<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1998
REGISTRATION NO. 333-62227
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN COMMERCIAL LINES LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL MARINE SERVICE LLC
LOUISIANA DOCK COMPANY LLC
WATERWAY COMMUNICATIONS SYSTEM LLC
AMERICAN COMMERCIAL TERMINALS LLC
AMERICAN COMMERCIAL TERMINALS --
MEMPHIS LLC
JEFFBOAT LLC
AMERICAN COMMERCIAL LINES
INTERNATIONAL LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
BREEN TAS LLC
BULLARD TAS LLC
SHELTON TAS LLC
LEMONT HARBOR & FLEETING SERVICES LLC
TIGER SHIPYARD LLC
WILKINSON POINT LLC
HOUSTON FLEET LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C> <C>
DELAWARE 4400 52-210660 52-2106599
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL N/A 52-2106588
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) 52-2106602 52-2106587
ORGANIZATION) N/A 52-2106595
52-2106589 52-2106594
52-2106585 52-2106586
52-2106596 52-2106582
52-2106598 52-2106593
52-2106590 52-2106584
52-2106591
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
</TABLE>
<TABLE>
<S> <C>
1701 EAST MARKET ST. MICHAEL C. HAGAN
JEFFERSONVILLE, INDIANA 47130 1701 EAST MARKET ST.
TELEPHONE: (812) 288-0100 JEFFERSONVILLE, INDIANA 47130
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE TELEPHONE: (812) 288-0100
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S (NAME, ADDRESS, INCLUDING ZIP CODE, AND
PRINCIPAL EXECUTIVE OFFICES) TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT
FOR SERVICE)
</TABLE>
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
Series B 10 1/4% Senior Notes due 2008..... $300,000,000 $1,000 $300,000,000 $88,500
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* Not Applicable.
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED OCTOBER 16, 1998
PROSPECTUS
AMERICAN COMMERCIAL LINES LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL MARINE SERVICE LLC
LOUISIANA DOCK COMPANY LLC
WATERWAY COMMUNICATIONS SYSTEM LLC
AMERICAN COMMERCIAL TERMINALS LLC
AMERICAN COMMERCIAL TERMINALS-MEMPHIS LLC
JEFFBOAT LLC
AMERICAN COMMERCIAL LINES INTERNATIONAL LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
BREEN TAS LLC
BULLARD TAS LLC
SHELTON TAS LLC
LEMONT HARBOR &
FLEETING SERVICES LLC
TIGER SHIPYARD LLC
WILKINSON POINT LLC
HOUSTON FLEET LLC
OFFER TO EXCHANGE SERIES B 10 1/4% SENIOR NOTES
[ACL LOGO] DUE 2008 FOR ANY AND ALL OUTSTANDING SERIES A
10 1/4% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
American Commercial Lines LLC ("ACL" or the "Company"), a Delaware limited
liability company and wholly-owned subsidiary of American Commercial Lines
Holdings LLC (the "Parent"), a Delaware limited liability company, ACL Capital
Corp. ("ACL Capital"), a Delaware Corporation, American Commercial Barge Line
LLC, a Delaware limited liability company, American Commercial Marine Service
LLC, a Delaware limited liability company, Louisiana Dock Company LLC, a
Delaware limited liability company, Waterway Communications System LLC, a
Delaware limited liability company, American Commercial Terminals LLC, a
Delaware limited liability company, American Commercial Terminals-Memphis LLC, a
Delaware limited liability company, Jeffboat LLC, a Delaware limited liability
company, American Commercial Lines International LLC, a Delaware limited
liability company, Orinoco TASA LLC, a Delaware limited liability company,
Orinoco TASV LLC, a Delaware limited liability company, Breen TAS LLC, a
Delaware limited liability company, Bullard TAS LLC, a Delaware limited
liability company, Shelton TAS LLC, a Delaware limited liability company, Lemont
Harbor & Fleeting Services LLC, a Delaware limited liability company, Tiger
Shipyard LLC, a Delaware limited liability company, Wilkinson Point LLC, a
Delaware limited liability company, and Houston Fleet LLC, a Delaware limited
liability company (each a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors") (ACL Capital, together with the Company, and the
Subsidiary Guarantors, the "Issuers"), hereby offer (the "Exchange Offer"), upon
the terms and conditions set forth in this Prospectus (the "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of Series B 10 1/4% Senior Notes due 2008 (the "Exchange
Notes"), which will have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
this Prospectus is a part, for each $1,000 principal amount of its outstanding
Series A 10 1/4% Senior Notes due 2008 (the "Notes"), of which $300,000,000
principal amount is outstanding. The form and terms of the Exchange Notes are
the same as the form and terms of the Notes (which they replace) except that the
Exchange Notes will bear a Series B designation and will have been registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and will not contain certain provisions relating to an increase in the
interest rate which were included in the terms of the Notes in certain
circumstances relating to the timing of the Exchange Offer. The Exchange Notes
will evidence the same debt as the Notes (which they replace) and will be issued
under and be entitled to the benefits of the Indenture dated June 23, 1998 among
the Issuers and United States Trust Company of New York (the "Indenture")
governing the Notes. See "The Exchange Offer" and "Description of the Exchange
Notes."
The Exchange Notes will be general unsecured senior obligations of the
Issuers, will rank pari passu in right of payment with all existing and future
senior indebtedness of the Issuers and will rank senior in right of payment to
all subordinated indebtedness of the Issuers. The Issuers' obligations under the
Exchange Notes will be fully, unconditionally, jointly and severally guaranteed
on a senior basis (the "Subsidiary Guarantees") by all of the Company's domestic
Subsidiaries (as defined) (other than ACL Capital, any Accounts Receivable
Subsidiary and certain Subsidiaries of the Company without substantial assets or
operations). See "Description of the Exchange Notes -- Subsidiary Guarantees."
The Exchange Notes will be effectively subordinated in right of payment to any
secured debt of the Issuers and the Subsidiary Guarantors (as defined) to the
extent of the value of the assets serving as security for such secured debt. As
of June 30, 1998, the Issuers had approximately $445.0 million in outstanding
secured indebtedness to which the Exchange Notes are effectively subordinated,
all of which is outstanding under the Senior Credit Facilities. The outstanding
secured indebtedness is net of $24.4 million of terminal revenue refunding bonds
(the "Terminal Revenue Refunding Bonds") which were defeased with funds invested
in U.S. government obligations deposited in an irrevocable trust. The Company
has approximately $90.0 million available for additional borrowings, under the
Senior Credit Facilities. The Exchange Notes will be effectively subordinated to
all liabilities of subsidiaries of the Issuers which are not Subsidiary
Guarantors, initially the Foreign Subsidiaries (as defined). As of June 30,
1998, the Foreign Subsidiaries had no outstanding indebtedness other than
inter-company indebtedness. The Indenture governing the Exchange Notes also
permits the Issuers and their subsidiaries to incur additional indebtedness
(including senior indebtedness), subject to certain limitations. See
"Description of the Senior Credit Facilities" and "Description of the Exchange
Notes."
ACL Capital is a wholly owned subsidiary of ACL that was incorporated for
the sole purpose of serving as a co-issuer of the Senior Notes in order to
accommodate the issuance of the Senior Notes by the Company. ACL Capital does
not have any operations or assets of any kind and does not have any revenues
(other than as may be incidental to its activities as co-issuer of the Senior
Notes). Prospective holders of Exchange Notes should not expect ACL Capital to
participate in servicing the interest, principal obligations or Liquidated
Damages, if any, on the Exchange Notes. See "Description of the Exchange
Notes -- Certain Covenants -- Restrictions on Activities of ACL Capital."
(Continued on next page)
------------------------------
SEE "RISK FACTORS" ON PAGE 14 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 3
(Continued from previous page)
The Issuers will accept for exchange any and all Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 1998,
unless extended by the Issuers in their sole discretion (the "Expiration Date").
Notwithstanding the foregoing, the Issuers will not extend the Expiration Date
beyond , 1998. Tenders of Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. The Notes were sold by the Issuers on June 23, 1998 to the
Initial Purchasers (as defined) in a transaction not registered under the
Securities Act in reliance upon an exemption under the Securities Act. The
Initial Purchasers subsequently placed the Notes with qualified institutional
buyers in reliance upon Rule 144A under the Securities Act and certain persons
outside the United States pursuant to Regulation S under the Securities Act that
agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Notes may not be reoffered, resold or otherwise transferred in
the United States unless registered under the Securities Act or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered hereunder in order to satisfy
the obligations of the Issuers under the Registration Rights Agreement entered
into by the Issuers in connection with the offering of the Notes. See "The
Exchange Offer."
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Securities and Exchange Commission (the "Commission") set forth in
no-action letters issued to third parties, the Issuers believe the Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "The Exchange Offer -- Resales of the Exchange Notes." Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus meeting the
requirements of the Securities Act, a participating Broker-Dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities. The Issuers have agreed that, for a period of up to
one year from the Effective Date (as defined), they will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
If any holder of Notes is an affiliate of the Issuers, is engaged in or
intends to engage in or has any arrangement or understanding with any person to
participate in the distribution of the Exchange Notes to be acquired in the
Exchange Offer, such holder (i) cannot rely on the applicable interpretations of
the Commission and (ii) must comply with the registration requirements of the
Securities Act in connection with any resale transaction.
