HALTER MARINE GROUP INC, 424B4, 1996-09-26

HALTER MARINE GROUP INC
424B4, 1996-09-26
SHIP & BOAT BUILDING & REPAIRING

Previous: SPRINT SPECTRUM FINANCE CORP, 10-Q, 1996-09-26

Next: ALLEGIANCE CORP, S-8, 1996-09-26

<PAGE> 1

PROSPECTUS Filed Pursuant to Rule 424(b)(4)
SEPTEMBER 25, 1996 Registration No. 333-6967

3,000,000 SHARES

HALTER LOGO

COMMON STOCK

All of the shares of Common Stock offered hereby (the "Offering") are being
sold by Halter Marine Group, Inc. (the "Company"). Prior to the Offering, the
Company has operated as a wholly owned subsidiary of Trinity Industries, Inc.
("Trinity"). Upon completion of the Offering, Trinity will continue to own
approximately 83.3% of the outstanding Common Stock (81.3% if the Underwriters
exercise their over-allotment option in full). Trinity has announced its
intention, subject to satisfaction of certain conditions, to divest itself of
its remaining ownership interest in the Company. See "Separation From Trinity."

Prior to the Offering, there has been no public market for the Common
Stock. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price.

The shares of Common Stock have been approved for listing on the American
Stock Exchange (the "AMEX"), subject to official notification of issuance.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
====================================================================================
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................... $11.00 $0.77 $10.23
Total(3).................... $33,000,000 $2,310,000 $30,690,000
====================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $1,070,000.
(3) The Company has granted the Underwriters an over-allotment option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
450,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to the Public, Underwriting Discounts and
Commissions and Proceeds to the Company will be $37,950,000, $2,656,500 and
$35,293,500, respectively. See "Underwriting."

The shares of Common Stock are offered by the several Underwriters, when,
as and if delivered to and accepted by the Underwriters, and subject to various
conditions, including their right to reject any order in whole or in part. It is
expected that delivery of share certificates will be made in New York, New York,
on or about October 1, 1996.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEAN WITTER REYNOLDS INC.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS INCORPORATED
MERRILL LYNCH & CO.
<PAGE> 2

[HALTER MARINE LOGO]

Halter Marine has built more off-
shore support vessels to service
offshore oil and gas drilling rigs
and production platforms than
any shipbuilder in the United
States. This anchor handling tug
supply boat constructed by the
Company is capable of towing
and positioning offshore drilling
rigs and their anchors as well as
providing supply vessel services.

[Picture of anchor handling
tug supply boat]

[Picture of multi-directional [Picture of double hull tank
tractor tug] barge and tug]

Halter Marine's construction Halter Marine has positioned itself
capabilities have kept pace with to benefit from the expected increase
the expanded role of tug boats in in offshore tank barge construction
servicing offshore and harbor operations. and conversion. Demand for double
The above 156-foot multi-directional hull barges has been created by the
tractor tug constructed by the Company Oil Pollution Act of 1990. The above
is capable of towing and pushing, 467-foot double hull tank barge and
moving and positioning, tanker escort tug constructed by the Company
and other support services. carries a large cargo of petroleum
products.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE, SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information contained in this
Prospectus (i) gives effect to the consolidation of the assets and liabilities
of the Company Businesses (as defined herein) described under "Separation From
Trinity -- Consolidation Transactions" and (ii) assumes that the Underwriters
will not exercise their over-allotment option (the "Over-Allotment Option").

THE COMPANY

The Company is the seventh largest shipbuilder, and the largest builder of
small to medium sized ocean-going ships and barges and inland tow boats, in the
United States. The Company, which has built more than 2,000 vessels in the past
40 years, specializes in the construction, repair and conversion of a wide
variety of vessels for the commercial and governmental markets. The Company's
principal products include offshore support vessels, offshore double hull tank
barges, offshore tug boats and oil spill recovery vessels for commercial use and
oceanographic survey and research ships, high speed patrol boats and ferries for
government use.

The Company has ten shipyards (including one that currently is idle) which
are strategically located along the Gulf Coast from Louisiana to Florida. The
Company's multiple shipyards employ advanced manufacturing techniques, including
modular construction and zone outfitting methods, and provide the Company
significant flexibility and efficiency in manufacturing a wide variety of
vessels. The Company believes that these factors, together with its large and
experienced engineering team and work force, make the Company one of the most
versatile and cost-efficient shipbuilders in the United States. The United
States, the European Union, Finland, Japan, Korea, Norway and Sweden
collectively control over 75% of the market share for worldwide vessel
construction.

As of July 31, 1996, the Company had firm shipbuilding contracts with an
aggregate remaining value of approximately $417 million (excluding unexercised
options held by customers), covering a total of 115 vessels (including 50 inland
hopper barges). Of this contract value, approximately $181 million was
attributable to contracts to build ships for the U.S. Navy.

The Company's strategy is to enhance its position as a leading manufacturer
of small to medium sized vessels, to respond to anticipated new shipbuilding
construction opportunities and to increase its revenues and profitability. The
following are the key elements of the Company's strategy:

- Wide Variety of Products for Diversified Markets. The Company's
shipbuilding versatility is one of its principal competitive strengths,
not only reducing its dependence on particular types of products, but also
providing engineering and manufacturing benefits across product lines. The
Company intends to continue to serve diversified markets, including a
balance of commercial and governmental shipbuilding projects. In fiscal
1996, the Company delivered 64 vessels, with commercial and governmental
projects accounting for 46.3% and 53.7% of revenues, respectively.

- New Construction Opportunities. The Company believes that it is well
positioned to take advantage of the expected upturn in the market for
offshore support vessels to service oil and gas drilling rigs and
production platforms and the expected increase in offshore tank barge
construction and conversion resulting from the requirements of the Oil
Pollution Act of 1990 ("OPA '90").

- Offshore Support Vessels. The Company has built more offshore support
vessels (including supply boats, anchor handling tug supply boats and
anchor handling tugs) than any shipbuilder in the United States. As a
result of the severe downturn in the oil and gas industry in the
mid-1980's, there has been very limited construction of offshore
support vessels in the United States since 1985. During the period from
1985 through 1995, the Company built eight new 200-foot or longer
offshore support vessels, more than any other U.S. shipbuilder. The
Company's offshore support vessel manufacturing activities during this
period have enabled it to gain a competitive advantage

3
<PAGE> 4

through experience with recent advances in vessel engineering and
construction techniques. The Company expects that substantial orders
for new offshore support vessels may be made in the next several years
due to the demand for larger vessels to support deep water oil and gas
exploration and production activities, as well as the substantial
worldwide fleet attrition over the past ten years and the aging of the
remaining fleet. The Company currently has eight offshore support
vessels under contract, of which six contracts have been entered into
since July 1, 1996. The Company also has outstanding options for eight
additional vessels, including seven from one customer, and is bidding
on a number of substantial potential orders for such vessels.

- Offshore Double Hull Tank Barges. OPA '90 generally requires certain
U.S. and foreign vessels carrying fuel or other hazardous cargos and
entering U.S. ports to have double hulls by 2015. OPA '90 establishes a
phase-out schedule that began January 1, 1995 for all existing single
hull vessels based on the vessel's age and gross tonnage. The Company
estimates that OPA '90 will require approximately 66 barges engaged in
domestic trade to be retrofitted or replaced by 2005 and another
approximately 22 such barges to be retrofitted or replaced by 2010.
During the past three years, the Company has built eight large offshore
double hull tank barges, more than any other U.S. shipbuilder. The
Company currently has three such barges under construction and has an
outstanding option from a customer for one additional barge. In
addition, the Company is bidding on a number of other substantial barge
construction projects.

- Multiple, Strategically Located Shipyards. The Company's multiple
shipyards, which are strategically located along the Gulf Coast, provide
it with significant flexibility and efficiency in manufacturing a wide
variety of vessels. The Company utilizes certain shipyards with
specialized machinery to centrally manufacture various components for its
other shipyards, helping to reduce costs and equipment redundancy. The
Company has spent approximately $46.5 million in the past five years to
acquire, expand and improve its shipyard facilities, which are well
maintained.

- Low Cost Structure. The Company believes it is one of the most
cost-efficient shipbuilders in the United States. The Company's shipyards
employ many advanced manufacturing techniques including modular
construction methods, which the Company was among the first U.S.
shipbuilders to use, zone outfitting methods, advanced welding techniques,
panel line fabrication, computerized plasma arc metal cutting and
automatic sandblasting and painting.

- Additional Capacity at Existing Facilities. The Company has the ability
to significantly increase production at its existing shipyards. As of June
30, 1996, the Company employed 2,597 shipyard workers and estimates that
it could employ a maximum of approximately 3,670 workers without
significant expansion of its plant facilities. While some of its principal
competitors are experiencing a severe shortage of skilled shipyard workers
in southern Louisiana (which has also affected one of the Company's
shipyards), the Company's other shipyards currently have access to
additional shipyard labor in their respective markets along the Gulf
Coast. Significant excess capacity is available at the Company's
Pascagoula, Mississippi yard, which was acquired in late 1995 and at which
production has recently commenced, and its Panama City, Florida yard,
which currently is idle.

- Increased Repair and Conversion Capacity. The Company recently has
significantly increased its capacity for repair and conversion work
through three acquisitions beginning in late 1994. Depending on demand for
such services, the Company may, at some time in the future, relocate a 115
foot wide dry dock from its Gulf Repair shipyard in New Orleans to its
Pascagoula yard in order to undertake large repair and conversion
projects, such as those for large barges, cargo ships and drilling rigs.

- Strategic Acquisitions. The Company has grown substantially through nine
acquisitions since 1972. Although the Company currently has additional
capacity at its existing facilities, the Company expects to consider
strategic acquisitions of additional shipyards in the future depending on
a variety of factors, including demand for new construction, conversion
and repair, the advantages offered by the facilities and the acquisition
terms.

4
<PAGE> 5

OFFERING RELATED TRANSACTIONS

On September 24, 1996, the Company entered into a new bank credit facility
(the "Credit Facility"), which provides for borrowings of $105.0 million.
Immediately prior to the consummation of the Offering, the Company will borrow
under the Credit Facility to repay (i) a $25.0 million intercompany note to
Trinity and (ii) $25.0 million of certain indebtedness of Trinity associated
with the Company Businesses and assumed by the Company in connection with the
Consolidation Transactions (as defined herein). See "Separation From
Trinity -- Consolidation Transactions" and "Separation From Trinity -- Offering
Related Transactions."

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered.................................... 3,000,000 shares
Common Stock to be outstanding after the Offering....... 18,000,000 shares(1)
Use of proceeds......................................... To repay income taxes payable to
Trinity and a portion of the
indebtedness incurred under the
Credit Facility immediately prior
to the Offering. See "Use of
Proceeds" and "Separation From
Trinity -- Offering Related
Transactions."
AMEX symbol............................................. "HLX"
</TABLE>

- ---------------

(1) Does not include 1,400,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1996 Stock Option and Incentive Plan (the "1996
Stock Option and Incentive Plan"). Options for an aggregate of 250,000
shares of Common Stock were granted under the 1996 Stock Option and
Incentive Plan in connection with the Offering. In addition, at the time of
the proposed Separation (as defined herein), the Company expects to assume
certain outstanding stock options exercisable for shares of Trinity Common
Stock (as defined herein) granted to Company employees under certain Trinity
stock compensation plans and such options will become exercisable for shares
of Common Stock. See "Management -- Incentive and Other Employee Benefit
Plans" and Note 7 of Notes to Consolidated Financial Statements.

PROPOSED SEPARATION FROM TRINITY

Prior to the Offering, the Company has been a wholly owned subsidiary of
Trinity. Upon the consummation of the Offering, Trinity will continue to own
approximately 83.3% of the outstanding Common Stock (81.3% if the Underwriters
exercise the Over-Allotment Option in full).

Trinity has announced its intention to divest itself of its remaining
ownership interest in the Company (the "Separation"). The timing, form and other
terms of the proposed Separation are subject to the approval of the Board of
Directors of Trinity (the "Trinity Board"). The proposed Separation could be
accomplished by means of either a non-taxable or taxable transaction. The
proposed Separation would be subject to various conditions, including the
absence of any events or developments that cause the Trinity Board to determine,
in its sole discretion, that the Separation is not in the best interests of
Trinity or its stockholders. If the proposed Separation is to be accomplished by
means of a non-taxable transaction (which could take the form of either an
exchange offer or a distribution to Trinity's stockholders), such transaction
also will be subject to the receipt of a private letter ruling from the Internal
Revenue Service (the "IRS") to the effect that the Separation will qualify as a
tax-free transaction for federal income tax purposes under Section 355 of the
Internal Revenue Code of 1986, as amended (the "Code"). There can be no
assurance that the proposed Separation will occur or, if it occurs, as to its
form or other terms. See "Risk Factors -- Risk of Noncompletion of the
Separation." Prior to the consummation of the Offering, the Company and Trinity
will enter into various agreements with respect to ongoing arrangements and
relationships between the two companies. See "Separation From Trinity" and
"Certain Transactions and Related Arrangements -- Arrangements Between the
Company and Trinity."

5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth summary consolidated financial data for the
Company for the five fiscal years ended March 31, 1996 and for the three months
ended June 30, 1995 and 1996 and as of June 30, 1996. See "Capitalization,"
"Selected Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Contract revenue earned............. $219,228 $304,385 $275,310 $250,586 $254,294 $ 72,008 $ 85,981
Cost of revenue earned.............. 206,959 259,819 228,833 207,398 214,559 60,876 74,695
Gross profit........................ 12,269 44,566 46,477 43,188 39,735 11,132 11,286
Selling, general and administrative
expenses.......................... 8,242 12,363 12,874 13,471 15,911 4,077 4,832
Operating income.................... 4,027 32,203 33,603 29,717 23,824 7,055 6,454
Interest expense, net............... 5,766 1,937 1,902 3,844 3,268 1,003 896
Income (loss) before income taxes... (1,734) 30,290 31,734 25,878 20,567 6,054 5,561
Provision (benefit) for income
taxes............................. (100) 10,704 12,227 10,170 8,102 2,385 2,219
Net income (loss)(1)................ (1,634) 19,586 19,507 15,708 12,465 3,669 3,342
Pro forma net income per share(2)... $ 0.70 $ 0.19
NET CASH PROVIDED (REQUIRED) BY:
Operating activities................ $ 33,593 $ 51,841 $(28,175) $ 14,803 $ 23,742 $ 22,010 $(10,381)
Investing activities................ (8,250) (8,546) (3,440) (10,443) (15,687) (404) (2,042)
Financing activities................ (25,192) (43,292) 31,300 (4,057) (7,907) (21,581) 12,408
OTHER DATA:
EBITDA(3)........................... $ 7,635 $ 36,762 $ 38,266 $ 35,136 $ 30,579 $ 8,430 $ 8,303
Depreciation and amortization....... 3,603 4,535 4,630 5,414 6,744 1,373 1,846
Capital expenditures(4)............. 2,100 5,064 3,529 6,405 5,568 404 2,623
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED(5)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................................... $ 39,615 $ 56,053
Total assets............................................................. 157,783 157,783
Long-term debt(6)........................................................ 25,000 36,818
Stockholder's net investment............................................. 70,085 --
Stockholders' equity..................................................... -- 74,705
</TABLE>

- ---------------

(1) Because the Company was a wholly owned subsidiary of Trinity prior to the
Offering, historical earnings per share have been omitted.

(2) Adjusted to give effect to the Consolidation Transactions, the Offering
Related Transactions and the Offering. Pro forma net income per share is
based on the 18,000,000 shares that will be outstanding immediately after
the Offering. Pro forma net income for the year ended March 31, 1996 and the
three months ended June 30, 1996 is $12.7 million and $3.4 million,
respectively, and reflects a reduction in interest expense, net of tax,
resulting from the use of the net proceeds of the Offering to retire
outstanding debt at the beginning of the period.

(3) EBITDA (earnings before interest, taxes, depreciation and amortization
expense) is presented here not as a measure of operating results, but rather
as a measure of the Company's operating performance and ability to service
debt since the Credit Facility contains restrictive covenants which are
based upon EBITDA. EBITDA should not be construed as an alternative to
operating income (determined in accordance with generally accepted
accounting principles ("GAAP")) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating activities
(determined in accordance with GAAP) as a measure of liquidity. EBITDA
measures presented herein may not be comparable to similarly titled measures
of other companies.

(4) Excludes payments for business acquisitions.

(5) Adjusted to give effect to the Consolidation Transactions, the Offering
Related Transactions and the Offering. If the Over-Allotment Option is
exercised in full, pro forma long-term debt and stockholders' equity would
be $32.2 million and $79.3 million, respectively. See "Separation From
Trinity -- Consolidation Transactions", "Separation From Trinity -- Offering
Related Transactions" and "Use of Proceeds."

(6) Long-term debt represents an intercompany note due to Trinity on an actual
basis and borrowings under the Credit Facility on an as adjusted basis. See
"Separation From Trinity -- Offering Related Transactions."

6
<PAGE> 7

RISK FACTORS

Prospective investors should carefully consider and evaluate the following
factors relating to the Company and the Offering, together with the information
and financial data set forth elsewhere in this Prospectus, prior to purchasing
any shares of Common Stock in the Offering.

LACK OF INDEPENDENT OPERATING HISTORY

Prior to the consummation of the Offering, the Company has operated as a
part of a business segment of Trinity, a large publicly traded company. As a
result, the Company has from time to time relied upon Trinity to provide credit
and other financial support, including performance guarantees of shipbuilding
contracts, to provide assistance in purchasing goods and services from third
parties, to provide technological assistance with respect to manufacturing
processes, to provide insurance coverage and to make available certain
administrative and other services. Following the consummation of the Offering,
the Company will not be able to rely on Trinity for such support, services and
assistance or be able to benefit from its relationship with Trinity. See
"-- Certain Financial Requirements; Absence of Trinity Financial Support." If
the Company is unable to obtain such support, services or assistance on its own
or from third parties on terms that it regards as satisfactory, its business,
financial condition and results of operations could be adversely affected.

CERTAIN FINANCIAL REQUIREMENTS; ABSENCE OF TRINITY FINANCIAL SUPPORT

In the past, the Company has relied upon Trinity to provide funding for
working capital, capital expenditures and acquisitions. As of June 30, 1996, the
aggregate amount of the intercompany indebtedness owed by the Company to Trinity
was $71.3 million, consisting of approximately $29.9 million of net current
liabilities, approximately $16.4 million of income taxes payable and a $25.0
million intercompany note. As of such date, Trinity also had an aggregate of
$25.0 million of outstanding indebtedness to third parties that was associated
with the Company Businesses and that will be assumed by the Company in
connection with the Consolidation Transactions. The intercompany note and the
indebtedness relating to the Company Businesses that is assumed by the Company
in connection with the Consolidated Transactions will be repaid immediately
prior to the Offering using the proceeds of borrowings under the Credit
Facility. The net proceeds of the Offering will be used to repay such income
taxes payable to Trinity outstanding as of the consummation of the Offering and
a portion of the amounts borrowed under the Credit Facility. The net current
liabilities to Trinity outstanding as of the consummation of the Offering are
expected to be repaid in the ordinary course of business and in any event no
later than 60 days after the consummation of the Offering. It is a condition to
the consummation of the Offering that the Credit Facility be in place prior to,
and that the Offering Related Transactions (as defined herein) be consummated
concurrently with the consummation of, the Offering. See "Separation From
Trinity -- Consolidation Transactions", "Separation From Trinity -- Offering
Related Transactions" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

In addition, a significant portion of the Company's existing contracts for
the construction, repair or conversion of vessels require that the Company's
performance be guaranteed by Trinity or by a surety company or other third party
pursuant to a contract bid or performance bond, letter of credit or similar
obligation. As of July 31, 1996, Trinity had guaranteed contract bid and
performance obligations of the Company in the aggregate amount of approximately
$66.1 million and the Company had outstanding contract bid and performance
bonds, letters of credit and similar obligations issued by third parties, with
Trinity as the obligor, with an aggregate face amount of approximately $74.9
million. These guarantees, bonds, letters of credit and similar obligations,
totalling approximately $141.0 million, will remain in effect after the Offering
until the obligations expire, and the Company will be obligated to indemnify
Trinity against any liability under such obligations. For the protection of
Trinity in the event that Trinity is called upon to satisfy any such
obligations, Trinity will be granted security interests in certain assets of the
Company which relate to the Company contracts from which such obligations arise
and will possess rights to complete performance of any such contract on behalf
of the Company in the event of nonperformance by the Company. Such rights and
remedies are similar to the rights possessed by surety companies that have
issued performance bonds on behalf of the Company. See "Business -- Bonding and
Guarantee Requirements" and "Certain Transactions and

7
<PAGE> 8

Related Arrangements -- Arrangements Between the Company and
Trinity -- Performance Bond and Guarantee Arrangements."

After the Offering, it is anticipated that Trinity will not provide any
further credit or other financial support to the Company. From time to time
after the Offering, the Company will need to continue to obtain contract bid and
performance bonds, letters of credit and similar obligations in connection with
its business. As a result of the discontinuance by Trinity of financial support
of the Company, customers may increasingly require such bonding and other
arrangements. Although the Company believes that it will be able to obtain bid
and contract performance bonds, letters of credit and similar obligations on
terms it regards as acceptable, there can be no assurance it will be successful
in doing so. In addition, the cost of obtaining such bonds, letters of credit
and similar obligations may increase. The inability of the Company to obtain
such bonds, letters of credit and similar obligations, or the inability of the
Company to obtain such bonds, letters of credit and similar obligations on terms
(including cost) that are as favorable as those historically obtained by the
Company, could have a material adverse effect on the Company's business,
financial condition and results of operations. The Credit Facility provides,
subject to certain conditions, for borrowings of $105.0 million on a revolving
basis, with a $50.0 million sublimit for letters of credit. In general, whether
the Company's capital resources after the Offering, including available
borrowings under the Credit Facility, will be sufficient to satisfy its future
working capital, capital expenditure and other requirements will depend on
numerous factors, including general economic and other conditions, shipbuilding
industry conditions and the Company's financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

BENEFITS TO TRINITY IN CONNECTION WITH THE OFFERING

Immediately prior to the consummation of the Offering, the Company will
borrow under the Credit Facility to repay a $25.0 million intercompany note to
Trinity and $25.0 million of indebtedness of Trinity relating to the Company
Businesses that is assumed by the Company in connection with the Consolidation
Transactions. A portion of the net proceeds of the Offering will be used to
repay income taxes payable to Trinity outstanding as of the consummation of the
Offering. Such income taxes payable totalled approximately $16.4 million as of
June 30, 1996. The net current liabilities to Trinity outstanding as of the
consummation of the Offering will be repaid in the ordinary course of business
and in any event no later than 60 days after the consummation of the Offering.
Such net current liabilities totalled approximately $29.9 million as of June 30,
1996. See "Separation From Trinity -- Consolidation Transactions", "Separation
From Trinity -- Offering Related Transactions" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Prior to the consummation of the Offering, the Company and Trinity will
enter into a Separation Agreement (the "Separation Agreement"), pursuant to
which, among other things, the Company and Trinity will indemnify each other
against certain liabilities specified therein. The Company and Trinity will also
enter into a Tax Sharing and Tax Benefit Reimbursement Agreement (the "Tax
Allocation Agreement"), pursuant to which the Company and Trinity will agree
upon the allocation of certain tax liabilities and related matters.

The terms of the Consolidation Transactions, the Offering Related
Transactions and such intercompany agreements were negotiated between affiliated
parties and do not reflect arms'-length dealings. See "Certain Transactions and
Related Arrangements."

DEPENDENCE ON U.S. NAVY CONTRACTS

Revenues derived from the construction of U.S. Navy vessels accounted for
approximately 30.2%, 38.8%, and 47.3% of the Company's revenues in fiscal 1994,
1995 and 1996, respectively. There can be no assurance that the Company will be
successful in obtaining new U.S. Navy contracts, all of which are subject to
strict competitive bidding requirements. Although the U.S. Navy has options to
purchase 14 additional vessels from the Company under two of the U.S. Navy's
shipbuilding programs, the U.S. Navy is not required to exercise any such
options. Any future purchases of vessels by the U.S. Navy are subject to the
uncertainties inherent in

8
<PAGE> 9

the U.S. government's budgeting and appropriations processes, which are affected
by political events over which the Company has no control.

With the end of the Cold War and the pressure of domestic budget
constraints, overall U.S. Navy spending for new vessel construction has declined
significantly since 1991 (from 88 vessels in 1990 to 46 in 1995). U.S. Navy
shipbuilding is expected to continue to decline during the remainder of the
decade. Although the Company believes that the small to medium sized U.S. Navy
vessels for which it competes are less likely to be cut back and, in some cases,
do not require specific Congressional appropriations, the Company generally
expects revenues and gross profit attributable to its current and any future
U.S. Navy contracts to decline over the next several years. Such decreases, if
not offset by increased revenues and profit from contracts with other customers,
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Principal
Products -- Governmental Vessels."

CONTROL BY TRINITY PENDING THE PROPOSED SEPARATION; POTENTIAL CONFLICTS OF
INTEREST

After the consummation of the Offering and prior to the proposed
Separation, Trinity will continue to own approximately 83.3% of the outstanding
shares of Common Stock (81.3% if the Underwriters exercise the Over-Allotment
Option in full). Prior to the proposed Separation, Trinity will be able to elect
all members of the Board of Directors of the Company (the "Company Board") and
determine the outcome of corporate actions requiring stockholder approval.
Furthermore, through its ability to elect the members of the Company Board,
Trinity will be able to control all matters affecting the business and
operations of the Company. See "Principal Stockholder."

Conflicts of interest may arise in the future between the Company and
Trinity in a number of areas relating to their past and ongoing relationships.
For example, conflicts of interest may arise with respect to the acquisition or
disposition of assets, the issuance of shares of capital stock or other
securities, the incurrence of indebtedness and the payment of dividends. The
Company also may from time to time enter into negotiations with Trinity
regarding the construction by the Company of inland barges for Trinity or its
customers. The construction of such inland barges generally constitutes a
Trinity Business (as defined in "Certain Transactions and Related
Arrangements -- Arrangements Between the Company and Trinity") which the Company
is precluded from entering for four years after the consummation of the
Offering. See "Certain Transactions and Related Arrangements -- Arrangements
Between the Company and Trinity -- Inland Barge Arrangements." In addition,
because of the possibility that Trinity will accomplish the proposed Separation
by means of a non-taxable transaction and in view of the U.S. Federal income tax
requirement that Trinity own and exchange or distribute 80% or more of the
outstanding voting securities of the Company in order for the proposed
Separation to be tax-free to Trinity and its stockholders, the Separation
Agreement restricts the Company from issuing a significant amount of additional
Common Stock (whether pursuant to an equity financing, acquisition or otherwise)
until the earlier of the Separation Date (as defined herein) or a decision by
the Trinity Board to accomplish the Separation by means of a taxable
transaction. Conflicts of interest may also arise in connection with certain
agreements to be entered into between the Company and Trinity with respect to
ongoing arrangements and relationships between the two companies. These
agreements include (i) the Separation Agreement, which sets forth the terms
governing various arrangements between the parties in connection with the
Offering and the proposed Separation, (ii) the Tax Allocation Agreement, which
relates to the allocation of federal, state and local income tax liabilities and
related matters, (iii) a Trademark License Agreement (the "Trademark License
Agreement") relating to the grant by Trinity to the Company of a long-term
license to continue to use the trademark "Trinity Yachts" in its business and
(iv) a limited term arrangement to produce inland hopper barges for Trinity. See
"Certain Transactions and Related Arrangements -- Arrangements Between the
Company and Trinity."

RISK OF NONCOMPLETION OF THE SEPARATION

Although Trinity has announced its intention to divest itself of its
remaining ownership interest in the Company, the timing, form and other terms of
the proposed Separation are subject to the approval of the Trinity Board. The
proposed Separation will be subject to various conditions, including the absence
of any events or developments that cause the Trinity Board to determine, in its
sole discretion, that the proposed

9
<PAGE> 10

Separation is not in the best interests of Trinity or its stockholders. In
addition, if the proposed Separation is to be accomplished by means of a
non-taxable transaction, such transaction also will be subject to the receipt of
a private letter ruling from the IRS to the effect that the Separation will
qualify as a tax-free transaction for federal income tax purposes under Section
355 of the Code. Trinity has informed the Company that, if the Trinity Board
determines to effect the proposed Separation by means of a non-taxable
transaction, it intends to apply for such a ruling as to the tax-free status of
the Separation, although there can be no assurance that such a ruling will be
obtained. There can be no assurance that the proposed Separation will occur or,
if it occurs, as to its form or other terms. If the proposed Separation does not
occur, Trinity will continue to control the Company and the business purposes of
the Separation will not be achieved in the manner currently contemplated by
Trinity and the Company, if at all. See "Separation From Trinity."

DEPENDENCE ON MANAGEMENT

The Company believes that its success to date is attributable to, and its
future performance will depend to a significant extent upon, the efforts and
abilities of John Dane III, the Company's President and Chief Executive Officer
and its other current executive officers. The Company does not have employment
agreements with any of its executive officers. However, John Dane III is
entering into a noncompetition agreement with the Company in connection with the
Offering. See "Management -- Noncompetition Agreements." The loss of the
services of one or more of the Company's executive officers could have a
material adverse effect on the Company. See "Management."

HIGHLY COMPETITIVE INDUSTRY

The shipbuilding industry is a highly competitive industry. In general,
during the 1990's, the U.S. shipbuilding industry has been characterized by
substantial excess capacity because of the significant decline in U.S. Navy
shipbuilding spending and the difficulties experienced by U.S. shipbuilders in
competing successfully for international commercial projects against foreign
shipyards, many of which are heavily subsidized by their governments. As a
result of these factors, competition by U.S. shipbuilders for domestic
commercial projects has increased significantly. Such increased competition has
resulted in substantial pressure on pricing and profit margins.

Contracts for the construction of vessels are usually awarded on a
competitive bid basis. Although the Company believes customers consider, among
other things, the availability and technical capabilities of equipment and
personnel, efficiency, condition of equipment, safety record and reputation,
price competition is currently a primary factor in determining which qualified
shipbuilder is awarded a contract.

Private U.S. shipbuilders generally fall into two categories: (i) the six
largest shipbuilders capable of building large scale vessels for the U.S. Navy
and (ii) other shipyards that build small to medium sized vessels for
governmental and commercial markets. Each of the six largest shipbuilders is
substantially larger than the Company. The Company does not compete for U.S.
Navy large vessel construction projects. The Company competes for U.S.
government shipbuilding contracts on small to medium sized vessels principally
with approximately six to 12 U.S. shipbuilders, which may include one or more of
the six largest shipbuilders. The Company competes for domestic commercial
shipbuilding contracts principally with approximately ten to 15 U.S.
shipbuilders. The number and identity of competitors on particular projects vary
greatly, depending on the type of vessel and size of project. See
"Business -- Competition."

Pursuant to the provisions of the Separation Agreement, the Company will be
prohibited, for four years after the consummation of the Offering, from engaging
in the Trinity Businesses, which include the construction and repair of inland
hopper barges and inland tank barges. Because the Company Businesses (as defined
in "Certain Transactions and Related Arrangements -- Arrangements Between the
Company and Trinity") do not include the construction and repair of inland
hopper barges and inland tank barges, the Company's historical results of
operations do not include any revenues from the construction or repair of inland
hopper barges and include only the following revenues from the construction or
repair of inland tank barges: $7.6 million, $13.3 million and $26.2 million for
fiscal years 1994, 1995 and 1996, respectively. The Company's gross profit
(loss) from such activities was ($0.6) million, ($0.9) million and $3.1 million
for

10
<PAGE> 11

fiscal years 1994, 1995 and 1996, respectively. See "Certain Transactions and
Related Arrangements -- Arrangements Between the Company and
Trinity -- Separation Agreement -- Non-Competition Covenants."

RISKS ASSOCIATED WITH CONTRACTUAL PRICING IN THE SHIPBUILDING INDUSTRY

Because of the nature of the shipbuilding industry, all of the Company's
commercial contracts and a substantial majority of the Company's government
contracts are currently performed on a fixed-priced basis. The Company attempts
to cover anticipated increased costs of labor and materials through an
estimation of such costs, which is reflected in the original price. Despite
these attempts, however, the revenue, cost and gross profit realized on a
fixed-price contract will often vary from the estimated amounts because of
changes in job conditions and variations in labor and equipment productivity
over the term of the contract. These variations and the risks generally inherent
in the shipbuilding industry may result in gross profits realized by the Company
being different from those originally estimated and may result in the Company
experiencing reduced profitability or losses on projects. Depending on the size
of the project, these variations from estimated contract performance could have
a significant effect on the Company's operating results for any particular
fiscal quarter or year.

