Kaiser Group Holdings Shares Second Quarter Results

September 26, 2011

The income statement at Kaiser Group Holdings, Inc. (KGHI.PK) changes little from quarter to quarter as the company continues to report losses, however management has been hard at work putting the cash on the balance sheet to work. In the second quarter ended June 30, 2011 the company reported a loss of $801 thousand or ($0.57) per share and revenues remained absent. For the first six months the loss was $1.52 million or ($1.08) per share and no revenues.

While the income statement has remained stagnant with continued losses, the management has been making some strategic acquisitions. The most notable transactions include the purchase of an additional 10% of Bally Total Fitness bringing the Company’s ownership to approximately 20% and the acquisition of the assets of Alabama Aircraft Industries, Inc. (AAIIQ.PK) by the Company’s wholly owned subsidiary Kaiser Aircraft Industries, Inc. for $500 thousand. AAII filed for chapter 11 bankruptcy in February 2011 and the sale to Kaiser was approved by the court in early September.

AAII is a 60 year old firm based in Birmingham, Alabama that provides aircraft maintenance and modification services to primarily government and military customers. The acquisition of Alabama Aircraft Industries, Inc. provides the platform for Kaiser to start producing regular operating revenues, but it could be an uphill battle. On the surface it would appear that the primary reason for the AAII bankruptcy was to get out from underneath a pension liability that may have been as high as $70 million and to break a long-standing labor contract with the United Auto Workers union. The catalyst that started the tailspin was the loss of a $1.1 billion contract to Boeing resulting in plunging revenues. The company has since filed suit against Boeing for various allegations of misconduct on the part of Boeing. These moves should make the company more competitive and allow it to begin attracting new business in a highly competitive commercial market in addition to its government contracts.

Kaiser continues to repurchase it own stock and has repurchased a total of 470,422 share through September 21, 2011 representing approximately 26% of the issued shares. The Company also increased its investment in Tennenbaum Opportunities Fund VI, LLC by $2 million bringing the Company’s total investment to $3.1 million. Kaiser still has an unfunded capital commitment of $11.9 million which can be called by the fund any time over the next 18 months.

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