Holders of Notes not tendered and accepted in the Exchange Offer will
continue to hold such Notes and will be entitled to all the rights and benefits
and will be subject to the limitations applicable thereto under the Indenture
and with respect to transfer under the Securities Act. The Issuers will pay all
the expenses incurred by them incident to the Exchange Offer. See "The Exchange
Offer."
<PAGE> 4
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus includes a discussion of all
material elements of the Exchange Offer Registration Statement, but does not
contain all of the information set forth therein. For further information with
respect to the Issuers and the Exchange Offer, reference is made to the Exchange
Offer Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549, at the Regional Offices of the Commission at 7 World Trade
Center, Suite 1300, New York, NY 10048 and at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, DC 20549, at prescribed rates. Additionally,
the Commission maintains a web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission, including the Issuers.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Issuers will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports and
other information with the Commission. The obligation of the Issuers to file
periodic reports and other information with the Commission will be suspended if
the Exchange Notes are held of record by fewer than 300 holders as of the
beginning of any fiscal year of the Issuers other than the fiscal year in which
the Exchange Offer Registration Statement is declared effective. The Issuers
will nevertheless be required to continue to file reports with the Commission if
the Exchange Notes are listed on a national securities exchange. In the event
the Issuers cease to be subject to the informational requirements of the
Exchange Act, the Issuers will be required under the Indenture to continue to
file with the Commission the annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, which would be required pursuant to the informational
requirements of the Exchange Act. Under the Indenture, the Issuers shall file
with the Trustee such annual, quarterly and other reports. Further, to the
extent that annual, quarterly or other financial reports are furnished by the
Issuers to their members or stockholders, as the case may be, generally they
will mail such reports to holders of Exchange Notes. The Issuers will furnish
annual and quarterly financial reports to members or stockholders, as the case
may be, of the Issuers and will mail such reports to holders of Exchange Notes
pursuant to the Indenture, thus holders of Exchange Notes will receive financial
reports every quarter. Annual reports delivered to the Trustee and the holders
of Exchange Notes will contain financial information that has been examined and
reported upon, with an opinion expressed by an independent public or certified
public accountant. The Issuers will also furnish such other reports as may be
required by law.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements under "Prospectus Summary," "Risk Factors," "The
Transactions," "Use of Proceeds," "Unaudited Pro Forma Combined Financial Data,"
"Selected Historical Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
elsewhere in this Prospectus constitute "forward-looking statements." Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as "will likely result," "are
expected to," "will continue," "anticipates," "expects," "estimates," "intends,"
"plans," "projects," and
iii
<PAGE> 5
"outlook") are not historical facts and may be forward-looking. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, levels of activity, cost
savings, performance or achievements of the Company, or industry results, to be
materially different from any future results, levels of activity, cost savings,
performance or achievements expressed or implied by such forward-looking
statements, and accordingly, such statements should be read in conjunction with
and are qualified in their entirety by reference to, such risks, uncertainties
and other factors, which are discussed throughout this Prospectus. Such factors
include, among others, the following: (i) substantial leverage and ability to
service debt; (ii) changing market trends in the barge and inland shipping
industries; (iii) general economic and business conditions including a prolonged
or substantial recession in the United States or certain international commodity
markets such as the market for grain exports; (iv) annual worldwide weather
conditions, particularly those weather conditions affecting North and South
America; (v) the ability of the Company to implement its business strategy and
maintain and enhance its competitive strengths; (vi) the ability of the Company
to obtain financing for general corporate purposes; (vii) the ability of the
Company to successfully comply with Year 2000 issues; (viii) competition; (ix)
availability of key personnel; (x) industry overcapacity; and (xi) changes in,
or the failure to comply with, government regulations. See "Risk Factors." As a
result of the foregoing and other factors, no assurance can be given as to
future results, levels of activity and achievements, and neither the Issuers nor
any other person assumes responsibility for the accuracy and completeness of
these forward-looking statements. Any forward-looking statements contained
herein speak solely as of the date on which such statements are made, and the
Issuers undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements were
made or to reflect the occurrence of unanticipated events.
------------------------
The Exchange Notes will be available initially only in book-entry form. The
Issuers expect that the Exchange Notes will be issued in the form of one or more
Global Notes. The Rule 144A Global Notes will be deposited with, or on behalf
of, DTC and registered in its name or in the name of Cede & Co., its nominee.
Beneficial interests in the Rule 144A Global Notes will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
Direct and Indirect Participants (as defined). Beneficial interests in the
Regulation S Temporary Global Notes may be held only through the Euroclear
System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel"). Upon delivery of
certification that the beneficial owners thereof are not U.S. Persons or that
such beneficial owners acquired such Exchange Notes in an offshore transaction
that did not require registration under the Securities Act, a beneficial
interest in the Regulation S Temporary Global Notes may be exchanged for an
interest in the Regulation S Permanent Global Notes. The Regulation S Permanent
Global Notes are expected to be deposited with the Trustee (as defined) as
custodian for DTC, and beneficial interests therein may be held through
Euroclear, Cedel Bank or any other Participant. After the initial issuance of
the Global Notes, Exchange Notes will be issued in registered form in minimum
denominations of $1,000 and integral multiples thereof on the terms set forth in
the Indenture.
------------------------
INDUSTRY DATA
The industry data presented herein are based upon estimates by management
of the Company, utilizing Barge Fleet Profile, Eleventh Edition (March 1998),
compiled by Jack Lambert and Sparks Companies, Inc. While management believes
that such estimates are reasonable and reliable, in certain cases, such
estimates cannot be verified by information available from independent sources.
Accordingly, no assurance can be given that such market share data are accurate
in all material respects. In addition, industry data presented herein are based
upon industry sources which the Company believes are reliable. However, no
assurance can be given that such industry data are accurate in all material
respects.
iv
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, included elsewhere in this Prospectus. Unless
otherwise noted or the context otherwise requires, "ACL" or the "Company" refers
to American Commercial Lines LLC and its wholly owned subsidiaries after giving
effect to the Transactions (as defined), except that when referring to prior
periods, "ACL" or the "Company" refers to American Commercial Lines, Inc., the
predecessor to the Company, and its wholly owned subsidiaries.
THE COMPANY
ACL is an integrated marine transportation and service company, providing
barge transportation services. The principal cargoes carried are grain, coal,
steel and other bulk commodities and liquids. The Company supports its barging
operations by providing towboat and barge design and construction, terminal
services and ship-to-shore voice and data telecommunications services to the
Company and third parties. The Company is the leading provider of river barge
transportation throughout the inland United States and Gulf Intracoastal
Waterway Systems, which include the Mississippi, Illinois, Ohio, Tennessee and
the Missouri Rivers and their tributaries and the Intracoastal canals that
parallel the Gulf Coast (collectively, the "Inland Waterways"). In addition,
since expanding its barge transportation operations to South America in 1993,
the Company has become the leading provider of barge transportation services on
the Orinoco River in Venezuela and the Parana/Paraguay River system serving
Argentina, Brazil, Paraguay, Uruguay and Bolivia. The Company believes that its
leadership position provides it with significant competitive advantages in terms
of its ability to generate revenue, manage costs and expand its operations. For
the twelve months ended June 26, 1998, pro forma for the Transactions, the
Company generated operating revenue, EBITDA and adjusted EBITDA of $732.3
million, $137.2 million and $146.2 million, respectively, and generated
operating income of $88.9 million and net earnings of $13.7 million. For the six
months ended June 26, 1998, pro forma for the Transactions, the Company
generated revenue, EBITDA and adjusted EBITDA of $325.1 million, $51.3 million
and $55.8 million, respectively, and generated operating income of $25.5 million
and a net loss of $10.5 million. The Company had long term debt of $769.4
million and member's deficit of $143.3 million. Pro forma earnings for the six
and twelve months ended June 26, 1998 include interest expense of $35.5 million
and $71.0 million, respectively.
The Company, through its Jeffboat LLC ("Jeffboat") subsidiary, designs and
manufactures towboats and barges for the Company and third-party customers.
Through its American Commercial Terminals LLC ("ACT") subsidiary, which operates
16 river terminal sites along the Inland Waterways, the Company supports its
barging operations with transfer and warehousing capabilities for steel, bulk,
liquid and other general commodity products moving between barge, truck and
rail. Through its Louisiana Dock Company LLC ("LDC") subsidiary, the Company
operates 22 facilities throughout the Inland Waterways that provide fleeting,
shifting, cleaning and repair services for both towboats and barges, primarily
to the Company as well as to third-party customers. The Company, through its
Waterway Communications System LLC ("Watercom") subsidiary, is the premier
provider of automated ship-to-shore voice and data telecommunications services
throughout the Inland Waterways.
ACL launched its international barging operations in South America in 1993.
The Company currently operates on the Orinoco River, with headquarters in Puerto
Ordaz, Venezuela, and the Parana/Paraguay River system, with headquarters in
Rosario, Argentina. A significant portion of the Company's planned capital
expenditures for the next few years will be dedicated to international growth.
While South American operations generated only 5% of ACL's 1997 operating
revenue, management expects revenue from South American operations to increase
significantly in the coming years. The Company's expansion in South America has
been effected by introducing new equipment and technology to the South American
river systems, transplanting systems used in the United States and developing
new processes to meet local requirements. ACL expects to use its expertise to
expand its barging operations into new regions.