In addition, the Company's contract revenues are recognized on a percentage
of completion basis. Accordingly, contract price and cost estimates are reviewed
periodically as the work progresses, and adjustments proportionate to the
percentage of completion are reflected in income in the period when such
estimates are revised. To the extent that these adjustments result in a loss or
a reduction or elimination of previously reported profits with respect to a
project, the Company would recognize a charge against current earnings, which
could be material. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General."

LEGISLATIVE PROPOSALS TO RESCIND PROVISIONS OF JONES ACT

Pursuant to the requirements of the Merchant Marine Act of 1920 (the "Jones
Act"), all vessels transporting products between U.S. ports must be constructed
in U.S. shipyards, owned and crewed by U.S. citizens and registered under U.S.
law. Many customers elect to have vessels constructed at U.S. shipyards, even if
such vessels are intended for international use, in order to maintain
flexibility to use such vessels in the U.S. coastwise trade in the future. The
Company believes that substantially all of its revenues from U.S. commercial
contracts (which represented 40.9% of the Company's total revenues for fiscal
1996) result from the sale of vessels capable of being used for U.S. coastwise
trade. In 1996, proposed legislation was introduced in Congress to substantially
modify the provisions of the Jones Act mandating the use of ships constructed in
the United States for U.S. coastwise trade. Similar bills seeking to rescind or
substantially modify the Jones Act and eliminate or adversely affect the
competitive advantages it affords to U.S. shipbuilders have been introduced in
Congress from time to time and are expected to be introduced in the future.
Although management believes it is unlikely that the Jones Act requirements will
be rescinded or materially modified in the foreseeable future, there can be no
assurance that this will not occur. Many foreign shipyards are heavily
subsidized by their governments and, as a result, there can be no assurance that
the Company would be able to effectively compete with such shipyards if they
were permitted to construct vessels for use in the U.S. coastwise trade. The
repeal of the Jones Act or any amendment of the Jones Act that would eliminate
or adversely affect the competitive advantages provided to U.S. shipbuilders
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Regulation -- Jones Act"
and "Business -- Regulation -- Title XI Loan Guarantee Amendments and OECD."

SHORTAGE OF TRAINED SHIPYARD WORKERS

Shipyards located in certain portions of Louisiana, including the Company's
Lockport, Louisiana facility, are experiencing severe shortages of skilled
shipyard labor as a result of recent labor demands brought about by increases in
offshore drilling activities, the construction of offshore rig platforms and
crewing of offshore vessels. This labor shortage has resulted in increased costs
of labor, and limitations on production capacity, for shipyards in such portions
of southern Louisiana. However, of the Company's ten shipyards, only its
Lockport shipyard is located within the affected areas of southern Louisiana.
Accordingly, the labor shortage has not

11
<PAGE> 12

impacted the Company to the same degree that it has affected many of the
Company's competitors. The areas in which the Company's other shipyards are
located are not currently experiencing any such labor shortages, although no
assurances can be given regarding whether shortages will be experienced at other
shipyards in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations" and
"Business -- Operations."

DEPENDENCE OF OFFSHORE SUPPORT VESSEL MARKET ON OFFSHORE EXPLORATION ACTIVITY

Offshore support vessels have accounted for a significant portion of the
Company's production in the past, and are expected to again in the future.
Customer demand for offshore support vessels is dependent on, among other
things, the levels of activity in offshore oil and gas exploration, development
and production, particularly in the Gulf of Mexico where many of the offshore
support vessels manufactured by the Company have been put into service. The
level of activity in offshore oil and gas exploration, development and
production is affected by such factors as prevailing oil and gas prices,
expectations about future prices, the cost of exploring for, producing and
delivering oil and gas, the sale and expiration dates of available offshore
leases, the discovery rate of new oil and gas reserves in offshore areas, local
and international political and economic conditions, technological advances and
the ability of oil and gas companies to generate or otherwise obtain funds for
capital expenditures. Although the Company believes there will be an increase in
demand for offshore support vessels, the Company cannot predict future levels of
activity in offshore oil and gas exploration, development and production.

UNCERTAINTY REGARDING CONSTRUCTION STANDARDS FOR OFFSHORE SUPPORT VESSELS

As currently in force, OPA '90 generally requires certain U.S. and foreign
vessels carrying fuel or other hazardous cargos and entering U.S. ports to have
double hulls by 2015. OPA '90, which establishes a phase-out schedule that began
January 1, 1995 for all existing single hull vessels based on the vessel's age
and gross tonnage, applies to oil and gas industry supply vessels over 500 gross
tons operated in U.S. waters. All offshore support vessels presently in
operation in U.S. waters either are less than 500 gross tons or have received a
Congressional waiver exempting such vessels from the OPA '90 double hull
requirements. However, as offshore oil and gas exploration and production enter
deeper waters, the Company anticipates that it will be necessary to construct a
significant number of new offshore support vessels in excess of 500 gross tons
to support such exploration and production activities. Proposed legislation is
pending in Congress which would impose, in lieu of the OPA '90 double hull
requirements, certain less onerous standards for the construction of these new
offshore support vessels (the "New Offshore Support Vessel Legislation").
Although management believes that the New Offshore Support Vessel Legislation is
likely to be enacted in its current form, there can be no assurance as to when
the New Offshore Support Vessel Legislation will be enacted or that such
legislation, if enacted, will not differ materially from its current form.
Management believes that the current uncertainty regarding construction
standards has caused certain operators to postpone placing new orders for
offshore support vessels in excess of 500 gross tons. See
"Business -- Regulation -- OPA '90."

IMPACT OF ENVIRONMENTAL LAWS

The Company is subject to extensive and changing federal, state and local
laws (including common law) and regulations designed to protect the environment
("Environmental Laws"). The Company from time to time is involved in
administrative and other proceedings under Environmental Laws involving its
operations and facilities. Environmental Laws could impose liability for
remediation costs or result in civil or criminal penalties in cases of
non-compliance. Compliance with Environmental Laws increases the Company's costs
of doing business. Additionally, Environmental Laws have been subject to
frequent change; therefore, the Company is unable to predict the future costs or
other future impact of Environmental Laws on its operations. There can be no
assurance that the Company will not incur material liability related to the
Company's operations and properties under Environmental Laws. See
"Business -- Regulation -- Environmental Regulation."

POSSIBILITY OF SUBSTANTIAL SALES OF COMMON STOCK

In general, if Trinity completes the proposed Separation by any means other
than a private sale to a third party, substantially all of the 15,000,000 shares
of Common Stock currently held by Trinity will be eligible for

12
<PAGE> 13

immediate resale in the public market. The Company is unable to predict whether
substantial amounts of Common Stock will be sold in the open market in
anticipation of, or following, the proposed Separation. Any sales of substantial
amounts of Common Stock in the public market, or the perception that such sales
might occur, whether as a result of the proposed Separation or otherwise, could
have a material adverse effect on the market price of the Common Stock. Trinity
has agreed that, except in connection with the proposed Separation, it will not
offer or sell any shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. See "Shares Eligible for Future Sale" and
"Underwriting."

CERTAIN ANTI-TAKEOVER EFFECTS

The Restated Certificate of Incorporation of the Company (the
"Certificate"), the By-Laws of the Company (the "By-Laws"), the Rights (as
defined herein) and applicable provisions of the Delaware General Corporation
Law (the "DGCL"), contain various provisions that may hinder, delay or prevent
the acquisition of control of the Company without the approval of the Company
Board. Certain provisions of the Certificate and the By-Laws, among other
things, will (i) authorize the issuance of "blank check" preferred stock, (ii)
divide the Company Board into three classes, the members of which (after an
initial transition period) will serve for three-year terms, (iii) establish
advance notice requirements for director nominations and stockholder proposals
to be considered at annual meetings and (iv) prohibit stockholder action by
written consent. In addition, the Company has entered into a Rights Agreement
(as defined herein), pursuant to which each share of Common Stock has attached
one Right which will initially trade together with such share. The Rights would
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved in advance by the Company Board. The provisions
pertaining to a classified board and to the prohibition of stockholder action by
written consent referred to above will not become effective until the
consummation of the proposed Separation. Furthermore, the provisions
establishing the advance notice requirements for director nominations and
stockholder proposals to be considered at annual meetings do not apply to
Trinity and its affiliates prior to the Separation Date. In addition, Section
203 of the DGCL imposes certain restrictions on mergers and other business
combinations between the Company and any holder of 15% or more of the Common
Stock (other than Trinity). See "Description of Capital Stock -- Anti-takeover
Provisions of the Certificate and By-Laws," "Description of Capital
Stock -- Stockholder Rights Plan" and "Description of Capital Stock -- Delaware
Business Combination Statute."

DIVIDEND POLICY

The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. In addition, the Credit Facility restricts the
payment of dividends. See "Dividend Policy."

IMMEDIATE AND SUBSTANTIAL DILUTION TO INVESTORS

Investors purchasing shares of Common Stock in the Offering will experience
immediate and substantial dilution in net tangible book value of approximately
$6.85 per share of Common Stock. See "Dilution."

ABSENCE OF A PRIOR PUBLIC MARKET FOR THE COMMON STOCK

Prior to the Offering, there has been no public market for the Common
Stock. Although the shares of Common Stock have been approved for listing on the
AMEX, subject to official notification of issuance, there can be no assurance
that an active public market for the Common Stock will develop or be sustained
or that the price at which the Common Stock will trade after the Offering will
not be lower than the initial public offering price. The initial public offering
price of the Common Stock in the Offering has been determined through
negotiations between the Company and the managing Underwriters. See
"Underwriting." Market prices for the Common Stock following the Offering will
be influenced by a number of factors, including the depth and liquidity of the
market for the Common Stock, investor perceptions of the Company and general
economic and other conditions.

13
<PAGE> 14

THE COMPANY

Prior to the consummation of the Offering, the Company has operated as a
part of a business segment of Trinity, whose common stock is traded on the New
York Stock Exchange (the "NYSE").

The principal offices of the Company are located at 13085 Industrial Seaway
Road, Gulfport, Mississippi 39503, and its telephone number at such offices is
(601) 896-0029.

SEPARATION FROM TRINITY

BACKGROUND

Trinity entered the business of constructing and repairing ocean-going
vessels in 1972 when it acquired the Equitable New Orleans shipyard. Since 1972,
Trinity has acquired 20 additional shipyards. The acquisition by Trinity of the
marine facilities and the decision to diversify into the marine products line of
business was a strategic undertaking to use similar metal fabrication skills and
techniques, purchasing power and general management abilities to serve a broader
customer base. The Company Businesses include the ownership and operation of ten
shipyards (including Equitable and one shipyard that currently is idle) formerly
owned by Trinity.

Trinity is a leading manufacturer of a variety of products with
manufacturing and fabrication operations in six business segments: railcars,
marine products, construction products, pressure and nonpressure containers,
metal components and leasing. Trinity believes that the creation of a separate
public market for the equity of the Company will allow the financial markets to
evaluate more effectively the respective values of Trinity's remaining
manufacturing and fabrication businesses and the Company's shipbuilding
business. Trinity also believes that the Separation should enhance the ability
of Trinity and the Company to maximize the value of their respective operations
for the benefit of their respective stockholders by permitting each company (i)
to focus its managerial and financial resources on the growth of its businesses
and (ii) to implement more focused incentive compensation programs designed to
better attract, retain and motivate its employees by offering economic rewards
that are tied more directly to the results of such employees' efforts. The
Company Businesses and the Trinity Businesses require substantially different
management focuses. While the Trinity Businesses generally involve the
production of standardized products, the Company Businesses generally involve
the production of a more limited number of products that are engineered on an
individual basis to meet the needs of particular customers. The Company
Businesses and the Trinity Businesses also generally involve different customers
and financing arrangements, and, unlike customer contracts in the Trinity
Businesses, customer contracts in the Company Businesses typically are long-term
contracts involving progress billing.

CONSOLIDATION TRANSACTIONS

Halter Marine Group, Inc. is a Delaware corporation incorporated on June
24, 1996. Prior to or concurrently with the Offering, the Company will
consummate the Consolidation Transactions. These

14
<PAGE> 15

transactions (the "Consolidation Transactions") include: (i) the transfer to the
Company of the stock of each subsidiary of Trinity that has assets and
liabilities related to the Company Businesses, (ii) the transfer to subsidiaries
of the Company of certain assets and liabilities of Trinity related to the
Company Businesses and (iii) the assumption by the Company of the indebtedness
of Trinity associated with the Company Businesses (which totalled $25.0 million
as of June 30, 1996). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Certain Transactions and Related Arrangements -- Consolidation Transactions."

For purposes of this Prospectus, unless the context otherwise requires, the
term "Company" gives effect to the Consolidation Transactions and includes
Halter Marine Group, Inc. and its subsidiaries and predecessors.

OFFERING RELATED TRANSACTIONS

Prior to or concurrently with the consummation of the Offering, the Company
will engage in certain other transactions (the "Offering Related Transactions").
The Offering Related Transactions include (i) the entering into by the Company
of the new Credit Facility and (ii) the borrowing by the Company under the
Credit Facility to repay (x) a $25.0 million intercompany note to Trinity and
(y) $25.0 million of certain indebtedness of Trinity associated with the Company
Businesses and assumed by the Company in connection with the Consolidation
Transactions. See "Risk Factors -- Benefits to Trinity in Connection with the
Offering," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Certain
Transactions and Related Arrangements -- Offering Related Transactions."

THE OFFERING

The Company is offering an aggregate of 3,000,000 shares of Common Stock
for sale to the public pursuant to this Prospectus. Upon consummation of the
Offering, Trinity will own approximately 83.3% of the outstanding shares of
Common Stock (81.3% if the Underwriters exercise the Over-Allotment Option in
full).

THE PROPOSED SEPARATION

Trinity has announced its intention to divest itself of its remaining
ownership interest in the Company by means of the Separation. The timing, form
and other terms of the proposed Separation are subject to the approval of the
Trinity Board. The Separation will be subject to the fulfillment, or waiver by
the Trinity Board, of certain conditions, including (i) all material
governmental consents, approvals or authorizations necessary to consummate the
Separation shall have been obtained and shall remain in full force and effect;
(ii) no order, injunction or decree issued by any court or governmental agency
or body of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Separation shall be in effect, and no other
event shall have occurred or failed to occur, that prevents the consummation of
the Separation; and (iii) no other events or developments shall have occurred
that cause the Trinity Board to determine, in its sole discretion, that the
Separation is not in the best interests of Trinity or its stockholders.

The proposed Separation could be accomplished by means of either a
non-taxable or taxable transaction. If the proposed Separation is to be
accomplished by means of a non-taxable transaction (which could take the form of
either an exchange offer or distribution to Trinity's stockholders), such
transaction also will be subject to receipt of a private letter ruling from the
IRS to the effect that the proposed Separation will qualify as a tax-free
transaction for federal income tax purposes under Section 355 of the Code and
the Consolidation Transactions will not result in the recognition of any gain or
loss for federal income tax purposes by Trinity, the Company or their respective
stockholders, and such ruling shall be in form and substance satisfactory to
Trinity, in its sole discretion, and shall remain in full force and effect. The
Trinity Board will have the sole discretion to determine the date of
consummation of the proposed Separation (the "Separation Date"). At the present
time, Trinity has not determined what action it would take if it does not obtain
a favorable ruling from the IRS as to a proposed Separation involving a
non-taxable transaction. In such event, the alternatives that would be available
to Trinity would include completing the proposed Separation based upon an
opinion of

15
<PAGE> 16

counsel as to the tax-free nature of the transaction, completing the Separation
as a taxable transaction or not completing the Separation at all.

There can be no assurance that the proposed Separation will occur or, if it
occurs, as to its form or other terms. See "Risk Factors -- Risk of
Noncompletion of the Separation."

ARRANGEMENTS BETWEEN THE COMPANY AND TRINITY

Prior to the consummation of the Offering, the Company and Trinity will
enter into various agreements with respect to ongoing arrangements and
relationships between the two companies, including the Separation Agreement, the
Tax Allocation Agreement and the Trademark License Agreement. The Company also
will build inland hopper barges and may build inland tank barges under a limited
arrangement with Trinity. See "Certain Transactions and Related
Arrangements -- Arrangements Between the Company and Trinity."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of shares of
Common Stock in the Offering, after deducting underwriting discounts and
commissions and the estimated expenses of the Offering, are expected to be
approximately $29.6 million ($34.2 million if the Underwriters exercise the
Over-Allotment Option in full).

The Company intends to use the net proceeds of the Offering to repay income
taxes payable to Trinity outstanding as of the consummation of the Offering, and
the balance will be used to reduce indebtedness incurred under the Credit
Facility immediately prior to the Offering. The income taxes payable to Trinity
totalled approximately $16.4 million as of June 30, 1996. The borrowings under
the Credit Facility will be used to repay an intercompany note to Trinity and
indebtedness assumed by the Company in connection with the Consolidation
Transactions. See "Separation From Trinity -- Consolidation Transactions,"
"Separation From Trinity -- Offering Related Transactions," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Certain Transactions and
Related Arrangements -- Offering Related Transactions" and "Certain Transactions
and Related Arrangements -- Arrangements Between the Company and Trinity."

DIVIDEND POLICY

The Company expects that it will retain all available earnings generated by
its operations for the development and growth of its business and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Any future determination as to dividend policy will be made at the
discretion of the Company Board and will depend on a number of factors,
including future earnings, capital requirements, financial condition and
business prospects of the Company and such other factors as the Company Board
may deem relevant. In addition, the Credit Facility restricts the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

16
<PAGE> 17

DILUTION

As of June 30, 1996, the net tangible book value attributable to the Common
Stock was $70.1 million, or $4.67 per share (based on 15,000,000 shares of
Common Stock). Net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the total number of shares of
Common Stock outstanding. After giving effect to the Consolidation Transactions,
the Offering Related Transactions, the Offering and the application of the
estimated net proceeds therefrom, the pro forma net tangible book value
attributable to the Common Stock as of June 30, 1996 would have been $74.7
million, or $4.15 per share. This represents an immediate dilution in net
tangible book value of $6.85 per share to investors purchasing shares of Common
Stock in the Offering. The following table illustrates the dilution to investors
purchasing shares of Common Stock in the Offering:

<TABLE>
<S> <C> <C>
Initial public offering price per share...................................... $11.00
Net tangible book value per share at June 30, 1996......................... $ 4.67
Decrease in net tangible book value per share attributable to the
Consolidation Transactions.............................................. (1.67)
Increase in net tangible book value per share attributable to new
investors............................................................... 1.15
------
Pro forma net tangible book value per share after the Offering............... 4.15
------
Dilution in net tangible book value per share to new investors............... $ 6.85
======
</TABLE>

17
<PAGE> 18

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an historical basis, (ii) as adjusted to give effect to the
Consolidation Transactions and the Offering Related Transactions and (iii) as
adjusted to give effect to the Offering and the application of the estimated net
proceeds therefrom. This table should be read in conjunction with "Separation
From Trinity -- Consolidation Transactions," "Separation From
Trinity -- Offering Related Transactions," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related notes included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------------------------
AS ADJUSTED FOR
CONSOLIDATION
TRANSACTIONS AND
OFFERING RELATED AS ADJUSTED
ACTUAL TRANSACTIONS FOR OFFERING
------- ---------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-Term Debt:
Due to an affiliate(1)............................. $25,000 $ -- $ --
Credit Facility.................................... -- 50,000 36,818
------- ------- --------
Total long-term debt....................... 25,000 50,000 36,818
------- ------- --------
Stockholder's Equity(2):
Stockholder's net investment....................... 70,085 -- --
Common stock, par value $0.01 per share; 50,000
shares authorized; zero shares, 15,000 shares
and 18,000 shares issued and outstanding,
respectively(3)................................. -- 150 180
Additional paid-in capital......................... -- 44,935 74,525
------- ------- --------
Total stockholder's equity................. 70,085 45,085 74,705
------- ------- --------
Total capitalization....................... $95,085 $ 95,085 $111,523
======= ======= ========
</TABLE>

- ---------------

(1) Excludes (i) $29.9 million of indebtedness to Trinity which is classified as
a current liability and expected to be repaid to Trinity, in the ordinary
course of business, and in any event no later than 60 days after the
consummation of the Offering, as the Company replaces such liabilities with
its own direct trade payables and (ii) $16.4 million of income taxes payable
to Trinity that will be paid from a portion of the net proceeds of the
Offering.

(2) The Company Board has authorized the creation of a series of Preferred Stock
of the Company designated as "Series A Junior Participating Preferred
Stock." An aggregate of 500,000 shares of Preferred Stock have been reserved
for issuance as such series of Preferred Stock. No shares of Preferred Stock
are issued and outstanding. See "Description of Capital Stock -- Preferred
Stock."

(3) Does not include 1,400,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1996 Stock Option and Incentive Plan. Options for
an aggregate of 250,000 shares were granted under such plan in connection
with the Offering. See "Management -- Incentive and Other Employee Benefit
Plans -- 1996 Stock Option and Incentive Plan."

18
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data for the
Company as of the dates and for the periods indicated. The selected consolidated
income statement data for the fiscal years ended March 31, 1994, 1995 and 1996
and the selected consolidated balance sheet data as of March 31, 1995 and 1996
have been derived from the audited consolidated financial statements of the
Company. The selected consolidated income statement data for the fiscal years
ended March 31, 1992 and 1993 and for the three months ended June 30, 1995 and
1996, and the selected consolidated balance sheet data as of March 31, 1992,
1993 and 1994 and as of June 30, 1996 have been derived from unaudited financial
information of the Company but in the opinion of management includes all
adjustments necessary for a fair presentation of the financial information. The
results of operations for the three months ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the full year.
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and related
notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE
YEAR ENDED MARCH 31, 30,
-------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Contract revenue earned................. $219,228 $304,385 $275,310 $250,586 $254,294 $ 72,008 $ 85,981
Cost of revenue earned.................. 206,959 259,819 228,833 207,398 214,559 60,876 74,695
-------- -------- -------- -------- -------- -------- --------
Gross profit............................ 12,269 44,566 46,477 43,188 39,735 11,132 11,286
Selling, general and administrative
expenses.............................. 8,242 12,363 12,874 13,471 15,911 4,077 4,832
-------- -------- -------- -------- -------- -------- --------
Operating income........................ 4,027 32,203 33,603 29,717 23,824 7,055 6,454
Interest expense, net................... 5,766 1,937 1,902 3,844 3,268 1,003 896
Other, net.............................. (5) (24) (33) (5) (11) (2) (3)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes....... (1,734) 30,290 31,734 25,878 20,567 6,054 5,561
Provision (benefit) for income taxes.... (100) 10,704 12,227 10,170 8,102 2,385 2,219
-------- -------- -------- -------- -------- -------- --------
Net income (loss)(1).................... $ (1,634) $ 19,586 $ 19,507 $ 15,708 $ 12,465 $ 3,669 $ 3,342
======== ======== ======== ======== ======== ======== ========
Pro forma net income per share(2)....... $ 0.70 $ 0.19
NET CASH PROVIDED (REQUIRED) BY:
Operating activities.................... $ 33,593 $ 51,841 $(28,175) $ 14,803 $ 23,742 $ 22,010 $(10,381)
Investing activities.................... (8,250) (8,546) (3,440) (10,443) (15,687) (404) (2,042)
Financing activities.................... (25,192) (43,292) 31,300 (4,057) (7,907) (21,581) 12,408
OTHER DATA:
EBITDA(3)............................... $ 7,635 $ 36,762 $ 38,266 $ 35,136 $ 30,579 $ 8,430 $ 8,303
Depreciation and amortization........... 3,603 4,535 4,630 5,414 6,744 1,373 1,846
Capital expenditures(4)................. 2,100 5,064 3,529 6,405 5,568 404 2,623
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
------------------------------------------------------------ JUNE 30,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................... $ (4,761) $ 8,972 $ 31,296 $ 40,855 $ 36,601 $ 39,615
Total assets................................. 109,448 94,056 120,784 124,271 141,374 157,783
Long-term debt(5)............................ 25,000 25,000 25,000 25,000 25,000 25,000
Stockholder's net investment (deficit)....... (523) 19,063 38,570 54,278 66,743 70,085
</TABLE>

- ---------------

(1) Because the Company was a wholly owned subsidiary of Trinity prior to the
Offering, historical earnings per share have been omitted.

(3) EBITDA (earnings before interest, taxes, depreciation and amortization
expense) is presented here not as a measure of operating results, but rather
as a measure of the Company's operating performance and ability to service
debt since the Credit Facility contains restrictive covenants which are
based upon EBITDA. EBITDA should not be construed as an alternative to
operating income (determined in accordance GAAP) as an indicator of the
Company's operating performance or as an alternative to cash flows from
operating activities (determined in accordance with GAAP) as a measure of
liquidity. EBITDA measures presented herein may not be comparable to
similarly titled measures of other companies.

(4) Excludes payments for business acquisitions.

(5) Represents intercompany note due to Trinity.

19
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company is the seventh largest shipbuilder, and the largest builder of
small to medium sized ocean-going ships and barges and inland tow boats, in the
United States. The Company, which has built more than 2,000 vessels in the past
40 years, specializes in the construction, repair and conversion of a wide
variety of vessels for the commercial and governmental markets. The Company's
principal products include offshore support vessels, offshore double hull tank
barges, large offshore tug boats and oil spill recovery vessels for commercial
use and oceanographic survey and research ships, high speed patrol boats and
ferries for government use. The Company has ten shipyards (including one that
currently is idle), which are strategically located along the Gulf Coast from
Louisiana to Florida.

As of July 31, 1996, the Company had firm contracts with an aggregate
remaining value of approximately $417 million (excluding unexercised options
held by customers), covering a total of 115 vessels (including 50 inland hopper
barges). Of this contract value, approximately $181 million was attributable to
contracts to build ships for the U.S. Navy. The Company anticipates that
approximately $245 million of the aggregate remaining value of the firm
contracts as of July 31, 1996 will be filled during fiscal 1997.

Revenues derived from the construction of U.S. Navy vessels accounted for
approximately 30.2%, 38.8% and 47.3% of the Company's revenues in fiscal 1994,
1995 and 1996, respectively. There can be no assurance that the Company will be
successful in obtaining new U.S. Navy contracts, all of which are competitively
bid. Overall U.S. Navy spending for new vessel construction has declined
significantly since 1991. Although the Company believes that the small to medium
sized U.S. Navy vessels for which it competes are less likely to be cut back
and, in some cases, do not require specific Congressional appropriations, the
Company generally expects revenues and gross profit attributable to its current
and any future U.S. Navy contracts to decline over the next several years. Such
decreases, if not offset by increased revenues and profit from contracts with
other customers, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors -- Dependence
on U.S. Navy Contracts."

All of the Company's commercial contracts and a substantial majority of its
government contracts to build ships are currently performed on a fixed-price
basis. The Company attempts to cover anticipated increased costs of labor and
materials through an estimation of such costs, which is reflected in the
original contract price. Despite these attempts, however, the revenue, costs and
gross profit realized on a fixed-price contract will often vary from the
estimated amounts because of changes in job conditions and in labor and plant
productivity over the contract term or other unanticipated changes. As a result,
the Company may experience reduced profitability or losses on projects.

The Company uses the percentage of completion method to account for its
contracts in process. Under this method, revenues from construction contracts
are measured by the percentage of labor hours incurred as compared to estimated
total labor hours for each contract. The timing of recognition of revenues and
expenses for financial reporting purposes may differ materially from the timing
of actual cash flows from contract payments received and expenses paid.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. See "Risk Factors -- Risks Associated with
Contractual Pricing in the Shipbuilding Industry" and Note 2 of Notes to
Consolidated Financial Statements.

The Company believes it is well positioned to take advantage of the
expected upturn in the market for new offshore support vessels. The Company
expects that substantial orders for new offshore support vessels may be made in
the next several years due to the demand for larger vessels to support deep
water oil and gas exploration and production activities, as well as the
substantial worldwide fleet attrition over the past ten years and the aging of
the remaining fleet. The Company currently has eight offshore support vessels
under contract,

20
<PAGE> 21

of which six contracts have been entered into since July 1, 1996. The Company
also has outstanding options for eight additional vessels, including seven from
one customer, and is bidding on a number of substantial potential orders for
such vessels. The timing of the expected upturn in the offshore support market
will depend principally upon conditions in the offshore oil and gas industry,
particularly an increase in drilling activity and dayrates for offshore support
vessels, which in turn depend upon oil and gas prices. No assurances can be
given regarding the timing or magnitude of an upturn in the market for offshore
support vessels. See "Risk Factors -- Dependence of Offshore Support Vessel
Market on Offshore Exploration Activity," "Business -- General" and
"Business -- Principal Products -- Offshore Support Vessels."

The Company also expects to capitalize on the anticipated increase in
offshore tank barge construction and conversion resulting from OPA '90 and the
aging of the worldwide fleet. The Company currently has three offshore double
hull tank barges under construction and has an outstanding option from a
customer for one additional barge. In addition, the Company is bidding on a
number of other substantial barge construction projects. See
"Business -- General" and "Business -- Principal Products -- Offshore Barges."

Pursuant to the provisions of the Separation Agreement, the Company will be
prohibited, for four years after the consummation of the Offering, from engaging
in the Trinity Businesses, which include the construction and repair of inland
hopper barges and inland tank barges. Because the Company Businesses do not
include the construction and repair of inland hopper barges and inland tank
barges, the Company's historical results of operations do not include any
revenues from the construction or repair of inland hopper barges and include
only the following revenues from the construction or repair of inland tank
barges: $7.6 million, $13.3 million and $26.2 million for fiscal years 1994,
1995 and 1996, respectively. The Company's gross profit (loss) from such
activities was ($0.6) million, ($0.9) million and $3.1 million for fiscal years
1994, 1995 and 1996, respectively. The Company's management does not believe
that the restrictions imposed pursuant to the Separation Agreement will have a
material adverse effect on the Company's business, financial condition or
results of operations.

Shipyards in certain portions of southern Louisiana, including the
Company's Lockport yard, are experiencing severe shortages of skilled shipyard
labor. This labor shortage has resulted in increased costs of labor at this
shipyard and may in the future limit the Company's ability to expand operations
at such shipyard. The areas in which the Company's other shipyards are located
are not currently experiencing any such labor shortages, although no assurances
can be given regarding whether shortages will be experienced at other shipyards
in the future. See "Risk Factors -- Shortage of Trained Shipyard Workers."

The Company anticipates that selling, general and administrative costs will
be somewhat higher after the Offering than previously as a result of new and
additional costs the Company will incur as a result of becoming a stand-alone
enterprise. Such cost increases will include additional contract bid and
performance bonding fees, administrative personnel costs and third party fees.
In addition, interest expense will increase as a result of higher borrowing
levels and higher interest rates charged by third party lenders. See "Risk
Factors -- Lack of Independent Operating History" and "-- Certain Financial
Requirements; Absence of Trinity Financial Support."

All statements other than statements of historical fact contained in this
Prospectus, including statements in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" concerning the Company's
financial position and liquidity, results of operations, prospects for U.S. Navy
contracts, ability to take advantage of new vessel construction and conversion
opportunities, labor supply and costs, selling, general and administrative costs
and other matters are forward looking statements. Forward-looking statements in
this Prospectus generally are accompanied by words such as "anticipate,"
"believe," "estimate" or "expect" or similar statements. Although the Company
believes that the expectations reflected in such forward looking statements are
reasonable, no assurance can be given that such expectations will prove correct.
Factors that could cause the Company's results to differ materially from the
results discussed in such forward

21
<PAGE> 22

looking statements include the risks described under "Risk Factors," such as
lack of independent operating history, absence of Trinity support to meet
certain financial requirements, benefits to Trinity of the Offering, dependence
on U.S. Navy contracts, potential conflicts of interest with Trinity both before
and after the proposed Separation, the possible non-completion of the proposed
Separation, intense competition and contractual, labor, regulatory and other
risks in the shipbuilding industry and risks relating to the market for offshore
support vessels and offshore double hull tank barges. All forward looking
statements in this Prospectus are expressly qualified in their entirety by the
cautionary statements in this paragraph.

RESULTS OF OPERATIONS

The following table sets forth certain statement of income information as a
percentage of the Company's revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, THREE MONTHS ENDED JUNE 30,
------------------------------------------------------ -----------------------------------
1994 1995 1996 1995 1996
---------------- ---------------- ---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contract revenue earned:
Government(1).............. $157.0 57.0% $148.1 59.1% $136.6 53.7% $40.0 55.5% $40.1 46.6%
Barges(2).................. 13.2 4.8 38.9 15.5 52.6 20.7 19.6 27.1 29.6 34.5
Offshore Energy(3)......... 61.4 22.3 37.4 14.9 54.3 21.4 11.7 16.3 13.0 15.1
Other(4)................... 43.7 15.9 26.2 10.5 10.8 4.2 0.7 1.1 3.3 3.8
------ ----- ------ ----- ------ ----- ----- ----- ----- -----
Total................ 275.3 100.0% 250.6 100.0% 254.3 100.0% 72.0 100.0% 86.0 100.0%
Cost of revenue earned....... 228.8 83.1 207.4 82.8 214.6 84.4 60.9 84.5 74.7 86.9
------ ----- ------ ----- ------ ----- ----- ----- ----- -----
Gross profit............... 46.5 16.9 43.2 17.2 39.7 15.6 11.1 15.5 11.3 13.1
Selling, general and
administrative expenses.... 12.9 4.7 13.5 5.3 15.9 6.2 4.0 5.7 4.8 5.6
------ ----- ------ ----- ------ ----- ----- ----- ----- -----
Operating income........... $ 33.6 12.2% $ 29.7 11.9% $ 23.8 9.4% $ 7.1 9.8% $ 6.5 7.5%
====== ===== ====== ===== ====== ===== ===== ===== ===== =====
</TABLE>

- ---------------

(1) Consists of revenues from the construction of U.S. Navy, other U.S.
government, state government and foreign government vessels.

