimates of disallowed costs oncost-reimburseable contracts, uncertainties exist with regard to whethergovernment audits will result in any disallowed costs needing to be refunded tothe government customer.  The continuedadequacy of provisions for reserves with regard to unallowable costs isreviewed regularly.

 

With respect to a revolving credit facility obtained by Kaiser-Hill inNovember 1999, both parents of Kaiser-Hill granted a first lien securityinterest to the Kaiser-Hill lenders in all of the ownership and equity interestof Kaiser-Hill and have agreed to cure any events of default by Kaiser-Hill onthe facility.  As of March 31, 2003 and December 31, 2002, Kaiser-Hill had nooutstanding balances on its revolving credit facility.

 

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**ITEM2****.  MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

**General Overview**

 

Kaiser Group Holdings, Inc. is a Delawareholding company formed on December 6, 2000 for the purpose of owning all of theoutstanding stock of Kaiser Group International, Inc.  Kaiser Group International, Inc. continues to own the stock ofits remaining subsidiaries.  On June 9,2000, Kaiser Group International, Inc. and 38 of its domestic subsidiariesvoluntarily filed for protection under Chapter 11 of the United StatesBankruptcy Code in the District of Delaware (case nos. 00-2263 to 00-2301).Kaiser Group International, Inc. emerged from bankruptcy with a confirmed Planof Reorganization that was effective on December 18, 2000.  In this document, we frequently use theterms “we” and “Kaiser” to refer to Kaiser Group Holdings, Inc., Kaiser GroupInternational, Inc. and other subsidiaries we own.

 

Under the Plan of Reorganization, KaiserGroup International, Inc. sold some of its businesses and made payments ofcash, stock or notes to various classes of creditors.  Currently, we are trying to resolve some outstanding creditorclaims through an alternative dispute resolution process.  We have only a limited number of activities,assets and liabilities, primarily consisting of the following:

 

•                  Weown Kaiser-Hill Company, LLC equally with CH2M Hill Companies Ltd.  Kaiser-Hill is our major source ofincome.  Kaiser-Hill currently serves asthe general contractor at the U.S. Department of Energy’s Rocky FlatsEnvironmental Technology Site near Denver, Colorado.

 

•                  We have a substantial claim, pending resolution,against Nova Hut a.s., the owner of a steel mini-mill for Nova Hut in the CzechRepublic.  The engineering andconstruction of the mini-mill was completed in 2000 by a subsidiary of KaiserGroup International, Inc. called Kaiser Netherlands, B.V.

 

•                  Until September 30, 2002 we held a minorityownership interest in ICF Consulting Group, Inc. (a division that Kaiser GroupInternational, Inc. sold in 1999).  Wecontinue to hold an 8 1⁄2% subordinated promissory note of ICF Consulting dueJune 25, 2006 in the principal amount of $6.4 million as a result of thattransaction.

 

•                  We have a wholly-owned captive insurance companythat is no longer issuing new policies and is solely involved in resolvingremaining claims made against previously issued policies.

 

•                  We have an ongoing obligation to fund a capped,post-employment medical benefit plan for a fixed group of retirees.

 

**Kaiser-Hill**

 

Our major remaining asset andsource of income is our 50% ownership interest in Kaiser-Hill Company, LLC.  Kaiser-Hill was formed solely for theperformance of the current and former Rocky Flats contracts.  CH2M Hilldesignates three of the five members of Kaiser-Hill’s Board of Managers and wedesignate two members.

 

Kaiser-Hill currently serves as the general contractorat the U.S. Department of Energy’s Rocky Flats Environmental Technology Sitenear Denver, Colorado. Kaiser-Hill has performed since 1995 at this site, aformer Department of Energy nuclear weapons production facility.  Kaiser-Hill is working to stabilize andsafely store radioactive materials at the site and other locations, clean upareas contaminated with hazardous and radioactive waste, and  restore much of the 6,000 acre site to thepublic.  The level of successexperienced by Kaiser-Hill in achieving timely closure of the Rocky Flats site,and the cost of achieving such closure, are the primary determinants of ourlong-term financial performance.

 

**RESULTSOF RETAINED OPERATIONS**

 

*Equity Income InEarnings of Affiliate*

 

Our major remaining source of incomeis a 50% ownership in Kaiser-Hill.  Thefinancial information contained herein for Kaiser-Hill is reflected on theequity basis.

 

*Closure ContractProvisions for Revenue and Performance Award*

 

The economic terms of the Closure Contract providethat Kaiser-Hill will earn revenue equal to the actual cost of physicalcompletion plus a performance fee based on a combination of the actual cost ofcompleting the site closure project and the 

 

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actual date of physical completion, both ascompared to contracted targets.   Thepotential fee to be earned pursuant to the Closure Contract ranges from $151.0million to $463.0 million based on Kaiser-Hill’s costs to complete the siteclosure being within the range of targeted completion cost of $3.6 billion and$4.8 billion, and completion at various dates between 2005 - 2007. Physicalcompletion for a total cost in excess of the target cost would result in areduction to the potential fee because Kaiser-Hill will share 30% in all costsincurred in excess of the target. Kaiser-Hill is also subject to a $20.0 million maximum penalty if theDecember 31, 2007 closure date is not met.