The U.S. barge industry has experienced modest cargo tonnage growth over
the past ten years. Tonnage carried on the Inland Waterways has grown from 570
million tons in 1987 to 622 million tons in 1996 (the
1
<PAGE> 7
latest year for which data are available). During this same time period, the
overall barge fleet has grown from 19,967 barges to 21,731 barges. Barge
transportation provides the lowest unit cost of delivery of any major form of
transportation for high volume, bulk products, delivering 12% of the volume of
U.S. freight for 2% of the total U.S. freight cost, according to data available
from the U.S. Department of Transportation ("USDT"). One standard hopper barge
has the equivalent carrying capacity of 15 railcars or 58 trucks. In areas where
shippers have access to water transportation, the rate per ton-mile is
significantly less than rail rates and approximately 10% to 20% of truck rates.
While it is generally less expensive to move large volumes of certain liquids by
pipeline when both the origin and destination have a direct connection to the
pipeline, barge transportation of liquids has greater flexibility with respect
to the origins and destinations that can be served.
The Company intends to pursue synergistic acquisitions in its core business
lines. ACL believes that there will continue to be opportunities to make such
acquisitions that create value through a combination of enhanced revenue
opportunities and cost reductions. In particular, some major companies have
recently sold or are considering the sale of their barging operations in an
effort to focus on their core business lines. In conjunction with these
divestitures, companies often establish long-term shipping contracts with the
purchasers of their fleets in order to secure reliable transportation for their
cargoes. In 1996, ACL acquired Continental Grain's barge fleet in such a
transaction. Based upon the success of this acquisition and other similar
transactions, combined with the Company's ability to provide long-term, reliable
service to its customers, ACL believes that it is particularly well-positioned
to continue to grow through strategic acquisitions.
COMPANY STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
Market Leadership. ACL is the premier provider of river barge
transportation in North America. The Company leads the industry in terms of
revenues, gross tons hauled and fleet size. ACL is the largest provider of dry
cargo transportation on the Inland Waterways, with leading positions in grain
and bulk cargo shipments. In addition, the Company is the second largest
provider of coal and liquid cargo river transportation. In recent years, ACL
also has become the leading provider of river barge transportation in South
America. The Company believes that its leadership position provides it with
significant competitive advantages in terms of its ability to generate revenues,
manage costs and expand its operations.
Full Service Fleet. ACL has the largest fleet on the Inland Waterways,
consisting of the largest number of hopper barges and towboats and the second
largest number of tankers in the industry. The Company's barge fleet is nearly
double the size of that of its largest competitor. The barge fleet meets all
current regulatory requirements and has already met the Federal requirement that
all tank barges be double-skinned by 2015. The size and diversity of ACL's fleet
allow it to service the most ports with the greatest frequency, thereby
providing superior customer service and maximizing profitable backhaul
opportunities. These advantages allow ACL to maximize the tonnage that a barge
can transport over a given time period, significantly enhancing the Company's
ability to generate revenues.
Long-standing Customer Relationships. ACL has a strong and diverse
customer base including several of the leading industrial and agricultural
companies in the United States. The Company has a number of long-standing
customer relationships, with 20 of ACL's top 25 customers having been customers
of the Company for over 20 years. In many cases, these relationships have
resulted in multi-year contracts with these customers. Long-term contracts
generally provide for minimum tonnage or requirements guarantees, which allow
the Company to plan its logistics more effectively. A majority of the Company's
contracts for non-grain cargoes are also at a fixed price, increasing the
stability and predictability of operating revenue. As of July 1, 1998, ACL had
contracted to transport 69 million tons domestically in 1998, of which 64
million tons are fixed as to price.
Fully Integrated Operator. As a fully integrated inland river
transportation company, ACL believes it has a substantial cost advantage over
some of its competitors. Through effective coordination of its barging,
2
<PAGE> 8
shipbuilding, terminals, fleeting, repair and communications services, ACL
reduces costs while maintaining each business unit's ability to generate
third-party revenues. In addition, the Company believes it is a technology
leader in the barging industry. ACL has made significant investments that allow
it to maximize operating efficiency through technologies such as real-time cargo
tracking. This investment in technology strengthens the Company's ability to
compete by lowering its cost structure and enhancing the quality of the services
and products provided.
Low Cost Operator. As a fully integrated operator, ACL believes it is able
to minimize costs through economies of scale and savings generated across its
vertically integrated business lines. In addition, the Company closely manages
operating expenses and continuously undertakes cost-cutting initiatives such as
a two-year staff review and restructuring effort, the adoption of best practices
and the utilization of process improvement teams. These initiatives have
resulted in aggregate first-year savings of at least $70 million since 1992.
Management believes that many of these savings are recurring in nature.
Successful Track Record of Integrating Acquisitions. Over the past several
years, ACL has been able to successfully complete and integrate multiple large
acquisitions, including SCNO Barge Lines, Inc., Hines, Inc., The Valley Line
Company and Continental Grain's barging operations. ACL believes that it will be
able to use this expertise to rapidly integrate the barge operations of National
Marine, Inc. ("NMI"), which are being combined with those of the Company as part
of the Recapitalization (as defined), permitting it to realize substantial
synergies quickly. In addition to the $17.7 million of synergies reflected in
adjusted pro forma EBITDA, ACL believes that the integration of NMI's operations
into its fleet will improve logistics and thus increase overall fleet capacity,
resulting in additional annual operating income of approximately $4 million by
fiscal 1999. The Company believes that its previous successes, combined with its
size and extensive organizational infrastructure, make it well-positioned to
acquire additional barging operators, thereby continuing to improve its cost
structure and service capability.
Management Experience. ACL's senior management team, which has an average
of 20 years with ACL and its affiliates and an average of more than 27 years of
transportation industry experience, is among the most qualified in the industry.
The management team has a detailed knowledge of each of the Company's businesses
and markets. Their knowledge and depth of experience will help ACL to continue
to improve its competitive position. In addition, certain members of senior
management (the "Management Investors") will own membership interests in the
Parent.
THE TRANSACTIONS
Concurrent with the consummation of the Offering, American Commercial Lines
Holdings LLC (the "Parent") was recapitalized (the "Recapitalization") in a
series of transactions in which (i) the barge business of Vectura Group, Inc.
("Vectura") and its subsidiaries was combined with that of ACL (the "NMI
Contribution"); (ii) ACL used the net proceeds of the Offering and borrowings
under the Senior Credit Facilities (as defined) together with the Vectura Cash
Contribution (as defined) to fund a cash distribution of $695.0 million (subject
to post-closing working capital adjustments) to CSX Brown Corp. ("CSX Brown"),
an affiliate of CSX Corporation ("CSX") (the "CSX Cash Distribution") and to
fund the assumption and immediate repayment of approximately $75 million of
existing indebtedness and other obligations of Vectura and its subsidiaries (the
"Vectura Debt"); and (iii) Vectura, CSX and NMI, a wholly owned subsidiary of
Vectura, holds approximately 52%, 33% and 11% of the junior common membership
interests of the Parent, which were allocated between voting and non-voting and
which represent the residual future profits interests in the Parent, on a fully
diluted basis, respectively (after giving effect to the investment by the
Management Investors and the Independent Investors (as defined)). See "Security
Ownership." In connection with the Recapitalization, the Parent issued
approximately $218.9 million of preferred and common membership interests, and
the Company issued 100% of its membership interests to the Parent.
The CSX Cash Distribution, the assumption and immediate repayment of the
Vectura Debt and the fees and expenses of the Transactions were funded by: (i)
$435.0 million of term loan borrowings by the Company pursuant to the Senior
Credit Facilities; (ii) $10.0 million of revolving credit borrowings pursuant to
the Senior Credit Facilities; (iii) the Offering, with aggregate gross proceeds
of $300.0 million from the issuance
3
<PAGE> 9
of the Notes; and (iv) a cash equity investment in the Parent by Vectura and
certain other third party investors (the "Independent Investors") of
approximately $60 million (the "Vectura Cash Contribution"). The
Recapitalization, the Offering, the borrowings under the Senior Credit
Facilities, the Vectura Cash Contribution, the NMI Contribution, the assumption
and immediate repayment of the Vectura Debt and the issuance of preferred and
common membership interests of the Parent are collectively referred to herein as
the "Transactions." Each of the Transactions were conditioned upon each of the
others, and consummation of all of the Transactions occurred simultaneously. See
"The Transactions."
The structure of the Parent and the Company (excluding inactive and
immaterial subsidiaries) after consummation of the Transactions is set forth
below:
[American Commercial structure chart]
- ---------------
(1) The Exchange Notes are being offered by the Company and ACL Capital, a
wholly owned subsidiary of the Company.
(2) The assets comprising the NMI Contribution are held by the Company and its
subsidiaries.
(3) The Company indirectly owns 79% and 80% of ACBL de Venezuela, C.A. and ACBL
Hidrovias, S.A., respectively.