(2) Consists of revenues from the construction, repair or conversion of tank
barges, including offshore and inland double hull tank barges, and deck
barges.

(3) Consists of revenues from the construction, repair or conversion of offshore
support vessels and tugboats.

(4) Consists of revenues from the construction of yachts, inland tow boats,
casino vessels and miscellaneous commercial vessels.

Three Months Ended June 30, 1996 Compared with Three Months Ended June 30,
1995

Contract revenue earned increased 19.4% to $86.0 million in the three month
period ended June 30, 1996 compared with $72.0 million in the three month period
ended June 30, 1995. Revenues for the first quarter of fiscal 1997 were
favorably affected principally by (i) a $10.0 million increase in Barges
revenues, resulting principally from the completion of a barge-conversion
contract at the Gulf Coast Fabrication shipyard, (ii) a $2.6 million increase in
Other revenues due primarily to the custom yacht business and (iii) a $1.3
million increase in Offshore Energy revenues.

Gross profit margin declined in the three month period ended June 30, 1996
to 13.1% of contract revenue earned compared to 15.5% in the three month period
ended June 30, 1995. The decline in gross profit margin principally resulted
from the substantial completion in the quarter ended June 30, 1995 of certain
contracts for the construction of large U.S. Navy vessels under which the
Company achieved higher than anticipated profitability that was recognized in
later stages of the contracts.

Selling, general and administrative expenses increased 18.5% to $4.8
million in the first quarter of fiscal 1997 from $4.0 million in the first
quarter of fiscal 1996. The increase was attributable to the addition of new
employees, normal salary increases for existing employees and increased selling
efforts in foreign markets.

Interest expense decreased 10.7% to $0.9 million during the three month
period ended June 30, 1996 from $1.0 million during the three month period ended
June 30, 1995. This decrease was due to lower levels of intercompany borrowings.

22
<PAGE> 23

Taxes decreased approximately 7.0% to $2.2 million in the first quarter of
fiscal 1997 from $2.4 million in the same period in fiscal 1996.

Fiscal 1996 Compared with Fiscal 1995

Contract revenue earned increased 1.5% to $254.3 million in the fiscal year
ended March 31, 1996 compared with $250.6 million in the fiscal year ended March
31, 1995. Fiscal 1996 revenues were favorably affected principally by (i) a
$13.7 million increase in Barges revenues, (ii) a $16.9 million increase in
Offshore Energy revenues and (iii) a $13.5 million increase in foreign
commercial contracts. The increase in Barges revenues was principally
attributable to the inclusion of results of the Gulf Coast Fabrication shipyard
for a full year in fiscal 1996 compared to five months in fiscal 1995 and to new
contracts at the Gulfport yard. The increase in Offshore Energy revenues was
principally attributable to new contracts and higher repair business. These
increases were largely offset by a $24.2 million decrease in revenue from
foreign governmental contracts and a $15.4 million decrease in Other revenues.
The decrease in foreign governmental revenue was principally attributable to
completion in fiscal 1995 of a large portion of the Company's contract with the
U.S. Navy to build patrol vessels for the Philippine government. The decrease in
Other revenues was attributable primarily to reduced casino vessel contracts.
The Company entered the casino vessel construction market in fiscal 1994 after
being awarded contracts for the construction of three large paddle wheel casino
boats. By the end of fiscal 1995, these contracts were substantially completed.
The Company believes that existing demand for casino vessels has largely been
satisfied and that it is unlikely that the Company will continue to construct a
significant number of casino vessels in the foreseeable future.

Gross profit margin declined in fiscal 1996 to 15.6% of contract revenue
earned compared to 17.2% in fiscal 1995. The decrease in the gross profit margin
principally resulted from (i) the substantial completion in fiscal 1995 of
certain contracts for the construction of large U.S. Navy vessels under which
the Company achieved higher than anticipated profitability that was recognized
in later stages of the contracts, (ii) wage increases at the Lockport shipyard
and (iii) reduced margins resulting from the re-entry of certain Company
shipyards into the general commercial market following the completion of casino
vessel construction contracts.

Selling, general and administrative expenses increased 18.1% to $15.9
million during fiscal 1996 from $13.5 million in fiscal 1995. Such increase
resulted principally from the addition of new employees, normal salary increases
for existing employees and increased selling efforts relating to foreign
shipbuilding contracts.

Interest expense decreased 15.0% to $3.3 million during fiscal 1996 from
$3.8 million during fiscal 1995 due to lower levels of intercompany borrowings.
Historically, Trinity charged the Company interest on outstanding intercompany
balances at market rates based on Trinity's borrowing costs.

Taxes decreased approximately 20.3% to $8.1 million in fiscal 1996 from
$10.2 million in fiscal 1995. See Note 9 of Notes to Consolidated Financial
Statements.

Fiscal 1995 Compared with Fiscal 1994

Contract revenue earned decreased 9.0% to $250.6 million in the fiscal year
ended March 31, 1995 compared with $275.3 million in the fiscal year ended March
31, 1994. Fiscal 1995 revenues were adversely affected by (i) a $24.0 million
reduction in Offshore Energy revenues, (ii) a $17.5 million reduction in Other
revenues and (iii) a $8.9 million reduction in Government revenues. The
reduction in Offshore Energy revenues is principally attributable to the
completion in fiscal 1994 of three tugboats and an anchor handling supply vessel
which were not replaced in fiscal 1995. The reduction in Other revenues resulted
from the completion in fiscal 1994 of a substantial portion of three large
paddle wheel casino vessels. The reduction in Government revenues resulted
principally from a decrease of $40.2 million due to the substantial completion
of certain large U.S. Army contracts in fiscal 1994, partially offset by (i) a
$14.0 million increase in U.S. Navy contracts due to increased oceanographic
survey and research ship construction activity, (ii) a $9.5 million increase in
state government contracts due to increased revenues from the construction of an
additional ferry boat and from increased activity under construction contracts
for two other ferry boats and (iii) a $4.7 million increase due to construction
of additional patrol craft. These decreases in revenues for fiscal 1995 were
partially offset by a $25.7 million increase in Barges revenues due to new
contracts and increased revenues

23
<PAGE> 24

from five months of operations of the Company's Gulf Coast Fabrication shipyard
which was acquired in October 1994.

Gross profit margin increased in fiscal 1995 to 17.2% of contract revenue
earned compared to 16.9% in fiscal 1994. The increase in gross profit margin
resulted principally from the completion in fiscal 1995 of a contract for the
construction of a large U.S. Navy vessel under which the Company achieved higher
than anticipated profitability that was recognized in later stages of the
contract.

Selling, general and administrative expenses increased 4.6% to $13.5
million during fiscal 1995 from $12.9 million in fiscal 1994, principally as a
result of normal salary increases for existing employees.

Interest expense increased $1.7 million to $3.8 million during fiscal 1995
from $2.1 million during fiscal 1994 due to higher levels of intercompany
borrowings to support operations as well as higher average interest rates.

Taxes decreased approximately 16.8% to $10.2 million in fiscal 1995 from
$12.2 million in fiscal 1994. See Note 9 of Notes to Consolidated Financial
Statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal needs for capital, in addition to the funding of
ongoing shipbuilding operations, have been capital expenditures, acquisitions
and the repayment of intercompany advances. The Company's principal sources of
liquidity have been net cash provided by operating activities and intercompany
advances from Trinity. Cash flows from operating activities were $23.7 million
during fiscal 1996 while intercompany activities resulted in a net repayment by
the Company to Trinity of $7.9 million in advances from Trinity.

Prior to the Offering, the Company has relied upon Trinity to provide
funding for working capital, capital expenditures and acquisitions. In addition,
a significant portion of the Company's existing contracts for the construction,
repair or conversion of vessels require that the Company's performance be
guaranteed by Trinity or by a surety company or other third party pursuant to a
contract bid or performance bond, letter of credit or similar obligation. As of
July 31, 1996, Trinity had guaranteed contract performance obligations of the
Company in the aggregate amount of approximately $66.1 million, and the Company
had outstanding contract bid and performance bonds, letters of credit and
similar obligations issued by third parties, with Trinity as the obligor, with
an aggregate face amount of approximately $74.9 million. These guarantees,
bonds, letters of credit and similar obligations, totalling approximately $141.0
million, will remain in effect after the Offering until the obligations expire,
and the Company will be obligated to indemnify Trinity against any liability
under such obligations. For the protection of Trinity in the event that Trinity
is called upon to satisfy any such obligations, Trinity will be granted security
interests in certain assets of the Company which relate to the Company contracts
from which such obligations arise and will possess rights to complete
performance of any such contract on behalf of the Company in the event of
nonperformance by the Company. Such rights and remedies are similar to the
rights possessed by surety companies that have issued performance bonds on
behalf of the Company. See "Business -- Bonding and Guarantee Requirements" and
"Certain Transactions and Related Arrangements -- Arrangements Between the
Company and Trinity -- Performance Bond and Guarantee Arrangements."

After the Offering, it is anticipated that Trinity will not provide any
further credit or other financial support to the Company. See "Risk
Factors -- Certain Financial Requirements; Absence of Trinity Financial
Support." The Credit Facility provides a $105.0 million revolving line of credit
for general corporate purposes and working capital, with a $50.0 million
sublimit for letters of credit. Immediately prior to the consummation of the
Offering, the Company expects to borrow under the Credit Facility to repay (i) a
$25.0 million intercompany note to Trinity and (ii) $25.0 million of certain
indebtedness of Trinity associated with the Company Businesses and assumed by
the Company in connection with the Consolidation Transactions. The Company
intends to use the net proceeds of the Offering to repay income taxes payable to
Trinity and a portion of the indebtedness incurred under the Credit Facility
immediately prior to the Offering. See "Separation From Trinity -- Consolidation
Transactions," "Separation From Trinity -- Offering Related Transactions" and
"Use of Proceeds."

As of June 30, 1996, the Company had approximately $29.9 million of net
current liabilities to Trinity resulting from Trinity's centralized cash
management system. Such liabilities bear interest at market rates.

24
<PAGE> 25

The Company expects to repay the net current liabilities to Trinity outstanding
as of the consummation of the Offering, in the ordinary course of business, and
in any event no later than 60 days after the consummation of the Offering, as it
replaces such liabilities with its own direct trade payables and similar
obligations. To the extent that sufficient funds are not available from the
replacement of such liabilities with its own payables within 60 days following
consummation of the Offering, the Company anticipates that it will have
sufficient borrowing capacity under the Credit Facility to repay such amount to
Trinity. See Note 6 of Notes to Consolidated Financial Statements.

As of June 30, 1996, the Company was obligated to reimburse Trinity for
income taxes incurred in connection with the Company Businesses in an aggregate
amount of approximately $16.4 million. Under the Tax Allocation Agreement, the
Company has agreed to pay the amount of the Company's income tax liability to
Trinity as of the consummation of the Offering with a portion of the net
proceeds of the Offering. It is currently estimated that the Company's income
tax liability to Trinity will be approximately $18.2 million upon consummation
of the Offering.

Upon consummation of the Offering, the Company estimates that it will have
approximately $65 million of borrowings available under the Credit Facility.
Borrowings under the Credit Facility will bear interest at the London Interbank
Offered Rate plus 0.625% to 1.25% per annum, depending on the ratio of the
Company's borrowed debt to EBITDA (as defined in the Credit Facility). Under the
Credit Facility, the Company is obligated to pay certain fees, including an
annual commitment fee in an amount that is expected to range from 0.175% to 0.5%
of the unused portion of the commitment, depending on the ratio of the Company's
borrowed debt to EBITDA, and a fee of 0.125% of the amount of the Credit
Facility commitment upon the initial funding under the Credit Facility. The
Credit Facility contains customary restrictive covenants (including covenants
restricting the ability of the Company to pay dividends or encumber its assets).
The Credit Facility requires the Company to maintain certain financial ratios,
including an interest coverage ratio (as defined in the Credit Facility) of at
least 4.0 to 1, a debt service coverage ratio (as defined in the Credit
Facility) of at least 1.35 to 1, a borrowed debt to EBITDA ratio (as defined in
the Credit Facility) of not more than 3.5 to 1 and a current ratio (as defined
in the Credit Facility) of at least 1.25 to 1. The Credit Facility will expire
on the third anniversary of the date of consummation of the Offering, subject to
extension at the option of the lenders. It is a condition to the consummation of
the Offering that the Credit Facility be in place prior to, and that the
Offering Related Transactions be consummated concurrently with the consummation
of, the Offering.

The Company made capital expenditures of $6.4 million and $5.6 million in
fiscal 1995 and 1996, respectively, and $2.6 million in the first quarter of
fiscal 1997. The Company currently has budgeted approximately $9 million for
planned capital projects at its current operating facilities for fiscal 1997,
including $4 million to $5 million for projects at its Pascagoula shipyard.
These Pascagoula shipyard expenditures are required to meet existing contractual
commitments. In addition, although not currently budgeted for fiscal 1997, the
Company estimates that additional capital expenditures of approximately $4
million to $5 million may be made to relocate a dry dock to its Pascagoula
shipyard and additional capital expenditures of approximately $8 million to $12
million may be made to make other improvements to enable such yard to do large
vessel and drilling rig construction, conversion and repair projects. The
Mississippi Business Finance Corporation has authorized the issuance of up to
$25 million of revenue bonds for the Company in connection with proposed
improvements at the Pascagoula facility. If the Company decides to reopen its
Panama City yard, which is currently inactive, startup costs are expected to be
approximately $3 million. Expenditures to reopen the Panama City yard are not
currently budgeted for fiscal 1997. However, such reopening could occur in
fiscal 1997 if such action is warranted due to an increase in the number of
shipbuilding or repair orders. See
"Business -- Operations -- Shipbuilding -- Shipyards."

The Company believes that cash flow from operations, together with funds
available under the Credit Facility and the Pascagoula revenue bonds, will be
sufficient to fund its requirements for working capital, capital expenditures
and other capital needs for at least the next 12 months.

25
<PAGE> 26

INFLATION AND CHANGING PRICES

The Company does not believe that general price inflation has had a
significant impact on the Company's results of operations during the periods
presented. To the extent that the effects of inflation are not offset by
improvements in manufacturing and purchasing efficiency and labor productivity,
the Company generally has been able to take such effects into account in pricing
its contracts with customers. There can be no assurance, however, that inflation
will not have a material effect on the Company's business in the future. For
information regarding the effects of increases in labor costs on the Company's
results of operations in recent periods, see "-- General" and "-- Results of
Operations."

26
<PAGE> 27

BUSINESS

GENERAL

The Company is the seventh largest shipbuilder in the United States,
specializing in the construction, repair and conversion of ocean-going and
inland waterway vessels for the commercial and governmental markets. The Company
is the largest U.S. builder of small to medium sized (from 50 to 400 feet)
ocean-going ships and barges and inland tow boats for these markets. The Company
and its predecessors have built more than 2,000 of these vessels in the past 40
years. The Company has ten shipyards (including one that currently is idle), all
of which are strategically located along the Gulf Coast from Louisiana to
Florida. The Company's shipyards employ advanced manufacturing techniques,
including modular construction methods which the Company was among the first
U.S. shipbuilders to use, zone outfitting methods, advanced welding techniques,
panel line fabrication, computerized plasma arc metal cutting and automated
sandblasting and painting. The Company's multiple shipyards provide the Company
significant flexibility and efficiency in manufacturing a wide variety of
vessels. The Company believes that these factors, together with its skilled and
experienced work force, make the Company one of the most versatile and
cost-efficient shipbuilders in the United States.

The Company provides a wide variety of products for diversified markets.
The Company has a large engineering team which has enabled it to build hundreds
of vessels for commercial and governmental customers. The Company's principal
products include offshore support vessels, offshore double hull tank barges,
offshore tug boats and oil spill recovery vessels for commercial use and
oceanographic survey and research ships, high speed patrol boats and ferries for
government use. Other Company products include inland tow boats, specialty
inland barges and private yachts. During fiscal 1994, following the legalization
of casino gambling in Louisiana, the Company was awarded contracts to construct
three large paddle wheel casino boats. These contracts were substantially
completed during fiscal 1995. The Company believes that the existing demand for
casino vessels has largely been satisfied and that it is unlikely that the
Company will continue to construct a significant number of casino vessels in the
foreseeable future. The Company will build inland hopper barges under a limited
arrangement with Trinity. At July 31, 1996, the Company had firm shipbuilding
contracts with an aggregate remaining value of approximately $417 million
(excluding unexercised options held by customers), representing 115 vessels
(including 50 inland hopper barges). Of this value, approximately $181 million
was attributable to contracts to build ships for the U.S. Navy.

The Company has built more offshore support vessels, including supply
boats, anchor handling tug supply boats and anchor handling tugs (collectively,
"offshore support vessels"), to service offshore oil and gas drilling rigs and
production platforms than any shipbuilder in the United States. The Company has
built a total of 534 offshore support vessels from 1965 through 1995, which the
Company believes account for approximately 25% of the world fleet of offshore
support vessels manufactured during such period. Vessels built by the Company
and known to be in service represented approximately 34% of the 395 total
offshore support vessels operated by the two largest worldwide fleet operators
as of March 31, 1996. As a result of the severe downturn in the oil and gas
industry in the mid-1980's, there has been very limited construction of offshore
support vessels in the United States since 1985. During the period from 1985
through 1995, the Company built a total of eight new 200-foot or longer offshore
support vessels, more than any other U.S. shipbuilder. The Company's offshore
support vessel manufacturing activities during this period have enabled it to
gain a competitive advantage through experience with recent advances in vessel
engineering and construction techniques. The Company currently has eight
offshore support vessels under contract, of which six contracts have been
entered into since July 1, 1996. The Company also has outstanding options for
eight additional vessels, including seven from one customer, and is bidding on a
number of substantial potential orders for such vessels.

27
<PAGE> 28

majority of the offshore support vessels currently in service worldwide are 16
or more years old and a majority of the others are between 11 and 16 years old.
As these vessels age, maintenance, repair and vessel certification costs
increase significantly and eventually require their replacement. New offshore
support vessels incorporating advances in engineering, technology and outfitting
are expected to cost between $6 million and $25 million each, depending on the
vessel's size and capability. The timing of the expected upturn in the offshore
support vessel market will depend principally upon conditions in the offshore
oil and gas industry, particularly an increase in drilling activity and dayrates
for offshore support vessels, which in turn depend upon oil and gas prices.
Because of its extensive experience in manufacturing offshore support vessels
and its ability to expand production at its existing shipyards, the Company
believes it is well positioned to take advantage of the expected upturn in the
offshore support vessel business.

The Company similarly has positioned itself to benefit from the expected
increase in offshore tank barge construction and conversion. Demand for offshore
tank barges has been created by OPA '90, which generally requires U.S. and
foreign vessels carrying fuel and certain other hazardous cargos and entering
U.S. ports to have double hulls by 2015. OPA '90 establishes a phase-out
schedule that began January 1, 1995 for all existing single hull vessels based
on the vessel's age and gross tonnage. The Company estimates that OPA '90 will
require approximately 66 barges engaged in domestic trade to be retrofitted or
replaced by 2005 and another approximately 22 such barges to be retrofitted or
replaced by 2010. Demand for new vessels is also created by the aging of the
worldwide fleet. According to estimates of the United States Maritime
Administration ("MARAD"), by 2000 approximately 40% of the current world
offshore tank barge fleet will be more than 25 years old and more than 20% will
be at least 30 years old. New double hull barges generally range in cost from $6
million to $25 million each (with an estimated average cost of $15 million).
During the past three years, the Company has built eight large offshore double
hull tank barges, more than any other U.S. shipbuilder. The Company currently
has three such barges under construction and has an outstanding option from a
customer for one additional barge. In addition, the Company is bidding on a
number of other substantial barge construction projects.

BACKGROUND

Since 1972, the Company has grown substantially through a series of nine
acquisitions. The Company acquired its first shipyard (Equitable in New Orleans,
Louisiana) in 1972 and another (Gretna Machine & Iron Works in Harvey,
Louisiana) in 1980. From 1972 to 1983, almost all of the Company's shipbuilding
projects were for the commercial market (such as lighter aboard ship (LASH)
container barges, anchor handling tugboats, ocean-going barges, inland hopper
barges and two Staten Island ferries).

In 1983, the Company acquired Halter Marine, Inc., including the Halter
shipyards in Moss Point and Lockport, Louisiana (and several other shipyards
that have been subsequently closed). As a result of this acquisition, the
Company entered the markets for construction of offshore support vessels and of
U.S. government vessels. The Halter Moss Point and Lockport yards were
principally engaged in building a large number of offshore support vessels from
1978 to 1985, when the downturn in the offshore oil and gas industry severely
curtailed demand for these vessels. A large majority of the Company's
shipbuilding business was for the U.S. government from 1983 to 1989, a period
during which the U.S. Navy was engaged in a large shipbuilding program.

In 1987, the Company acquired Moss Point Marine, Inc. in Escatawpa,
Mississippi, which was then owned and operated by the Company's current Chief
Executive Officer, John Dane III, and the Company's shipyards were reorganized
to centralize sales, engineering, production, administrative and other functions
in order to increase their efficiency and reduce costs. In 1990, as U.S. Navy
shipbuilding activities were beginning to decline, the Company began to expand
its commercial business again and obtained a large commercial contract to build
12 oil spill recovery vessels.

In 1991, the Company acquired its Gulfport, Mississippi shipyard, which
initially brought additional governmental projects. In 1992, the Company
acquired its Panama City, Florida yard, which was closed at the time of
acquisition. The Panama City yard was purchased on advantageous terms to provide
additional capacity when needed.

28
<PAGE> 29

From late 1994 to late 1995, the Company purchased three shipyards that
significantly increased its capacity to do repair and conversion work. In late
1994, the Company acquired the Gulf Coast Fabrication shipyard in Pearlington,
Mississippi. This yard, which has the widest graving dock on the Gulf Coast,
specializes in large barge construction and conversion projects, including
construction and retrofitting of barges with double hulls to meet the
requirements of OPA '90. At the time of the acquisition by the Company, the Gulf
Coast Fabrication shipyard also was engaged in the construction of casino
vessels. In mid-1995, the Company acquired the Gulf Repair yard in New Orleans,
which now has five large dry docks for repair of offshore vessels. In late 1995,
the Company acquired its Pascagoula, Mississippi shipyard, which provides deep
water access and currently has the capacity to build large vessels (up to 800
feet in length, 115 feet in width and of an unlimited height).

See "-- Operations" for additional information about the Company's
shipyards and recent shipbuilding, repair and conversion activities.

INDUSTRY OVERVIEW

Private U.S. shipbuilders generally fall into two categories: (i) the six
largest shipbuilders capable of building large scale vessels for the U.S. Navy
and (ii) other shipyards that build small to medium sized vessels for
governmental and commercial markets. Each of the six largest shipbuilders is
substantially larger than the Company. Included in the second category are ten
shipbuilders, including the Company, that are capable of building vessels of 400
feet or more. This category also includes several hundred companies engaged in
shipbuilding and repair activities in the United States, many of which are
smaller than the Company, having one or two shipyards and specializing in the
construction or repair of one or a small number of types of vessels.

In general, during the 1990's, the U.S. shipbuilding industry has been
characterized by substantial excess capacity because of the significant decline
in U.S. Navy shipbuilding spending and the difficulties experienced by U.S.
shipbuilders in competing successfully for international commercial projects
against foreign shipyards, many of which are heavily subsidized by their
governments. As a result of these factors, competition by U.S. shipbuilders for
domestic commercial projects has increased significantly.

The U.S. shipbuilding industry has two distinct markets: (i) contracts with
domestic and foreign governments, principally the U.S. Navy, and (ii) commercial
contracts for domestic and international customers. See "-- Contract Procedure,
Structure and Pricing" and "-- Competition."

BUSINESS STRATEGY

The Company's strategy is to enhance its position as a leading manufacturer
of small to medium sized vessels, to respond to anticipated new shipbuilding
construction opportunities and to increase its revenues and profitability. In
order to implement this strategy, the Company intends to:

Provide a Wide Variety of Products to Diversified Markets

The Company's shipbuilding versatility is one of its principal competitive
strengths, not only reducing its dependence on particular types of products, but
also providing engineering and manufacturing benefits across product lines. The
Company intends to continue to serve diversified markets, including a balance of
commercial and governmental shipbuilding projects. See "-- Operations" and
"-- Principal Products."

Take Advantage of New Construction Opportunities

The Company intends to anticipate and position itself to take advantage of
significant new vessel construction opportunities, including the following:

Expected Upturn in Market for Offshore Support Vessels. Because of its
extensive experience in manufacturing offshore support vessels (including
those incorporating recent advances in vessel engineering, construction and
outfitting) and its ability to expand its production at its existing
shipyards, the Company believes it is well positioned to take advantage of
the expected upturn in the market for new offshore support vessels. The
Company has built more offshore support vessels than any shipbuilder in the

29
<PAGE> 30

United States. As a result of the severe downturn in the oil and gas
industry in the mid-1980's, there has been very limited construction of
offshore support vessels in the United States since 1985. The Company
expects that substantial orders for new offshore support vessels may be
made in the next several years due to the need for larger vessels to
support deep water oil and gas exploration and production activities, as
well as the substantial worldwide fleet attrition over the past ten years
and the aging of the remaining fleet. The timing of the expected upturn in
the offshore support vessel market will depend principally upon conditions
in the offshore oil and gas industry, particularly an increase in drilling
activity and dayrates for offshore support vessels, which in turn depend
upon oil and gas prices. The Company currently has eight offshore support
vessels under contract, of which six contracts have been entered into since
July 1, 1996. The Company also has outstanding options for eight additional
vessels, including seven from one customer, and is bidding on a number of
substantial potential orders for such vessels. See "Risk
Factors -- Dependence of Offshore Support Vessel Market on Offshore
Exploration Activity," "-- General" and "-- Principal Products -- Offshore
Support Vessels."

Current and Future Demand for Offshore Double Hull Tank Barges. The
Company expects to capitalize on the increase in offshore tank barge
construction and conversion resulting from OPA '90 and the aging of the
worldwide fleet. OPA '90 establishes a phase-out schedule that began
January 1, 1995 for all existing U.S. and foreign single hull vessels
carrying fuel and certain other hazardous cargos and entering U.S. ports.
Operators will be required either to retrofit existing single hull vessels
or construct new double hull vessels in order to comply with the law's
requirement that such vessels have double hulls by 2015. The Company
estimates that OPA '90 will require approximately 66 barges engaged in
domestic trade to be retrofitted or replaced by 2005 and another
approximately 22 such barges to be retrofitted or replaced by 2010.
According to MARAD estimates, by 2000 approximately 40% of the world
offshore tank barge fleet will be more than 25 years old and more than 20%
will be at least 30 years old. During the past three years, the Company has
built eight large offshore double hull tank barges, more than any other
U.S. shipbuilder. The Company currently has three such barges under
construction and has an outstanding option from a customer for one
additional barge. In addition, the Company is bidding on a number of other
substantial barge construction projects. See "-- Principal
Products -- Offshore Barges."

Utilize Multiple, Strategically Located Shipyard Facilities

The Company's multiple shipyards will continue to provide it with
significant flexibility and efficiency in manufacturing a wide variety of
ocean-going vessels. The Company utilizes certain shipyards with specialized
machinery to centrally manufacture various components for its other shipyards,
helping to reduce costs and equipment redundancy. The Company is often able to
enhance its production efficiency and accelerate vessel delivery schedules by
allocating projects among multiple shipyards based on capability and capacity.
The Company's shipyards are strategically located along the Gulf Coast, in close
proximity to many commercial customers and with access to additional
shipbuilding labor as the Company's business expands (except in southern
Louisiana, where shipyards, including the Company's Lockport facility, are
experiencing a severe shortage of skilled shipyard labor). The Company has spent
approximately $46.5 million in the past five years to acquire, expand and
improve its shipyard facilities, which are all well maintained. See
"-- Operations."

Continue To Be a Low Cost Shipbuilder

The Company intends to continue to enhance its position as one of the most
cost-efficient shipbuilders in the United States. The Company's shipyards employ
advanced manufacturing techniques, including modular construction methods which
the Company was among the first U.S. shipbuilders to use, zone outfitting
methods, advanced welding techniques, panel line fabrication, computerized
plasma arc metal cutting and automated sandblasting and painting. The Company
believes that these factors make the Company one of the most versatile and
cost-efficient shipbuilders in the United States. See "-- General" and
"-- Operations -- Shipbuilding."

30
<PAGE> 31

Increase Output at the Company's Existing Facilities

The Company has the ability to significantly increase production at almost
all of its existing shipyards. As of June 30, 1996, the Company employed 2,597
shipyard workers and estimates that it could employ a maximum of approximately
3,670 workers without significant expansion of its plant facilities. While some
of its principal competitors are experiencing a severe shortage of skilled
shipyard workers in southern Louisiana (which has also affected the Company's
Lockport, Louisiana yard), the Company's other shipyards currently have access
to additional shipyard labor in their respective markets along the Gulf Coast.
Significant excess capacity is available at the Company's Pascagoula yard, which
was acquired in late 1995 and at which production has recently commenced, and
its Panama City yard, which currently is idle. See "Risk Factors -- Shortage of
Trained Shipyard Workers" and "-- Operations."

Expand Repair and Conversion Activities

Since October 1994, the Company has acquired the Gulf Coast Fabrication,
Gulf Repair and Pascagoula shipyards in order to increase its capacity for
repair and conversion work. Depending on demand for such services, the Company
also may, at some time in the future, relocate a 115 foot wide dry dock from its
Gulf Repair shipyard in New Orleans to its Pascagoula, Mississippi yard in order
to undertake large repair and conversion projects, such as those for large
barges, cargo ships and drilling rigs. The Pascagoula yard's deep water access
and expandable capacity to handle large vessels will enable the Pascagoula yard
to perform repair and conversion (as well as construction) services for very
large vessels and repair and construct offshore drilling rigs. See
"-- Operations -- Shipyards" and "-- Operations -- Repair and Conversion
Services."

Acquire Additional Shipyards Opportunistically

The Company has grown substantially through nine acquisitions since 1972.
Although the Company currently has additional capacity at its existing
facilities, the Company expects to consider strategic acquisitions of additional
shipyards in the future depending on a variety of factors, including demand for
new construction, conversion and repairs, the advantages offered by the
facilities and the acquisition terms. The Company expects that consolidation
will continue to occur among small to medium sized shipbuilders in light of
increasing costs of meeting environmental and other legal requirements and other
changes in the markets for various types of governmental and commercial vessels.

Increase Foreign Government Shipbuilding Activities

During the past six years, the Company has completed a significant amount
of shipbuilding projects for foreign governments, especially projects requiring
specialized expertise, such as high speed patrol boats. Depending on the project
and other circumstances, factors that can help the Company compete for foreign
government shipbuilding projects include its advanced technology, higher
productivity, vessel delivery schedules and prevailing exchange rates. See
"-- Principal Products -- Governmental Vessels."

Provide Sophisticated Engineering Services

Engineering services are a key part of the complete shipbuilding services
offered by the Company. The Company maintains a large marine engineering
department, consisting of approximately 140 employees, 45 of whom are engineers
or naval architects. The Company has built hundreds of vessels for the
commercial and governmental markets. This capability allows the Company's
customers to select from standard configurations, modify a standard
configuration, or have the Company build a vessel to the customer's
specifications or design. See "-- Engineering."

31
<PAGE> 32

OPERATIONS

Shipbuilding

Projects. The Company's shipbuilding projects consisted of 115 vessels
(including 50 inland hopper barges) as of July 31, 1996. The Company had firm
contracts (excluding unexercised options held by customers) with an aggregate
remaining value of approximately $417 million as of July 31, 1996. Of this
contract value, approximately $181 million was attributable to contracts to
build ships for the U.S. Navy. The Company anticipates that approximately $245
million of the aggregate remaining value of the firm contracts as of July 31,
1996 will be filled during fiscal 1997. The following chart includes a
description of the shipbuilding projects as of July 31, 1996.