 

Kaiser-Hill’s favorable performance on thecontract since its inception in February of 2000 has resulted in a trend ofcautious but continuously improving estimates of completion dates, costestimates and potential fee earning opportunities.   As of March 31, 2003, Kaiser-Hill’s cost estimate to completethe project is $3.75 billion, with an estimated completion date of December2006, resulting in a potential fee of $424 million.    Kaiser-Hill has goals of further improving its ultimate projectperformance; however, goals are not free of risk, and the ability to accuratelypredict the ultimate results are highly uncertain.  See “Risk Factors Relating to Kaiser Holdings and Forward-LookingStatements” below.

 

For the three months ended March 31, 2003, the Company recorded itsequity in Kaiser-Hill’s income, recognizing $4.4 million (50% of Kaiser-Hill’s$10.5 million income, less amortization of the intangible asset attributed toKaiser-Hill of $0.9 million), an increase of $0.7 million over the amountrecorded for the three months ended March 31, 2002.  The increase for the three months ended March 31, 2003 is due tothe increasing estimates of the performance fee to be earned over the durationof Kaiser-Hill’s contract.

 

*Closure ContractBilling Provisions*

 

****Throughout the period of the Closure Contract (beginning in February2000), Kaiser-Hill has invoiced DOE for the performance fee based on the targetlevels within the contract, resulting in fee invoices of approximately $6.1million per quarter. ****InDecember 2002, Kaiser-Hill’s continued favorable progress on the project resultedin an award by the DOE of an additional $10.0 million in fee. Adjusted for theeffects of the 50% retainage holdback, Kaiser-Hill expects that its performancefee invoices to DOE will be approximately $7.1 million per quarter effective asof January 1, 2003.

 

Fee payments made by DOE to Kaiser-Hill, less certain non-reimbursablecosts, will continue to be distributed to the joint venture owners uponreceipt.  Kaiser-Hill has historicallyincurred expenses that are not reimbursable by the DOE pursuant to the Federalregulations.  Accordingly, suchexpenses, which Kaiser-Hill estimates could approximate up to 15% - 20% of thetotal award fee, are deducted from the total fee earned and collected byKaiser-Hill prior to any distributions of net fees to either Kaiser Group orCH2M Hill Companies Ltd.  EffectiveJanuary 1, 2003, Kaiser-Hill expects to begin distributing approximately $3.0million per quarter to each of its two owners based on its fee invoicing levelwith DOE.  From the commencement of the new Closure Contract through March 31, 2003,Kaiser-Hill has received an aggregate of $82.1 million in fee from the DOE.

 

In the future, as Kaiser-Hill continues to accrue performance fee basedon its currently projected total, less reserves deemed appropriate in thecircumstances, and remains subject to a 50% retainage holdback on itsperformance fee invoicing, the level of unbilled accounts receivable on itsbalance sheet will begin to increase substantially.  Kaiser-Hill will classify the difference between recordedperformance fee and the collected fee as long-term unbilled accounts receivableon its balance sheet, which will be included as a component of Investment inAffiliate on the Company’s balance sheet. The Closure Contract also contains provisions for DOE to releaseportions of the retainage holdback prior to contract completion if the DOEdeems appropriate.  Kaiser-Hill is notable to estimate whether any of the retainage holdback will be released priorto contract completion.

 

In both of the three-month periods ended March 31, 2003 and 2002, theequity income in earnings of affiliate is net of $0.9 million of amortizationof the excess of our carrying value of our investment in Kaiser-Hill over ourownership percentage of the underlying Kaiser-Hill equity.  We increased the carrying value of thisinvestment by $21.1 million as part of our adoption of Fresh-Start reporting asof December 31, 2000 and will continue to amortize that difference over theestimated life of the Kaiser-Hill investment of approximately 6 years.

 

*Administrative Expenses*

 

Administrative expenses for thethree months ended March 31, 2003 were $1.4 million, a decrease of $1.2 millioncompared to the three months ended March 31, 2002.  The decrease in administrative expense is due primarily toreductions in legal and professional fees totaling $0.5 million for thethree-month period.  These decreasesresult from our progress in winding down the discontinued operations of KaiserGroup International.  We anticipate further declines in general andadministrative spending as remaining litigation and bankruptcy claims areresolved.  Our cost to provide certainpost-employment medical****

 

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benefits to a capped group of retirees isalso treated as an administrative expense. In the three-month periods ended March 31, 2003 and 2002, the expenserelated to this plan was $0.2 million and $0.3 million, respectively.

 

*Gain on Sale of Stock*

 

We disposed of our investment in the commonstock of Prudential Insurance Company in February 2002 and recorded a gain of$106,000 at the time of the sale.

 

*Interest Income*

 

Interest income for the three months endedMarch 31, 2003 was $0.2 million, an increase of $0.1 million compared with thethree months ended March 31, 2002.  Theincrease is primarily due to the accrual of interest income on the ICFConsulting notes.  At March 31, 2002, wewere not accruing interest income on the ICF Consulting notes due touncertainties over the collectibility of accrued interest.  As of September 30, 2002, we restructuredthe ICF Consulting notes and began accruing interest on the new notes.