4
<PAGE> 10
The following table sets forth the estimated sources and uses of funds of
the Transactions which were consummated on June 30, 1998:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS
Senior Credit Facilities(1)
Tranche B Term Loan.................................... $200.0
Tranche C Term Loan.................................... 235.0
Revolving Credit Facility.............................. 10.0
10 1/4% Senior Notes due 2008............................... 300.0
Parent Senior Preferred Membership Interests(2)............. 115.0
Parent Junior Preferred Membership Interests(2)............. 40.0
Parent Senior Common Membership Interests(2)................ 3.4
Parent Junior Common Membership Interests(2)................ 0.4
Vectura Cash Contribution to the Parent(3).................. 60.0
------
Total sources of funds............................ $963.8
======
USES OF FUNDS
Recapitalization(4)......................................... $851.3
Consideration for NMI Contribution(5)....................... 78.9
Estimated fees and expenses of the Transactions............. 27.5
Working capital............................................. 6.1
------
Total uses of funds............................... $963.8
======
</TABLE>
- ---------------
(1) The Company received commitments of up to $535.0 million for the Senior
Credit Facilities, of which $100.0 million is in the form of a Revolving
Credit Facility (as defined) and $435.0 million is in the form of Term Loans
(as defined), consisting of a $200.0 million Tranche B Term Loan (as
defined) and a $235.0 million Tranche C Term Loan (as defined). At June 30,
1998, the Company had drawn $435.0 million under the Term Loans and had
$10.0 million outstanding under the Revolving Credit Facility. See
"Description of the Senior Credit Facilities."
(2) Represents non-cash consideration. See "The Transactions."
(3) Reflects the issuance of $59.4 million of Junior Preferred Membership
Interests and $0.6 million of Junior Common Membership Interests in exchange
for a cash capital contribution of approximately $60 million. See "The
Transactions."
(4) Includes $696.3 million in cash proceeds (comprised of $695.0 million, plus
$1.3 million which represents an estimated adjustment for working capital to
be finalized) and $155.0 million of non-cash consideration in the form of
membership interests to CSX Brown. See "The Transactions."
(5) Includes $75.0 million of cash to repay assumed debt and related obligations
and $3.9 million of non-cash consideration in the form of membership
interests in respect of the NMI Contribution. See "The Transactions."
5
<PAGE> 11
THE OFFERING
Notes......................... The Notes were sold by the Company on June 23,
1998 to Wasserstein Perella Securities, Inc.
and Chase Securities Inc. (the "Initial
Purchasers") pursuant to a Purchase Agreement
dated June 23, 1998 (the "Purchase Agreement").
The Initial Purchasers subsequently resold the
Notes to qualified institutional buyers
pursuant to Rule 144A under the Securities Act
and to certain persons outside the United
States pursuant to Regulation S under the
Securities Act that agreed to comply with
certain transfer restrictions and other
conditions.
Registration Rights
Agreement..................... Pursuant to the Purchase Agreement, the
Company, ACL Capital, the Subsidiary Guarantors
and the Initial Purchasers entered into a
Registration Rights Agreement dated June 23,
1998, which grants the holder of the Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such
exchange rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered............ $300,000,000 aggregate principal amount of
Series B 10 1/4% Senior Notes due 2008.
The Exchange Offer............ $1,000 principal amount of the Exchange Notes
in exchange for each $1,000 principal amount of
Notes. As of the date hereof, $300,000,000
aggregate principal amount of Notes are
outstanding. The Company will issue the
Exchange Notes to holders on or promptly after
the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Issuers believe
that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder which is an "affiliate" of the
Issuers within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary
course of such holder's business and that such
holder does not intend to participate and has
no arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes.
Each Participating Broker-Dealer that receives
Exchange Notes for its own account pursuant to
the Exchange Offer must acknowledge that it
will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus
meeting the requirements of the Securities Act,
a Participating Broker-Dealer will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or
supplemented from time to time, may be used by
a Participating Broker-Dealer in connection
with resales of Exchange Notes received in
6
<PAGE> 12
exchange for Notes where such Notes were
acquired by such Participating Broker-Dealer as
a result of market-making activities or other
trading activities. The Issuers have agreed
that, for a period of up to one year from the
Effective Date, they will make this Prospectus
available to any Participating Broker-Dealer
for use in connection with any such resale. See
"Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the Exchange Notes could not rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Issuers.
Expiration Date............... 5:00 p.m., New York City time, on ,
1998 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Accrued Interest on the
Exchange Notes and the
Notes....................... Each Exchange Note will bear interest from its
issuance date. Holders of Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the Exchange Notes. Such
interest will be paid with the first interest
payment on the Exchange Notes. Interest on the
Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Issuers. See "The Exchange Offer --
Conditions."
Procedures for Tendering
Notes......................... Each holder of Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the Notes and any other required documentation
to the Exchange Agent (as defined) at the
address set forth herein. By executing the
Letter of Transmittal, each holder will
represent to the Issuers that, among other
things, the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act,
of the Issuers. See "The Exchange
Offer -- Purpose and Effect of the Exchange
Offer" and "-- Procedures for Tendering."
7
<PAGE> 13
Untendered Notes.............. Following the consummation of the Exchange
Offer, holders of Notes eligible to participate
but who do not tender their Notes will not have
any further exchange rights and such Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Notes could be adversely
affected.
Consequences of Failure
to Exchange................. The Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Notes may be
resold only: (i) to the Company; (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to some other exemption under
the Securities Act; (iii) outside the United
States to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act; or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer -- Consequences of
Failure to Exchange."
Shelf Registration
Statement..................... If any holder of the Notes (other than any such
holder which is an "affiliate" of the Issuers
within the meaning of Rule 405 under the
Securities Act) is not eligible under
applicable securities laws to participate in
the Exchange Offer, and such holder has
provided information regarding such holder and
the distribution of such holder's Notes to the
Issuers for use therein, the Issuers have
agreed to register the Notes on a shelf
registration statement (the "Shelf Registration
Statement") and use their best efforts to cause
it to be declared effective by the Commission
as promptly as practicable on or after the
consummation of the Exchange Offer. The Issuers
have agreed to maintain the continuous
effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of two years, to cover resales of the
Notes held by any such holders.
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Notes are registered
in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Notes,
either make appropriate arrangements to
register ownership of the Notes in such owner's
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable
time. The Issuers will keep the Exchange Offer
open for not less than twenty days in order to
provide for the transfer of registered
ownership.
Guaranteed Delivery
Procedures.................... Holders of Notes who wish to tender their Notes
and whose Notes are not immediately available
or who cannot deliver their Notes, the Letter
of Transmittal or any other documents required
by the Letter of Transmittal to the Exchange
Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration
Date must tender their Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Guaranteed Delivery
Procedures."
8
<PAGE> 14
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Notes and
Delivery of Exchange Notes.... The Company will accept for exchange any and
all Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ United States Trust Company of New York
THE EXCHANGE NOTES
General....................... The form and terms of the Exchange Notes are
the same as the form and terms of the Notes
(which they replace) except that: (i) the
Exchange Notes bear a Series B designation;
(ii) the Exchange Notes have been registered
under the Securities Act and, therefore, will
not bear legends restricting the transfer
thereof; and (iii) the holders of Exchange
Notes will not be entitled to certain rights
under the Registration Rights Agreement,
including the provisions providing for an
increase in the interest rate on the Notes in
certain circumstances relating to the timing of
the Exchange Offer, which rights will terminate
when the Exchange Offer is consummated. See
"The Exchange Offer -- Purpose and Effect of
the Exchange Offer." The Exchange Notes will
evidence the same debt as the Notes and will be
entitled to the benefits of the Indenture. See
"Description of the Exchange Notes." The Notes
and the Exchange Notes are referred to herein
collectively as the "Senior Notes."
Securities Offered............ $300,000,000 aggregate principal amount of
Series B 10 1/4% Senior Notes due 2008.
Maturity...................... June 30, 2008.
Interest...................... Interest on the Exchange Notes will be payable
in cash at a rate of 10 1/4% per annum,
semi-annually in arrears on June 30 and
December 31 of each year, commencing December
31, 1998.
Sinking Fund.................. None.
Optional Redemption........... The Exchange Notes will be redeemable at the
option of the Issuers, in whole or in part, at
any time on or after June 30, 2003, in cash at
the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages (as defined), if any, thereon to the
date of redemption. In addition, at any time
prior to June 30, 2001, the Issuers may on any
one or more occasions redeem up to 35% of the
aggregate principal amount of the Senior Notes
originally issued, at a redemption price of
110.25% of the principal amount thereof plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the redemption
date, with the net cash proceeds of one or more
Equity Offerings (as
9
<PAGE> 15
defined); provided, that at least 65% of the
aggregate principal amount of the Senior Notes
originally issued remains outstanding
immediately after the occurrence of such
redemption (excluding Senior Notes held by the
Company and its Subsidiaries); and provided
further, that such redemption shall occur
within 60 days of the date of the closing of
such Equity Offering. See "Description of the
Exchange Notes -- Optional Redemption."
Subsidiary Guarantees......... The Company's obligations under the Exchange
Notes will be fully, unconditionally, jointly
and severally guaranteed on a senior basis (the
"Subsidiary Guarantees") by the Company's
domestic Subsidiaries other than ACL Capital,
any Accounts Receivable Subsidiary and certain
Subsidiaries of the Company without substantial
assets or operations. See "Description of the
Exchange Notes -- Subsidiary Guarantees."
Ranking....................... The Exchange Notes will be general unsecured
senior obligations of the Issuers, will rank
pari passu in right of payment with all
existing and future senior indebtedness of the
Issuers and will rank senior in right of
payment to all subordinated indebtedness of the
Issuers. The Exchange Notes will be effectively
subordinated to all liabilities of subsidiaries
of the Issuers that are not Subsidiary
Guarantors. As of June 30, 1998, such
subsidiaries had no third-party indebtedness
outstanding except for $24.4 million of
Terminal Revenue Refunding Bonds which were
defeased with funds invested in U.S. government
obligations deposited in an irrevocable trust.