<TABLE>
<CAPTION>
NUMBER OF TYPE(S) OF
TYPE OF VESSEL SHIPYARD(S) VESSELS CUSTOMER
- ------------------------------- ------------------------------ ----------------- ------------------------------
<S> <C> <C> <C>
GOVERNMENTAL:
Oceanographic Survey and Halter Moss Point; Pascagoula 4 U.S. Government
Research Ships
Patrol Boats Equitable 5 U.S. Government;
Foreign Governments
Ferries Halter Moss Point; Moss Point 3 State Governments;
Marine; Lockport Foreign Governments
Miscellaneous, governmental Equitable; Gulf Coast 23(1) U.S. Government;
Fabrication; Moss Point Marine State Governments
BARGES:
Tank Barges Gretna; Moss Point Marine 3 Private Fleet Operators
Inland Hopper Barges Gulfport 50(2) Private Fleet Operators
Inland Double Hull Tank Gulfport 7 Private Fleet Operators
Barges
Deck Barges Lockport; Gulf Coast 2 Private Fleet Operators
Fabrication
OFFSHORE ENERGY:
Offshore Support Vessels
Anchor Handling Tug Lockport 1 Marine Support Service
Supply Boats Companies
Supply Boats Moss Point Marine; Lockport; 4 Marine Support Service
Pascagoula Companies
Tug Boats Moss Point Marine; Lockport 6 Private Fleet Operators
OTHER:
Yachts Equitable 4 Individuals
Inland Tow Boats Lockport 1 Private Fleet Operators
Miscellaneous, commercial Lockport 2 Foreign Operators
---
Total 115
===
</TABLE>

- ---------------

(1) Certain of these vessels are being constructed by a subcontractor at its
facility in New Orleans.

(2) The Company has a firm contract to construct 50 inland hopper barges under a
limited arrangement with Trinity. See "Certain Transactions and Related
Arrangements -- Arrangements Between the Company and Trinity -- Inland Barge
Arrangements."

Shipyards. The Company conducts its shipbuilding operations at nine active
shipyards. None of the Company's principal U.S. competitors for new construction
of small to medium sized vessels, by contrast, has more than two active
shipyards used for new construction. The Company also owns a shipyard in Panama
City, Florida that was closed when acquired. The Panama City yard is not
currently operational but may be reopened, if justified by customer demand, late
in fiscal 1997.

Management believes that the Company's focus on the operation of a
relatively large number of smaller shipyards and the diversity of location and
function of its various shipyards enable the Company to maintain significant
flexibility and to achieve substantial operating efficiencies. The number and
diversity of function of the Company's shipyards allow the Company to achieve
operating efficiencies by permitting each of its shipyards to focus on
construction of particular types of vessels. Additionally, the Company's
Equitable and Gulfport shipyards manufacture components or modules that are
shipped to the Company's other shipyards for inclusion in vessels, thereby
eliminating the need to maintain certain costly manufacturing equipment at each
shipyard. The Company anticipates that the component manufacturing function
currently performed by its Gulfport shipyard will be shifted to its Pascagoula
shipyard and that the Gulfport facility will be temporarily converted primarily
to the production of inland hopper barges under an arrangement with Trinity.

32
<PAGE> 33

The Company has budgeted approximately $4 million to $5 million for fiscal 1997
for improvements at its Pascagoula shipyard necessary to shift such component
manufacturing function to Pascagoula and for other improvements necessary to
meet existing contractual requirements. See "Certain Transactions and Related
Arrangements -- Arrangements Between the Company and Trinity -- Inland Barge
Arrangements."

The location of the Company's shipyards at various sites along the Gulf
Coast generally alleviates problems that can arise from labor shortages in
particular locations. Shipyards located in certain portions of southern
Louisiana currently are experiencing severe shortages of skilled shipyard labor
as a result of labor demands brought about by increases in offshore drilling
activities, the construction of offshore rig platforms and crewing of offshore
vessels. This labor shortage has resulted in increased costs of labor and
limitations on production capacity for shipyards in such portions of southern
Louisiana. However, of the Company's ten shipyards, only Lockport is located
within the affected areas of southern Louisiana. Accordingly, the labor shortage
has not impacted the Company to the same degree that it has affected many of the
Company's competitors.

The Company's shipyards are well maintained facilities. During the past
five years, the Company made, in the aggregate, approximately $46.5 million of
capital expenditures in order to acquire, expand and improve its shipyard
facilities. These expenditures have allowed the Company to solidify its position
as a low cost producer of high quality vessels. In the 1970's, the Company was
one of the first U.S. builders of small to medium sized ships to adopt modular
construction techniques. The Company now employs the latest in modular
construction techniques, zone outfitting, which involves the installation of
pipe, electrical wiring and other systems at the modular stage, thereby reducing
construction time while at the same time simplifying systems integration and
improving quality. The Company also uses panel line fabrication for efficiently
attaching stiffeners to shell and bulkheads, computerized plasma arc metal
cutting for close tolerances and automated sandblasting and painting processes
for efficiency and high quality.

The Company has capacity, with the addition of new employees, to expand
production significantly at almost all of its existing shipyards. In addition,
the Pascagoula shipyard, which was acquired by the Company as a closed facility
in November 1995, is still in the start-up phase. The Pascagoula shipyard
provides deep water access and currently has the capacity to build large vessels
(up to 800 feet in length, 115 feet in width and of an unlimited height). The
Company believes that the Pascagoula area offers a good supply of skilled labor
and that the Pascagoula facility could become the Company's largest shipyard.
The Company estimates that capital expenditures totaling approximately $4
million to $5 million will be required during fiscal 1997 for improvements at
the Pascagoula facility necessary to shift the component manufacturing function
from the Gulfport facility to Pascagoula and for other improvements necessary to
meet existing contractual requirements. However, the Company estimates that,
although not currently budgeted for fiscal 1997, additional capital expenditures
totaling approximately $4 million to $5 million may be made to relocate a 115
foot wide drydock from its Gulf Repair shipyard in New Orleans to the Pascagoula
yard and additional capital expenditures of approximately $8 million to $12
million may be made to permit the Pascagoula facility to offer large vessel
construction, repair and conversion services and drilling rig construction. The
Company also may reopen its shipyard in Panama City, Florida late in fiscal
1997, if justified by customer demand. The Panama City shipyard has been idle
since its acquisition by the Company in October 1992. The Company estimates that
initial capital expenditures totaling approximately $3 million would be
necessary to reopen the Panama City facility.

33
<PAGE> 34

The following chart contains certain information, as of June 30, 1996,
regarding each of the Company's shipyards.

<TABLE>
<CAPTION>
PRIMARY PRODUCTS/ CURRENT MAXIMUM
SHIPYARD LOCATION DATE ACQUIRED OPERATIONS(1) EMPLOYEES EMPLOYEES(2)
- ------------------ ---------------- -------------- ---------------------------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Equitable New Orleans, LA December 1972 Patrol Boats; Yachts; 354 500
Crew Boats; Manufacturing of
Components for Other
Company Shipyards
Gretna Harvey, LA December 1980 Offshore Barges; Minor 185 250
Repairs; Gas Freeing and
Cleaning
Halter Moss Point Moss Point, MS October 1983 Oceanographic Survey and 359 450
Research Ships; Other
Specialized Navy Vessels;
Offshore Support Vessels;
Large Ferries
Lockport Lockport, LA October 1983 Tug Boats; Offshore Deck 273 300
Barges; Offshore Support
Vessels; Patrol Boats
Moss Point Marine Escatawpa, MS August 1987 Ferries; Large Offshore Tug 328 400
Boats; Landing Craft;
Offshore Support Vessels
Gulfport Gulfport, MS December 1991 Roll On-Roll Off Ramps for 413 500
U.S. Government; Inland Double
Hull Tank Barges; Inland Hopper
Barges; Manufacturing of
Components for Other Company
Shipyards; Offshore Deck Barges
Panama City Panama City, FL October 1992 Idle; To be Reopened 1 400
(Depending on Market
Conditions)
Gulf Coast Pearlington, MS October 1994 Offshore Container and Deck 232 250
Fabrication Barges; Offshore Double Hull
Tank Barges; Repair and
Conversion
Gulf Repair New Orleans, LA July 1995 Repairs; Offshore Deck Barges 238 220
Pascagoula Pascagoula, MS November 1995 Offshore Support Vessels; 214 400
Oceanographic Survey and Research
Ships; Containerships; Repairs;
Offshore Double Hull Tank Barges
------- -------
Total Number of Employees(3) 2,597 3,670
======= =======
</TABLE>

- ---------------

(1) Includes operations currently conducted and products currently produced or
contemplated to be produced at the applicable shipyard.
(2) Represents management's estimate of the maximum number of persons that could
be employed at the existing plant facilities without significant expansion.
For information regarding related capital expenditures, see discussion
above. Because of a severe labor shortage affecting shipyards in certain
portions of southern Louisiana (including the Lockport shipyard), it is
doubtful that the Company could increase the number of employees at its
Lockport shipyard at the present time. See "Risk Factors -- Shortage of
Trained Shipyard Workers."
(3) Excludes employees at corporate headquarters and engineering employees.

34
<PAGE> 35

Repair and Conversion Services

Since October 1994, the Company has acquired two shipyards that currently
provide major vessel repair and conversion services. The Company's Gulf Coast
Fabrication shipyard in Pearlington, Mississippi has the widest graving dock on
the Gulf Coast, capable of accommodating vessels up to 140 feet in width. The
Company's Gulf Repair facility in New Orleans, Louisiana has five floating dry
docks capable of accommodating vessels up to 770 feet in length. Depending on
demand for such services, the Company may, at some time in the future, relocate
a 115 foot wide dry dock from the Gulf Repair shipyard to the Pascagoula yard in
order to undertake large repair and conversion projects, such as those for large
barges, cargo ships and drilling rigs. The Pascagoula shipyard provides deep
water access and currently has the capacity to build large vessels (up to 800
feet in length, 115 feet in width and of an unlimited height). The Company also
performs minor vessel repairs at its Gretna facility in Harvey, Louisiana, where
it has two graving docks.

The enactment of OPA '90 has created a demand for retrofitting existing
offshore barges to double hulls to comply with the law's single hull phase-out
requirements (in addition to the construction of new double hull vessels
complying with OPA '90). Additionally, demand for vessel repair and conversion
services has increased in recent years as vessel owners have attempted to extend
the useful lives of offshore barges and offshore support vessels, as a
significant portion of their fleets approach the end of their useful lives.
Management believes that the Company is well positioned to benefit from these
demand trends and that these trends should continue for at least the next ten
years.

Other Services

The Company offers 24-hour a day vessel parts supply service to its
customers throughout the world and offers crew training services in the
customers' native languages. At its Gretna yard, the Company also offers gas
freeing and cleaning services for vessels that carry fuels or other hazardous
cargos. See "-- Regulation -- Environmental Regulation."

PRINCIPAL PRODUCTS

The Company manufactures a variety of small and medium sized vessels
principally for the commercial and governmental markets. Certain of the
principal types of vessels manufactured by the Company are described below.

Governmental Vessels

The Company builds several types of vessels for the U.S. Navy.
Oceanographic survey and research ships are built by the Company to study and
explore the ocean and its phenomena. These vessels are built to meet demanding
performance and reliability criteria as well as critical noise, vibration and
shock parameters. Oceanographic survey and research ships range in length from
210 feet to 325 feet and range in price from $8 million to $70 million. The
Company also constructs patrol boats for the U.S. Navy, which range in length
from 26 feet to 120 feet and range in price from $300,000 to $10 million. After
head-to-head competition between a Company prototype vessel and vessels from
several competitors, a Company vessel was selected as the new Mark V high speed
special operations craft for the U.S. Navy Seal and Special Operations Forces.
These 45 knot special operations craft are 82 feet in length and sell for
approximately $5 million. As of July 31, 1996, the Company had two patrol craft
under construction for the U.S. Navy.

The U.S. Navy has options to purchase, over a period of years, up to an
additional two oceanographic survey and research ships and 12 Mark V patrol
craft. The continuation of any U.S. Navy shipbuilding program is dependent upon
the continuing availability of Congressional appropriations for that program.
Because Congress usually appropriates funds on a fiscal year basis, funds may
never be appropriated to permit the U.S. Navy to exercise options that have been
awarded. In addition, even if funds are appropriated, the U.S. Navy is not
required to exercise the options. With the end of the Cold War and the pressure
of domestic budget constraints, overall U.S. Navy spending for new vessel
construction has declined significantly since 1991 (from 88 vessels in 1990 to
46 in 1995). Although the Company believes that the small to medium sized U.S.
Navy vessels for which it competes are less likely to be cut back and, in some
cases, do not require

35
<PAGE> 36

specific Congressional appropriations, the Company generally expects revenues
and gross profit attributable to its current and any future U.S. Navy contracts
to decline over the next several years.

The Company believes that its relationship with the U.S. government is
good. Since 1989, the U.S. Navy has chosen the Company to complete construction
on certain vessels pursuant to three contracts that were originally awarded to
other shipyards, and which in the aggregate totaled over $250 million in value.

The Company constructs 78 foot patrol craft fast ("PCFs") for foreign
navies. The Company has delivered 36 of these boats to the Philippine and Saudi
Arabian governments. As of July 31, 1996, the Company had three PCFs under
construction for the government of Sri Lanka and had outstanding options from
such customer for three additional PCFs.

Company-built passenger/vehicle ferries are used by governmental operators
on all three U.S. coasts. These vessels range in length from 90 feet to 383 feet
and range in price from $1 million to $76 million. The Company recently
commenced construction on a 383 foot ferry for the State of Alaska. In 1995, the
Company developed and model-tested an "E-Cat" catamaran ferry to carry
passengers on lakes, bays, sounds and other partially protected waters. When
built, the E-Cat will be a high speed, low wake, fuel efficient vessel that will
carry 150 to 240 passengers at 30 knots and produce only minimal wake.

Offshore Barges

The Company builds a variety of offshore barges, including tank, container
and deck barges. Contract prices for barges range from $1 million to $25
million. The Company's barges are used by operators to carry large cargo such as
liquefied petroleum gas, molten sulfur, propane, butane, propylene, heavy oil,
phenol, jet fuel and other petroleum products as well as commodities including
grain, coal, wood products, containers and rail cars. Other barges function as
pipe laying barges, drilling barges, cement unloaders and split-hull dump scows.
The Company's barges range from 110 feet to 580 feet in length, with as many
cargo tanks, decks and support systems as necessary for the barge to be used for
its intended function.

The Company has positioned itself to benefit from the expected increase in
offshore tank barge construction and conversion. Demand for double hull barges
has been created by OPA '90, which generally requires U.S. and foreign vessels
carrying fuel and certain other hazardous cargos and entering U.S. ports to have
double hulls by 2015. Operators will be required either to retrofit existing
vessels or construct new double hull vessels in order to comply with the law's
single hull phase-out requirements that began January 1, 1995. The Company
estimates that OPA '90 will require approximately 66 barges engaged in domestic
trade to be retrofitted or replaced by 2005 and another approximately 22 such
barges to be retrofitted or replaced by 2010. Demand for new vessels is also
created by the aging of the worldwide fleet. According to MARAD estimates, by
2000 approximately 40% of the current world offshore tank barge fleet will be
more than 25 years old and more than 20% will be at least 30 years old. During
the past three years, the Company has built eight large offshore double hull
tank barges, more than any other U.S. shipbuilder. The Company currently has
three such barges under construction and has an outstanding option from a
customer for one additional barge. In addition, the Company is bidding on a
number of other substantial barge construction projects. See
"-- Regulation -- OPA '90."

Inland Barges

Although the Company generally is restricted under the Separation Agreement
from constructing inland hopper barges and inland tank barges, the Company will
construct inland hopper barges under a limited arrangement with Trinity. The
Company plans to construct these barges at its Gulfport facility. The Company
also will be permitted to complete the construction of eight inland double hull
tank barges for which it has existing contracts. In addition, it is contemplated
that the Company from time to time may construct other inland hopper barges and
inland tank barges under future arrangements with Trinity. Hopper barges
generally are priced at approximately $300,000 each and inland double hull tank
barges generally range in price from approximately $600,000 to $1.8 million
each. Because the Company Businesses do not include the construction and repair
of inland hopper barges and inland tank barges, the Company's historical results
of operations do not include any revenues from the construction or repair of
inland hopper barges and include

36
<PAGE> 37

only the following revenues from the construction or repair of inland tank
barges: $7.6 million, $13.3 million and $26.2 million for fiscal years 1994,
1995 and 1996, respectively. The Company's gross profit (loss) from such
activities was ($0.6) million, ($0.9) million and $3.1 million for fiscal years
1994, 1995 and 1996, respectively. See "Certain Transactions and Related
Arrangements -- Arrangements Between the Company and Trinity -- Inland Barge
Arrangements."

Offshore Support Vessels

The offshore support vessels built by the Company serve oil and gas
drilling and production facilities and support offshore construction and
maintenance work. The Company's supply boats range from 85 feet to 254 feet in
length with conventional or diesel electric power and feature functional pilot
houses with unencumbered visibility and large aft decks with high cargo
capacities. In addition to transporting deck cargo, such as pipe or drummed
materials, supply boats transport liquid mud, potable water, diesel fuel, dry
bulk cement and dry bulk mud. Supply boats constructed by the Company range from
standard supply boats to multi-purpose sophisticated ships with high horsepower
and bollard pull, automated controls, dynamic positioning, controllable pitch
propellers, articulated rudders, Kort nozzles and any type of auxiliary, deck or
towing equipment. Anchor handling tugs and anchor handling tug supply boats
constitute a separate class of offshore support vessels. These vessels have more
powerful engines and deck mounted winches and are capable of towing and
positioning offshore drilling rigs and their anchors as well as providing supply
vessel services.

The Company has built more offshore support vessels to service oil and gas
drilling rigs and production platforms than any shipbuilder in the United
States. The Company has built a total of 534 offshore support vessels from 1965
through 1995, which the Company believes account for approximately 25% of the
world fleet of offshore support vessels manufactured during such period. Vessels
built by the Company and known to be in service represented, as of March 31,
1996, approximately 34% of the 395 total offshore support vessels operated by
the two largest worldwide fleet operators. As a result of the severe downturn in
the oil and gas industry in the mid-1980's, there has been very limited
construction of offshore support vessels in the United States since 1985. During
the period from 1985 through 1995, the Company built eight new 200-foot or
longer offshore support vessels, more than any other U.S. shipbuilder. The
Company's offshore support vessel manufacturing activities during this period
have enabled it to gain a competitive advantage through experience with recent
advances in vessel engineering and construction techniques. The Company
currently has eight offshore support vessels under contract, of which six
contracts have been entered into since July 1, 1996. The Company also has
outstanding options for eight additional vessels, including seven from one
customer, and is bidding on a number of substantial potential orders for such
vessels.

The Company expects that substantial orders for new offshore support
vessels may be made in the next several years due to the need for larger
offshore support vessels to service deep water oil and gas exploration and
production activities, the substantial worldwide fleet attrition over the past
ten years and the aging of the remaining fleet. The demand for deep water
(deeper than 1,000 feet) drilling services has increased substantially in recent
years as a result of large reserve discoveries and technological advances which
have made development and production of reserves in deepwater economically
viable. A number of offshore contract drillers have entered into long-term
agreements to upgrade or convert existing drilling rigs or build new drilling
rigs capable of drilling in deep water. The Company believes that the increase
in drilling activity in deep water will require the construction of larger, more
powerful offshore support vessels. The Company believes that the number of
offshore support vessels available for service worldwide decreased substantially
during the last ten years. The number of such vessels available for service in
the Gulf of Mexico decreased from a peak of approximately 700 in 1985 to
approximately 270 in July 1996. A majority of the offshore support vessels
currently in service worldwide are 16 or more years old and a majority of the
others are between 11 and 16 years old. As these vessels age, maintenance,
repair and vessel certification costs increase significantly and eventually
require their replacement. New offshore support vessels incorporating advances
in engineering, technology and outfitting are expected to cost between $6
million and $25 million each depending on the vessel's size and capabilities.
The timing of the expected upturn in the offshore support vessel market will
depend principally upon conditions in the offshore oil and gas industry,
particularly an increase in drilling

37
<PAGE> 38

activity and dayrates for offshore support vessels, which in turn depend upon
oil and gas prices. Because of its extensive experience in manufacturing
offshore support vessels and its ability to expand its production at its
existing shipyards, the Company believes it is well positioned to take advantage
of the expected upturn in the offshore support vessel business.

Tug Boats

The Company builds tug boats for towing and pushing, anchor handling,
mooring and positioning, dredging assistance, tanker escort, port management,
shipping, piloting, fire fighting and salvage. For each offshore barge that is
built in the United States pursuant to OPA '90, a tug boat is generally added to
the purchaser's fleet. Tug boats are built with two or three engines, standard
propellers, controllable pitch propellers, azimuthing Z-drives, cycloidal
propulsion and with or without steerable or fixed nozzles. Tug boats range from
85 feet to 155 feet in length and range in price from $2 million to $12 million.
The Company has built some of the world's largest, most powerful tug boats
fitted with Voith-Schneider cycloidal propulsion units.

Yachts

In response to increased demand, the Company has begun placing a greater
emphasis on its custom yacht business and has increased its marketing efforts,
added a separate engineering department and improved its yacht construction
facilities. The Company is currently one of three U.S. shipbuilders that
currently build yachts over 150 feet in length. The Company either can custom
build a yacht or construct a yacht in accordance with a customer's
specifications and to the certification and survey requirements of the American
Bureau of Shipping. In building a yacht, the Company uses technology developed
by it in the engineering and construction of high speed military patrol boats
and special purpose vessels. Advanced techniques of acoustic insulation,
noise/vibration reduction and diesel/electric propulsion have all been utilized
in yachts built by the Company. Construction is available in aluminum, steel,
fiberglass, composites and any combination of those materials. Interior
outfitting and finishing are completed by the shipyard and specialized
sub-contractors working under the supervision of the Company. The Company has
built yacht tenders from 30 feet in length and has completed repairs and
conversions of super yachts that are up to 260 feet in length. The Company
recently was awarded contracts for the construction of two 155 foot mega yachts
and one 118 foot mega yacht.

Inland Tow Boats

Inland tow boats are used by waterway operators to push inland barges. The
Company manufactures a full line of tow or push boats. The Company offers the
complete line of the St. Louis Ship designs, including the "Super Hydrodyne"
hull shapes optimized for push towing service on river systems and the Nashville
Bridge, "NABRICO" tow boat design. Seventy-two vessels based on the Company's
Hydrodyne hulls have been delivered to owners since 1959. Inland tow boats range
from 70 feet to 200 feet in length and range in price from $1.3 million to $13
million. The Company recently completed the tow boat "Mississippi" for the U.S.
Army Corp of Engineers, which is the fifth largest tow boat operating in the
United States today.

Miscellaneous

In addition to the vessels described above, the Company has built crew
boats, excursion and casino vessels and barges, fire/rescue, pollution control
and oil recovery vessels, utility boats and fishing trawler processors, and
other small to medium sized vessels. From time to time, the Company has
performed work as a subcontractor.

PRINCIPAL CUSTOMERS

In fiscal 1996, revenues from contracts with the U.S. Navy accounted for
approximately 47.3% of consolidated contract revenue earned. The Company builds
several types of vessels for the U.S. Navy, including oceanographic survey and
research ships and patrol boats. The continuation of any U.S. Navy shipbuilding
program is dependent upon the continuing availability of Congressional
appropriations for that

38
<PAGE> 39

program. With the end of the Cold War and the pressure of domestic budget
constraints, overall U.S. Navy spending for new vessel construction has declined
significantly since 1991. See "-- Principal Products -- Governmental Vessels."
No other customer generated revenues that accounted for more than 10% of
consolidated contract revenue earned in fiscal 1996.

In fiscal 1995, revenues from two customers, the U.S. Navy and the
Philippine government, accounted for approximately 38.8% and 10.2%,
respectively, of the consolidated contract revenue earned by the Company.
Revenues from the Philippine government resulted from a contract with the U.S.
Navy for patrol vessels.

CONTRACT PROCEDURE, STRUCTURE AND PRICING

The Company's contracts for vessels generally are obtained through a
competitive bidding process. A potential buyer ordinarily provides
specifications and performance criteria for a proposed vessel and will invite
numerous shipbuilders to place bids for the construction of the vessel. After
being invited to place a vessel bid, the Company generally assigns a team of
specialists from its estimating department and its engineering or research and
development department to project costs of completion. Management then
determines the applicable profit margin and finalizes the bid. All contracts for
the construction and conversion of U.S. Navy vessels are subject to competitive
bidding. As a safeguard to anti-competitive bidding practices, the U.S. Navy has
recently employed the concept of "cost realism," which requires that each bidder
submit information on pricing, estimated costs of completion and anticipated
profit margins. The U.S. Navy uses this and other data to determine an estimated
cost for each bidder. The U.S. Navy then reevaluates the bids by using the
higher of the bidder's and the U.S. Navy's cost estimates.

The Company makes a large number of bids in the commercial market. However,
in the case of U.S. government contracts for which the bidding process is
significantly more detailed and costly, the Company tends to be far more
selective regarding the projects on which it chooses to bid.

Most of the contracts entered into by the Company, whether commercial or
governmental, are fixed-price contracts under which the Company retains all cost
savings on completed contracts but is also liable for the full amount of all
cost overruns. Historically, cost overruns on fixed price contracts have not
been a significant problem for the Company. See "Risk Factors -- Risks
Associated with Contractual Pricing in the Shipbuilding Industry."

A limited number of the Company's contracts with the U.S. Navy are
fixed-price incentive contracts, which provide for sharing between the
government and the Company of cost savings and cost overruns based primarily on
a specified formula that compares the contract target cost with actual cost. In
addition, such fixed-priced incentive contracts generally provide for payment of
escalation of costs based on published indices relating to the shipbuilding
industry. Although all cost savings are shared under fixed-price incentive
contracts, costs overruns in excess of a specified amount must be borne entirely
by the Company. Under government regulations, certain costs, including certain
financing costs, portions of research and development costs and certain
marketing expenses, are not allowable costs under fixed-price incentive
contracts. The only current U.S. Navy fixed-price incentive contracts of the
Company relate to three oceanographic survey and research ships. One of these
vessels is close to completion, and the two others have been launched and are
scheduled for delivery in the third quarter of fiscal 1997.

Contracts with the U.S. Navy are subject to termination by the government
either for its convenience or upon default by the Company. If the termination is
for the government's convenience, the contracts provide for payment upon
termination for items delivered to and accepted by the government, payment of
the Company's costs incurred plus the costs of settling and paying claims by
terminated subcontractors, other settlement expenses and a reasonable profit.

Although varying contract terms may be negotiated on a case-by-case basis,
commercial contracts entered into by the Company ordinarily provide for a down
payment in a negotiated amount, with five or more progress payments at various
stages of construction and a final payment upon delivery, which final payment
may be subject to deductions if the vessel fails to meet certain performance
specifications based on tests

39
<PAGE> 40

conducted by the Company prior to delivery. U.S. Navy contracts typically
provide for bi-weekly progress payments. Some foreign governments have small
warranty reserve holdbacks which are payable at the end of the warranty period.

Under commercial contracts, the Company generally provides either a six
month or one year warranty with respect to workmanship. In the majority of
commercial contracts, the Company does not warrant materials acquired from its
suppliers but, instead, passes through the suppliers' warranties to the
customer. The Company's government contracts typically contain one year
warranties covering both materials and workmanship. Expenses of the Company to
fulfill warranty obligations have not been material in the aggregate.

BONDING AND GUARANTEE REQUIREMENTS

A significant portion of the Company's existing contracts for the
construction, repair or conversion of vessels require that the Company's
performance be guaranteed by Trinity or by a surety company or other third party
pursuant to a contract bid or performance bond, letter of credit or similar
obligation. Generally, contracts with state or local governments require
contract bid or performance bonds and foreign governmental contracts generally
require bank letters of credit or similar obligations. Commercial contracts may
require contract bid and performance bonds if requested by the customer. As of
July 31, 1996, Trinity had guaranteed contract performance obligations of the
Company in the aggregate amount of approximately $66.1 million, and the Company
had outstanding contract bid and performance bonds, letters of credit and
similar obligations issued by third parties, with Trinity as the obligor, with
an aggregate face amount of approximately $74.9 million. These guarantees,
bonds, letters of credit and similar obligations, totalling approximately $141.0
million, will remain in effect after the Offering until the obligations expire,
and the Company will be obligated to indemnify Trinity against any liability
under such obligations. For the protection of Trinity in the event that Trinity
is called upon to satisfy any such obligations, Trinity will be granted security
interests in certain assets of the Company which relate to the Company contracts
from which such obligations arise and will possess rights to complete
performance of any such contract on behalf of the Company in the event of
nonperformance by the Company. Such rights and remedies are similar to the
rights possessed by surety companies that have issued performance bonds on
behalf of the Company. See "Certain Transactions and Related
Arrangements -- Arrangements Between the Company and Trinity -- Performance Bond
and Guarantee Arrangements."

ENGINEERING

Customers can select from standard configurations, modify standard
configurations or have the Company build to the customer's specifications or
design. The Company can utilize, at its customer's request, advanced technology
to create a computer generated model of the vessel that allows the customer to
"walk through" the entire vessel. All major equipment and machinery is in place,
in scale, in the computer model. The Company believes that generating this type
of computer model helps to prevent engineering mistakes and costly re-work or
change orders and helps to ensure the vessel's functionality and ergonomics.

The Company maintains a large marine engineering department, consisting of
approximately 140 employees, 45 of whom are engineers or naval architects. The
Company has developed and produced several innovative vessels. Together with a
joint venture partner, the Company developed and produced the first governmental
and commercial use surface effect ships in the United States. The joint venture
is no longer in existence. The Company also built the first gas turbine and
diesel powered water jet crew boat. The Company

40
<PAGE> 41

has built more small and medium sized vessels with diesel electric propulsion
than any other U.S. shipbuilder. MARAD and the U.S. Department of Defense have
teamed with the Company to develop a 23,000 ton container/bulk carrier, a medium
sized multi-purpose ship and a high-speed, low wake, fuel efficient passenger
ferry. Additionally, after head-to-head competition between a Company prototype
vessel and vessels from several competitors, a Company vessel was selected as
the new 82 foot, 45 knot Mark V high speed special operations craft for U.S.
Navy Seal and Special Operations Forces personnel.

MATERIALS AND SUPPLIES

The principal materials used by the Company in its shipbuilding, conversion
and repair businesses are standard steel shapes, steel plate and paint. Other
materials used in large quantities include aluminum, steel pipe, electrical
cable and fittings. The Company also purchases component parts such as
propulsion systems, boilers, generators and other equipment. All these materials
and parts are currently available in adequate supply from domestic and foreign
sources. The Company's Equitable and Gulfport shipyards are located on rail
lines and typically obtain materials and supplies by rail, truck or barge. The
remainder of the Company's shipyards ordinarily obtain materials and supplies by
truck. The Company seeks to obtain favorable pricing and payment terms for its
purchases by coordinating purchases among all of its shipyards and buying in
large quantities. The Company has not engaged, and does not presently intend to
engage, in hedging transactions with respect to its purchase requirements for
materials. In the past, as a result of the Company's relationship with Trinity,
the Company has been able to purchase steel at favorable prices relative to
those available to shipbuilders in general. While management believes that the
Company will continue to be able to obtain steel at relatively favorable prices,
there can be no assurance that this will be the case. See "Risk Factors -- Lack
of Independent Operating History."

MANUFACTURING PROCESS

Once a contract has been awarded to the Company, a project manager is
assigned to supervise all aspects of the project from the date the contract was
signed through delivery of the vessel. The project manager oversees the
engineering department in its completion of the vessel's drawings and supervises
the planning of the vessel's construction. The project manager also oversees the
purchasing of all supplies and equipment needed to construct the vessel, as well
as the actual construction of the vessel.

The Company constructs each vessel from flat steel, which is then
fabricated by yard workers into the necessary shapes to construct the hull and
vessel superstructure. Component parts, such as propulsion systems, boilers and
generators, are purchased separately by the Company and installed in the vessel.
The Company utilizes job scheduling and costing systems to track progress of the
construction of the vessel, which allows the customer and the Company to remain
apprised of the status of the vessel's construction.

For vessels over 150 tons, the Company generally utilizes modular
construction techniques. A vessel is divided into modules of approximately 100
tons each. With the assistance of computers, separate manufacturing drawings and
bills of materials are prepared for each module, and each module is separately
built and fully equipped with the piping, electrical and ventilation systems and
other equipment. Fully fabricated modules are cleaned, painted and transported
to the building ways for erection. After the modules are welded to each other to
form the ship, all piping, ventilation and other systems are connected between
modules, electrical cables are strung and the ship is launched and ready for
final outfitting and delivery.

SALES AND MARKETING

The Company's marketing efforts are geographically centralized at the
Company's headquarters in Gulfport, Mississippi. The Company's Sales and
Marketing Department consists of a commercial marketing section, which employs
six persons, and an international marketing section, which employs four persons.
The Company's Government Department includes 11 persons who engage in marketing
and sales activities.