 

*Income Tax Expense*

 

We recorded an income tax expense of $1.2million on operating income from continuing operations of $3.2 million duringthe three months ended March 31, 2003. Our effective income tax rate of 39% is reflective of thenon-deductibility of certain expenditures for federal income tax purposes.  For the three months ended March 31, 2002,we recorded an income tax expense of $0.5 million on operating income fromcontinuing operations of $1.2 million.

 

*Loss from Discontinued Operations*

 

The loss from discontinued operationsconsists of the activities associated with the Nova Hut project.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

*OperatingActivities*

 

We used $1.4 million and $2.7 million of cashduring the three months ended March 31, 2003 and March 31, 2002, respectively,primarily for the extinguishment of obligations arising out of our bankruptcy,including severances, professional fees, retiree benefits and various otherwind-down expenditures.

 

*InvestingActivities*

 

We received $3.0 million in distributionsfrom Kaiser-Hill during the period ended March 31, 2003 compared to $2.6million in the period ended March 31, 2002. The increase of Kaiser-Hill cash distributions is a result of thecontinued favorable progress in its performance.

 

During the first quarter of 2002, weliquidated our holdings of shares of stock of Prudential Insurance Company andreceived approximately $6.0 million.  Wehad acquired the Prudential stock through the demutualization transactioneffected by the insurance company during the fourth quarter of 2001.

 

*FinancingActivities*

 

During the three months ended March 31, 2003,we redeemed $15.5 million liquidation preference of our preferred stock, net of$1.4 million liquidation preference of shares held as treasury stock.  Pursuant to the terms of the Plan ofReorganization, the Company used $8.9 million in excess restricted cash inaddition to $5.2 million of unrestricted cash to facilitate this redemption.

 

During the three months ended March 31, 2003and 2002, we paid $1.0 million and $1.1 million, respectively, in dividends onour preferred stock.   During the threemonths ended March 31, 2002, we acquired 3,000 shares of preferred stock for$0.1 million.

 

*Liquidity andCapital Resource Outlook*

 

We currently have no debt as a result of the effectiveness of the Planof Reorganization. We have financed the initial 

 

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bankruptcy distribution requirements and follow-on working capitalneeds in part through the use of the available cash and distributions fromKaiser-Hill and from other asset sale proceeds. Based on (i) currentexpectations for operating activities and results, (ii) expected Kaiser-Hilldistributions, (iii) our current available cash position, (iv) recent trendsand projections in liquidity and capital needs, and (v) current expectations oftotal allowed claims upon the completion of the bankruptcy proceedings,management believes we have sufficient liquidity to cover the required cashdistributions resulting from the resolution of claims in the bankruptcyprocess, our future operating needs and income tax requirements, as well as thedividend requirements applicable to the our preferred stock.  Furthermore, as allowed Class 4 claims areresolved, we will continue to review the timing of additional partial preferredstock redemptions.

 

We have obligations to pay dividends onoutstanding preferred stock at March 31, 2003. Accordingly, we are required to present the following table assumingthat no preferred stock redemptions are made until the mandatory redemptiondate of December 31, 2007, no additional shares are issued and that all futuredividends are paid in cash (irrespective of this disclosure requirement, we arenot representing intentions with regard to the timing of preferred stockredemptions).  The effect theseobligations are expected to have on our liquidity and cash flow in future periodsare as follows:

 
|                      |   | **Total** |   | **Less Than One  Year** |   | **One to Three  Years** |   | **After Three  Years** |   |
|---------------------------|--------|-----------|--------|-------------------------|--------|-------------------------|--------|------------------------|--------|
| Preferred Stock dividends |   | $         | 13,897 |                    | $      | 2,926                   |   | $                      | 5,851  |   | $ | 5,120 |   |
|                           |        |           |        |                         |        |                         |        |                        |        |  |  |  |  |

 

 

*Other Matters*

 

We have various obligations and liabilitiesfrom our continuing operations, including general overhead expenses inconnection with maintaining, operating and winding down the variousentities.  Additionally, we believecontingent liabilities may exist in the areas described in Note 6 to the ConsolidatedFinancial Statements.

 

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**RISK FACTORS RELATING TO KAISER HOLDINGS AND**

**FORWARD-LOOKING STATEMENTS**

 

This Quarterly Report on Form 10-Q contains, and our periodic filingswith the Securities and Exchange Commission and written or oral statements made by our officers and directors to press,potential investors, securities analysts and others, may contain,forward-looking statements within the meaning of Section 27A of the SecuritiesAct of 1933 and Section 21E of the Securities Exchange Act of 1934.  These forward-looking statements are nothistorical facts, but rather are predictions and generally can be identified byuse of statements that include phrases such as “believe,” “expect,”“anticipate,” “estimate,” “intend,” “plan,” “foresee” or other words or phrasesof similar import.  Similarly,statements that describe or containinformation related to matters such as our intent, belief, or expectation withrespect to financial performance, claims resolution, cash availability, stockredemption plans, contract awards and performance, potential acquisitions andjoint ventures, and cost-cutting measures are forward-looking statements. Theseforward-looking statements often reflect a number of assumptions and involveknown and unknown risks, uncertainties and other factors that could cause ouractual results to differ materially from those currently anticipated in theseforward-looking statements.  In light ofthese risks and uncertainties, including those described below, theforward-looking events might or might not occur.