The Exchange Notes will also be effectively
subordinated in right of payment to any secured
debt of the Issuers to the extent of the assets
serving as security for such secured debt. As
of June 30, 1998, the Company and the
Subsidiary Guarantors had approximately
$445.0 million in outstanding secured
indebtedness under the Senior Credit Facilities
to which the Exchange Notes are effectively
subordinated. The Company has available
additional borrowings of up to $90.0 million
under the Revolving Credit Facility. The
Indenture (as defined) pursuant to which the
Exchange Notes will be issued permits the
Issuers and their Subsidiaries to incur
additional indebtedness (including senior
indebtedness), subject to certain limitations.
See "Description of the Senior Credit
Facilities" and "Description of the Exchange
Notes."
Change of Control............. Upon the occurrence of a Change of Control (as
defined) (i) at any time prior to June 30,
2003, the Issuers will have the option to
redeem the Exchange Notes at any time within
180 days after a Change of Control, in whole or
in part, at a redemption price equal to 100% of
the principal amount thereof, together with
accrued and unpaid interest thereon to the
redemption date plus the Applicable Premium (as
defined), together with Liquidated Damages, if
any, thereon to the redemption date, and (ii)
if the Issuers do not so redeem all of the
Exchange Notes or if a Change of Control occurs
on or after June 30, 2003, each holder of
Exchange Notes will have the right to require
the Issuers to make an offer to repurchase all
or any part of such holder's Exchange Notes at
a purchase price in cash equal to 101% of the
principal amount thereof plus accrued
10
<PAGE> 16
and unpaid interest and Liquidated Damages, if
any, thereon to the date of repurchase. See
"Description of the Exchange Notes --
Repurchase at the Option of Holders -- Change
of Control." There can be no assurance that, in
the event of a Change of Control, the Issuers
would have sufficient funds to repurchase all
Exchange Notes tendered. See "Risk
Factors -- Risks Relating to the Exchange
Notes -- Limitations on Ability to Make Change
of Control Payments."
Certain Covenants............. The Indenture contains certain covenants that
limit, among other things, the Issuers' ability
to (i) pay dividends or make distributions,
redeem capital stock or membership interests or
make certain other restricted payments or
investments, (ii) incur additional indebtedness
or issue certain preferred equity interests,
(iii) merge, consolidate or sell all or
substantially all of their assets, (iv) create
liens on assets and (v) enter into certain
transactions with affiliates or related
persons. These covenants are subject to
important exceptions and qualifications. See
"Description of the Exchange Notes -- Certain
Covenants."
Certain Federal Income Tax
Considerations.............. See "Certain Federal Income Tax
Considerations."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH TENDERING NOTES FOR EXCHANGE NOTES, SEE "RISK FACTORS."
The principal executive offices of the Issuers are located at 1701 East
Market St., Jeffersonville, IN 47130, and its telephone number is (812)
288-0100.
11
<PAGE> 17
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL AND OPERATING DATA
The following table sets forth (i) summary historical consolidated
financial data of ACL for the three years ended December 29, 1995, December 27,
1996 and December 26, 1997, (ii) summary historical interim financial data of
ACL for the six months ended June 27, 1997 and June 26, 1998 and (iii) summary
unaudited pro forma combined financial data for the fiscal year ended December
26, 1997 and the twelve and six months ended June 26, 1998. The summary
historical consolidated financial data for the three years ended December 29,
1995, December 27, 1996 and December 26, 1997 were derived from the audited
consolidated financial statements of ACL which are included elsewhere herein,
together with the report of Ernst & Young LLP, independent auditors. The summary
historical interim financial data of ACL for the six months ended June 27, 1997
and June 26, 1998 were derived from the unaudited consolidated financial
statements of ACL for such periods, which, in the opinion of management of ACL,
reflect all adjustments necessary to present fairly the financial position and
results of operations for the periods presented, such adjustments being of a
normal recurring nature. The summary unaudited pro forma combined financial data
for the fiscal year ended December 26, 1997 and the twelve and six months ended
June 26, 1998 give effect to the Transactions as if each had occurred on
December 28, 1996. The unaudited pro forma combined statement of financial
position data give effect to the Transactions as if they had occurred on June
26, 1998. Other operating data is derived from non-financial operating
information maintained by the Company. The following table should be read in
conjunction with "Unaudited Pro Forma Combined Financial Data," "Selected
Historical Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the historical
consolidated financial statements and the notes thereto of ACL included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------------------
FISCAL YEARS ENDED SIX MONTHS ENDED FISCAL YEAR TWELVE SIX
------------------------------ ------------------- ENDED MONTHS ENDED MONTHS ENDED
DEC. 29, DEC. 27, DEC. 26, JUNE 27, JUNE 26, DEC. 26, JUNE 26, JUNE 26,
1995 1996 1997 1997 1998 1997 1998 1998
-------- -------- -------- -------- -------- ----------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Operating revenue............. $553,582 $622,140 $618,233 $275,423 $266,858 $742,677 $732,319 $325,056
Operating expense............. 458,126 521,476 559,600 261,872 249,666 655,638 643,442 299,540
Operating income.............. 95,456 100,664 58,633 13,551 17,192 87,039 88,877 25,516
Other expense................. 1,808 2,726 1,930 (411) 687 1,503 2,282 363
Interest expense.............. 11,385 11,780 12,472 6,166 6,068 71,008 71,008 35,504
Earnings (loss) before income
taxes....................... 82,263 86,158 44,231 7,796 10,437 14,528 15,587 (10,351)
Income tax expense
(benefit)................... 30,861 28,733 18,287 3,688 (62,225) 2,127 1,868 137
Net earnings (loss)........... 51,402 57,425 25,944 4,108 72,662 12,401 13,719 (10,488)
OTHER OPERATING DATA:
Towboats (at period end)...... 127 148 145 147 145 201 201 201
Barges (at period end)........ 3,228 3,718 3,818 3,778 3,833 4,540 4,497 4,497
Ton-miles (millions, for
period ended)............... 52,235 55,842 56,026 27,219 26,811 64,826 64,326 31,096
Tonnage (thousands, for period
ended)...................... 61,055 64,929 65,998 31,989 31,725 78,099 77,061 37,190
OTHER FINANCIAL DATA:
EBITDA(1)..................... $126,208 $135,419 $97,852 $34,091 $37,074 $135,069 $137,219 $51,342
Adjusted EBITDA(2)............ 144,069 146,219 55,842
Depreciation and
amortization................ 32,560 37,481 41,149 20,129 20,569 49,533 50,624 26,189
Property additions............ 33,425 90,551 51,500 38,212 25,034
Net cash provided (used) by:
Operating activities........ 99,080 113,620 52,069 (4,337) 12,673
Investing activities........ (36,504) (93,655) (49,300) (42,050) (51,022)
Financing activities........ (36,226) (52,484) (28,134) 38,262 43,826
Cash interest expense......... 68,208 68,208 34,104
EBITDA to interest expense.... 1.9x 1.9x 1.5x
EBITDA to cash interest
expense..................... 2.0x 2.0x 1.5x
Adjusted EBITDA to interest
expense..................... 2.0x 2.1x 1.6x
Adjusted EBITDA to cash
interest expense............ 2.1x 2.1x 1.6x
Debt to EBITDA................ 5.6x
Debt to adjusted EBITDA....... 5.3x
Ratio of earnings to fixed
charges(3).................. 6.9x 5.8x 3.3x 1.8x 2.1x 1.2x 1.2x .7x
</TABLE>
12
<PAGE> 18
<TABLE>
<CAPTION>
PRO FORMA
------------
DEC. 29, DEC. 27, DEC. 26, JUNE 27, JUNE 26, JUNE 26,
1995 1996 1997 1997 1998 1998
-------- -------- -------- -------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL POSITION DATA (AT
PERIOD END):
Cash and cash equivalents................. $56,803 $24,284 $(1,081) $(679) $4,396 $6,448
Working capital (deficit)................. 71,291 21,005 7,445 (19,298) (36,210) 36,483
Properties -- net......................... 394,717 449,221 460,295 467,835 457,341 542,758
Total assets.............................. 658,499 667,095 632,132 656,763 671,583 796,615
Long-term debt, including current
portion................................. 57,198 52,714 48,230 50,472 45,988 769,400
Shareholder's equity/member's equity
(deficit)............................... 285,932 292,557 299,501 287,166 329,816 (143,301)
</TABLE>
- ---------------
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is presented because management believes it is a widely
accepted financial indicator used by certain investors and securities
analysts to analyze and compare companies on the basis of operating
performance. EBITDA is not intended to represent cash flows for the period,
nor has it been presented as an alternative to operating income as an
indicator of operating performance and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles. The Company understands that while
EBITDA is frequently used by securities analysts in the evaluation of
companies, EBITDA, as used herein, is not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. See the historical and
unaudited pro forma financial statements of ACL and NMI and the related
notes thereto included elsewhere herein.
(2) The Company estimates it will realize certain additional cost reductions as
a result of the Transactions. The effect of such additional reductions on
pro forma EBITDA are as follows (dollars in thousands):
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------
TWELVE SIX
YEAR MONTHS MONTHS
ENDED ENDED ENDED
DEC. 26, JUNE 26, JUNE 26,
1997 1998 1998
------------- -------- --------
<S> <C> <C> <C>
EBITDA...................................................... $135,069 $137,219 $51,342
Adjustments to EBITDA:
Estimated cost savings from operating combined barge
fleet(a).................................................. 4,200 4,200 2,100
Estimated fuel savings(b)................................... 2,300 2,300 1,150
Estimated reduction in third-party towing, fleet boats and
maintenance costs(c)...................................... 2,500 2,500 1,250
-------- -------- -------
Adjusted EBITDA............................................. $144,069 $146,219 $55,842
======== ======== =======
</TABLE>
- ---------------
(a) The estimated cost savings from operating a combined barge fleet relates
to operating NMI barges at ACL's lower equivalent cost. NMI's average
historical barge miles were used in estimating the cost savings.