41
<PAGE> 42

COMPETITION

Private U.S. shipbuilders generally fall into two categories: (i) the six
largest shipbuilders capable of building large scale vessels for the U.S. Navy
and (ii) other shipyards that build small to medium sized vessels for
governmental and commercial markets. Each of the six largest shipbuilders is
substantially larger than the Company. Included in the second category are ten
shipbuilders, including the Company, that are capable of building vessels of 400
feet or more. This category also includes several hundred companies engaged in
shipbuilding and repair activities in the United States, many of which are
smaller than the Company, having one or two shipyards and specializing in the
construction or repair of one or a small number of types of vessels.

The Company does not compete for U.S. Navy large vessel construction
projects. The Company generally competes for U.S. government shipbuilding
contracts on small to medium sized vessels principally with approximately six to
12 U.S. shipbuilders, which occasionally includes one or more of the six largest
shipbuilders. The number and identity of competitors on particular projects vary
greatly, depending on the type of vessel and size of project. The Company
competes for foreign government shipbuilding contracts principally with numerous
shipyards in several countries, many of which are heavily subsidized by their
governments. Competition for both U.S. and foreign government contracts is
intense.

Most of the commercial ships built in the United States since 1981 have
been constructed principally for domestic customers operating under the Jones
Act requirement that all vessels transporting products between U.S. ports be
constructed by U.S. shipyards. From time to time Congressional proposals have
been introduced in the past, and may be introduced in the future, in order to
repeal the Jones Act and eliminate the competitive advantages it affords to U.S.
shipbuilders. See "Risk Factors -- Legislative Proposals to Rescind Provisions
of Jones Act."

In recent years, U.S. commercial shipbuilding opportunities have been
enhanced by two legislative initiatives. OPA '90 generally requires certain U.S.
and foreign vessels carrying fuel or other hazardous cargos and entering U.S.
ports to have double hulls by 2015. OPA '90 establishes a phase-out schedule
that began January 1, 1995 for all existing single hull vessels based on the
vessel's age and gross tonnage. This law has created a demand for the
retrofitting of existing single hull vessels and the construction of new double
hull vessels as operators upgrade their fleets to comply with the law. See
"-- Regulation -- OPA '90."

In addition, opportunities for U.S. shipyards to build foreign-flagged
vessels for foreign owners were significantly increased in late 1993, when
Congress amended Title XI of the Merchant Marine Act of 1936. As a result of
these amendments, MARAD was authorized to guarantee loan obligations of foreign
owners for foreign-flagged vessels that are built in U.S. shipyards on terms
generally more advantageous than available under guarantee or subsidy programs
of foreign countries. Under a trade accord (the "OECD Accord"), which was
negotiated in December 1994, among the United States and other major
shipbuilding nations, the Title XI guarantee program will be required to be
amended, if the OECD Accord is ratified by the United States, to eliminate the
competitive advantages provided by the 1993 amendments. See "-- Regulation --
Title XI Loan Guarantee Amendments and OECD."

42
<PAGE> 43

The OECD Accord would virtually eliminate all direct and indirect
government shipbuilding subsidies, which should significantly improve the
ability of U.S. shipbuilders to compete successfully for international
commercial contracts with foreign shipbuilders, many of which are heavily
subsidized by their governments. Some of the subsidies range as high as 25% of
the vessel construction cost. The ability of U.S. shipbuilders to compete
effectively with subsidized foreign shipbuilders for commercial contracts has
been greatly impaired since the termination in 1981 of the U.S. construction
differential subsidy program, which had provided subsidies to U.S. shipbuilders
with respect to the construction of vessels for international markets. See
"Regulation -- Title XI Loan Guarantee Amendments and OECD."

The Company competes for domestic commercial shipbuilding contracts
principally with approximately ten to 15 U.S. shipbuilders. The number and
identity of competitors on particular projects vary greatly, depending on the
type of vessel and size of project. The Company competes for foreign commercial
shipbuilding contracts principally with numerous shipyards in several countries,
many of which are heavily subsidized by their governments. Competition for both
U.S. and foreign commercial contracts is intense.

INSURANCE

Trinity has maintained, on behalf of the Company, insurance against
property damage caused by fire, explosion and similar catastrophic events that
may result in physical damage or destruction to the Company's premises or
properties. Trinity has also maintained, on behalf of the Company, general
liability and product liability insurance in amounts it deemed appropriate for
the Company's business. It is contemplated that on or prior to the consummation
of the Offering, the Company will secure its own property, general liability and
product liability insurance in replacement of the insurance formerly maintained
by Trinity.

EMPLOYEES

As of June 30, 1996, the Company had 2,769 employees, of which 313 were
salaried and 2,456 were employed on an hourly basis. None of the Company's
employees is represented by any collective bargaining unit. Management believes
that the Company's relationship with its employees is good. Most of the
Company's shipyards have implemented in-house training programs or participate
in training programs through local vocational-technical schools.

REGULATION

Environmental Regulation

The Company is subject to extensive and changing Environmental Laws,
including laws and regulations that relate to air and water quality, impose
limitations on the discharge of pollutants into the environment and establish
standards for the treatment, storage and disposal of toxic and hazardous wastes.
Stringent fines and penalties may be imposed for non-compliance with these
Environmental Laws. Additionally, these laws require the acquisition of permits
or other governmental authorizations before undertaking certain activities,
limit or prohibit other activities because of protected areas or species and
impose substantial liabilities for pollution related to Company operations or
properties.

The Company's operations are potentially affected by the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"). CERCLA (also known as the "Superfund" law) imposes liability
(without regard to fault) on certain categories of persons for particular costs
related to releases of hazardous substances at a facility into the environment
and for liability for natural resource damages. Categories of responsible
persons under CERCLA include certain owners and operators of industrial
facilities and certain other persons who generate or transport hazardous
substances. Liability under CERCLA is strict and generally is joint and several.
Persons potentially liable under CERCLA may also bring a cause of action against
certain other parties for contribution. In addition to CERCLA, similar state or
other Environmental Laws may impose the same or even broader liability for the
discharge, release or the mere presence of certain substances into and in the
environment.

In the 1980's, the Company was identified as a Potentially Responsible
Party or "PRP" under CERCLA at the Dutchtown Oil Treatment site ("Dutchtown
Site") in Dutchtown, Louisiana because it allegedly sent

43
<PAGE> 44

hazardous substances from its Gretna shipyard to that site for disposal. The
Dutchtown Site is on the National Priorities List under CERCLA. The Company
signed a consent decree with other PRPs in 1989 to settle its liability and
spent approximately $800,000 remediating the Dutchtown Site. Remediation is
complete at the Dutchtown Site.

Because industrial operations have been conducted at some of the Company's
properties by the Company and previous owners and operators for many years,
various materials from these operations might have been disposed of at such
properties. This could result in obligations under Environmental Laws, such as
requirements to remediate environmental impacts. During the last five years, the
Company has been remediating environmental impacts from historical waste
disposal practices at the Company's Gretna shipyard in Harvey, Louisiana. These
disposal practices (including the alleged shipments to the Dutchtown Site)
relate to practices of previous owners in connection with the Gretna shipyard's
tank cleaning and gas-freeing operations. The Company, which discontinued such
disposal practices shortly after the shipyard's acquisition, has spent
approximately $4 million during the past five years on this remediation under
the direction of the Louisiana Department of Environmental Quality. The Company
believes that it has completed all remediation requirements for this site,
including post-remediation groundwater monitoring requirements. Within the next
few months, the Company will submit the final groundwater sampling and analysis
results to the Louisiana Department of Environmental Quality and will request
that the State of Louisiana provide written confirmation that the Company has
completed all remediation requirements for the site. There could be additional
environmental impact from historical operations at the Company's properties that
require remediation under Environmental Laws in the future. However, the Company
currently is not aware of any such circumstances that are likely to result in
any such impact under Environmental Laws.

The Company performs a tank cleaning and gas-freeing operation at its
Gretna facility that involves removal of residual fumes from vapor spaces in
barges. There are risks associated with the operation, including possible
explosion and emission of hazardous substances to the environment.

An example of an Environmental Law impacting the Company is the federal
Resource Conservation and Recovery Act ("RCRA"). RCRA and similar state laws
regulate the generation, treatment, storage, disposal, and other handling of
solid wastes, with the most stringent regulations applying to solid wastes that
are considered hazardous wastes. RCRA also may impose stringent requirements on
the closure, and the post-closure care, of facilities where hazardous waste was
treated, disposed of or stored. The Company generates solid waste, including
hazardous and non-hazardous waste, in connection with its routine operations.
Management believes that the Company's wastes are handled properly under RCRA.

Another Environmental Law impacting the Company's operations is the federal
Clean Air Act. Amendments in 1990 to this act resulted in numerous changes that
could increase the Company's capital and operational expenses after the
Environmental Protection Agency and similar state agencies fully implement
regulations authorized by the amendments. Although the Company does not expect
these Clean Air Act amendments to result in material expenses at its properties,
the amount of increased expenses, if any, resulting from such amendments is not
presently determinable. There can be no assurance that the Company will not
incur material expenses in connection with these amendments in the future.

Although no assurances can be given, management believes that the Company
and its operations are in compliance in all material respects with all
Environmental Laws. However, stricter interpretation and enforcement of
Environmental Laws (including the Clean Air Act) and compliance with potentially
more stringent future Environmental Laws could materially and adversely affect
the Company's operations.

Health and Safety Matters

The Company's facilities and operations are governed by laws and
regulations, including the federal Occupational Safety and Health Act, relating
to worker health and workplace safety. The Company believes that appropriate
precautions are taken to protect employees and others from workplace injuries
and harmful exposure to materials handled and managed at its facilities. While
it is not anticipated that the Company will be required in the near future to
expend material amounts by reason of such health and safety laws and
regulations, the Company is unable to predict the ultimate cost of compliance
with these changing regulations.

44
<PAGE> 45

Jones Act

The Jones Act requires that all vessels transporting products between U.S.
ports must be constructed in U.S. shipyards, owned and crewed by U.S. citizens
and registered under U.S. law, thereby eliminating competition from foreign
shipbuilders with respect to vessels to be constructed for the U.S. coastwise
trade. Many customers elect to have vessels constructed at U.S. shipyards, even
if such vessels are intended for international use, in order to maintain
flexibility to use such vessel in the U.S. coastwise trade in the future. A
legislative bill seeking to substantially modify the provisions of the Jones Act
mandating the use of ships constructed in the United States for U.S. coastwise
trade has been introduced in Congress. Similar bills seeking to rescind or
substantially modify the Jones Act and eliminate or adversely affect the
competitive advantages it affords to U.S. shipbuilders have been introduced in
Congress from time to time and are expected to be introduced in the future.
Although management believes it is unlikely that the Jones Act requirements will
be rescinded or materially modified in the foreseeable future, there can be no
assurance that such will not occur. Many foreign shipyards are heavily
subsidized by their governments and, as a result, there can be no assurance that
the Company would be able to effectively compete with such shipyards if they
were permitted to construct vessels for use in the U.S. coastwise trade.

OPA '90

Demand for double hull carriers has been created by OPA '90, which
generally requires U.S. and foreign vessels carrying fuel and certain other
hazardous cargos and entering U.S. ports to have double hulls by 2015. OPA '90
establishes a phase-out schedule that began January 1, 1995 for all existing
single hull vessels based on the vessel's age and gross tonnage. The Company
estimates that OPA '90 will require approximately 66 barges engaged in domestic
trade to be retrofitted or replaced by 2005 and another approximately 22 such
barges to be retrofitted or replaced by 2010. Demand for new vessels is also
created by the aging of the worldwide fleet. According to MARAD estimates, by
2000 approximately 40% of the current world offshore tank barge fleet will be
more than 25 years old and more than 20% will be at least 30 years old. New
offshore double hull tank barges generally range in cost between $6 million and
$25 million each.

OPA '90's single hull phase-out requirements may be deemed to apply to oil
and gas industry supply vessels over 500 gross tons operated in U.S. waters. All
offshore support vessels presently in operation in U.S. waters either are less
than 500 gross tons or have received a Congressional waiver exempting such
vessels from the OPA '90 double hull requirements. Proposed New Offshore Support
Vessel Legislation, which is currently pending in Congress, would impose, in
lieu of the OPA '90 double hull requirements, certain less onerous standards for
the construction of supply vessels operated in U.S. waters. There can be no
assurance as to when the New Offshore Support Vessel Legislation will be enacted
into law, if at all, or that the New Offshore Support Vessel Legislation, if
enacted, will not differ materially from its current form. Management believes
that the current uncertainty regarding construction standards has caused certain
operators to postpone placing new orders for offshore support vessels in excess
of 500 gross tons.

Title XI Loan Guarantee Amendments and OECD

In late 1993, Congress amended the loan guarantee program under Title XI of
the Merchant Marine Act of 1936, to permit MARAD to guarantee loan obligations
of foreign vessel owners. As a result of these amendments, MARAD was authorized
to guarantee loan obligations of foreign owners for foreign-flagged vessels that
are built in U.S. shipyards on terms generally more advantageous than available
under guarantee or subsidy programs of foreign countries. Under the OECD Accord,
which was negotiated in December 1994, among the United States, the European
Union, Finland, Japan, Korea, Norway and Sweden (which collectively control over
75% of the market share for worldwide vessel construction), the Title XI
guarantee program will be required to be amended, once the OECD Accord is
ratified by the United States, to eliminate the competitive advantages provided
by the 1993 amendments to Title XI. In December 1995, a subcommittee of the Ways
and Means Committee of the U.S. House of Representatives passed a bill providing
for the implementation of the OECD Accord and elimination of the competitive
advantages provided by the 1993 amendments to Title XI. To date, such bill has
not been approved by either the U.S. House of Representatives or the U.S.
Senate.

45
<PAGE> 46

If the OECD Accord is ratified by the U.S. and Japan (the only remaining
parties to the OECD Accord that have not yet ratified the OECD Accord), the OECD
Accord would virtually eliminate all direct and indirect governmental
shipbuilding subsidies by the party nations. Despite the fact that the OECD
Accord will require the elimination of the competitive advantages provided to
U.S. shipbuilders by the 1993 amendments to Title XI, management believes that
the OECD Accord should significantly improve the ability of U.S. shipbuilders to
compete successfully for international commercial contracts with foreign
shipbuilders, many of which currently are heavily subsidized by their
governments. Some of the governmental subsidies to foreign shipbuilders
currently range as high as 25% of the vessel construction cost. At this time,
the Company is unable to predict whether the OECD Accord will be ratified by the
U.S. and Japan.

PROPERTIES

Equitable New Orleans Shipyard

The Equitable shipyard is located on the Industrial Canal in New Orleans,
Louisiana. The yard has the capacity to build vessels up to the following
dimensions: 350 foot length; 90 foot beam; 25 foot water depth; and 110 foot
height. The shipyard has over 225,000 square feet of under-cover production
facilities divided between a fabrication shop, mold loft, pipe shop, carpentry
shop, electrical shop and a machine shop. The facility has two crawler cranes,
one barge mounted crane and 12 track mounted overhead cranes. The shipyard is
served by direct rail access. The Company occupies the shipyard under a lease
that expires on December 31, 2016. Generally, either party may terminate the
lease upon one year's advance notice.

Gretna Machine & Iron Works Shipyard

The Gretna shipyard is located in Harvey, Louisiana. The yard has the
capacity to build vessels up to the following dimensions: 600 foot length; 95
foot beam; 5.5 foot water depth; and 70 foot height. The shipyard contains over
15,500 square feet of under-cover production facilities divided between a
fabrication shop, mold loft, carpentry shop and electrical shop. The facility
has two graving docks, one with a length of 700 feet and the other with a length
of 300 feet, and has three crawler cranes, two track mounted gantry cranes and
two tower cranes. The Company occupies the shipyard pursuant to two leases,
which are renewable by the Company until 2026.

Halter Moss Point Shipyard

The Halter Moss Point shipyard is located in Moss Point, Mississippi. The
yard has the capacity to build vessels up to the following dimensions: 400 foot
length; 85 foot beam; 18 foot water depth; and 85 foot height. The facility
consists of approximately 58 acres of property with 61,500 square feet of shops,
offices and warehouses and 60,165 square feet of outside concrete construction
platforms. The facility has six crawler cranes and six track mounted gantry
cranes.

Lockport Shipyard

The Lockport shipyard is located in Lockport, Louisiana. The yard has the
capacity to build vessels up to the following dimensions: 310 foot length; 80
foot beam; 10 foot water depth; and 68 foot height. This facility contains over
35,000 square feet of under-cover production facilities divided between a
fabrication shop, mold loft, pipe shop, carpentry shop, electrical shop and a
machine shop and has 46,000 square feet of outside concrete construction
platforms and a 16,000 square foot warehouse. The yard has four crawler cranes
and six track mounted gantry cranes.

Moss Point Marine Shipyard

The Moss Point Marine shipyard is located in Escatawpa, Mississippi. The
yard has the capacity to build vessels up to the following dimensions: 420 foot
length; 85 foot beam; 14 foot water depth; and 44 foot height. The yard contains
over 35,000 square feet of under-cover production facilities divided between a
fabrication shop, mold loft, carpentry shop, electrical shop and warehouse, and
has 40,000 square feet of outside construction platforms. The yard has four
crawler cranes and nine track mounted gantry cranes.

46
<PAGE> 47

Gulfport Shipyard

The Gulfport shipyard is located in Gulfport, Mississippi and has the
capacity to build vessels up to the following dimensions: 360 foot length; 80
foot beam; 12 foot water depth; and 90 foot height. The facility consists of 113
acres on Bernard Bayou Industrial Park and includes an environmentally
controlled 38,000 square foot sandblasting and painting facility and 400,000
square feet of under-cover production facilities. The yard has 16,500 square
feet of outside concrete erection ways, two crawler cranes, 15 track mounted
overhead cranes and two truck mounted gantry cranes. The shipyard is served by
direct rail access.

Panama City Shipyard

The Panama City shipyard is located in Panama City, Florida and contains
over 35,000 square feet of under-cover production facilities divided between a
fabrication shop, mold loft, carpentry shop, electrical shop and warehouse. The
yard has the capacity to build vessels up to the following dimensions: 420 foot
length; 75 foot beam; 14 foot water depth; and 44 foot height. The facility has
not been operational since its acquisition by the Company in 1992.

Gulf Coast Fabrication Shipyard

The Gulf Coast Fabrication shipyard is located in Pearlington, Mississippi.
The facility contains over 15,000 square feet of under-cover production
facilities divided between a shear shop, mechanical shop, electrical shop and
warehouse. The facility has a 460 foot graving dock. The yard has the capacity
to build vessels up to the following dimensions: 460 foot length; 140 foot beam;
10 foot water depth; and unlimited height. The yard has two crawler cranes, two
track mounted gantry cranes and one tower crane.

Gulf Repair Shipyard

The Gulf Repair shipyard is located on the Industrial Canal across from the
Company's Equitable New Orleans shipyard. The facility contains 72,000 square
feet of under-cover production facilities divided between a fabrication shop,
pipe shop, carpentry shop, electrical shop and a machine shop. The facility has
a 586 foot dry dock with 20,000 ton capacity, a 200 foot dry dock with 3,750 ton
capacity, a 285 foot drydock with 3,700 ton capacity, a 162 foot drydock with
1,500 ton capacity, and a 240 foot drydock with 5,000 ton capacity. The yard has
the capacity to build vessels up to the following dimensions: 325 foot length;
120 foot beam; 21 foot water depth; and 137 foot height. The yard has one
crawler crane, seven track mounted gantry cranes and two barge mounted cranes.
The Company occupies the shipyard pursuant to a lease that expires on December
31, 2016.

Pascagoula Shipyard

The Pascagoula shipyard was acquired by the Company in 1995 and is located
in Pascagoula, Mississippi. The yard consists of approximately 88 acres of
property and has the capacity to build vessels up to the following dimensions:
800 foot length; 115 foot beam; 20 foot water depth; and unlimited height. The
yard has over 42,000 square feet of under-cover production facilities divided
between a fabrication shop, paint shop, maintenance shop, and warehouse. The
yard has a 900 foot slip for wet dock work and a 300 ton shore mounted crane.
The yard has three crawler cranes and two track mounted gantry cranes.

Corporate Headquarters

The Company's corporate headquarters are located at the same site as the
Company's Gulfport shipyard. The headquarters occupy approximately 39,660 square
feet of such site. The Company's engineering headquarters are located one-half
mile from the corporate headquarters and contains approximately 33,600 square
feet of offices and a separate secure office for classified work.

47
<PAGE> 48

LEGAL PROCEEDINGS

The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the aggregate
will not have a material adverse effect on the Company's business, financial
condition or results of operations.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the Company's
directors and executive officers, including their respective ages.

<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ----------------------------------- --- ------------------------------------------------
<S> <C> <C>
John Dane III...................... 46 President, Chief Executive Officer and Director
Vincent R. Almerico................ 56 Senior Vice President
Harvey B. Walpert.................. 63 Senior Vice President
Wayne Bourgeois.................... 42 Senior Vice President
Sidney C. Mizell................... 53 Senior Vice President
Anil Raj........................... 46 Senior Vice President
Keith L. Voigts.................... 52 Vice President
Kenneth W. Lewis................... 58 Director
F. Dean Phelps, Jr................. 52 Director
Rick S. Rees....................... 43 Director
John T. Sanford.................... 44 Director
Timothy R. Wallace................. 42 Director
W. Ray Wallace..................... 73 Director
</TABLE>

John Dane III has served as President of the Company since 1987. Mr. Dane
directed the growth of the Company from four active shipyards to nine active
yards and is responsible for the total management of the shipyards. Mr. Dane
graduated from Tulane University with a Ph.D. in civil engineering and began his
22 year career in the marine industry by entering the junior executive training
program of Halter Marine, Inc. ("Halter Marine"). He remained with Halter Marine
for six years and eventually became Assistant Vice President of Production. In
addition, Mr. Dane formed Moss Point Marine, Inc. in 1980, which he sold to
Trinity in 1987.

Vincent R. Almerico joined the Company in 1987 and served as the Senior
Vice President of Development of the Company from 1992 to August 1996. Since
August 1996, Mr. Almerico has served as Senior Vice President of Administration.
Mr. Almerico was employed by Moss Point Marine, Inc. from 1984 to 1987, where he
served as Vice President, Operations until it was acquired by Trinity in 1987.

Harvey B. Walpert joined the Company in 1983 and served as Senior Vice
President of Administration/Corporate Operations of the Company from 1992 to
August 1996. Since August 1996, Mr. Walpert has served as Senior Vice President
of Corporate Affairs. Mr. Walpert served as Project Manager at Halter Marine
from 1978 until it was acquired by Trinity in 1983. From 1957 to 1978, Mr.
Walpert worked in the Electric Boat Division of General Dynamics Corporation,
where he served as Assistant Materials Director. Mr. Walpert graduated from
Columbia University with an M.B.A. in Business and received a B.S. in
Engineering from John Hopkins University. He is Chairman of the American
Waterways Shipyard Conference and President of the New Orleans Chapter Navy
League of the United States.

Wayne Bourgeois joined the Company in 1983 and served as Vice President of
Operations of the Company from 1994 to August 1996. Since August 1996, Mr.
Bourgeois has served as Senior Vice President of Operations. From 1977 to 1987,
Mr. Bourgeois was employed by Halter Marine where he served in various
positions, including Shipyard General Manager.

48
<PAGE> 49

Sidney C. Mizell served as Vice President of Sales and Marketing of the
Company from 1988 to August 1996. Since August 1996, Mr. Mizell has served as
Senior Vice President of Sales and Marketing. Mr. Mizell joined Halter Marine in
1972, where he served as its Vice President of Sales from 1978 to 1980. He
resigned from Halter Marine in 1980 to co-found Champion Shipyards in Pass
Christian, Mississippi where he served as Vice President and General Manager.
Mr. Mizell served as a Management Consultant Program Manager for Moss Point
Marine, Inc. from 1982 to 1988.

Anil Raj joined the Company in 1987 and served as Vice President of
Government Projects of the Company from 1994 to August 1996. Since August 1996,
Mr. Raj has served as Senior Vice President of Government Projects. Mr. Raj also
serves as the Company's Small and Disadvantaged Business Liaison officer. Prior
to joining the Company, Mr. Raj was an Engineering Manager for Brown & Root, a
publicly held construction and fabrication company, from 1982 to 1987. Mr. Raj
served as Senior Staff Naval Architect and as area manager from 1977 to 1980 and
from 1980 to 1982, respectively, for Gulf Fleet Marine Corporation.

Keith L. Voigts has served as Vice President of Finance of the Company
since 1995. Mr. Voigts was employed by the accounting firm of KPMG Peat Marwick
from 1965 to 1975 and was a partner of KPMG Peat Marwick from 1975 to 1991. Mr.
Voigts was a director of Healthcare Communications, Inc. from 1991 to 1995 and
was its Chief Financial Officer from 1994 to 1995. From 1991 to 1994, Mr. Voigts
owned and managed the accounting, consulting and investments firm of The KLV
Group. Mr. Voigts was a partial owner and Chairman of the consulting firm
Adelson, Voigts & Associates, Inc. from 1992 to 1993. In addition, from 1992 to
1993, Mr. Voigts was a director and Vice President of Comp-U-Check, Inc., a
publicly held check guarantee company. Mr. Voigts is a member of AICPA, a past
director of National Association of Accountants, Chairman of the Board of Texas
Information Network System and a Board Member and Vice President of Texas
Computer Industry Council.

Kenneth W. Lewis became a director of the Company in September 1996. Mr.
Lewis, who retired from Trinity in January 1996 after 32 years of service, was a
Senior Vice President and Chief Financial Officer of Trinity.

F. Dean Phelps, Jr. has been a director of the Company since August 1996.
Mr. Phelps has served as Vice President of Trinity since 1984. Mr. Phelps joined
Trinity in 1979, where he served as Corporate Controller from 1979 to 1984.

Rick S. Rees became a director of the Company in September 1996. In March
1996, Mr. Rees became President of Maritime Holdings, Inc., a holding company
with operations in the offshore rig repair, modification and construction
business and the industrial real estate business. From November 1990 to June
1992, Mr. Rees served as Chairman of Wm. F. Surgi Equipment Company, a privately
held industrial distribution company. In July 1992, the Wm. F. Surgi Equipment
Company filed a petition for reorganization pursuant to Chapter 11 of the United
States Bankruptcy Code, which petition was subsequently converted into a
petition for liquidation pursuant to Chapter 7 of the United States Bankruptcy
Code, whereby the Wm. F. Surgi Equipment Company was liquidated and dissolved.
From 1989 to 1996, Mr. Rees was President of Maritime Capital Corporation, a
marine finance company.

John T. Sanford has been a director of the Company since August 1996. Mr.
Sanford has served as Senior Vice President of Trinity since 1996. Mr. Sanford
joined Trinity in 1980, where he served as Vice President from 1984 to 1993 and
as Group Vice President from 1993 to 1996.

Timothy R. Wallace has been a director of the Company since August 1996. He
is the son of Mr. W. Ray Wallace, a director of the Company. Mr. Wallace has
been employed by Trinity for at least the past five years in various senior
management capacities, including his current capacity as a Group Vice President
and director of Trinity.

W. Ray Wallace has been a director of the Company since August 1996. Mr.
Wallace has served as President and Chief Executive Officer of Trinity since
1958 and as Chairman of the Board of Directors of Trinity since 1992. Mr.
Wallace is the father of Timothy R. Wallace, a director of the Company.

49
<PAGE> 50

It currently is contemplated that F. Dean Phelps, Jr., John T. Sanford and
Timothy R. Wallace will tender their resignations from the Company Board
effective upon completion of the proposed Separation and that their replacements
will be selected by the remaining members of the Company Board. Such
replacements may be employees of the Company, non-employees of the Company or a
combination thereof.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company has established two standing committees of the Company Board:
an Audit Committee and a Compensation Committee. Messrs. Lewis and Rees are the
members of the Compensation Committee and the Audit Committee. The Audit
Committee will review the functions of the Company's management and independent
auditors pertaining to the Company's financial statements and perform such other
related duties and functions as are deemed appropriate by the Audit Committee or
the Company Board. The Compensation Committee will recommend to the Company
Board the base salaries and incentive bonuses for the officers of the Company
and will grant stock options and make other awards under the 1996 Stock Option
and Incentive Plan. The Company Board does not have a standing nominating
committee or other committee performing similar functions.

COMPENSATION OF DIRECTORS

Following the consummation of the Offering, each director will receive $750
for each Company Board meeting attended and reimbursement for reasonable
out-of-pocket expenses incurred in connection with attendance at such Company
Board meetings or any meeting of a committee of the Company Board. In addition,
each director who is not a compensated officer or employee of Trinity, the
Company or their respective subsidiaries will receive a fee of $20,000 per year
for serving as a director (and the Chairman of the Audit Committee and the
Chairman of the Compensation Committee will receive an additional $1,000 per
year for serving in those capacities) and $750 for each Audit Committee or
Compensation Committee meeting attended. Directors are eligible to receive
options and other awards under the Company's 1996 Stock Option and Incentive
Plan. See "-- Incentive and Other Employee Benefit Plans -- 1996 Stock Option
and Incentive Plan."

EXECUTIVE COMPENSATION

The following table sets forth the compensation for fiscal 1996 awarded to
or earned by the chief executive officer of the Company and the five other most
highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 for services rendered in all capacities.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION TRINITY
--------------------------------------- STOCK
OTHER OPTION
NAME AND ANNUAL AWARDS ALL OTHER
PRINCIPAL POSITION(1) SALARY BONUS(2) COMPENSATION(3) (SHARES) COMPENSATION(4)
- -------------------------------- -------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
John Dane III................... $450,000 $36,810 $48,681 -- $19,699
President and Chief Executive
Officer
Daniel J. Mortimer(5)........... $337,500 $88,020 -- -- $ 4,833
President, Gulf Coast
Fabrication, Inc.
Vincent R. Almerico............. $143,500 $39,833 -- 800 $ 6,071
Senior Vice President
Sidney C. Mizell................ $120,660 $61,172 -- 750 $ 8,740
Senior Vice President
Anil Raj........................ $117,720 $40,789 -- 750 $ 8,671
Senior Vice President
Harvey B. Walpert............... $106,250 $40,789 -- 800 $ 8,505
Senior Vice President
</TABLE>

50
<PAGE> 51

- ---------------

(1) Represents such persons' current titles with the Company, except for Mr.
Mortimer who is no longer employed by the Company.

(2) Annual incentive bonuses are paid by Trinity only upon the achievement of a
predetermined financial goal set for each executive at the beginning of
Trinity's fiscal year. One half (50%) of the incentive bonus is paid within
90 days after the close of Trinity's fiscal year. The remaining 50% of the
incentive bonus is paid in one, two or three equal annual installments in
the succeeding years provided the executive's employment with Trinity has
not been terminated prior to the payment for any reason other than death,
disability, retirement or a change of control of Trinity. The amounts shown
for bonus in the foregoing table include the deferred installments payable
to the executive in the succeeding year if still employed by Trinity at that
time and were $18,405 for Mr. Dane, $0 for Mr. Almerico, $30,586 for Mr.
Mizell, $20,394 for Mr. Raj and $20,394 for Mr. Walpert.

(3) An amount equal to ten percent of the salary and bonus of Mr. Dane is set
aside annually pursuant to a Trinity long-term deferred compensation plan.

(4) All Other Compensation includes matching amounts under certain profit
sharing plans of Trinity, automobile allowance, and in the case of John Dane
III, reimbursement for medical insurance premiums.

(5) Mr. Mortimer resigned from the Company on May 31, 1996. The salary shown was
paid to him between April 1, 1995 and March 31, 1996. The bonus shown
represents amounts paid to him prior to leaving the Company.

The following table sets forth certain information regarding the options
("Trinity Options") to purchase common stock, par value $1.00 per share, of
Trinity ("Trinity Common Stock") granted during fiscal 1996 to the executive
officers named in the Summary Compensation Table.

TRINITY OPTION GRANTS IN FISCAL 1996

<TABLE>
<CAPTION>
INDIVIDUAL POTENTIAL
GRANTS REALIZABLE VALUE
------------ AT ASSUMED ANNUAL
PERCENT OF RATES OF STOCK
TOTAL PRICE APPRECIATION
OPTIONS FOR OPTION TERM
GRANTED TO EXERCISE MARKET ------------------
OPTIONS TRINITY OR BASE PRICE ON AT 5% AT 10%
GRANTED EMPLOYEES IN PRICE DATE OF EXPIRATION ANNUAL ANNUAL
NAME (SHARES) FISCAL YEAR ($/SH) GRANT DATE GROWTH GROWTH
- ----------------------------- -------- ------------ -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
John Dane III................ -- -- -- -- -- -- --
Daniel J. Mortimer........... -- -- -- -- -- -- --
Vincent R. Almerico.......... 800 0.7% $32.50 $32.50 08/16/05 $16,000 $41,000
Sidney C. Mizell............. 750 0.6% 32.50 32.50 08/16/05 15,000 39,000
Anil Raj..................... 750 0.6% 32.50 32.50 08/16/05 15,000 39,000
Harvey B. Walpert............ 800 0.7% 32.50 32.50 08/16/05 16,000 41,000
</TABLE>

Most of the option agreements relating to Trinity Options provide that such
options may be surrendered for cash for the difference between the then market
value of the shares and the option exercise price within 30 days after the
acquisition of 50% or more of the outstanding shares of Trinity Common Stock
pursuant to a tender or exchange offer other than one made by Trinity.