** **

**Ourlong-term future profitability is significantly tied to Kaiser-Hill, which issubject to uncertainties that may adversely affect our operating results.**

 

*The fee income wewill receive from Kaiser-Hill is dependent upon the ability of Kaiser-Hill toclose the Rocky Flats site at a predetermined targeted cost of between $3.6billion and $4.8 billion and closing date of not later than March 31, 2007,both of which are uncertain.*

 

Our long-termfuture profitability will be dependent, to a significant extent, on theperformance of Kaiser-Hill under its contract with the Department ofEnergy.  Kaiser-Hill serves as thegeneral contractor at the Rocky Flats Environmental Technology site near Denver,Colorado, a former nuclear weapons production facility. Kaiser-Hill’s contractwith the Department of Energy includes a performance fee based upon acombination of the actual costs incurred to complete the site closure and theactual date of completion of the closure. If Kaiser-Hill fails to complete the closure within the target cost forthe project of between $3.6 billion and $4.8 billion, Kaiser-Hill’s fee will bereduced to a level significantly less than the fee estimate currently beingused to recognize income on the project and further reduced by 30% of the costsincurred after the target date of March 31, 2007.  Kaiser-Hill is also subject to a $20.0 million maximum penalty ifthe December 31, 2007 closure date is not met.

 

Kaiser-Hill hashistorically incurred expenses that are not reimbursable by the Department ofEnergy pursuant to the federal regulations. Accordingly such expenses, which Kaiser-Hill estimates could approximateup to 15% - 20% of the total award fee, will be deducted from the total feeprior to any distributions of net fees to either us or CH2M Hill Companies,Ltd. For reasons similar to those described in the following paragraph, it isdifficult to estimate either the amount of net fee to be distributed to theowners of Kaiser-Hill and or the effect, if any, that such unreimbursable costswould have on our future cash flows.  Adecrease in our cash flows could result in a decrease in the value of ourcommon and preferred stock.

 

*There aresubstantial performance risks associated with Kaiser-Hill’s work at the RockyFlats site.  The performance risks mayimpact the timing and cost of closing the site, which in turn could impact ourfee income from Kaiser-Hill.*

 

The clean-up and closure of the Department of Energy’s Rocky Flats site involve substantialperformance risks.  Among other things,Kaiser-Hill’s activities at the Rocky Flats site involve the clean-up,packaging and transportation of nuclear waste, and the demolition anddestruction of facilities where nuclear weapons components were previouslyproduced.  Some of these activities havenot been previously performed elsewhere, and therefore require the developmentof innovative and untested approaches. Kaiser-Hill emphasizes safety in its performance, but the nature of theRocky Flats site and the activities of Kaiser-Hill and its subcontractors atthe site are such that serious injuries, or even deaths, are possible.  Significant safety incidents at the sitecould stop or significantly impede the progress of work being performed at thesite by Kaiser-Hill and its subcontractors. The Department of Energycontract contemplates that all, or substantially all, of the nuclear waste atRocky Flats will be transported to other sites operated or managed by the Departmentof Energy. The appropriate sites for storage of certain of those nuclear wasteshave not yet been identified.  Inaddition, third-party objections have arisen from time to time with regard tothe transportation to, and storage of nuclear waste at, certain sitespreviously designated by the Department of Energy to receive waste from RockyFlats, including the Department of Energy’s Savannah River site in SouthCarolina.  Deliveries of waste to theSavannah River site were delayed as a result of objections interposed by theGovernor of South Carolina.  Deliveriesto the Savannah River site have begun, but it is possible that similarobjections will be raised with respect to the transportation to, and storage ofwaste from Rocky Flats at, other Department of Energy sites.  Although the Department of Energy contractcontemplates that the Department of Energy is responsible for providingtransportation and storage sites for 

 

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nuclear waste from Rocky Flats, an inability to ship plutonium and othernuclear waste to Department of Energy sites would pose a substantial risk tothe timely closure of the Rocky Flats site, and could interfere withKaiser-Hill’s ability to earn the fees to which Kaiser-Hill believes it shouldbe entitled.  This loss of fee income couldadversely affect our operating results, which could in turn result in adecrease in the value of our common and preferred stock.

 

*There are potentialsubstantial liabilities and costs associated with Kaiser-Hill’s Department ofEnergy contract, which may directly and indirectly impact our fee income fromKaiser-Hill.*

 

Under the Department of Energy contract, Kaiser-Hill is responsible for,and the Department of Energy will not pay for costs associated with,liabilities caused by the willful misconduct or lack of good faith ofKaiser-Hill’s managerial personnel or the failure to exercise prudent businessjudgment by Kaiser-Hill’s managerial personnel. If Kaiser-Hill were foundliable for any of these reasons, the associated costs could be substantial, whichcould have an adverse effect on our operating results. A decrease in ouroperating results could cause a decrease in the value of our common andpreferred stock.