(b) The estimated cost savings are expected to be derived from the use of
ACL's proprietary software on NMI towboats, which is expected to reduce
fuel consumption, and from the reduction in fuel price to reflect ACL's
vendor discounts.
(c) The estimated cost savings represent discontinuing the use of external
vendors for certain NMI towing, repair and maintenance services, with no
additional infrastructure cost to the combined entity. The combined
towboat fleet will have sufficient capacity to reduce externally
contracted towing services and reduce the number of fleet boats as the
fleets are consolidated.
(3) For purposes of computing the ratio of earnings to fixed charges, earnings
represent earnings before income taxes plus interest expense on
indebtedness, amortization of debt discount, the interest portion of fixed
rent expense, and undistributed earnings of affiliates accounted for using
the equity method. Fixed charges include interest on indebtedness (whether
expensed or capitalized), amortization of debt discount, and the interest
portion of fixed rent expense.
13
<PAGE> 19
RISK FACTORS
Holders of the Notes should carefully consider the risk factors set forth
below, as well as the other information appearing elsewhere in this Prospectus,
before tendering their Notes in the Exchange Offer.
RISKS RELATING TO THE EXCHANGE NOTES
Substantial Leverage
The Company incurred significant debt in connection with the Transactions.
As of June 30, 1998, the Company had outstanding indebtedness of $745.0 million,
including $435.0 million drawn under the Term Loans, $300.0 million aggregate
principal amount of Notes and $10.0 million drawn under the Revolving Credit
Facility. In addition, the Company has available borrowings of up to an
additional $90.0 million under the Revolving Credit Facility. Subject to
restrictions in the Senior Credit Facilities and the Indenture, the Company may
incur additional indebtedness from time to time to finance acquisitions or
capital expenditures. The outstanding indebtedness of $745.0 million is net of
$24.4 million of Terminal Revenue Refunding Bonds which were defeased with funds
invested in U.S. government obligations deposited in an irrevocable trust. Pro
forma for the Transactions, the Company had long term debt of $769.4 million and
member's deficit of $143.3 million. Mandatory debt service payments for the
twelve months ended June 26, 1998 were $70.2 million, 51% of cash generated from
operations, as measured by EBITDA.
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including, but not limited to:
(i) making it more difficult for the Company to satisfy its obligations with
respect to the Exchange Notes; (ii) increasing the Company's vulnerability to
general adverse economic and industry conditions; (iii) limiting the Company's
ability to obtain additional financing to fund future working capital, capital
expenditures and other general corporate requirements; (iv) requiring the
dedication of a substantial portion of the Company's cash flow from operations
to the payment of principal of, and interest on, its indebtedness, thereby
reducing the availability of such cash flow to fund working capital, capital
expenditures or other general corporate requirements; (v) limiting the Company's
flexibility in planning for, or reacting to, changes in its business and the
industry in which it competes; and (vi) placing the Company at a competitive
disadvantage compared to less leveraged competitors. In addition, the Indenture
and the Senior Credit Facilities contain financial and other restrictive
covenants that limit the ability of the Company to, among other things, borrow
additional funds. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company's business, financial condition and
results of operations. If the Company cannot generate sufficient cash to meet
its obligations as they become due or refinance such obligations, the Company
may have to sell assets or reduce capital expenditures. In addition, the degree
to which the Company is leveraged could prevent it from repurchasing all of the
Exchange Notes tendered to it upon the occurrence of a Change of Control. See
"Description of the Senior Credit Facilities" and "Description of the Exchange
Notes -- Repurchase at the Option of Holders -- Change of Control."
Potential Inability to Repay Debt
The Company's ability to make scheduled payments of principal of, or to pay
the premium, if any, interest or Liquidated Damages, if any, on, or to
refinance, its indebtedness (including the Exchange Notes), or to fund planned
capital expenditures will depend on its future performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond its control. There can be no
assurance that the Company's business will generate sufficient cash flow from
operations, that anticipated revenue growth and operating improvements will be
realized or that future borrowings will be available under the Senior Credit
Facilities or otherwise in an amount sufficient to enable the Company to service
its indebtedness, including the Exchange Notes, or to fund its other liquidity
needs. The Company may be required to refinance all or a portion of the
principal of the Exchange Notes on or prior to maturity. There can be no
assurance, however, that such refinancing would be available on commercially
reasonable terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
14
<PAGE> 20
Restrictions Imposed by the Senior Credit Facilities and the Indenture
The Senior Credit Facilities and the Indenture limit the Company's
financial flexibility in a number of ways. The Senior Credit Facilities require
the Company to maintain specified financial ratios and tests, among other
obligations, including a minimum interest expense coverage ratio, a maximum
leverage ratio, a minimum fixed charge coverage ratio and a minimum net worth
test. In addition, the Senior Credit Facilities restrict, among other things,
the Company's ability to incur additional indebtedness, sell assets, create
liens or other encumbrances, incur guarantee obligations, repay the Exchange
Notes or amend the Indenture, make certain payments, including dividends or
other distributions, make investments, loans or advances and make acquisitions
and capital expenditures beyond a certain level. A failure to maintain specified
financial ratios or otherwise to comply with the restrictions contained in the
Senior Credit Facilities could lead to an event of default thereunder, which
could result in an acceleration of such indebtedness. In such event, the lenders
under the Senior Credit Facilities could elect to declare all amounts
outstanding thereunder, together with accrued and unpaid interest, to be
immediately due and payable, and, if the Company were unable to repay such
amounts, such lenders would have the right to proceed against the collateral
granted to them to secure such indebtedness and other amounts (which is expected
to be substantially all of the assets of the Company). Such an acceleration
would constitute an event of default under the Indenture relating to the
Exchange Notes. In addition, the Indenture restricts, among other things, the
Company's ability to incur additional indebtedness, sell assets, create liens or
other encumbrances, make certain payments, including dividends or other
distributions, or merge or consolidate. A failure to comply with the
restrictions in the Indenture could result in an event of default under the
Indenture. See "Description of the Senior Credit Facilities" and "Description of
the Exchange Notes -- Certain Covenants."
Asset Encumbrances
In connection with the Senior Credit Facilities, the Parent granted the
lenders thereunder a first priority lien on all of the membership interests of
the Company owned by it as security for its guarantee of the Company's
obligations under the Senior Credit Facilities. In the event of a default under
the Senior Credit Facilities or such guarantee, the lenders under the Senior
Credit Facilities could foreclose upon the assets pledged to secure the Senior
Credit Facilities, including such membership interests, and the holders of the
Exchange Notes might not be able to receive any payments until any payment
default was cured or waived, any acceleration was rescinded, or the indebtedness
of the Senior Credit Facilities was discharged or paid in full. See "Description
of the Senior Credit Facilities."
Fraudulent Transfer
All of the net proceeds of the Offering were distributed to the Parent and
used to consummate the Recapitalization. Under applicable provisions of the
United States Bankruptcy Code (the "Bankruptcy Code") or comparable provisions
of state fraudulent transfer or conveyance laws, a court could void, in whole or
in part, the Senior Notes, including the Exchange Notes, or, in the alternative,
subordinate the Senior Notes, including the Exchange Notes to existing and
future indebtedness of the Company, if the Company, at the time it issued the
Notes, (i) incurred such indebtedness with intent to hinder, delay or defraud
creditors or (ii)(a) received less than reasonably equivalent value or fair
consideration for incurring such indebtedness and (b)(1) was insolvent at the
time of incurrence, (2) was rendered insolvent by reason of such incurrence (and
the application of the proceeds thereof), (3) was engaged or was about to engage
in a business or transaction for which the assets remaining with the Company
constituted unreasonably small capital to carry on its businesses or (4)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they mature.
The analysis of insolvency for purposes of the foregoing would vary
depending upon the law applied in such case. Generally, however, the Company
would be considered insolvent if the sum of its debts, including contingent
liabilities, was greater than all of its assets at fair valuation or if the
present fair saleable value of its assets was less than the amount that would be
required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and matured. While there can be
no assurance that a court passing on such questions would agree with the
Company's view, the Company believes that, for
15
<PAGE> 21
purposes of all such insolvency, bankruptcy and fraudulent transfer or
conveyance laws, the Senior Notes were and the Exchange Notes are being issued
without the intent to hinder, delay or defraud creditors and for proper purposes
and in good faith. The Company, after the issuance of the Notes and the
application of the proceeds thereof, was solvent, and believes it has sufficient
capital for carrying on its business and will be able to pay its debts as they
mature.
Effective Subordination
The Exchange Notes will be effectively subordinated to all existing and
future liabilities of the Company's subsidiaries that are not Subsidiary
Guarantors (including all current and future foreign subsidiaries). As of June
30, 1998, there were no liabilities of the Company's subsidiaries to which
holders of the Exchange Notes will be effectively subordinated.