51
<PAGE> 52

The table below sets forth information concerning each exercise of Trinity
Options during fiscal 1996 by the executive officers named in the Summary
Compensation Table and the number of exercisable and unexercisable Trinity
Options held by them and the fiscal year-end value of such exercisable and
unexercisable options.

AGGREGATED TRINITY OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John Dane III.................. -- -- 88,030 103,250 $ 922,624 $ 910,841
Daniel J. Mortimer............. -- -- -- -- -- --
Vincent R. Almerico............ -- -- 9,000 5,000 119,100 39,375
Sidney C. Mizell............... -- -- 3,150 2,850 41,963 20,519
Anil Raj....................... -- -- 2,193 2,307 28,738 15,562
Harvey B. Walpert.............. -- -- 2,565 1,010 42,042 5,024
</TABLE>

INCENTIVE AND OTHER EMPLOYEE BENEFIT PLANS

Salary and Annual Incentive Bonus

It is contemplated that the Company will establish initial annual base
salaries for Messrs. Dane, Almerico, Mizell, Raj, Bourgeois and Walpert in the
amounts of $550,000, $170,000, $138,000, $138,000, $138,000 and $115,000,
respectively, effective upon completion of the Offering.

The Company will also establish an annual incentive compensation plan for
key employees under which bonuses will be paid based on the Company's success in
achieving certain significant performance goals that are set each year. An
incentive bonus will be determined for each executive upon the basis of the
achievement of certain financial goals set each year by the Compensation
Committee at the beginning of the year. The Company's performance targets for
its executives are directly related to the Company's earnings before federal
income taxes and may be related to certain other factors. The performance goals
will be predetermined by the Compensation Committee on the basis of the
Company's past performance and anticipated future performance. The total amount
of incentive compensation that may be earned by an executive in any year will be
limited to a predetermined maximum percentage (200%) of base salary. If the
amount of the incentive bonus for the year would exceed a certain percentage of
the base salary, 50% of the incentive compensation amount will be paid currently
and the balance will be deferred and paid within 90 days after the close of the
next succeeding fiscal year. Any unpaid deferred portion will be forfeited if
the executive leaves the employ of the Company for any reason other than death,
disability or retirement or a change in control (except for any change of
control resulting from the proposed Separation) of the Company. In the first
year of the Company's operations, certain executives may be guaranteed a minimum
percentage (75%) of base salary.

1996 Stock Option and Incentive Plan

The description set forth below represents a summary of the principal terms
and conditions of the Company's 1996 Stock Option and Incentive Plan and does
not purport to be complete.

The objectives of the 1996 Stock Option and Incentive Plan are to attract
and retain key employees and directors of the Company, to encourage the sense of
proprietorship of such persons and to stimulate the active interest of such
persons in the development and financial success of the Company. These
objectives are to be accomplished by making awards ("Awards") under the 1996
Stock Option and Incentive Plan and thereby providing participants with a
proprietary interest in the growth and performance of the Company.

Persons eligible for Awards under the 1996 Stock Option and Incentive Plan
("Participants") include directors of the Company and key employees who hold
positions of responsibility and whose performance can have a significant effect
on the success of the Company.

52
<PAGE> 53

Awards to Participants under the 1996 Stock Option and Incentive Plan may
be made in the form of grants of stock options ("Options"), stock appreciation
rights ("SARs"), restricted or non-restricted stock or units denominated in
stock ("Stock Awards"), performance awards ("Performance Awards") or any
combination of the foregoing.

The 1996 Stock Option and Incentive Plan provides for Awards to be made in
respect of a maximum of 1,400,000 shares of Common Stock. Shares of Common Stock
which are the subject of Awards that are forfeited or terminated, or expire
unexercised, will again become available for Awards under the 1996 Stock Option
and Incentive Plan.

The 1996 Stock Option and Incentive Plan will be administered by the
Compensation Committee of the Company Board, or such other committee as may in
the future be appointed by the Company Board (the "Committee"). To the extent
required pursuant to Rule 16b-3 under the Securities Exchange Act of 1934 in
order for the grant of Awards to be exempt under Section 16(b) of that act, the
Committee will at all times consist of at least two members of the Company Board
who qualify as Non-Employee Directors, as defined in Rule 16b-3(b)(3)(i). Rule
16b-3 generally provides an exemption from the short-swing profit recovery
provisions of Section 16(b) of the Securities Exchange Act of 1934 for the grant
of Awards to, and exercise of Awards by, "insiders," i.e., officers and
directors of the Company, who are subject to such provision. Under a new Rule
16b-3, generally effective August 15, 1996, the grant and exercise of Options
and SARs and the grant of Stock Awards are exempt from the short-swing profit
recovery provisions if such grants are approved by the Company Board itself or
by the Committee and if all such exercises are made in accordance with the terms
of the original grant. If the requirements of Rule 16b-3 are not satisfied, such
grants or exercises could be matched with other stock transactions made within a
six-month period by officers and directors, resulting in liability under the
short-swing profit provisions of Section 16(b).

The Committee will have the exclusive power to administer the 1996 Stock
Option and Incentive Plan and to take all actions which are specifically
contemplated thereby or are necessary or appropriate in connection with the
administration thereof. The Committee also will have the exclusive power to
interpret the 1996 Stock Option and Incentive Plan and to adopt such rules,
regulations and guidelines for carrying out the purposes of the 1996 Stock
Option and Incentive Plan as it may deem necessary or proper in keeping with the
objectives thereof. The Committee may, in its discretion, provide for the
extension of the exercisability of an Award, accelerate the vesting or
exercisability of an Award, eliminate or make less restrictive any restrictions
contained in an Award, waive any restriction or other provision of the 1996
Stock Option and Incentive Plan or in any Award or otherwise amend or modify an
Award in any manner that is either (i) not adverse to the Participant holding
the Award or (ii) consented to by such Participant.

The Committee will determine the type or types of Awards made under the
1996 Stock Option and Incentive Plan and will designate the Participants who are
to be recipients of such Awards. Each Award may be embodied in an agreement,
which will contain such terms, conditions and limitations as are determined by
the Committee. Awards may be granted singly or in combination. All or part of an
Award may be subject to conditions established by the Committee, which may
include continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attainment of specified growth rates
and other comparable measurements of performance.

The types of Awards that may be made under the 1996 Stock Option and
Incentive Plan are as follows:

Options. Options are rights to purchase a specified number of shares of
Common Stock at a specified price. An Option granted pursuant to the 1996 Stock
Option and Incentive Plan may consist of either an incentive stock option that
complies with the requirements of Section 422 of the Code or a non-qualified
stock option that does not comply with such requirements. The exercise price of
Options will be determined by the Committee, except that incentive stock options
must have an exercise price per share that is not less than the fair market
value of Common Stock on the date of grant. The exercise price must be paid in
full at the time an Option is exercised in cash or, if the Participant so
elects, by means of tendering Common Stock that the Participant already owns.
The Committee will determine acceptable methods for tendering Common Stock by a
Participant to exercise an Option. Subject to the foregoing, the terms,
conditions and limitations applicable

53
<PAGE> 54

to any Options, including the term of any Options and the date or dates upon
which they become exercisable, will be determined by the Committee.

SARs. SARs are rights to receive a payment, in cash or Common Stock, equal
to the excess of the fair market value or other specified valuation of a
specified number of shares of Common Stock on the date the rights are exercised
over a specified strike price. An SAR may be granted under the 1996 Stock Option
and Incentive Plan to the holder of an Option with respect to all or a portion
of the shares of Common Stock subject to such Option or may be granted
separately. The terms, conditions and limitations applicable to any SARs,
including the term of any SARs and the date or dates upon which they become
exercisable, will be determined by the Committee.

Stock Awards. Stock Awards consist of restricted and non-restricted grants
of Common Stock or units denominated in Common Stock. The terms, conditions and
limitations applicable to any Stock Awards will be determined by the Committee.

Performance Awards. Performance Awards consist of grants made to a
Participant subject to the attainment of one or more performance goals. A
Performance Award will be paid, vested or otherwise deliverable solely upon the
attainment of one or more pre-established, objective performance goals
established by the Committee prior to the earlier of (i) 90 days after the
commencement of the period of service to which the performance goals relate and
(ii) the lapse of 25% of the period of service, and in any event while the
outcome is substantially uncertain. A performance goal may be based upon one or
more business criteria that apply to a Participant, one or more business units
of the Company or the Company as a whole, and may include any of the following:
increased revenue, net income, stock price, market share, earnings per share,
return on equity, return on assets or decrease in costs. Subject to the
foregoing, the terms, conditions and limitations applicable to any Performance
Awards will be determined by the Committee.

Without limiting the foregoing, rights to dividends or dividend equivalents
may be extended to and made part of any Award in the discretion of the
Committee.

Options to purchase an aggregate of 250,000 shares of Common Stock under
the 1996 Stock Option and Incentive Plan have been granted in connection with
the Offering. In particular, Messrs. Dane, Almerico, Mizell, Raj and Bourgeois
were granted Options to purchase 110,000, 11,000, 11,000, 11,000 and 11,000
shares of Common Stock, respectively. The exercise price of these Options is
equal to the initial public offering price per share of Common Stock set forth
on the cover page of this Prospectus. These Options will become vested and
exercisable as to one-fifth of such Options on each of the first five
anniversaries of the date of grant. The Options will expire ten years after the
date of grant. All unvested portions of such Options will terminate upon
termination of the optionee's employment with the Company or its subsidiaries,
unless such termination results from retirement at age 65 or older, disability
or death, in which case the unvested portions of such Options will vest
automatically.

Conversion of Trinity Options

As of August 29, 1996, there were 230,710 shares of Trinity Common Stock
subject to outstanding Trinity Options granted by Trinity to employees of the
Company and its subsidiaries pursuant to certain Trinity stock compensation
plans (the "Trinity Stock Option and Incentive Plans"). If the proposed
Separation is consummated, the Company expects to assume such stock options (the
"Converted Options") held by individuals employed by the Company or its
subsidiaries (the "Company Employees"). Such conversion of Trinity Options into
Converted Options is referred to herein as the "Option Conversion." If the
Option Conversion occurs, each Converted Option will provide for the purchase of
a number of shares of Common Stock equal to the number of shares of Trinity
Common Stock subject to the applicable Trinity Option as of the Separation Date,
multiplied by the Conversion Ratio (as defined herein), rounded down to the
nearest whole share. Furthermore, the per share exercise price of each Converted
Option will equal the per share exercise price of the applicable Trinity Option
as of the Separation Date divided by the Conversion Ratio. The Company will not
issue Converted Options for the purchase of any fractional shares of Common
Stock, but will instead pay the holders of Converted Options cash in lieu of any
such fractional shares. As used herein, the term "Conversion Ratio" means the
amount obtained by dividing (i) the average of the daily high

54
<PAGE> 55

and low per share prices of Trinity Common Stock as reported on the NYSE during
a specified five day period preceding the Separation Date by (ii) the average of
the daily high and low per share prices of the Common Stock as reported on the
AMEX during a specified five day period preceding the Separation Date.

Prior to the Option Conversion (which will occur, if at all, upon
consummation of the proposed Separation), Trinity Options held by Company
Employees will remain outstanding in accordance with the terms of the Trinity
Stock Option and Incentive Plans. Upon the exercise of a Trinity Option by a
Company Employee at any time prior to the Option Conversion, the Company will
pay to Trinity an amount in cash equal to the excess, if any, of (i) the Market
Value (as defined herein) of the purchased shares on the date of exercise of
such option over (ii) the exercise price paid for such shares. As used herein,
the term "Market Value" means the average of the high and the low per share
price of the Trinity Common Stock as reported on the NYSE on such date, or if
there is no trading on the NYSE on such date, on the most recent previous date
on which such trading took place.

At the present time, it is not possible to determine how many shares of
Common Stock will be subject to Converted Options issued by the Company at the
time of the Option Conversion. This results from the fact that some Trinity
Options may be exercised and other Trinity Options may be granted prior to such
time. In addition, the number of Converted Options will depend upon the
Conversion Ratio, which will not be known until the proposed Separation is
completed. Stockholders of the Company are, however, likely to experience some
dilution from the issuance of Converted Options. For example, assuming that the
Conversion Ratio was 3.00 (calculated based on $33.00, the closing price per
share of Trinity Common Stock on the NYSE on September 19, 1996 and $11.00 per
share, the initial public offering price per share of Common Stock set forth on
the cover page of this Prospectus) and the number of shares of Trinity Common
Stock subject to Trinity Options held by Company Employees was 230,710 (based on
the number of shares subject thereto as of August 29, 1996), the number of
shares of Common Stock subject to Converted Options upon consummation of the
proposed Separation would be approximately 692,000.

No compensation expense is expected to be recorded by the Company as a
result of the Option Conversion. However, if the Separation is accomplished by
means other than a distribution of Common Stock to Trinity stockholders,
compensation expense may be recorded by the Company based on the excess of the
then current market price of Trinity Common Stock over the exercise price of the
applicable Trinity Options. Such compensation expense would have been
approximately $1.6 million if the Option Conversion had been consummated on
August 29, 1996.

Deferred Compensation

Following the consummation of the Offering, the Company will establish a
deferred compensation plan for certain key officers of the Company. Under the
deferred compensation plan, an amount equal to 10% of the participant's annual
base salary and incentive compensation is accrued on the books of the Company,
together with interest at the prime rate of a specified national bank, to be
paid as determined by the Company Board after consultation with the participant
in annual installments over five years or other periods as determined by the
Company Board. Payment of the deferred compensation commences one year and one
day after termination of the participant's employment with the Company. If the
participant dies, the installments are paid to his or her designated
beneficiary. The installment payments terminate if the participant, without the
prior written consent of the Company, directly or indirectly, becomes or serves
as an officer, employee, owner or partner of any business which competes in a
material manner with the Company.

Pension Plan

The Company is a participating employer in the Trinity Industries, Inc.
Marine Group Pension Plan (the "Pension Plan") maintained by Trinity. The
Pension Plan is a noncontributory, defined benefit plan that provides retirement
and death benefits to persons employed by the Company who are not covered by
another pension plan maintained by Trinity. The Pension Plan is not available to
employees covered by a collective bargaining agreement, unless that agreement
provides that the employees will be eligible, to leased employees, to project
status employees or to certain other designated employees. Benefits under the
Pension Plan are determined based on the participant's years of credited service
and final compensation from the Company.

55
<PAGE> 56

The Pension Plan provides for five-year cliff vesting, or vesting upon the
participant's attainment of age 65 or, if later, the fifth anniversary of the
date the participant's employment commenced. The Company's contributions for
fiscal years 1994, 1995 and 1996 were approximately $850,000, $1,050,000 and
$996,000, respectively.

Benefits that may be provided under the Pension Plan are limited under the
Code. For 1996, under Code Section 401(a)(17), the maximum annual compensation
that can be taken into account under the Pension Plan for all purposes,
including the determination of the benefits payable to a participant, is
$150,000. Under Code Section 415, the maximum annual pension payable to a
participant who retires at age 65 is $120,000. This maximum benefit is reduced
actuarially in the case of retirement at an earlier age and is scheduled to
increase with the cost of living for years after 1996.

The assets of the Pension Plan are currently held in the Trinity
Industries, Inc. Master Retirement Trust. It is contemplated that, following
consummation of the Offering, a separate pension plan will be established for
the Company's employees and the assets attributable to benefits accrued by
employees of the Company under the Pension Plan will be transferred to a
separate trust.

Profit Sharing Plan

The Company is a participating employer in the Profit Sharing Plan for
Employees of Trinity Industries, Inc. and Certain Affiliates (the "Profit
Sharing Plan"). The Profit Sharing Plan permits contributions under Section
401(k) of the Code of at least 2% but no more than 10% of compensation,
determined in whole percentages. For participants with at least five years of
service, 50% of these contributions are matched, up to 6% of the participant's
compensation. For participants with less than five years of service, 25% of
these contributions are matched, up to 6% of compensation. Participants are 100%
vested in salary reduction contributions, and vest in employer contributions
pursuant to a five-year graded schedule or upon normal retirement, death or
disability. The Company's contributions, exclusive of salary reduction
contributions, for fiscal years 1994, 1995 and 1996 were approximately $372,000,
$500,000 and $589,000, respectively.

Contributions that may be made under the Profit Sharing Plan are limited
under the Code. The maximum salary reduction contribution that may be made by a
participant in 1996 is $9,500, which amount can be further reduced under the
Code's 401(k) nondiscrimination rules. Nondiscrimination rules also apply with
respect to the matching contributions. Additionally, for 1996, the maximum
annual compensation that can be taken into account under the Profit Sharing Plan
for all purposes, including the determination of contributions made with respect
to a participant, is $150,000. The maximum allocation for a participant is equal
to the lesser of 25% of the participant's compensation or $30,000. Each of the
three dollar limitations referred to in this paragraph is scheduled to increase
with the cost of living for years after 1996.

It is contemplated that, following consummation of the Offering, the
Company will terminate its participation in the Profit Sharing Plan and
establish a comparable plan. Company employees who are participants in the
Profit Sharing Plan, and assets attributable to their accounts, will be
transferred to the new plan. All Company employees currently participating in
the Profit Sharing Plan who are transferred to the new plan will be
automatically credited under the new plan with years of service credited under
the Profit Sharing Plan.

Supplemental Retirement Plan

The Company is a participating employer in the Trinity Industries, Inc.
Supplemental Retirement Plan (the "Supplemental Retirement Plan"). This is a
nonqualified, deferred compensation plan that provides benefits to a select
group of management or highly compensated employees equal to the amount that the
participants would have received under the qualified retirement plan in which
they participate but for the limitations of Sections 401(a)(17) and 415 of the
Code. A participant is entitled to benefits under the Supplemental Retirement
Plan upon his retirement from the Company. All benefits under the Supplemental
Retirement Plan are paid out of general Trinity assets. It is contemplated that,
following consummation of the Offering, the Company will terminate its
participation in the Supplemental Retirement Plan and establish a comparable
plan, and the obligation to provide benefits under the Supplemental Retirement
Plan attributable to employees of the Company will be transferred to the
Company.

56
<PAGE> 57

Supplemental Profit Sharing Plan

The Company is also a participating employer in the Supplemental Profit
Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates
(the "Supplemental Profit Sharing Plan"). Under this nonqualified deferred
compensation plan, certain highly compensated employees are permitted to defer
compensation, and the Company credits amounts to an account established for each
such employee who elects to defer compensation under the Supplemental Profit
Sharing Plan in an amount that is coordinated with contributions on behalf of
such employees to the Profit Sharing Plan and the limitations under Sections
402(g) and 401(a)(17) of the Code. Assets intended by Trinity to be used to pay
benefits under the Supplemental Profit Sharing Plan are maintained in the
Supplemental Profit Sharing Trust for Employees of Trinity Industries, Inc. and
Certain Affiliates. It is contemplated that, following consummation of the
Offering, the Company will terminate its participation in this plan and
establish a comparable plan, and that the assets attributable to benefits
accumulated for Company employees under the Supplemental Profit Sharing Plan
will be transferred from the existing Trinity grantor trust to a separate
grantor trust to be established by the Company.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

No officer or director of the Company currently owns any shares of Common
Stock, all of which are currently owned by Trinity. Certain officers of the
Company received Options to purchase Common Stock under the 1996 Stock Option
and Incentive Plan in connection with the Offering. Directors and officers of
the Company may receive shares of Common Stock in the proposed Separation, if it
occurs, in respect of shares of Trinity Common Stock held, if any, by each of
them on the record date for the Separation.

The following table sets forth certain information as of July 31, 1996
regarding the beneficial ownership of Trinity Common Stock by (i) each director
of the Company, (ii) each executive officer named in the Summary Compensation
Table and (iii) all executive officers and directors of the Company as a group.
Unless otherwise noted, the persons named below have sole voting and investment
power with respect to the shares shown as beneficially owned by them.

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF TRINITY COMMON STOCK PERCENT OF
NAME BENEFICIALLY OWNED(1) CLASS
----------------------------------------------------- ----------------------- ----------
<S> <C> <C>
Vincent R. Almerico.................................. 9,000 *
John Dane III........................................ 211,086 *
Kenneth W. Lewis..................................... 89,019 *
Sidney C. Mizell..................................... 3,386 *
F. Dean Phelps, Jr. ................................. 21,165 *
Anil Raj............................................. 2,331 *
Rick S. Rees......................................... 1,000 *
John T. Sanford...................................... 85,085 *
Timothy R. Wallace................................... 146,309 *
W. Ray Wallace....................................... 1,337,429 3.10%
Harvey B. Walpert.................................... 2,938 *
Directors and Executive Officers as a Group (13
persons)........................................... 1,908,748 4.50%
</TABLE>

- ---------------

* Less than one percent (1%).

(1) All shares are owned directly and the owner has the right to vote the
shares, except that the share amounts listed above include shares issuable
under Trinity Stock Option and Incentive Plans as of July 31, 1996 or within
60 days thereafter in the following amounts: Vincent R. Almerico -- 9,000
shares; John Dane III -- 70,030 shares; Kenneth W. Lewis -- 26,232 shares;
Sidney C. Mizell -- 3,150 shares; F. Dean Phelps, Jr. -- 15,130 shares; Anil
Raj -- 2,193 shares; John T. Sanford -- 46,699 shares; Timothy R.
Wallace -- 142,323 shares; W. Ray Wallace -- 450,000 shares; Harvey B.
Walpert -- 2,565 shares; and directors and executive officers as a
group -- 767,322 shares.

57
<PAGE> 58

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1996, the Company had no Compensation Committee or other
committee of the Company Board performing similar functions. Decisions
concerning compensation of executive officers were made by certain executive
officers of Trinity and members of Trinity's Compensation Committee, none of
whom is an executive officer of the Company. The Company Board has established a
Compensation Committee, all of the members of which are nonemployee directors.
See "-- Committees of the Board of Directors."

NONCOMPETITION AGREEMENTS

Prior to the consummation of the Offering, John Dane III, the Chief
Executive Officer of the Company, will enter into an agreement with the Company
under which he will agree not to compete with the Company in its present line of
business in the Gulf Coast region of the United States (which consists of the
States of Mississippi, Louisiana, Florida, Texas and Alabama) for a period of
three years from the date of this Prospectus. In order to enable Mr. Dane to
serve as President and Chief Executive Officer of the Company, to the extent
such covenant relates to the Company Businesses, Trinity has released Mr. Dane
from a noncompetition covenant that Mr. Dane entered into in connection with his
sale of Moss Point Marine, Inc. to Trinity in 1987. Under such agreement as
modified, Mr. Dane will continue to be precluded from competing with Trinity
under the terms of the 1987 agreement for four years from the date of
consummation of the Offering.

CHANGE OF CONTROL AGREEMENTS

The Company intends to enter into agreements (the "Change of Control
Agreements") with each of the current executive officers named in the Summary
Compensation Table and others to provide certain severance benefits to them in
the event of a termination of employment following a change of control (as
defined in the Change of Control Agreements) of the Company. A change of control
resulting from consummation of the proposed Separation would not be included in
the defined term. Each Change of Control Agreement will provide that, following
a change of control of the Company, if the Company terminates the executive's
employment other than as a result of the executive's death, disability or
retirement, or for cause (as defined in the Change of Control Agreements), or if
the executive terminates his employment for good reason (as defined in the
Change of Control Agreements), then the Company will pay to such executive a
lump sum equal to three times the amount of the executive's base salary and
bonus paid by the Company and its subsidiaries to the executive during the 12
months prior to termination or, if higher, the 12 months prior to the change of
control.

The severance benefits to be provided by the Change of Control Agreements
also will include (i) for 36 months following the executive's termination,
certain fringe benefits to which the executive would have been entitled had he
remained in the employment of the Company and (ii) a supplemental benefit based
on the Company's pension plan, which benefit will be payable in a series of cash
payments.

The Change of Control Agreements will further provide that if any payment
to which the executive is entitled is subject to the excise tax imposed by
Section 4999 of the Code, then the Company will pay to the executive an
additional amount so that the net amount retained by the executive is equal to
the amount that otherwise would be payable to the executive if no such excise
tax had been imposed.

INDEMNIFICATION AGREEMENTS

The Company intends to enter into Indemnification Agreements with certain
of its directors and officers pursuant to which it will indemnify such persons
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement incurred as a result of the fact that such person, in his or her
capacity as a director or officer, is made or threatened to be made a party to
any suit or proceeding. Such persons will be indemnified to the fullest extent
now or hereafter permitted by the DGCL. The Indemnification Agreements will also
provide for the advancement of certain expenses to such directors and officers
in connection with any such suit or proceeding.

58
<PAGE> 59

CERTAIN TRANSACTIONS AND RELATED ARRANGEMENTS

CONSOLIDATION TRANSACTIONS

Prior to or concurrently with the Offering, the Company will consummate the
Consolidation Transactions. These transactions include: (i) the transfer to the
Company of the stock of each subsidiary of Trinity that has assets and
liabilities related to the Company Businesses, (ii) the transfer to subsidiaries
of the Company of certain assets and liabilities of Trinity related to the
Company Businesses and (iii) the assumption by the Company of the indebtedness
of Trinity associated with the Company Businesses (which totalled $25.0 million
as of June 30, 1996). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

OFFERING RELATED TRANSACTIONS

Prior to or concurrently with the consummation of the Offering, the Company
will engage in the Offering Related Transactions. The Offering Related
Transactions include (i) the entering into by the Company of the new Credit
Facility and (ii) the borrowing by the Company under the Credit Facility to
repay (x) a $25.0 million intercompany note to Trinity and (y) $25.0 million of
certain indebtedness of Trinity associated with the Company Businesses and
assumed by the Company in connection with the Consolidation Transactions. See
"Risk Factors -- Benefits to Trinity in Connection with the Offering" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

THE PROPOSED SEPARATION

Trinity has announced its intention to divest itself through the proposed
Separation of its remaining ownership interest in the Company. The timing, form
and other terms of the Separation are subject to the approval of the Trinity
Board. The Separation will be subject to various conditions, including the
absence of any events or developments that cause the Trinity Board to determine,
in its sole discretion, that the proposed Separation is not in the best
interests of Trinity or its stockholders. If the proposed Separation is to be
accomplished by means of a non-taxable transaction, such transaction also will
be subject to receipt of a private letter ruling from the IRS to the effect that
the Separation will qualify as a tax-free transaction for federal income tax
purposes under Section 355 of the Code. For additional information regarding the
proposed Separation and the conditions thereto, see "Separation From Trinity."

ARRANGEMENTS BETWEEN THE COMPANY AND TRINITY

Prior to the consummation of the Offering, the Company and Trinity will
enter into various agreements for the purpose of establishing the terms
governing their on-going arrangements and relationships. These agreements
include the Separation Agreement, the Tax Allocation Agreement, the Trademark
License Agreement and an Indemnity and Security Agreement (collectively, the
"Separation and Related Agreements"). The terms of such agreements were
negotiated between affiliated parties, do not reflect arms'-length dealings and
may not be as favorable to the Company as terms that would be available in
similar agreements from unrelated third parties. The form of each such agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Although the summary of the terms and provisions of
such agreements set forth below describes the material provisions of each such
agreement, it does not purport to be complete and is qualified in its entirety
by reference to the full text of such agreements. See "Available Information."

Separation Agreement

Releases. The Separation Agreement provides for a full and complete release
and discharge as of the date of consummation of the Offering of all liabilities
and obligations existing or arising from all acts and events occurring or
failing to occur or alleged to have occurred or to have failed to occur and all
conditions existing or alleged to have existed on or before the date of
consummation of the Offering, between or among

59
<PAGE> 60

the Company or any other member of the Company Group (as defined herein), on the
one hand, and Trinity or any other member of the Trinity Group (as defined
herein), on the other hand (including any contractual agreements or arrangements
existing or alleged to exist between or among any such members on or before the
consummation of the Offering), except as expressly set forth in the Separation
and Related Agreements.

Indemnification. Trinity generally will agree to indemnify and hold
harmless the Company and each other member of the Company Group, and each of
their respective directors, officers and employees, from and against all
liabilities and obligations relating to, arising out of or resulting from (i)
the failure of Trinity or any member of the Trinity Group to pay, perform or
otherwise promptly discharge any of its liabilities and obligations, other than
Halter Asset Liabilities (as defined herein) and liabilities that relate to,
arise out of or result from any of the Company Businesses, (ii) the Trinity
Businesses, other than Halter Asset Liabilities and liabilities that relate to,
arise out of or result from any of the Company Businesses, or (iii) any breach
by Trinity of the terms of the Separation and Related Agreements or other
agreements entered into between Trinity and the Company in connection with the
Offering. As used in the Separation Agreement, the term "Halter Asset
Liabilities" means (i) all liabilities relating to, arising at any time out of
or resulting at any time from any assets of any member of the Company Group or
any assets that at any time were owned by any of the Specified Entities (as
defined herein), or relating to, arising at any time out of or resulting at any
time from any operations conducted with or on any assets of any member of the
Company Group or any of the assets that at any time were owned by any of the
Specified Entities (excluding, however, any liabilities resulting from the
operation of any item of tangible personal property exclusively in connection
with any of the Trinity Businesses) and (ii) all liabilities of any of the
Specified Entities existing at any time. As used in the Separation Agreement,
the term "Specified Entities" refers to certain specified entities whose assets
historically have been in large part used in connection with the Company
Businesses and which entities have transferred their assets to Trinity or
another member of the Trinity Group.

Except as provided in the Separation Agreement, the Company will agree to
indemnify and hold harmless Trinity and each other member of the Trinity Group,
and each of their respective directors, officers and employees, from and against
all liabilities and obligations relating to, arising out of or resulting from
(i) the failure of the Company or any member of the Company Group to pay,
perform or otherwise promptly discharge any of its liabilities and obligations,
(ii) any of the Halter Asset Liabilities, (iii) the Company Businesses, (iv) any
breach by the Company or any other member of the Company Group of the terms of
the Separation and Related Agreements, (v) any untrue statement or alleged
untrue statement of a material fact in this Prospectus or the Registration
Statement of which it forms a part or any omission or alleged omission to state
a material fact required to be stated herein or therein or necessary to make the
statements herein or therein not misleading (except for any such untrue
statement or alleged untrue statement arising from information regarding Trinity
and supplied in writing by Trinity expressly for inclusion in this Prospectus or
the Registration Statement) and (vi) certain obligations of Trinity under an
agreement to be entered into among Trinity and the Underwriters pursuant to
which, among other things, Trinity will agree to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933. Without limiting the foregoing, the Company will agree to indemnify and
hold harmless each of Trinity and any other member of the Trinity Group from and
against any liability that any of them may have in respect of guarantees by
Trinity or any other member of the Trinity Group of any contract bid and
performance obligations of the Company or any other member of the Company Group.
As of July 31, 1996, Trinity had guaranteed contract performance obligations of
the Company in the aggregate amount of approximately $66.1 million. The Company
also had outstanding contract bid and performance bonds, letters of credit and
similar obligations issued by third parties (for which Trinity is the obligor)
with an aggregate face amount of approximately $74.9 million.

The Separation Agreement provides for different indemnification obligations
in the case of liabilities which arise as a result of actual or alleged
workplace exposure to hazardous substances on the part of persons who have been
employed both by (i) any of the Trinity Businesses and (ii) any of the Company
Businesses or at any facility with respect to which liabilities from operations
are the responsibility of the Company pursuant to the Separation Agreement. The
Separation Agreement generally provides that such liabilities will be allocated
between Trinity and the Company based on the respective number of days that any
such person was employed by any of the Trinity Businesses, on the one hand, and
by any of the Company Businesses (or at any

60
<PAGE> 61

facility with respect to which liabilities from operations are the
responsibility of the Company), on the other hand.

The forgoing indemnification provisions will not apply to liabilities and
obligations in respect of federal, state and local taxes, which will be
addressed elsewhere in the Separation Agreement and in the Tax Allocation
Agreement described below.

The Separation Agreement will also set forth certain procedures with
respect to third-party claims for which indemnification is available and related
matters.