 

**We face significantcontingencies, which may adversely impact our ability to meet our obligationson our preferred stock, to fund our continuing operations and to undertake newoperations.**

 

*Our cash flow ispartially dependent on the wind-down of the Nova Hut project and theprobability of receiving our payment from Nova Hut is currently uncertain.*

 

Our cash flow is partially dependent on the resolution of disputesrelating to Kaiser Netherlands’ performance under its fixed-price contract forturnkey engineering and construction services relating to the Nova Hut projectand on the ability of Nova Hut, which is in financial difficulty, to pay forsuch services.

 

*We do not have abusiness plan beyond Kaiser-Hill and the Nova Hut project, and we may or maynot undertake new activities.*

 

Our long-term future profitability will be dependent, to a significantextent, on our ability to develop a business plan for ongoing operations.Unless and until our Board of Directors develops such a business plan, we areunable to determine either the amount of risk that future operations willinvolve or whether we have the ability to realize long-term profitability. Itis possible that our ongoing business plan will be limited to resolving issuesrelated to the Nova Hut project and participating in the activities ofKaiser-Hill.  However, our Board ofDirectors is considering whether we should attempt to develop a new revenuebase.  Such efforts could, for example,attempt to take advantage of our successful history of performing in thegovernment services market, both independently and through Kaiser-Hill.  Our efforts to develop a revenue baseseparate from Kaiser-Hill may involve start-up activities with risks peculiarto activities of this type, which may adversely impact our cash flow andoperating results. A decrease in our cash flows and operating resultscould result in a decrease in the value of our common and preferred stock.

 

*We may be unable toobtain performance guarantees, which may limit our ability to undertake newactivities.*

 

Given the reorganization history of Kaiser Group Holdings, Inc., we maynot be able to obtain satisfactory contract performance guaranty mechanisms,such as performance bonds and letters of credit, at all or on satisfactoryterms, to the extent such mechanisms are needed for new projects.  These factors could limit the nature of thebusiness activities in which we could engage should we decide to attempt todevelop a new revenue base apart from Kaiser-Hill, which may adversely impactour cash flow and operating results and result in a decrease in thevalue of our common and preferred stock.

 

*We may be unable togenerate funds to meet our obligations and we may be unable to accessadditional capital.*

 

We may be unable to continue to generate sufficient funds to meet ourobligations, notwithstanding the significant improvements in our operations andfinancial condition.  Although webelieve that we will be able to generate sufficient funds to meet our workingcapital needs for the foreseeable future, our ability to gain access toadditional capital, if needed, is not certain. Due to reorganization history ofKaiser Group Holdings, Inc. and current financial markets, it is difficult topredict whether additional capital would be available to us in the event thatwe were unable to general funds to meet our obligations.  Our inability to gain access to additionalcapital may also limit our ability to undertake new activities.  Ultimately, our inability to meet ourexisting obligations or to undertake new activities could adversely impact ourcash flow and operating results.  Adecrease in our cash flows and operating results could result in a decrease inthe value of our common and preferred stock.

 

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*Inthe event of a change of control, we may not have the financial resources toredeem preferred stock.*

 

Our preferredstock is redeemable at the option of the holder upon a change of control asdefined in the terms of the preferred stock. We are not presently aware of any events that would cause a change ofcontrol.  However, based on a Report onForm 4 dated February 12, 2003, which was filed with the Securities andExchange Commission by Tennenbaum & Co., LLC on February 13, 2003, webelieve that Tennenbaum & Co., LLC and Michael E. Tennenbaum together ownapproximately 47.2% of our common stock. The terms of our preferred stock provide that a change of control occurswhen, among other things, a person or “group” (within the meaning of Section13(d)(3) of the Securities Exchange Act of 1934) directly or indirectlyacquires “beneficial ownership” (as defined in Rule 13d-3 under the SecuritiesExchange Act of 1934) of more than 50% of all classes of our common equity(defined in the terms of our preferred stock as capital stock entitled to votein the election of directors).

 

In the event that we are required to redeem preferred stock due to achange of control, we may not have available capital to redeem the stock.  Ourability to gain access to additional capital from outside sources, if needed,is not certain.  The inability to gainaccess to additional capital may limit our ability to meet the redemptionobligations with respect to the preferred stock.

 

**ITEM3****.   QUANTITATIVE AND QUALITATIVEINFORMATION ABOUT MARKET RISK**

 

We do not believe that we have significantexposures to market risk as we do not presently have any debt.  The interest rate risk associated with ourobligation to fund a capped retiree medical obligation is not sensitive tointerest rate risk other than via the determination of the present value of ourremaining obligation there under.  A 10%increase or decrease in the average annual prime rate would result in adecrease in the carrying value of the plan obligation but would not change theactual cost of the plan.

 

**ITEM4****.  CONTROLS AND PROCEDURES**

 

Based upon an evaluation by our ChiefExecutive Officer and Chief Financial Officer within 90 days prior to thefiling date of this Quarterly Report on Form 10-Q, they have concluded that ourdisclosure controls and procedures, as defined in Rule 13a-14(c) and Rule15d-14(c) under the Securities Exchange Act of 1934, as amended, are effectivein ensuring that all material information required to be filed in thisQuarterly Report has been made known to them in a timely fashion.