Any right of the Company to participate in any distribution of assets of
its subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the holders of the Exchange Notes to
participate in the distribution of those assets) will be subject to the prior
claims of the creditors of the respective non-Subsidiary Guarantors. The
obligations of the Company under the Senior Credit Facilities are secured by
substantially all of its assets. Additionally, the Parent will guarantee the
Company's obligations under the Senior Credit Facilities, and such guarantee
will be secured by a first priority pledge of all the membership interests of
the Company owned by the Parent. See "Description of the Senior Credit
Facilities."
Limitation on the Payment of Funds to the Company by its Subsidiaries
The Company's cash flow, and consequently its ability to pay dividends and
to service debt, including its obligation under the Exchange Notes, is dependent
upon the cash flows of its subsidiaries and the payment of funds by such
subsidiaries to the Company in the form of loans, dividends or otherwise.
Limitations on Ability to Make Change of Control Payments
Upon the occurrence of a Change of Control (as defined) (i) at any time
prior to June 30, 2003, the Issuers will have the option to redeem the Exchange
Notes at any time within 180 days after a Change of Control, in whole or in
part, at a redemption price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest thereon to the redemption date plus
the Applicable Premium, together with Liquidated Damages, if any, thereon to the
redemption date, and (ii) if the Issuers do not so redeem all of the Exchange
Notes or if a Change of Control occurs on or after June 30, 2003, each holder of
Exchange Notes will have the right to require the Issuers to make an offer to
repurchase all or any part of such holder's Exchange Notes at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of repurchase.
Such provisions may not, however, afford holders of the Exchange Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect holders of Exchange Notes, if such transaction does not result
in a Change of Control. A Change of Control will result in an event of default
under the Senior Credit Facilities and may result in a default under other
indebtedness of the Company that may be incurred in the future. The Senior
Credit Facilities will prohibit the purchase of outstanding Exchange Notes prior
to repayment of the borrowings under the Senior Credit Facilities and any
exercise by the holders of the Exchange Notes of their right to require the
Issuers to repurchase the Exchange Notes will cause an event of default under
the Senior Credit Facilities. In addition, prior to repurchasing the Notes upon
a Change of Control, the Company must either repay all outstanding indebtedness
under the Senior Credit Facilities or obtain the consent of the lenders. If the
Company does not obtain such consent or repay its outstanding indebtedness under
the Senior Credit Facilities, the Company would remain effectively prohibited
from redeeming or offering to purchase the Exchange Notes. Finally, there can be
no assurance that the Company will have the financial resources necessary or be
able to arrange financing to repay obligations under the Senior Credit
Facilities and to redeem
16
<PAGE> 22
or repurchase the Exchange Notes upon a Change of Control. See "Description of
the Exchange Notes -- Repurchase at the Option of Holders -- Change of Control."
Lack of Public Market; Transfer Restrictions
Prior to the Exchange Offer, there has been no public market for the Notes.
The Notes have not been registered under the Securities Act and will be subject
to restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in this Exchange
Offer. The holders of Notes (other than any such holder that is an "affiliate"
of the Issuers within the meaning of Rule 405 under the Securities Act) who are
not eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Issuers are required to file a Shelf Registration
Statement with respect to such Notes. The Exchange Notes are new securities for
which there currently is no market. The Exchange Notes are eligible for trading
by qualified buyers in the Private Offerings, Resale and Trading though
Automated Linkages (PORTAL) market. The Issuers do not intend to apply for
listing of the Exchange Notes, on any securities exchange or for quotation
through the National Association of Securities Dealers Automated Quotation
System. Although the Exchange Notes are eligible for trading through PORTAL, the
Exchange Notes may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities, the
Company's performance and other factors. The Issuers have been advised by the
Initial Purchasers that the Initial Purchasers currently intend to make a market
in the Exchange Notes. However, they are not obligated to do so and any
market-making activities with respect to the Exchange Notes may be discontinued
at any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and may
be limited during the Exchange Offer and the pendency of any Shelf Registration
Statement. Although under the Registration Rights Agreement, the Issuers are
required to consummate an offer to exchange the Notes for equivalent registered
securities, or to register the Notes under the Securities Act, there can be no
assurance that an active trading market for the Notes or the Exchange Notes will
develop. If a market were to exist, the Exchange Notes could trade at prices
that may be lower than the initial offering price thereof depending on many
factors, including prevailing interest rates and the markets for similar
securities, general economic conditions and the financial condition and
performance of, and prospects for, the Company. See "Description of the Exchange
Notes -- Registration Rights; Liquidated Damages."
The Exchange Notes generally will be permitted to be resold or otherwise
transferred (subject to the restrictions described under "Description of
Exchange Notes") by each holder without the requirement of further registration.
The Exchange Notes, however, will also constitute a new issue of securities with
no established trading market. The Exchange Offer will not be conditioned upon
any minimum or maximum aggregate principal amount of Notes being tendered for
exchange. No assurance can be given as to the liquidity of the trading market
for the Exchange Notes, or, in the case of non-exchanging holders of Notes, the
trading market for the Notes following the Exchange Offer.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market or by declines in the
market for similar securities. Such declines may adversely affect such liquidity
and trading markets independently of the financial performance of, and prospects
for, the Company.
Exchange Offer Procedures
Issuance of the Exchange Notes in exchange for the Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Issuers of such
Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Notes desiring to tender
such Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Issuers are under no duty to give notification of defects
or irregularities with respect to the tenders of Notes for exchange. Notes that
are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, upon consummation of the Exchange Offer,
certain registration rights under the Registration Rights Agreement will
terminate. In addition, any holder of Notes who tenders in the Exchange Offer
for the purpose of participating in a
17
<PAGE> 23
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transactions. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Notes, where such Notes were acquired
by such Participating Broker-Dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. See "Plan of Distribution." To the extent that Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Notes could be adversely affected. See "The Exchange
Offer."
COMPANY-SPECIFIC RISKS
Risks of Adverse Weather and River Conditions
The Company's barging operations are affected by weather and river
conditions. Varying weather patterns can affect river levels and cause ice in
northern river areas. For example, the Upper Mississippi River closes annually
from approximately mid-December to mid-March and ice conditions can hamper
navigation on the upper reaches of the Illinois River during the winter months.
In addition, adverse river conditions affect towboat speed, tow size and loading
drafts and can delay barge movements. Lock outages due to lock maintenance
and/or other interruptions in normal lock operation can also delay barge
movements. Jeffboat's waterfront location is subject to occasional flooding.
Jeffboat's manufacturing operations that are conducted outdoors are also subject
to weather conditions, which may adversely impact production schedules.
Terminals may also experience operational interruptions as a result of weather
and river conditions. It is likely that the Company's operations will be subject
to adverse weather or river conditions in the future and there can be no
assurance that such weather or river conditions will not have a material adverse
effect on the Company's business, financial condition and results of operations.
For example, in 1997 the Company was affected by both weather and river
conditions. The year started with ice problems on the Ohio and Mid-Mississippi
rivers, followed by major flooding on the Ohio and Mississippi Rivers. These
adverse operating conditions forced the Company to operate smaller tows at lower
speeds, resulting in lower productivity and corresponding lost volume, reducing
operating income by approximately $12.0 million. Jeffboat was also impacted by
the flooding with decreased production lowering operating income by
approximately $1.0 million.
Exposure to Grain Exports
The Company's dry cargo barging business in North America is significantly
affected by the level of grain export volume handled through the Gulf of Mexico
ports. Grain exports can vary due to, among other things, crop harvest yield
levels in the United States and abroad. Overseas grain shortages can increase
demand for U.S. grain, while worldwide over-production can decrease the demand
for U.S. grain. This variable nature of grain exports can result in temporary
barge oversupply which can drive down freight rates. There can be no assurance
that historical levels of North American grain export volume will be maintained
in the future and, to the extent supply imbalances were to prevail for a
significant period of time, they could have a material adverse effect on the
Company's business, financial condition and results of operations.
Seasonality
The Company's business is seasonal, and its quarterly revenues and profits
historically have been lower during the first and second fiscal quarters of the
year (January through June) and higher during the third and fourth fiscal
quarters (July through December) due to the fall grain harvest. In addition,
working capital requirements fluctuate throughout the year. Adverse market or
operating conditions during the last four months of the year could have a
greater effect on the Company's business, financial condition and results of
operations than during other periods.
Variability
Freight transportation rates may fluctuate from season to season and year
to year, which could result in varying levels of cash flow. The level of dry and
liquid cargoes requiring transportation on the Inland Waterways will vary due to
numerous factors, including global economic conditions and business cycles,
18
<PAGE> 24
domestic agricultural production/demand as well as international agricultural
production/demand and the value of the U.S. dollar relative to other currencies.
In addition, the number of barges and towboats in the overall industry fleet
available to transport these cargoes will vary from year to year as older
vessels are retired and scrapped and new vessels are constructed and placed into
service. The resulting relationship between available cargoes and available
vessels will vary with periods of low vessel availability and high cargo demand
causing higher freight rates and periods of high vessel availability and low
cargo demand causing lower freight rates. Significant periods of high vessel
availability and low cargo demand could have a material adverse effect on the
Company's business, financial condition and results of operations.