Protection of Tax-Free Status of Separation. The Separation Agreement will
also contain covenants on the part of the Company intended to protect the
ability of Trinity to effect the proposed Separation as a tax-free transaction
if it elects to do so. In particular, the Company will agree that, after the
consummation of the Offering, neither it nor any of its affiliates will take any
action which reasonably could be expected to prevent the proposed Separation
from qualifying as a tax-free transaction pursuant to Section 355 of the Code or
which could otherwise be reasonably expected to jeopardize the ability of
Trinity to effect the proposed Separation as a tax-free transaction if it elects
to do so. Without limiting the generality of the foregoing, the Company will
agree that, during the period beginning upon the consummation of the Offering
and ending on the Separation Date, the Company will not issue or grant, and will
not permit any other member of the Company Group to issue or grant, directly or
indirectly, any shares of Common Stock or any rights, warrants, options or other
securities entitling the holder to purchase or acquire any shares of Common
Stock, except for (i) the grant of options for 250,000 shares of Common Stock
pursuant the 1996 Stock Option and Incentive Plan in connection with the
Offering and (ii) the issuance of shares of Common Stock upon exercise of such
options. The Company will indemnify Trinity and its affiliates from and against
all liabilities and obligations relating to, arising out of or resulting from
the breach of any of the provisions of the Separation Agreement intended to
protect the tax-free status of the proposed Separation.

Non-Competition Covenants. The Separation Agreement will provide that, for
a period of four years after the consummation of the Offering, neither Trinity
nor any other member of the Trinity Group will engage in any of the Company
Businesses; provided, that neither Trinity nor any member of the Trinity Group
will be prohibited from engaging in (i) the construction, conversion or repair
of deck barges (whether ocean-going or inland) or (ii) the production of any
component of or accessory to any ocean-going or inland vessels.

The Separation Agreement also will provide that, for a period of four years
after the consummation of the Offering, neither the Company nor any other member
of the Company Group will engage in any of the Trinity Businesses. In the event
that the Company fails to comply with the foregoing covenant related to
competition with the Trinity Businesses, then Trinity may, in addition to any
other remedies that may be available to it, terminate all or any portion of the
rights granted to the Company under the Trademark License Agreement.

Notwithstanding the foregoing noncompetition provisions, any member of the
Trinity Group or the Company Group will be permitted to complete performance of
any contract of such party existing as of the date of the Offering, and such
performance will not be deemed to violate any noncompetition covenant in the
Separation Agreement.

Auditors. The Separation Agreement will provide that for a period of three
years following the date of the Offering, the Company will not voluntarily cease
to retain Ernst & Young LLP as its auditing firm with respect to its financial
statements; provided, that the Company may voluntarily cease to continue to
retain Ernst & Young LLP as its auditing firm with respect to its financial
statements if (i) Ernst & Young LLP ceases to satisfy any applicable criteria
relating to independence of auditors or (ii) the Company Board determines in
good faith that (x) a disagreement exists between the Company and Ernst & Young
LLP that effectively precludes Ernst & Young LLP from adequately performing its
duties as the Company's independent auditing firm or (y) the performance of
Ernst & Young LLP as the Company's outside auditing firm is materially
deficient.

Fees and Expenses. The Separation Agreement will provide that the Company
will pay all third party costs, fees and expenses relating to the Offering, all
of the reimbursable expenses of the Underwriters pursuant to the Underwriting
Agreement, all of the costs of producing, printing, mailing and otherwise
distributing this

61
<PAGE> 62

Prospectus, as well as the Underwriters' discounts and commissions as provided
in the Underwriting Agreement. See "Underwriting." Except as expressly set forth
in the Separation and Related Agreements, all third party fees, costs and
expenses paid or incurred in connection with the proposed Separation will be
paid by Trinity.

Certain Definitions. As used in this Prospectus and in the Separation
Agreement, the terms set forth below have the following respective meanings:

"Company Businesses" means the business and operations conducted prior
to the date hereof by Trinity and certain of its subsidiaries that consist
of (i) the construction, repair and conversion of ocean-going and inland
vessels (other than inland hopper barges and inland tank barges and the
construction of accessories for such barges) and (ii) the production of any
component of or accessory to any ocean-going or inland vessel being
constructed by any member of the Company Group.

"Company Group" means the group consisting of the Company and all of
its subsidiaries.

"Trinity Businesses" means all businesses and operations conducted
prior to the date hereof by Trinity and any other members of the Trinity
Group other than the Company Businesses.

"Trinity Group" means the group consisting of Trinity and all of its
subsidiaries (other than any member of the Company Group).

Tax Sharing and Tax Benefit Reimbursement Agreement

In connection with the Offering, Trinity and the Company will enter into
the Tax Allocation Agreement. The Tax Allocation Agreement (i) will provide for
the termination of any existing tax sharing or allocation arrangements between
the Company and Trinity, (ii) will specify the manner in which certain federal,
state and local income tax liabilities (including any subsequent adjustments to
such federal, state and local income tax liabilities) of the consolidated group
of which Trinity is the common parent (the "Trinity Tax Group") will be
allocated for the final year (the "Final Year") in which the Company is a member
of the Trinity Tax Group and for any prior tax year of the Trinity Tax Group and
(iii) will specify the manner in which audits or administrative or judicial
proceedings relating to federal income taxes and certain state taxes of the
Trinity Tax Group will be controlled. In general, the Company's share of the
federal income tax liabilities, and in some cases state and local tax
liabilities, will be computed as if the Company and its subsidiaries filed a
separate consolidated income tax return. Under the Tax Allocation Agreement,
Trinity will generally control any audit or administrative or judicial
proceeding relating to taxes of the Trinity Tax Group.

As of June 30, 1996, the Company was obligated to reimburse Trinity for
income taxes incurred in connection with the Company Businesses in an aggregate
amount of approximately $16.4 million. A portion of the net proceeds of the
Offering will be used to repay income taxes payable outstanding as of the
consummation of the Offering. See "Use of Proceeds."

Trademark License Agreement

The Company and Trinity will also enter into the Trademark License
Agreement, pursuant to which Trinity will grant to the Company and the other
members of the Company Group a long-term, limited, royalty-free license to allow
the Company to use the "Trinity Yachts" trademark in connection with its yacht
business.

Inland Barge Arrangements

The Company has a firm contract to construct 50 inland hopper barges for
Trinity. Such barges will be constructed at the Company's Gulfport shipyard over
approximately the next six months. However, the Company anticipates that from
time to time in the future it may enter into discussions with Trinity regarding
manufacturing additional inland hopper barges or inland double hull tank barges,
or both, for Trinity or its customers. The terms of any such future arrangements
will be negotiated by the Company and Trinity at that time. Although the Company
expects that any such future arrangements will be at least as favorable to the
Company as those it could obtain from unaffiliated third parties, any such
arrangements entered into prior to

62
<PAGE> 63

the proposed Separation will be negotiated between affiliated parties and will
not reflect arms'-length dealings. See "Risk Factors -- Control by Trinity
Pending the Proposed Separation; Potential Conflicts of Interest." Except for
the arrangement described above, the Separation Agreement precludes the Company,
absent Trinity's consent, from constructing inland hopper barges and inland tank
barges (both of which constitute a portion of the Trinity Businesses) for four
years after the consummation of the Offering.

Performance Bond and Guarantee Arrangements

A significant portion of the Company's contracts for the construction,
repair or conversion of vessels require that the Company's performance be
guaranteed by Trinity or by a surety company or other third party pursuant to a
contract bid or performance bond, letter of credit or similar obligation.
Generally, contracts with state or local governments require contract bid and
performance bonds, and foreign governmental contracts require bank letters of
credit or similar obligations. Commercial contracts may require contract bid and
performance bonds if requested by the customer. As of July 31, 1996, Trinity had
guaranteed contract bid and performance obligations of the Company in the
aggregate amount of approximately $66.1 million and the Company had outstanding
contract bid and performance bonds, letters of credit and similar obligations
issued by third parties (and for which Trinity is the obligor) with an aggregate
face amount of approximately $74.9 million. These guarantees, bonds, letters of
credit and similar obligations, totalling approximately $141.0 million, will
remain in effect after the Offering until the obligations expire, and, pursuant
to the Indemnity and Security Agreement, the Company will be obligated to
indemnify Trinity against any liability under such obligations. For the
protection of Trinity in the event that Trinity is called upon to satisfy any
such obligations, Trinity will be granted security interests in certain assets
of the Company which relate to the Company contracts from which such obligations
arise and will possess rights to complete performance of any such contract on
behalf of the Company in the event of nonperformance by the Company. Such rights
and remedies are similar to the rights possessed by surety companies that have
issued performance bonds on behalf of the Company. See "Business -- Bonding and
Guarantee Requirements."

CERTAIN OTHER TRANSACTIONS

John Dane III, the President, Chief Executive Officer and a director of the
Company, acquired 25% of the stock of United States Marine, Inc. ("USMI") in
June 1996. Mr. Dane has the option to acquire up to an additional 50% of the
stock of USMI over the next five years. USMI performs services for the Company
as a subcontractor with respect to the production of high speed composite
vessels for the U.S. Navy. The Company paid USMI approximately $10.6 million,
$3.9 million and $5.5 million during fiscal 1994, 1995 and 1996, respectively,
and approximately $2.2 million during the three months ended June 30, 1996, for
subcontractor services. The Company believes that the terms on which the Company
is supplied such subcontractor services by USMI are at least as favorable as
those that could be obtained by the Company in arm's-length transactions with
unrelated parties.

Rick S. Rees, who became a director of the Company in September 1996, has
been the President of Maritime Holdings, Inc. ("MHI") since March 1996 and is a
director of Texas Drydock, Inc. ("TDI"), a wholly owned subsidiary of MHI. TDI,
which is engaged in the offshore rig repair, modification and new construction
business, entered into certain contracts with Trinity in November 1993 and May
1994, respectively, for the construction by Trinity of six drilling barges. Such
contracts provided for payments to Trinity of approximately $12 million.

63
<PAGE> 64

PRINCIPAL STOCKHOLDER

Prior to the Offering, all of the outstanding shares of Common Stock will
be owned by Trinity. Upon the consummation of the Offering, Trinity will own
approximately 83.3% (81.3% if the Underwriters exercise the Over-Allotment
Option in full) of the Common Stock then outstanding. Except as described above,
the Company is not aware of any person or group that will beneficially own more
than 5% of the outstanding shares of Common Stock following the Offering.

Prior to the proposed Separation, Trinity will be able to elect all members
of the Company Board and determine the outcome of corporate actions requiring
stockholder approval. Furthermore, through its ability to elect the members of
the Company Board, Trinity will be able to control all matters affecting the
business and operations of the Company.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, par value $0.01 per share, and (ii) 1,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"). Upon the
consummation of the Offering, 18,000,000 shares of Common Stock (18,450,000
shares if the Over-Allotment Option is exercised in full) and no shares of
Preferred Stock will be outstanding.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of the stockholders and, except as otherwise
required by law or provided in any resolution adopted by the Company Board with
respect to any series of Preferred Stock, the holders of Common Stock will
possess all voting power. Cumulative voting of shares of Common Stock in the
election of directors is not permitted. The holders of Common Stock are entitled
to receive ratably such dividends, if any, as may be declared from time to time
by the Company Board out of funds legally available therefor, subject to the
payment of any preferential dividends with respect to any series of Preferred
Stock created by the Company Board from time to time. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, after distribution to the holders of any outstanding Preferred
Stock created by the Company Board from time to time of the amounts to which
they are entitled. The holders of Common Stock have no preemptive or other
subscription rights. All of the shares of Common Stock offered hereby will be,
when issued, validly issued, fully paid and nonassessable.

PREFERRED STOCK

The Certificate authorizes the Company Board to establish one or more
series of Preferred Stock and to determine, with respect to any series of
Preferred Stock, the terms and rights of such series, including (i) the
designation of the series, (ii) the number of shares of the series, which number
the Company Board may thereafter (except where otherwise provided in the
applicable Certificate of Designations) increase or decrease (but not below the
number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative, and, in the case of shares of any series
having cumulative dividend rights, the date or dates or method of determining
the date or dates from which dividends on the shares of such series shall be
cumulative, (iv) the rate of any dividends (or method of determining such
dividends) payable to the holders of the shares of such series, any conditions
upon which such dividends will be paid and the date or dates or the method for
determining the date or dates upon which such dividends will be payable, (v) the
redemption rights and price or prices, if any, for shares of the series, (vi)
the terms and amount of any sinking fund provided for the purchase or redemption
of shares of the series, (vii) the amounts payable on and the preferences, if
any, of shares of the series in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, (viii)
whether the shares of the series will be convertible or exchangeable into shares
of any other class or series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class or series or such
other security, the conversion or exchange price or prices or rate or rates, any
adjustments thereof, the date or dates as of which such shares will be
convertible or exchangeable and all other terms and conditions upon which such
conversion or exchange

64
<PAGE> 65

may be made, (ix) restrictions on the issuance of shares of the same series or
of any other class or series, (x) the voting rights, if any, of the holders of
the shares of the series and (xi) any other relative rights, preferences and
limitations of such series.

The Company believes that the ability of the Company Board to issue one or
more series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise from time to time. The authorized shares of
Preferred Stock, as well as shares of Common Stock, will be available for
issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. If the approval of the Company's stockholders is not required for the
issuance of shares of Preferred Stock or Common Stock, the Company Board may
determine not to seek stockholder approval.

Although the Company Board has no intention at the present time of doing
so, it could issue a series of Preferred Stock that may, depending on the terms
of such series, hinder, delay or prevent the completion of a merger, tender
offer or other takeover attempt. Among other things, the Company Board could
issue a series of Preferred Stock having terms that could discourage an
acquisition attempt through which an acquirer may be able to change the
composition of the Company Board, including a tender offer or other transaction
that some, or a majority, of the Company's stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then current market price of such stock.

For purposes of the Rights Agreement described below, the Company Board has
authorized the creation of a series of Preferred Stock designated as "Series A
Junior Participating Preferred Stock" (the "Series A Preferred Stock"). An
aggregate of 500,000 shares of Preferred Stock have been reserved for issuance
as Series A Preferred Stock. Series A Preferred Stock will rank junior to all
other series of Preferred Stock that have been or may be established by the
Company Board with respect to the payment of dividends and the distribution of
assets upon liquidation. In general, the voting, dividend and liquidation rights
of Series A Preferred Stock are designed in such a way that one one-hundredth of
a share of Series A Preferred Stock will be substantially equivalent from an
economic point of view to one share of Common Stock. For a statement of the
rights and privileges of Series A Preferred Stock, reference is made to the form
of Certificate of Designations which is included as an exhibit to this
Registration Statement.

ANTI-TAKEOVER PROVISIONS OF THE CERTIFICATE AND BY-LAWS

Classified Board of Directors

Effective upon the Separation Date, the members of the Company Board, other
than those who may be elected by the holders of Preferred Stock, will be
classified, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, one class to be originally
elected for a term expiring at the first annual meeting of stockholders held
following the Separation Date, another class to be originally elected for a term
expiring at the second annual meeting of stockholders held following the
Separation Date and another class to be originally elected for a term expiring
at the third annual meeting of stockholders held following the Separation Date,
with each director to hold office until his or her successor is duly elected and
qualified. Commencing with the first annual meeting of stockholders held
following the Separation Date, directors elected to succeed directors whose
terms then expire will be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director to hold office until such person's successor is duly elected and
qualified.

Removal of Directors

Subject to the rights of holders of Preferred Stock, any director may be
removed from office only for cause by the affirmative vote of the holders of at
least a majority of the voting power of all shares of stock of the Company
entitled to vote generally in the election of directors ("Voting Stock") then
outstanding, voting together as a single class; provided, however, that prior to
the Separation Date, any director or directors may be removed from office by the
affirmative vote of the holders of at least 80% of the voting power of all
Voting Stock then outstanding, voting together as a single class.

65
<PAGE> 66

No Stockholder Action by Written Consent

The Certificate and By-Laws provide that, after the Separation Date, any
action required or permitted to be taken by the stockholders of the Company must
be taken at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders.

Special Meetings

Effective as of the Separation Date, except as otherwise required by law
and subject to the rights of the holders of any Preferred Stock, special
meetings of stockholders of the Company for any purpose or purposes may be
called only by the Company Board pursuant to a resolution stating the purpose or
purposes thereof approved by a majority of the whole Company Board or by the
Chairman of the Board and, effective as of the Separation Date, any power of
stockholders to call a special meeting is specifically denied.

Advance Notice Procedures

The By-Laws establish an advance notice procedure for stockholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of stockholders of the Company (the "Stockholder Notice
Procedure"). The Stockholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Chairman of the Board, or by a
stockholder who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of the Company. The Stockholder Notice Procedure also
provides that at an annual meeting only such business may be conducted as has
been brought before the meeting by, or at the direction of, the Chairman of the
Board or the Company Board, or by a stockholder who has given timely written
notice to the Secretary of the Company of such stockholder's intention to bring
such business before such meeting. Under the Stockholder Notice Procedure, for
notice of stockholder nominations to be made at an annual meeting to be timely,
such notice must be received by the Company not later than the close of business
on the 90th calendar day nor earlier than the close of business on the 120th
calendar day prior to the first anniversary of the preceding year's annual
meeting (except that, in the event that the date of the annual meeting is more
than 30 calendar days before or more than 60 calendar days after such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the 120th calendar day prior to such
annual meeting and not later than the close of business on the later of the 90th
calendar day prior to such annual meeting or the 10th calendar day following the
day on which public announcement of a meeting date is first made by the
Company).

In addition, under the Stockholder Notice Procedure, a stockholder's notice
to the Company proposing to nominate a person for election as a director must
set forth the following information with respect to each person proposed to be
nominated: the person's name, business address, residence address, principal
occupation and ownership of Company stock along with any other information
required by federal proxy rules. In addition, such notice must set forth the
following information with respect to the stockholder giving notice: such
stockholder's name and record address, along with the number of shares of stock
of the Company owned by such stockholder.

Also, under the Stockholder Notice Procedure, a stockholder's notice to the
Company relating to the conduct of business other than the nomination of
directors must contain, as to each matter the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
the name and record address of such stockholder, the class and number of shares
of the Company that are beneficially owned by the stockholder and any material
interest of the stockholder in such business.

If the chairman of a meeting determines that an individual was not
nominated, or other business was not brought before the meeting, in accordance
with the Stockholder Notice Procedure, such individual will not be eligible for
election as a director or such business will not be conducted at such meeting,
as the case may be.

The Stockholder Notice Procedure does not apply to Trinity and its
affiliates prior to the Separation Date.

66
<PAGE> 67

Amendment

The Certificate provides that the affirmative vote of the holders of at
least 80% of the voting power of the outstanding shares of Voting Stock, voting
together as a single class, is required to amend certain provisions of the
Certificate, including those relating to (i) stockholder action without a
meeting, (ii) the calling of special meetings and (iii) the number, election and
term of the Company's directors. The Certificate further provides that the
related By-Laws described above (including the Stockholder Notice Procedure) may
be amended only by the Company Board or by the affirmative vote of the holders
of at least 80% of the voting power of the outstanding shares of Voting Stock,
voting together as a single class.

STOCKHOLDER RIGHTS PLAN

Prior to the consummation of the Offering, the Company will adopt a
Stockholder Rights Plan pursuant to which one right ("Right") will be issued
with respect to each outstanding share of Common Stock. Each Right will entitle
the registered holder to purchase from the Company a unit consisting of one
one-hundredth of a share (a "Fractional Share") of Series A Preferred Stock, at
a purchase price per Fractional Share to be determined by the Company Board when
the issuance of the Rights is approved, subject to adjustment in certain events
(the "Purchase Price"). The Purchase Price may be paid, at the option of the
holder, in cash or shares of Common Stock having a value at the time of exercise
equal to the Purchase Price. The terms of the Rights are set forth in a
Stockholder Rights Agreement (the "Rights Agreement") to be entered into between
the Company and The Bank of New York as rights agent. Although the summary
description of the Rights set forth below briefly describes the material
provisions of the Rights, it does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, the form of which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.

Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, including the shares of Common Stock sold in
the Offering, and no separate certificates for the Rights ("Rights
Certificates") will be distributed. The Rights will separate from the Common
Stock and a "Rights Distribution Date" will occur upon the earlier of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock or (ii) ten business days following the commencement of a tender
offer or exchange offer that would result in a person's becoming an Acquiring
Person. In certain circumstances and with the concurrence of a majority of the
Company's Continuing Directors (as described below), the Rights Distribution
Date may be deferred by the Company Board. Certain acquisitions that the Company
Board, with the concurrence of a majority of the Company's Continuing Directors,
determines are inadvertent, will not result in a person's becoming an Acquiring
Person if the person promptly divests itself of sufficient Common Stock. Until
the Rights Distribution Date, (a) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (b) Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any certificate for Common Stock will also constitute the transfer
of the Rights associated with the Common Stock represented by such certificate.

Trinity, which prior to consummation of the Offering will be the Company's
sole stockholder and, immediately after consummation of the Offering, will be
the beneficial owner of approximately 83.3% of the outstanding shares of the
Company's Common Stock, will not be deemed to be an Acquiring Person as a result
of such ownership position unless and until Trinity first ceases to be the
beneficial owner of 15% or more of the outstanding shares of Common Stock and
thereafter again becomes the beneficial owner of 15% or more of the Common
Stock.

The Rights are not exercisable until the Rights Distribution Date and will
expire ten years from the date the Rights are first issued, unless earlier
redeemed or exchanged by the Company as described below.

As soon as practicable after the Rights Distribution Date, Rights
Certificates will be mailed to holders of record of Common Stock as of the close
of business on the Rights Distribution Date and, from and after the Rights
Distribution Date, the separate Rights Certificates alone will represent the
Rights. All shares of Common Stock issued prior to the Rights Distribution Date
will be issued with Rights. Shares of Common

67
<PAGE> 68

Stock issued after the Rights Distribution Date in connection with certain
employee benefit plans or upon conversion of certain securities will be issued
with Rights. Except as otherwise determined by the Company Board, no other
shares of Common Stock issued after the Rights Distribution Date will be issued
with Rights.

In the event (a "Flip-In Event") that a person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms that a majority of the Company's
independent Continuing Directors determines to be fair to and otherwise in the
best interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, in lieu of Fractional Shares of Series A Preferred Stock, a number
of shares of Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a Current Market Price (as defined in the
Rights Agreement) equal to two times the Purchase Price of the Right.
Notwithstanding the foregoing, following the occurrence of any Triggering Event
(as defined below), all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by or transferred to
any Acquiring Person (or by certain related parties) will be null and void in
the circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by the Company as set forth below.

In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer) or (ii) 50% or more of the Company's assets or earning
power is sold or transferred, each holder of a Right (except Rights that
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise of the Right, a number of shares of common stock of
the acquiring company having a Current Market Price equal to two times the
Purchase Price of the Right. Flip-In Events and Flip-Over Events are
collectively referred to as "Triggering Events."

The number of outstanding Rights associated with a share of Common Stock,
or the number of Fractional Shares of Series A Preferred Stock issuable upon
exercise of a Right and the Purchase Price, are subject to adjustment in the
event of a stock dividend on, or a subdivision, combination or reclassification
of, the Common Stock occurring prior to the Distribution Date. The Purchase
Price payable, and the number of Fractional Shares of Series A Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution in the event of
certain transactions affecting the Series A Preferred Stock.

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Series A Preferred Stock are required to be
issued and, in lieu thereof, an adjustment in cash may be made based on the
market price of the Series A Preferred Stock on the last trading date prior to
the date of exercise. Pursuant to the Rights Agreement, the Company reserves the
right to require prior to the occurrence of a Triggering Event that, upon any
exercise of Rights, a number of Rights be exercised so that only whole shares of
Series A Preferred Stock will be issued.

The term "Continuing Director" means any member of the Company Board, while
such person is a member of the Company Board, who is not an officer or employee
of the Company or any subsidiary of the Company and who is not an Acquiring
Person, or an affiliate or associate of an Acquiring Person, or a nominee or
representative of an Acquiring Person or of any such affiliate or associate, if
(i) such person was a member of the Company Board prior to the time a person
becomes an Acquiring Person or (ii) such person's nomination for election or
election to the Company Board is recommended or approved by a majority of the
then Continuing Directors.

At any time until ten days following the first date of public announcement
of the occurrence of a Flip-In Event, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, payable, at the option of
the Company, in cash, shares of Common Stock or such other consideration as the
Company Board may determine. Immediately upon the effectiveness of the action of
the Company Board ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be to receive the $.01
redemption price.

68
<PAGE> 69

At any time after the occurrence of a Flip-In Event and prior to a person's
becoming the beneficial owner of 50% or more of the shares of Common Stock then
outstanding, the Company Board (with the concurrence of a majority of the
Continuing Directors) may at its option exchange the Rights (other than Rights
owned by an Acquiring Person or an affiliate or an associate of an Acquiring
Person, which will have become void), in whole or in part, at an exchange ratio
of one share of Common Stock, and/or other equity securities deemed to have the
same value as one share of Common Stock, per Right, subject to adjustment.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Company Board as long as the Rights are
redeemable. Thereafter, the provisions of the Rights Agreement may be amended by
the Company Board (in certain circumstances, with the concurrence of the
Continuing Directors) in order to cure any ambiguity, defect or inconsistency,
to make changes that do not materially adversely affect the interests of holders
of Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Rights Agreement; provided, however, that no
amendment to lengthen the time period governing redemption shall be made at such
time as the Rights are not redeemable.

The Rights will have certain anti-takeover effects. The Rights may result
in substantial dilution to any person or group that attempts to acquire the
Company without the approval of the Company Board. As a result, the overall
effect of the Rights may be to render more difficult or to discourage any
attempt to acquire the Company even if such acquisition may be on terms
favorable to the Company's stockholders.

DELAWARE BUSINESS COMBINATION STATUTE

Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, an "interested stockholder" of a Delaware corporation shall
not engage in any business combination, including mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the date that such stockholder becomes an interested
stockholder unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
"interested stockholder," the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) on or subsequent to such date,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock which
is not owned by the interested stockholder. Except as otherwise specified in
Section 203, an interested stockholder is defined to include (x) any person that
is the owner of 15% or more of the outstanding voting stock of the corporation,
or is an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within three
years immediately prior to the date of determination and (y) the affiliates and
associates of any such person.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. The Company has not
elected to be exempt from the restrictions imposed under Section 203. However,
Trinity and its affiliates are excluded from the definition of "interested
stockholder" pursuant to the terms of Section 203. The provisions of Section 203
may encourage persons interested in acquiring the Company to negotiate in
advance with the Company Board, since the stockholder approval requirement would
be avoided if a majority of the directors then in office approves either the
business combination or the transaction which results in any such person
becoming an interested stockholder. Such provisions also may have the effect of
preventing changes in the management of the Company. It is possible that such
provisions could make it more difficult to accomplish transactions which the
Company's stockholders may otherwise deem to be in their best interests.

69
<PAGE> 70

LIABILITY OF DIRECTORS; INDEMNIFICATION

The Certificate provides that a director of the Company will not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except, if required by the DGCL as
amended from time to time, for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, which concerns unlawful payments of
dividends, stock purchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit. Neither the amendment
nor repeal of such provision will eliminate or reduce the effect of such
provision in respect of any matter occurring, or any cause of action, suit or
claim that, but for such provision, would accrue or arise prior to such
amendment or repeal. Such limitations on personal liability of directors of the
Company will not reduce or eliminate any monetary liability of directors arising
under federal securities laws.

While the Certificate provides directors with protection from awards for
monetary damages for breaches of their duty of care, it does not eliminate such
duty. Accordingly, the Certificate will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.

The Certificate provides that each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person, or a person of whom such person is the legal
representative, is or was or has agreed to become a director or officer of the
Company or is or was serving or has agreed to serve at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving or having agreed to serve as a director,
officer, employee or agent, will be indemnified and held harmless by the Company
to the fullest extent authorized by the DGCL, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than said law permitted the Company to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, amounts paid or to be paid in settlement and excise taxes or penalties
arising under the Employee Retirement Income Security Act of 1974, as in effect
from time to time) reasonably incurred or suffered by such person in connection
therewith. Such right to indemnification includes the right to have the Company
pay the expenses incurred in defending any such proceeding in advance of its
final disposition, subject to the provisions of the DGCL. Such rights are not
exclusive of any other right which any person may have or thereafter acquire
under any statute, provision of the Certificate, By-Law, agreement, vote of
stockholders or disinterested directors or otherwise. No repeal or modification
of such provision will in any way diminish or adversely affect the rights of any
director, officer, employee or agent of the Company thereunder in respect of any
occurrence or matter arising prior to any such repeal or modification. The
Certificate also specifically authorizes the Company to maintain insurance and
to grant similar indemnification rights to employees or agents of the Company.

TRANSFER AGENT AND REGISTRAR

The Bank of New York will be the transfer agent and registrar for the
Common Stock.

70
<PAGE> 71

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of the Offering, the Company will have 18,000,000
shares of Common Stock outstanding (18,450,000 shares if the Over-Allotment
Option is exercised in full). Of these shares, the 3,000,000 shares of Common
Stock sold in the Offering will be freely tradeable in the public market without
restriction or limitation under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by an "affiliate" (as defined
under the Securities Act) of the Company. The shares of Common Stock that
continue to be held by Trinity after the Offering will constitute "restricted
shares" for purposes of Rule 144 under the Securities Act, and may not be sold
by Trinity other than in compliance with the registration requirements of the
Securities Act or pursuant to an available exemption therefrom. Trinity has
agreed that, except in connection with the proposed Separation, it will not
offer or sell any shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. See "Underwriting."

Trinity has announced its intention to divest itself through the proposed
Separation of its ownership interest in the Company remaining after the
Offering. In general, if Trinity completes the proposed Separation by any means
other than a private sale to a third party, all of the 15,000,000 shares of
Common Stock currently held by Trinity will be freely tradeable in the public
market without restriction or limitation under the Securities Act, except for
any shares distributed to an "affiliate" of the Company.

Shares of Common Stock that are purchased by "affiliates" of the Company in
the Offering or upon exercise of Options or Converted Options or received by
them in the proposed Separation may not be sold other than in compliance with
the registration requirements of the Securities Act or pursuant to an available
exemption therefrom, including the exemption provided by Rule 144.

In general, under Rule 144 as currently in effect, an "affiliate" of the
Company may sell within any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of such class or
(ii) the average weekly trading volume on the AMEX during the four calendar
weeks preceding the date on which a notice of sale is filed with the Securities
and Exchange Commission (the "Commission") with respect to the proposed sale.
Sales under Rule 144 are subject to certain restrictions relating to the manner
of sale, notice and the availability of current public information about the
issuer. A person who has not been an affiliate of the Company at any time during
the 90 days preceding a sale, and who has beneficially owned shares for at least
three years (including the holding period of any prior owner other than an
affiliate), would be entitled to sell such shares without regard to the volume
limitations, manner of sale provisions, notice or other requirements of Rule
144.

The Company has reserved an aggregate of 1,400,000 shares of Common Stock
for issuance pursuant to the 1996 Stock Option and Incentive Plan. Following the
Offering, such shares will be registered under the Securities Act through the
filing of a registration statement on Form S-8. Accordingly, shares of Common
Stock issued pursuant to the 1996 Stock Option and Incentive Plan will be
available for sale in the public market without restriction or limitation under
the Securities Act, except for any shares acquired by an "affiliate" of the
Company.

The Company is unable to predict whether substantial amounts of Common
Stock will be sold in the open market in anticipation of, or following, the
proposed Separation. Any sales of substantial amounts of Common Stock in the
public market, or the perception that such sales might occur, whether as a
result of the proposed Separation or otherwise, could have a material adverse
effect on the market price of the Common Stock.

71
<PAGE> 72

UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement (the
"Underwriting Agreement"), each of the underwriters named below, for whom
Donaldson, Lufkin & Jenrette Securities Corporation, Dean Witter Reynolds Inc.,
Howard, Weil, Labouisse, Friedrichs Incorporated and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company the
respective number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITERS COMMON STOCK
----------------------------------------------------------------------- ------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.................... 605,000
Dean Witter Reynolds Inc. ............................................. 605,000
Howard, Weil, Labouisse, Friedrichs Incorporated....................... 605,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................. 605,000
ABN Amro Securities (USA) Inc. ....................................... 40,000
Bear, Stearns & Co. Inc. .............................................. 40,000
Goldman, Sachs & Co. .................................................. 40,000
PaineWebber Incorporated............................................... 40,000
Prudential Securities Incorporated..................................... 40,000
Salomon Brothers Inc................................................... 40,000
Schroder Wertheim & Co. Incorporated................................... 40,000
Smith Barney Inc. ..................................................... 40,000
Hanifen, Imhoff Inc. .................................................. 40,000
Principal Financial Securities, Inc. .................................. 40,000
Rauscher Pierce Refsnes, Inc. ......................................... 40,000
Johnson Rice & Company L.L.C. ......................................... 20,000
Petrie Parkman & Co. .................................................. 20,000
Sanders Morris Mundy................................................... 20,000
Muriel Siebert & Co., Inc. ............................................ 20,000
Simmons & Company International........................................ 20,000
Southcoast Capital Corporation......................................... 20,000
Williams MacKay Jordan & Co., Inc. .................................... 20,000
----------
Total........................................................ 3,000,000
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock are
subject to the satisfaction of certain conditions, including consummation of the
Consolidation Transactions and the Offering Related Transactions, the execution
and delivery by the Company and Trinity of the Separation and Related
Agreements, the delivery of certain legal opinions and the accuracy of certain
representations and warranties made by the Company and Trinity. The nature of
the Underwriters' obligations under the Underwriting Agreement is such that they
are obligated to purchase all of the shares of Common Stock offered (other than
the shares subject to the Over-Allotment Option described below) if any are
purchased.