 

There were no significant changes in ourinternal controls or in other factors that could significantly affect internalcontrols subsequent to the date of the evaluation referred to above.

 

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**PARTII****- OTHER INFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS**

 

As previously reported in the Annual Reporton Form 10-K for the year ended December 31, 2002.

 

**ITEM 2.  CHANGES IN SECURITIESAND USE OF PROCEEDS**

 

(a) None

(b) None

(c) Recent Sales of Unregistered Securities

 

On January 15, 2003, we issued 1,000 shares of our common stock to eachof John T. Grigsby, Jr., James J. Maiwurm, John B. Bennett and Frank E.Williams, Jr. as part of their compensation for service as officers and membersof the Board of Directors. These issuances were exempt from registration underSection 4(2) of the Securities Act of 1933.

 

(d) Not applicable

 

**ITEM 3.  DEFAULTS UPON SENIORSECURITIES**

 

(a) None

(b) None

 

**ITEM 4.  SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS**

 

None

 

**ITEM 5.  OTHER INFORMATION**

 

None

 

**ITEM 6.  EXHIBITS AND REPORTS ONFORM 8-K**

** **

**ExhibitNo. 2—Plan of Acquisition, reorganization, arrangement, liquidation orsuccession**

 

2(a) Second Amended Plan of Reorganization(Incorporated by reference to Exhibit 2 to Current Report on Form8-K (Registrant No. 1-12248) filedwith the Commission on December 14, 2000)

 

**ExhibitNo. 3—Articles of Incorporation and By-laws of the Registrant**

 

3(a)  Certificate ofIncorporation of Kaiser Group Holdings, Inc. (Incorporated by reference toExhibit 3(i) to Current Report on Form 8-K (Registrant No. 1-12248) filed withthe Commission on December 14, 2000)

 

3(b)  By-laws of Kaiser GroupHoldings, Inc. (Incorporated by reference to Exhibit 3(ii) to Current Report onForm 8-K (Registrant No. 1-12248) filed with the Commission on December 14,2000)

 

**ExhibitNo. 4—Instruments Defining the Rights of Security Holders, including Indentures**

 

4(a) Form of Put Agreement relating to preferred stock of Kaiser GroupHoldings, Inc. (Incorporated by reference to Exhibit 4 to Current Report onForm 8-K (Registrant No. 1-12248) filed with the Commission on December 14,2000)

 

**ExhibitNo. 10 — Material Contracts**

 

10(a) Kaiser Group International, Inc. Employee Stock Ownership Plan (asamended and restated as of January 1, 1996) (Incorporated by reference to Exhibit No. 10(b) to Annual Report on Form10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

1.  Amendment No. 1 with theeffective date of January 1, 1998 (Incorporated by reference to Exhibit No. 10(b)(1) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

2.  Amendment No. 2 with the effective date ofJanuary 1, 1996  (Incorporated by reference to Exhibit No. 10(b)(2) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

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3.  Amendment No. 3 dated April19, 1999  (Incorporated by reference toExhibit No. 10(b)(3) to Annual Report on Form 10-K (Registrant No. 1-12248)filed with the Commission on April 17, 2000)

 

4.  Amendment No. 4 dated June25, 1999 (Incorporated by reference to Exhibit No. 10(b)(4) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

10(b) Trust Agreement with Vanguard FiduciaryTrust Company dated as of August 31, 1995, for ICF Kaiser International, Inc.Employee Stock Ownership Plan (Incorporated by reference to Exhibit No. 10(c)to Registration Statement on Form S-1 (Registrant No. 33-64655) filed with theCommission on November 30, 1995)

 

10(c) ICF Kaiser International, Inc. Retirement Plan (as amended andrestated as of March 1, 1993) (and further amended with respect to name changeonly as of June 26, 1993) (Incorporated by reference to Exhibit No. 10(d) toQuarterly Report on Form 10-Q (Registrant No. 1-12248) for the second quarterof fiscal 1994 filed with the Commission on October 15, 1993)

 

1.  Amendment No. 1 dated April 24, 1995(Incorporated by reference to Exhibit No. 10(d)(1) to Annual Report on Form10-K (Registrant No. 1- 12248) filed with the Commission on May 23, 1995)

 

2. Amendment No. 2 dated December 15, 1995 (Incorporated by reference toExhibit No. 10(d)(2) to Transition Report on Form 10-K (Registrant No. 1-12248)for the transition period from March 1, 1995 to December 31, 1995 filed withthe Commission on March 29, 1996)

 

3.  Amendment No. 3 dated December 13, 1996(Incorporated by reference to Exhibit No. 10(d)(3) to Registration Statement onForm S-1 (Registrant No. 333-19519) filed with the Commission on January 10,1997)

 

4.  Amendment No. 4 dated April19, 1999 (Incorporated by reference to Exhibit No. 10(d)(4) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

5.  Amendment No. 5 dated June25, 1999 (Incorporated by reference to Exhibit No. 10(d)(5) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

6.  Amendment No. 6 dated August30, 1999 (Incorporated by reference to Exhibit No. 10(d)(6) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

7.  Amendment No. 7 dated April 13, 2000(Incorporated by reference to Exhibit 10(d)(7) on Form 8-K (Registrant No.1-12248) filed with the Commission on May 2, 2000)

 

8.  Amendment No. 8 dated June8, 2000 (Incorporated by reference to Exhibit 10(d)(8) to Quarterly Report onForm 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 2000 filedwith the Commission on September 6, 2000)

 

10(d) Trust Agreement with Vanguard FiduciaryTrust Company dated as of August 31, 1995, for ICF Kaiser International, Inc.Retirement Plan (Incorporated by reference to Exhibit No. 10(e) to RegistrationStatement on Form S-1 (Registrant No. 33-64655) filed with the Commission onNovember 30, 1995)

 

10(e)       ICF KaiserInternational, Inc. Section 401(k) Plan (as amended and restated as of March 1,1993) (and further amended with respect to name change only as of June 26,1993) (Incorporated by reference to Exhibit No. 10(f) to Quarterly Report onForm 10-Q (Registrant No. 1-12248) for the second quarter of fiscal 1994 filedwith the Commission on October 15, 1993)

 

1. Amendment No. 1 dated April 24, 1995 (Incorporated by reference toExhibit No. 10(p)(1) to Annual Report on Form 10-K (Registrant No. 1-12248) forfiscal 1995 filed with the Commission on May 23, 1995)

 

2.  Amendment No. 2 dated December 15, 1995(Incorporated by reference to Exhibit No. 10(p)(2) to Transition Report on Form10-K (Registrant No. 1-12248) for the transition period from March 1, 1995 toDecember 31, 1995 filed with the Commission on March 29, 1996)

 

3. Amendment No. 3 dated December 13, 1996 (Incorporated by reference toExhibit No. 10(q)(3) to Registration Statement on Form S-1 (Registrant No.333-19519) filed with the Commission on January 10, 1997)

 

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4. Amendment No. 4 dated April 8, 1999 (Incorporated by reference toExhibit No. 10(k)(4) to Annual Report on Form 10-K (Registrant No. 1-12248)filed with the Commission on April 17, 2000)

 

5.  Amendment No. 5 dated June25, 1999 (Incorporated by reference to Exhibit No. 10(k)(5) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

6.  Amendment No. 6 dated April 13, 2000(Incorporated by reference to Exhibit 10(k)(6) on Form 8-K (Registrant No.1-12248) filed with the Commission on May 2, 2000)

 

7.  Amendment dated January 1, 2001(Incorporated by reference to Exhibit No. 10(m)(7) to Annual Report on Form 10-K(Registrant No. 1-2248) filed with the Commission on March 30, 2001)

 

10(f) Trust Agreement with Vanguard Fiduciary Trust Company dated as of March1, 1989, for the ICF Kaiser International, Inc. Section 401(k) Plan(Incorporated by reference to Exhibit No. 28(b) to Registration Statement onForm S-8 (Registrant No. 33-51460) filed with the Commission on August 31,1992)

 

10(g)  Asset Purchase Agreementbetween The IT Group, Inc. and ICF Kaiser International, Inc. dated March 9,1999 (Incorporated by reference to Exhibit C to Registration Statement on Form8-K (Registrant No. 1- 12248) filed with the Commission on April 23, 1999)

 

10(h) Contract between Kaiser-Hill Company,LLC, a subsidiary of the Corporation, and the U.S. Department of Energy dated January24, 2000 (Incorporated by reference to Exhibit No. 10(o) to Annual Report onForm 10-K (Registrant No. 1-12248) filed with the Commission on April 17, 2000)

 

10(i) Master Transaction Agreement between Tyco Group S.a.r.l. and KaiserGroup International, Inc. dated June 9, 2000 (Incorporated byreference to Exhibit 10(p) to Quarterly Report on Form 10-Q (Registrant No.1-12248) for the second quarter of fiscal 2000 filed with the Commission onSeptember 6, 2000)

 

1.  Amendment No. 1 to theMaster Transaction Agreement between TycoGroup S.a.r.l. and Kaiser Group International, Inc. dated June 9, 2000 (Incorporatedby reference to Exhibit 10(p)(1) to Quarterly Report on Form 10-Q (RegistrantNo. 1-12248) for the second quarter of fiscal 2000 filed with the Commission onSeptember 6, 2000)

 

10(j) Master Transaction Agreement between Hatch Associates, Inc. and KaiserGroup International, Inc. dated July 6, 2000 (Incorporated byreference to Exhibit 10(q) to Quarterly Report on Form 10-Q (Registrant No. 1-12248)for the second quarter of fiscal 2000 filed with the Commission on September 6,2000)

 

10(k)  Assignment of MembershipInterest in Hunters Branch Leasing, LLC by and between Kaiser HoldingsUnlimited, Inc. (Assignor) and NutleyPartners, LC (Assignee), dated January 1, 2001 (Incorporated byreference to Exhibit No. 10(r) to Annual Report on Form 10-K (Registrant No.1-12248) filed with the Commission on April 2, 2001)