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the Price to the
Public set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $0.45 per share and that the
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $0.10 per share on sales to other dealers. After the initial public offering
of the shares of Common Stock, the offering price and the concessions and
discounts to dealers may be changed by the Representatives.

Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters the Over-Allotment Option, exercisable for 30 days from the date of
this Prospectus, to purchase up to an aggregate of 450,000 additional shares of
Common Stock from the Company at the Price to the Public set forth on the

72
<PAGE> 73

cover page hereof, less underwriting discounts and commissions. The Underwriters
may exercise such option solely for the purpose of covering over-allotments, if
any, made in connection with the sale of the shares of Common Stock in the
Offering. To the extent that such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of additional shares as the number of shares set forth opposite
the name of such Underwriter in the above table bears to 3,000,000 shares, on
the same terms as those on which the 3,000,000 shares are being sold.

The Company and Trinity have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to losses in respect thereof.

The Company and Trinity have agreed that they will not offer or sell any
shares of Common Stock for a period of 180 days from the date of this Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation (except, in the case of the Company, for the grant of Awards under
the 1996 Stock Option and Incentive Plan or issuances of stock upon exercise of
or otherwise pursuant to such Awards and upon exercise of Converted Options,
and, in the case of Trinity, in connection with the proposed Separation).

The Representatives have advised the Company that the Underwriters will not
confirm sales of shares of Common Stock to accounts over which they exercise
discretionary authority.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the shares of Common Stock has been
determined by negotiations between the Company and the Representatives. Among
the principal factors considered in determining the initial public offering
price were prevailing economic prospects, the sales, earnings and financial and
operating performance of the Company in recent periods, the estimates of future
business potential and earnings prospects, market valuations of companies in
related businesses and the history and prospects for the industries in which the
Company competes. Additionally, consideration was given to the general condition
of the securities markets, the market for new issues of securities and the
demand for securities of comparable companies at the time the Offering is made.
There can be no assurance that an active trading market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to the Offering at or above the initial public offering price.

The shares of Common Stock have been approved for listing on the AMEX under
the symbol "HLX", subject to official notification of issuance.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Baker & Botts, L.L.P., Dallas,
Texas. Certain legal matters in connection with the sale of the Common Stock
offered hereby will be passed upon for the Underwriters by Thompson & Knight, A
Professional Corporation, Dallas, Texas.

EXPERTS

The consolidated financial statements of the Company as of March 31, 1995
and 1996 and for the fiscal years ended March 31, 1994, 1995 and 1996, included
in this Prospectus and the Registration Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and are so included in
reliance on such report given upon the authority of such firm as experts in
auditing and accounting.

73
<PAGE> 74

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered by this Prospectus. This Prospectus constitutes a
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted from
this Prospectus as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus regarding the contents of any contract,
agreement or other document are not necessarily complete. The material
provisions of each contract, agreement or other document filed with the
Commission as an exhibit to the Registration Statement are described in the
Prospectus; however, reference is made to the exhibit for further information
regarding the contents thereof, and each such statement is qualified in its
entirety by such reference. For further information regarding the Company and
the shares of Common Stock offered hereby, reference is made to the Registration
Statement, including the exhibits thereto.

The Registration Statement, including the exhibits thereto, are available
for inspection at, and copies of such materials may be obtained at prescribed
rates from, the public reference facilities maintained by the Commission at its
principal offices located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its regional offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601 and
7 World Trade Center, New York, New York 10048.

The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934. As a result of the Offering, the Company
will become subject to the informational requirements of such act. The Company
will fulfill its obligations with respect to such requirements by filing
periodic reports and other information with the Commission. In addition, the
Company intends to furnish to its stockholders annual reports containing
consolidated financial statements examined by an independent public accounting
firm.

74
<PAGE> 75

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Income and Stockholder's Net Investment.................... F-4
Consolidated Statements of Cash Flows................................................. F-5
Notes to Consolidated Financial Statements............................................ F-6
</TABLE>

F-1
<PAGE> 76

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholder
Halter Marine Group, Inc.

We have audited the accompanying consolidated balance sheets of Halter
Marine Group, Inc. and subsidiaries as of March 31, 1995 and 1996, and the
related consolidated statements of income and stockholder's net investment and
cash flows for each of the three years in the period ended March 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Halter Marine
Group, Inc. and subsidiaries as of March 31, 1995 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Dallas, Texas
September 20, 1996

F-2
<PAGE> 77

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31
--------------------- JUNE 30,
1995 1996 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash.................................................... $ 524 $ 672 $ 657
Contract receivables.................................... 7,287 8,340 8,674
Costs and estimated earnings in excess of billings on
uncompleted contracts................................ 71,025 67,905 85,327
Inventories............................................. 6,518 6,063 6,066
Deferred tax benefit.................................... -- 2,865 1,300
Other current assets.................................... 494 387 289
-------- -------- --------
Total current assets................................. 85,848 86,232 102,313
Property, plant and equipment, net........................ 38,138 54,857 55,185
Other assets.............................................. 285 285 285
-------- -------- --------
$124,271 $141,374 $157,783
======== ======== ========
LIABILITIES AND STOCKHOLDER'S NET INVESTMENT
Current Liabilities:
Accounts payable and accrued liabilities................ $ 3,379 $ 3,799 $ 4,440
Due to an affiliate..................................... 25,426 17,519 29,927
Income taxes payable to an affiliate.................... 9,836 15,785 16,438
Billings in excess of cost and estimated earnings on
uncompleted contracts................................ 1,534 12,528 11,893
Deferred income taxes................................... 4,818 -- --
-------- -------- --------
Total current liabilities............................ 44,993 49,631 62,698
Long-term note to an affiliate............................ 25,000 25,000 25,000
Stockholder's net investment.............................. 54,278 66,743 70,085
-------- -------- --------
$124,271 $141,374 $157,783
======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-3
<PAGE> 78

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND STOCKHOLDER'S NET INVESTMENT
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31 JUNE 30
---------------------------------- ---------------------
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Contract revenue earned............. $275,310 $250,586 $254,294 $ 72,008 $ 85,981
Cost of revenue earned.............. 228,833 207,398 214,559 60,876 74,695
-------- -------- -------- -------- --------
Gross profit........................ 46,477 43,188 39,735 11,132 11,286
Selling, general and administrative
expenses.......................... 12,874 13,471 15,911 4,077 4,832
-------- -------- -------- -------- --------
Operating income.................... 33,603 29,717 23,824 7,055 6,454
Other (income) expenses:
Interest income................... (246) -- -- -- --
Interest expense.................. 2,148 3,844 3,268 1,003 896
Other, net........................ (33) (5) (11) (2) (3)
-------- -------- -------- -------- --------
1,869 3,839 3,257 1,001 893
-------- -------- -------- -------- --------
Income before income taxes.......... 31,734 25,878 20,567 6,054 5,561
Provision (benefit) for income
taxes:
Current........................... 13,057 9,836 15,785 4,644 654
Deferred.......................... (830) 334 (7,683) (2,259) 1,565
-------- -------- -------- -------- --------
12,227 10,170 8,102 2,385 2,219
-------- -------- -------- -------- --------
Net income.......................... 19,507 15,708 12,465 3,669 3,342
Beginning stockholder's net
investment........................ 19,063 38,570 54,278 54,278 66,743
-------- -------- -------- -------- --------
Ending stockholder's net
investment........................ $ 38,570 $ 54,278 $ 66,743 $ 57,947 $ 70,085
======== ======== ======== ======== ========
Pro forma net income per share...... $ 0.70 $ 0.19
======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-4
<PAGE> 79

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31 JUNE 30
---------------------------------- ---------------------
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating
activities:
Net income........................ $ 19,507 $ 15,708 $ 12,465 $ 3,669 $ 3,342
Adjustments to reconcile net
income to net cash provided
(required) by operating
activities:
Depreciation................... 4,630 5,414 6,744 1,373 1,846
Deferred provision (benefit)
for income taxes............. (830) 334 (7,683) (2,259) 1,565
Net equipment transfers to/from
affiliates................... 374 (1,120) (7,776) -- (132)
Changes in assets and
liabilities:
(Increase) decrease in
contract receivables...... (21,676) 19,954 (1,053) 951 (334)
(Increase) decrease in costs
and estimated earnings in
excess of billings on
uncompleted contracts..... (10,655) (12,825) 3,120 9,618 (17,422)
(Increase) decrease in
inventories............... (1,089) (3,823) 455 (4,093) (3)
(Increase) decrease in other
current assets............ 1,743 (341) 107 92 98
Decrease in other assets..... 1,253 -- -- -- --
Increase (decrease) in
accounts payable and
accrued liabilities....... (1,574) 1,132 420 8,168 641
Increase (decrease) in income
taxes payable............. 2,713 (3,221) 5,949 4,644 653
Increase (decrease) in
billings in excess of cost
and estimated earnings on
uncompleted contracts..... (22,571) (6,409) 10,994 (153) (635)
-------- -------- -------- -------- --------
Total adjustments....... (47,682) (905) 11,277 18,341 (13,723)
-------- -------- -------- -------- --------
Net cash provided (required) by
operating activities......... (28,175) 14,803 23,742 22,010 (10,381)
Cash flows from investing
activities:
Capital expenditures.............. (3,529) (6,405) (5,568) (404) (2,623)
Disposals of equipment............ 89 68 -- -- 581
Payment for purchase of
acquisitions................... -- (4,106) (10,119) -- --
-------- -------- -------- -------- --------
Net cash required by investing
activities................... (3,440) (10,443) (15,687) (404) (2,042)
Cash flows from financing
activities:
Net borrowings from (repayments
to) parent..................... 31,300 (4,057) (7,907) (21,581) 12,408
-------- -------- -------- -------- --------
Net cash provided (required) by
financing activities......... 31,300 (4,057) (7,907) (21,581) 12,408
-------- -------- -------- -------- --------
Net increase (decrease) in cash..... (315) 303 148 25 (15)
Cash at beginning of period......... 536 221 524 524 672
-------- -------- -------- -------- --------
Cash at end of period............... $ 221 $ 524 $ 672 $ 549 $ 657
======== ======== ======== ======== ========
</TABLE>

See accompanying notes to consolidated financial statements

F-5
<PAGE> 80

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

1. GENERAL INFORMATION

Halter Marine Group, Inc. (the "Company") is a Delaware corporation
incorporated on June 24, 1996. Prior to or concurrently with the initial public
offering (the "Offering") of shares of common stock of the Company (the "Common
Stock"), the Company will consummate the Consolidation Transactions. These
transactions include (i) the transfer to the Company of the stock of each
subsidiary of Trinity Industries, Inc. ("Trinity") that has assets and
liabilities through which Trinity has historically conducted its businesses of
construction, repair, and conversion of primarily ocean-going vessels for the
governmental and commercial markets and (ii) the transfer to subsidiaries of the
Company of certain assets and liabilities of Trinity related to the businesses
of the Company and (iii) the assumption by the Company of the indebtedness of
Trinity associated with the Company Businesses (which totalled $25.0 million as
of June 30, 1996).

Trinity has announced that it currently contemplates divesting itself of
its remaining ownership in the Company (the "Separation"). The form and other
terms of the proposed Separation are subject to the approval of the Board of
Directors of Trinity (the "Trinity Board"). The proposed Separation could be
accomplished by means of either a non-taxable or taxable transaction. The
proposed Separation will be subject to various conditions, including the absence
of any events or developments that cause the Trinity Board to determine, in its
sole discretion, that the proposed Separation is not in the best interests of
Trinity or its stockholders. If the proposed Separation is to be accomplished by
means of a non-taxable transaction (which could take the form of either an
exchange offer or a distribution to Trinity's stockholders), such transaction
also will be subject to the receipt of a favorable private letter ruling from
the Internal Revenue Service (the "IRS") to the effect that the proposed
Separation will qualify as a tax-free transaction for federal income tax
purposes under Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code").

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The Consolidated Financial Statements include the accounts of the Company
and its wholly owned subsidiaries, and have been prepared using Trinity's
historical basis in the assets and liabilities of the Company. All significant
intercompany accounts and transactions have been eliminated. The consolidated
financial statements reflect the results of operations, financial condition and
cash flows of the Company as a component of Trinity and may not be indicative of
actual results of operations and financial position of the Company under other
ownership. Management believes that the consolidated income statements include a
reasonable allocation of the administrative costs incurred by Trinity on the
Company's behalf. These costs include payroll services, benefits administration,
and cash management. The allocations of such costs to the Company were
approximately $1.4 million, $1.7 million, and $1.8 million in 1994, 1995 and
1996, respectively, and approximately $0.5 million and $0.6 million for the
three months ended June 30, 1995 and 1996, respectively.

Additionally, the Company provides administrative services for Trinity's
Inland Marine division in the areas of accounting, human resources, marketing
and public relations. The allocation of such costs to the Inland Marine division
were approximately $2.0 million, $2.0 million and $2.6 million in 1994, 1995 and
1996, respectively, and approximately $0.6 million and $0.8 million for the
three months ended June 30, 1995 and 1996, respectively.

The interim consolidated financial statements, marked unaudited, have been
prepared from the books and records of the Company. In the opinion of the
Company, all adjustments, consisting only of normal and recurring adjustments
necessary to a fair presentation of the financial position of the Company as of
June 30, 1996, the results of operations for the three month periods ended June
30, 1995 and 1996, and cash flows for

F-6
<PAGE> 81

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

the three month periods ended June 30, 1995 and 1996, in conformity with
generally accepted accounting principles, have been made.

(b) Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

The Company uses the percentage of completion method to account for its
contracts in process. Under this method, revenues of construction contracts are
measured by the percentage of labor hours incurred to date to estimated total
labor hours for each contract. Management considers expended labor hours to be
the best available measure of progress on these contracts. Changes in estimated
profitability may result in revisions to income and costs and are recognized in
the period in which the revisions are determined. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are
determined. Other changes, including those arising from contract penalty
provisions, and final contract settlements are recognized in the period in which
the revisions are determined.

Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Selling, general, and
administrative costs are charged to expense as incurred.

The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.

For income tax purposes, the Company reports contract profits as earned
under the percentage of completion capitalized cost method as originally
prescribed by the Tax Reform Act of 1986 and subsequently modified by the
Revenue Act of 1987 and the Technical and Miscellaneous Revenue Act of 1988.

(d) Inventories

Inventories are valued at the lower of cost or market. Inventory cost is
determined principally on the specific identification method. Market is
replacement cost or net realizable value.

(e) Depreciation

Additions to property, plant and equipment are recorded at cost.
Depreciation and amortization are generally computed by the straight-line method
on the estimated useful lives of the assets which range from 3 to 30 years for
buildings and improvements and 2 to 28 years for machinery and equipment. The
costs of ordinary maintenance and repair are charged to expense, while renewals
and major replacements are capitalized.

(f) New Accounting Standards

In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of," ("SFAS No. 121") was issued. Adoption

F-7
<PAGE> 82

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

is required for the Company beginning in fiscal 1997. The Company does not
believe that the adoption of this Statement will have a significant impact on
the Company.

Effective April 1, 1996 the Company adopted SFAS No. 121 and there was no
impact.

In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. The disclosure
requirements of this Statement are effective for the Company's financial
statements beginning in fiscal 1997. The Company intends to continue to apply
the accounting provisions of APB Opinion 25, "Accounting for Stock Issued to
Employees." With the Company's plan of adoption, the impact will be limited to
additional footnote disclosure.

(g) Allocation of Expenses

Indirect manufacturing costs are allocated on the basis of labor hours
incurred on the respective contracts.

(h) Pro Forma Net Income Per Share

Pro forma net income for the year ended March 31, 1996 and the three months
ended June 30, 1996 is $12.7 million and $3.4 million, respectively, and
reflects a reduction in interest expense, net of tax, resulting from the use of
the net proceeds of the Offering to retire outstanding debt at the beginning of
the period.

3. BUSINESS ACQUISITIONS

The Company made certain business acquisitions during fiscal 1995 and 1996.
All have been accounted for by the purchase method. The operations of these
companies have been included in the consolidated financial statements from the
effective dates of the acquisitions.

In fiscal 1995, the Company acquired 100 percent of the common stock of
Gulf Coast Fabrication, Inc., a company engaged in the manufacture and repair of
marine vessels. The purchase price of approximately $4.1 million was allocated
entirely to assets acquired.

In fiscal 1996, the Company acquired the assets of American Marine
Corporation (now known as Gulf Repair) and CBI NA-Con, Inc. (now known as
Pascagoula). The assets of these businesses are utilized in the manufacture and
repair of marine products. The aggregate purchase price of approximately $10.1
million was allocated entirely to the assets acquired. Contribution of these
acquisitions to revenues and operating profit during fiscal 1996 is not
material.

F-8
<PAGE> 83

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

<TABLE>
<CAPTION>
MARCH 31
--------------------- JUNE 30
1995 1996 1996
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Costs incurred on uncompleted contracts............ $364,426 $479,811 $519,510
Estimated earnings................................. 82,275 110,558 119,841
-------- -------- --------
446,701 590,369 639,351
Less billings to date.............................. 377,210 534,992 565,917
-------- -------- --------
$ 69,491 $ 55,377 $ 73,434
======== ======== ========
Included in accompanying balance sheet under the following
captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts............. $ 71,025 $ 67,905 $ 85,327
Billings in excess of costs and estimated
earnings on uncompleted contracts............. 1,534 12,528 11,893
-------- -------- --------
$ 69,491 $ 55,377 $ 73,434
======== ======== ========
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows:

<TABLE>
<CAPTION>
MARCH 31
-------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................. $ 3,213 $ 5,686
Buildings and improvements....................................... 17,042 23,660
Machinery and equipment.......................................... 42,891 58,874
Construction in progress......................................... 5,881 3,688
------- -------
69,027 91,908
Less accumulated depreciation.................................... 30,889 37,051
------- -------
Property, plant and equipment, net............................... $38,138 $54,857
======= =======
</TABLE>

6. RELATED PARTY TRANSACTIONS

John Dane III, Chief Executive Officer and a director of the Company,
acquired 25% of the stock of United States Marine, Inc. ("USMI") in June 1996.
Mr. Dane has the option to acquire up to an additional 50% of the stock of USMI
over the next five years. USMI performs services for the Company as a
subcontractor with respect to the production of high speed composite vessels for
the U.S. Navy. During 1994, 1995 and 1996, the Company paid USMI fees of
approximately $10.6 million, $3.9 million and $5.5 million for subcontractor
services. During the three months ended June 30, 1996, the Company paid USMI
fees of approximately $2.2 million.

The aggregate amount of intercompany indebtedness owed by the Company to
Trinity at March 31, 1996 was $42.5 million (excluding income taxes payable) of
which $25 million represents a long-term note due September 30, 1997 at an
interest rate of prime minus 1% (7.25% at March 31, 1996) and approximately
$17.5 million, due upon demand, which represents the net current liability from
Trinity's cash management practices of centralizing payment of accounts payable
and accrued liabilities, and centralizing cash receipts. Trinity charges the
Company interest on the net current liability at prime minus 1%. Subsequent to
the

F-9
<PAGE> 84

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Offering it is anticipated that the Company will repay the net current liability
through cash generated by operations in the ordinary course of business, and in
any event no later than 60 days after the consummation of the Offering, as it
replaces such liability with its own direct trade payables and similar
obligations.

In connection with the Offering, the Company and Trinity will enter into
various agreements for the purpose of establishing the terms governing their
ongoing arrangements and relationships, including a separation agreement, an
income tax allocation agreement and a trademark license agreement. In addition,
the Company will build inland hopper barges under a limited arrangement with
Trinity.

7. STOCK OPTIONS

Trinity has a Stock Option and Incentive Plan (the "Trinity Plan") which
provides that incentive or non-qualified stock options for a maximum of
1,500,000 shares of common stock may be granted to directors, officers and key
employees. Incentive options may be granted over a period not to exceed ten
years at a price not less than fair market value on the date of grant. The
Trinity Plan provides that to the extent options granted are forfeited, expire
or canceled, they may again be granted pursuant to the provisions of the Trinity
Plan. The Trinity Plan provides that if shares already owned by the optionee are
surrendered as full or partial payment of the exercise price of an option, a new
option (the "Reload Option") may be granted equal to the number of shares
surrendered. The exercise price of Reload Options shall be the fair market value
of Trinity common stock on the effective date of the grant.

As of March 31, 1996, there were 86,415 incentive and 162,355 non-incentive
Trinity stock options outstanding to employees of the Company with a total
exercise value of $6,221,948 at exercise prices ranging from $16.00 to $38.38
per share of which 105,392 options were exercisable.

If the proposed Separation is consummated, the Company expects to assume
such Trinity stock options ("Converted Options") held by employees of the
Company. The Converted Options would provide for the purchase of a number of
shares of Common Stock equal to the number of shares of Trinity stock multiplied
by the Conversion Ratio, as defined. Furthermore, the per share exercise price
of each Converted Option would equal the per share exercise price of the
applicable Trinity option as of the date of the Separation divided by the
Conversion Ratio. No compensation expense is expected to result from assumption
of the Converted Options. However, if the Separation is accomplished by means
other than a distribution to Trinity stockholders, compensation expense may be
recorded based on the excess of the then current market price of Trinity stock
over the exercise price of the Trinity stock options. Such compensation expense
at June 30, 1996 would have been $1,963,000.

Pending the proposed Separation, Trinity stock options held by employees of
the Company will remain outstanding in accordance with the terms of the Trinity
Plan. Upon the exercise of a Trinity stock option by an employee of the Company
at any time prior to the proposed Separation, the Company will pay to Trinity an
amount in cash equal to the excess, if any, of (i) the Market Value, as defined,
of the purchased shares on the date of exercise of such option over (ii) the
exercise price paid for such shares.

The Company will establish the 1996 Stock Option and Incentive Plan (the
"1996 Plan") which will provide for awards to employees and directors in the
form of grants of stock options, stock appreciation rights ("SARs"), restricted
or non-restricted stock or units denominated in stock ("Stock Awards"),
collectively

F-10
<PAGE> 85

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

"Awards". The 1996 Plan will provide that shares of Common Stock which are the
subject of Awards granted under the 1996 Plan that are forfeited or terminated,
expire unexercised, are settled in cash in lieu of Common Stock or in a manner
such that all or some of the shares covered thereby are not issued or are
exchanged for Awards that do not involve Common Stock will again immediately
become available for Awards under the 1996 Plan.

8. EMPLOYEE BENEFIT PLANS

The Company's employees are included in pension plans sponsored by Trinity
which provide income and death benefits for eligible employees. Trinity's policy
is to fund retirement costs accrued to the extent such amounts are deductible
for income tax purposes. Plan assets include cash, short-term debt securities,
and other investments. Benefits are based on years of credited service and
compensation.

The Company's share of net periodic pension expense for fiscal 1996
included the following components:

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1996
--------------
(IN THOUSANDS)
<S> <C>
Service cost-benefits earned during the period....................... $ 598
Interest cost on projected benefit obligation........................ 386
Actual return on assets.............................................. (1,112)
Net amortization and deferral........................................ 699
Accrual of profit sharing contribution............................... 614
--------
Net periodic pension expense......................................... $ 1,185
========
</TABLE>

The Company's share of net periodic pension expense for 1994 and 1995 was
approximately $875 and $1,101, respectively. Included in these amounts is the
accrual of profit sharing contribution.

Amounts recognized in the Company's consolidated balance sheet and included
in due to an affiliate follow:

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
(IN THOUSANDS)
<S> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation............................................ $3,484
======
Accumulated benefit obligation....................................... $4,452
======
Projected benefit obligation........................................... $6,306
Plan assets at fair value.............................................. 5,931
------
Projected benefit obligation in excess of plan assets.................. (375)
Unrecognized net asset at April 1, 1985................................ (75)
Unrecognized net loss.................................................. 1,741
------
Prepaid pension expense................................................ $1,291
======
</TABLE>

Assumptions used for the valuation of the projected benefit obligation for
1996 were a discount rate of 7.75%, an increase in compensation levels of 4.75%
and an expected long-term rate of return on assets of 9.0%.

It is contemplated that, upon consummation of the Offering, a separate
pension plan will be established for the Company's employees and the assets
attributable to benefits accrued by employees of the Company under the Trinity
pension plans will be transferred to a separate trust.

F-11
<PAGE> 86

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Trinity has a contributory profit sharing plan in which employees of the
Company may participate. Under the plan, eligible employees are allowed to make
voluntary pre-tax contributions. The contribution to this plan, as defined, is
based on consolidated earnings and dividends of Trinity. It is contemplated that
upon consummation of the Offering, a separate contributory profit sharing plan
will be established for the Company's employees and the assets attributable to
benefits accrued by employees of the Company under the Trinity contributory
profit sharing plan will be transferred to a separate trust.

9. INCOME TAXES

Effective April 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This Statement
requires a change from the deferred to the liability method of computing income
taxes. The cumulative effect of applying FAS 109 at the date of adoption was
insignificant.

The entities comprising the Company are included in the consolidated
federal income tax return of Trinity. Trinity has charged an amount equal to the
income tax payments that the Company would have been obligated to pay if it had
filed a separate tax return. At the time of the consummation of the Offering,
the Company and Trinity will enter into a Tax Allocation Agreement pursuant to
which the Company and Trinity will agree upon the allocation of certain tax
liabilities and related matters. Under the Tax Allocation Agreement the balance
reflected as income tax payable to Trinity will be paid out of the net proceeds
of the Offering.

The significant components of the provision (benefit) for income taxes
follow:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------
1994 1995 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal............................................... $11,285 $ 8,174 $13,475
State................................................. 1,772 1,662 2,310
------- ------- -------
13,057 9,836 15,785
Deferred
Federal............................................... (830) 334 (6,692)
State................................................. -- -- (991)
------- ------- -------
(830) 334 (7,683)
------- ------- -------
Total......................................... $12,227 $10,170 $ 8,102
======= ======= =======
</TABLE>

F-12
<PAGE> 87

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Deferred income tax was provided in the financial statements for temporary
differences between financial and taxable income. The components of deferred
liabilities and assets follow:

<TABLE>
<CAPTION>
MARCH 31
-------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Excess of tax depreciation over financial statement
depreciation................................................ $(3,221) $(2,771)
Profits on long-term contracts recorded on the percentage of
completion method for financial purposes and related
items....................................................... (984) --
Pensions and other benefits.................................... (579) (711)
------- -------
Total deferred tax liabilities......................... (4,784) (3,482)
------- -------
Deferred tax assets:
Profits on long-term contracts recorded on the percentage of
completion method for financial purposes and related
items....................................................... -- 5,406
State taxes.................................................... -- 991
Other.......................................................... (34) (50)
------- -------
Total deferred tax assets.............................. (34) 6,347
------- -------
Net deferred tax asset (liability)............................... $(4,818) $ 2,865
======= =======
</TABLE>

The reconciliation between the effective tax rate and the statutory tax
rate is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate................................................. 35.0% 35.0% 35.0%
State taxes.................................................... 3.7 4.2 4.2
Other.......................................................... (0.2) 0.1 0.2
---- ---- ----
Effective tax rate............................................. 38.5% 39.3% 39.4%
==== ==== ====
</TABLE>

10. STOCKHOLDER RIGHTS PLAN

Prior to the consummation of the Offering, the Company will adopt a
Stockholder Rights Plan pursuant to which one right will be issued with respect
to each share of Common Stock. Each right entitles the stockholder to purchase
from the Company one one-hundredth of a share of Series A Preferred Stock at an
exercise price to be determined by the Board when the rights are issued. The
rights are not exercisable or detachable from the common stock until ten
business days after a person acquires beneficial ownership of fifteen percent or
more of the Common Stock or if a person or group commences a tender or exchange
offer upon consummation of which that person or group would beneficially own
fifteen percent or more of the common stock.

If any person becomes a beneficial owner of fifteen percent or more of the
Common Stock other than pursuant to an offer, as defined, for all shares
determined by certain directors to be fair to the stockholders and otherwise in
the best interests of both the Company and its stockholders (other than by
reason of share purchases by the Company), each right not owned by that person
or related parties enables its holder to purchase, at the right's then current
exercise price, shares of the Company's common stock having a calculated value
of twice the right's exercise price. Beneficial ownership of Common Stock by
Trinity will not trigger any such purchase rights unless Trinity first ceases to
be the beneficial owner of fifteen percent or more of the Common Stock and
thereafter again becomes the beneficial owner of fifteen percent of the Common
Stock.

F-13
<PAGE> 88

HALTER MARINE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

The rights which are subject to adjustment, may be redeemed by the Company
at a price of one cent per right at any time prior to their expiration ten years
from issuance or the point at which they become exercisable.

11. SIGNIFICANT CUSTOMERS

In fiscal 1994, contract revenue earned includes revenues from three
customers which accounted for 30.2%, 18.8%, and 14.7%, respectively, of
consolidated contract revenue earned. Also in fiscal 1994, contract revenue
earned includes revenues from foreign governments which accounted for 12.9% of
consolidated contract revenue earned.

In fiscal 1995, contract revenue earned includes revenues from two
customers which accounted for 38.8% and 10.2%, respectively, of consolidated
contract revenue earned. Also in fiscal 1995, contract revenue earned includes
revenues from foreign governments which accounted for 13.6% of consolidated
contract revenue earned.

Contract revenue earned includes revenues from one customer which accounted
for 47.3% of consolidated contract revenue earned in fiscal 1996.

12. COMMITMENTS AND CONTINGENCIES

As of July 31, 1996, Trinity has guaranteed contract performance
obligations of the Company in the aggregate amount of approximately $66.1
million and the Company has outstanding contract bid and performance bonds and
similar obligations issued by third parties with Trinity as the obligor with an
aggregate face amount of approximately $74.9 million. After the Offering, the
Company will be obligated to indemnify Trinity against any liability under its
outstanding guarantees and any liability under the bonds, letters of credit and
similar obligations under which Trinity is the obligor of the Company's contract
performance obligations. Trinity will be granted security interests in certain
assets of the Company which relate to the Company contracts from which such
obligations arise and will possess rights to complete performance of any such
contract on behalf of the Company in the event of nonperformance by the Company.
Such rights and remedies are similar to the rights possessed by surety companies
that have issued performance bonds on behalf of the Company.

13. SUPPLEMENTARY UNAUDITED QUARTERLY DATA

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1995:
Contract revenue earned................... $64,871 $49,026 $82,608 $54,081 $250,586
Gross profit.............................. 11,135 10,131 10,604 11,318 43,188
Net income................................ 4,237 3,674 3,805 3,992 15,708
Year ended March 31, 1996:
Contract revenue earned................... $72,008 $53,904 $56,625 $71,757 $254,294
Gross profit.............................. 11,132 7,943 10,848 9,812 39,735
Net income................................ 3,669 2,419 3,757 2,620 12,465
</TABLE>

F-14
<PAGE> 89

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 90

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 91
[HALTER MARINE LOGO]

[Picture of oceanographic research ship]

Halter Marine builds several types of small to medium sized vessels for the
U.S. Navy. The above 325-foot oceanographic research ship was constructed by
the Company to meet demanding performance and reliability criteria and is used
by the U.S. Navy to study and explore the oceans.

[Picture of logistical [Picture of Mark V
support vessel] patrol craft]

Halter Marine is one of the world's Halter Marine also constructs patrol
most experienced builders of vessels boats for foreign governments and
for government and military use. the U.S. Navy such as the above
The above 273-foot logistical support 82-foot Mark V high speed special
vessel was constructed by the Company operations craft for the Navy
for the U.S. Army. Seals.
<PAGE> 92
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
The Company........................... 14
Separation From Trinity............... 14
Use of Proceeds....................... 16
Dividend Policy....................... 16
Dilution.............................. 17
Capitalization........................ 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 27
Management............................ 48
Certain Transactions and Related
Arrangements........................ 59
Principal Stockholder................. 64
Description of Capital Stock.......... 64
Shares Eligible for Future Sale....... 71
Underwriting.......................... 72
Legal Matters......................... 73
Experts............................... 73
Available Information................. 74
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

---------------------

UNTIL OCTOBER 21, 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,000,000 SHARES

LOGO

COMMON STOCK

-----------------------

PROSPECTUS

-----------------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

DEAN WITTER REYNOLDS INC.

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED

MERRILL LYNCH & CO.

September 25, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------