 

**ExhibitNo. 10—Material Contracts (management contracts, compensatory plans, or arrangements.)**

 

10(l)  Kaiser Group Holdings,Inc. 2002 Equity Compensation Plan (Incorporated by reference to Exhibit No.10(n) to Registration Statement on Form S-4 (Registrant No. 333-100640) filedwith the Commission on October 18, 2002)

 

10(m)  Amended and RestatedEmployment Agreement with John T. Grigsby, Jr., President and Chief ExecutiveOfficer, effective as of December 19, 2000 (Incorporated by reference toExhibit No. 10(m) to Registration Statement on Form S-4 (Registrant No.333-100640) filed with the Commission on October 18, 2002)

 

**ExhibitNo. 21—Consolidated Subsidiaries of the Registrant as of April 30, 2003**

 

**ExhibitNo. 99.1 — Certification of the Chief Executive Officer**

Pursuant to18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002

 

**ExhibitNo. 99.2 — Certification of the Chief Financial Officer**

Pursuant to18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002

 

**(b)Reports on Form 8-K**

 

None

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this QuarterlyReport on Form 10-Q to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|               | **KAISER GROUP  HOLDINGS, INC.**                |   |
|--------------------|-------------------------------------------------|--------|
|               | (Registrant)                                    |   |
|               |                                            |
| Date: May 15, 2003 |                                            |
|               |                                            |
|               | /s/ Marijo L. Ahlgrimm                          |   |
|               | Marijo L. Ahlgrimm                              |
|               | Executive Vice President and Chief  Financial   |
|               | Officer (Duly authorized officer and  principal |
|               | financial officer)                              |
|                    |                                                 |        |  |

 

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**CERTIFICATION**

 

I, John T.Grigsby, Jr., Chief Executive Officer of the registrant, certify that:

 

1)              I have reviewed this quarterly report on Form 10-Q ofKaiser Group Holdings, Inc.;

 

2)              Based on my knowledge, this quarterly report does notcontain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the period coveredby this quarterly report;

 

3)              Based on my knowledge, the financial statements, andother financial information included in this quarterly report, fairly presentin all material respects the financial condition, results of operations andcash flows of the registrant as of, and for, the periods presented in thisquarterly report;

 

4)              The registrant’s other certifying officer and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and wehave:

 

a)              designed such disclosure controls and procedures toensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

b)             evaluated the effectiveness of the registrant’sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5)              The registrant’s other certifying officer and I havedisclosed, based on our most recent evaluation, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or personsperforming the equivalent function):

 

a)              all significant deficiencies in the design oroperation of internal controls which could adversely affect the registrant’sability to record, process, summarize and report financial data and haveidentified for the registrant’s auditors any material weaknesses in internalcontrols; and

 

b)             any fraud, whether or not material, that involvesmanagement or other employees who have a significant role in the registrant’sinternal controls; and

 

6)              The registrant’s other certifying officer and I haveindicated in this quarterly report whether or not there were significantchanges in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

 
| May  15, 2003 |   |   |   | /s/  John T. Grigsby, Jr. |                                   |
|---------------|--------|--------|--------|---------------------------|----------------------------------------|
|          |   |   |   |                      | John  T. Grigsby, Jr.,                 |
|          |   |   |   |                      | President  and Chief Executive Officer |
|               |        |        |        |                           |                                        |  |

 

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**CERTIFICATION**

 

I, Marijo L.Ahlgrimm, Chief Financial Officer of the registrant, certify that:

 

1)     I have reviewedthis quarterly report on Form 10-Q of Kaiser Group Holdings, Inc.;

 

2)              Based on my knowledge, this quarterly report does notcontain any untrue statement of a material fact or omit to state a materialfact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the periodcovered by this quarterly report;

 

3)              Based on my knowledge, the financial statements, andother financial information included in this quarterly report, fairly presentin all material respects the financial condition, results of operations andcash flows of the registrant as of, and for, the periods presented in thisquarterly report;

 

4)              The registrant’s other certifying officer and I areresponsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and wehave:

 

a)              designed such disclosure controls and procedures toensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this quarterly report is beingprepared;

 

b)             evaluated the effectiveness of the registrant’sdisclosure controls and procedures as of a date within 90 days prior to thefiling date of this quarterly report (the “Evaluation Date”); and

 

c)              presented in this quarterly report our conclusionsabout the effectiveness of the disclosure controls and procedures based on ourevaluation as of the Evaluation Date;

 

5)              The registrant’s other certifying officer and I havedisclosed, based on our most recent evaluation, to the registrant’s auditorsand the audit committee of registrant’s board of directors (or persons performingthe equivalent function):

 

a)              all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)             any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theregistrant’s internal controls; and

 

6)              The registrant’s other certifying officer and I haveindicated in this quarterly report whether or not there were significantchanges in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

 
| May  15, 2003 |   | /s/  Marijo L. Ahlgrimm |                          |
|---------------|--------|-------------------------|-------------------------------|
|          |   |                    | Marijo  L. Ahlgrimm,          |
|          |   |                    | Executive  Vice President and |
|               |        |                         |                               |  |

 

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