The foregoing factors can also affect market rates. As contracts expire and
terms are renegotiated at then current market rates, the level of revenue can
vary relative to prior years. This has become more pronounced as the industry
has shifted to shorter term contracts. The impact of these factors could be
material and there can be no assurance that the rates at which contracts are
renewed will not have a material adverse effect on the Company's business,
financial condition or results of operations. In particular, one of the
Company's electric utility customers is in proceedings under Chapter 11 of the
Bankruptcy Code. The contract with such customer for the transportation of coal
is at attractive margins. The Company believes that this contract will be
restructured during 1999 as a long-term contract having a term of at least five
years at reduced rates as part of such proceedings, and that as a result the
revenue from such contract could be reduced by up to $12 to $16 million
annually.
Competition
The barge business is highly competitive and there are few significant
barriers to entry. Certain of the Company's principal competitors have greater
financial resources and/or are less leveraged than the Company and may be better
able to withstand and respond to adverse market conditions within the barging
industry. There can be no assurance that such competition will not have a
material adverse effect on the Company's business, financial condition or
results of operations or that the Company will not encounter increased
competition in the future, which also could have a material adverse effect on
the Company's business, financial condition or results of operations. See
"Business -- Competition."
Exposure to International Economic and Political Factors
The Company's operations may be affected by actions of foreign governments
and global or regional economic developments. For example, economic events in
Asia, such as Chinese import/export policy or currency fluctuations, could
affect the level of imports and exports. Foreign agricultural subsidies can also
impact demand for U.S. agricultural exports. In addition, foreign trade
agreements and each country's adherence to the terms of such agreements can
raise or lower demand for U.S. imports and exports. National and international
boycotts and embargoes of other countries' or U.S. imports and/or exports
together with the raising or lowering of tariff rates will affect the level of
cargoes requiring transportation on the Inland Waterways. Changes in the value
of the U.S. dollar relative to other currencies will raise or lower demand for
U.S. exports as well as U.S. demand for foreign produced raw materials and
finished good imports. Such actions or developments could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Risk of Providing Services Abroad
Barging services provided to customers outside the United States
represented approximately 5% of 1997 operating revenue and are expected to
increase in the future. Demand for the Company's services may be affected by
economic and political conditions in each of the countries in which the Company
provides services. The Company's foreign operations are also subject to other
risks of doing business abroad, including fluctuations in the value of
currencies (which may affect demand for products priced in U.S. dollars as well
as local labor and supply costs), import duties, changes to import and export
regulations (including quotas), possible restrictions on the repatriation of
capital and earnings, labor or civil unrest, long payment cycles, greater
difficulty in collecting accounts receivable and the burdens and cost of
compliance with a variety of foreign laws, changes in citizenship requirements
for purposes of doing business and government expropriation
19
<PAGE> 25
of operations and/or assets. There can be no assurance that foreign governments
will not adopt regulations or take other actions that would have a direct or
indirect adverse impact on the business or market opportunities of the Company
or that the political, cultural or economic climate outside the United States
will be favorable to the Company's operations and growth strategy.
Exposure to Fuel Prices
Fuel costs represented approximately 11% of the Company's operating expense
in fiscal 1997. Fuel prices are subject to fluctuation as a result of domestic
and international events. There can be no assurance that the Company will not
experience increased fuel prices in the future, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Replacement Needs
Barge and towboat replacement represents a significant cost for the
Company, and the Company expects to replace an average of 140 barges per year
during the next five years. Due to the variable nature of the barging industry
and the freight transportation industry in general and the relatively long life
of marine equipment, it is difficult for the Company and other barge companies
to accurately predict equipment requirements. Accordingly, no assurance can be
given that the Company will have sufficient equipment to satisfy market demand
or that the industry will not have an oversupply of equipment. An oversupply of
equipment could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Combined Operations
The integration of the NMI operations will require substantial management
time and financial and other resources and may pose risks with respect to
operations, customer service and customer acceptance. While the Company's
management has successfully combined other barging operations into the Company
and the Company believes that it has sufficient financial and management
resources to accomplish the rationalization and integration of the NMI
operations, there can be no assurance that such operations can be integrated
successfully or that the Company will not experience difficulties with
customers, personnel or others. In addition, although the Company believes that
the NMI operations will enhance the competitive position and business prospects
of the Company, there can be no assurance that such benefits will be fully
realized.
Dependence on Key Personnel
The Company is dependent on the continued services of its senior management
team. The loss of such key personnel could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management."
Labor Relations
As of June 30, 1998, the Company employed approximately 4,140 individuals.
Of these, approximately 1,025 are represented by unions, most of whom
(approximately 985) are represented by the International Brotherhood of
Teamsters at the Company's Jeffboat shipyard facility, where the contract with
the union was recently renewed for a term of three years. The Company's combined
barging operations employ 540 boat officers as pilots and captains. On April 4,
1998, a labor organization, Pilots Agree, called for an industry-wide work
stoppage. Twenty-eight of the Company's boat officers joined the work stoppage.
The National Labor Relations Board, in a previous ruling, held that the
Company's pilots and captains are supervisors and, therefore, are not covered by
the National Labor Relations Act. The Company has refused to recognize or
bargain with Pilots Agree. The work stoppage has terminated and had no effect on
the Company's marine operations. Although the Company believes that its
relations with its employees and with the recognized labor unions are generally
good, there can be no assurance that the Company will not be subject to work
stoppages or other labor disruption and, if such events were to occur, that
there would not be a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Employees."
20
<PAGE> 26
Environmental, Health and Safety Requirements
The Company's operations are subject to extensive Federal, state and local
environmental laws and regulations which, among other things, specify
requirements for the management of oil, hazardous wastes, and hazardous
substances and impose liability for releases of these materials into the
environment. A release of oil, hazardous waste, hazardous substances or other
pollutants into the environment at or by the Company's properties or vessels, as
a result of the Company's current or past operations, or at a facility to which
the Company has shipped wastes, or the existence of historical contamination at
any of the Company's properties, could result in material liability to the
Company. The Company is in discussions with the Environmental Protection Agency
("EPA"), the Department of Justice ("DOJ") and local law enforcement authorities
regarding alleged violations of various environmental laws and has also been
identified as a potentially responsible party ("PRP") with respect to the
cleanup of certain waste disposal sites. See "Business -- Environmental
Matters." The Company currently does not believe that its liability for any such
matters would be material.
Federal, state and local governments could in the future enact laws or
regulations concerning environmental matters that affect the Company's
operations or facilities, increase the Company's costs of operation, or
adversely affect the demand for the Company's services. The Company cannot
predict the effect that such future laws or regulations could have on the
Company. Nor can the Company predict what environmental conditions may be found
to exist at the Company's current or past facilities or at other properties
where the Company or its predecessors have arranged for the disposal of wastes
and the extent of liability that may result from the discovery of such
conditions. It is possible that such future laws or undiscovered conditions
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Environmental Matters."
The Company's domestic vessel operations are primarily regulated by the
U.S. Coast Guard for occupational health and safety standards. The Company's
domestic shore operations are subject to the U.S. Occupational Safety and Health
Administration regulations. There can be no assurance that claims will not be
made against the Company for work related illness or injury, or that the further
adoption of occupational health and safety regulations in the United States or
in foreign jurisdictions in which the Company operates will not adversely affect
the Company's business, financial condition and results of operations. See
"Business -- Occupational Health and Safety Matters."
Other Government Regulation
The Company's barging operations are subject to various laws and
regulations, including international treaties, conventions, national, state and
local laws and regulations and the laws and regulations of the flag nations of
the Company's vessels, all of which are subject to amendment or changes in
interpretation. Further, the Company is required by various governmental and
quasi-governmental agencies to obtain and/or maintain certain permits, licenses
and certificates respecting its operations. The Company's domestic towboats are
in certain circumstances subject to a significant Federal fuel use tax, which
may be increased. Any significant changes in laws or regulations affecting the
Company's operations, or in the interpretation thereof, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Government Regulation."
Controlling Shareholders
Vectura, NMI, CSX, the Independent Investors and the Management Investors
(collectively, the "Investors") beneficially own all of the outstanding voting
securities of the Parent and collectively control the affairs and policies of
the Company. See "Security Ownership" and "Certain Relationships and Related
Transactions." In addition, each of CSX and the Vectura Parties (as defined)
have certain veto rights. Circumstances may occur in which the interests of the
Investors could be in conflict with the interests of the holders of the Exchange
Notes. In addition, the Investors may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the Exchange Notes. See "Security Ownership."
21
<PAGE> 27
THE TRANSACTIONS
The following description of certain terms of the Recapitalization
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Recapitalization Agreement.
OVERVIEW
Pursuant to a recapitalization agreement, dated as of April 17, 1998 (the
"Recapitalization Agreement"), among CSX, Vectura, NMI, a wholly owned
subsidiary of Vectura, the Company and the Parent, the Parent was recapitalized
in a series of transactions in which (i) the barge business of Vectura and its
subsidiaries was combined with that of ACL; (ii) ACL used the net proceeds of
the Offering and borrowings under the Senior Credit Facilities together with the
Vectura Cash Contribution to fund a cash distribution of $695.0 million (subject
to post-closing working capital adjustments) to CSX Brown and to fund the
assumption and immediate repayment of approximately $75 million of existing
indebtedness and other obligations of Vectura and its subsidiaries; and (iii)
Vectura, CSX and NMI hold approximately 52%, 33% and 11% of the junior common
membership interests of the Parent, which were allocated between voting and
non-voting and which represent the residual future profits interests in the
Parent, respectively (after giving effect to the investment by the Management
Investors). In connection with the Recapitalization, (a) CSX or one of its
affiliates received (i) an aggregate amount of cash equal to $695.0 million plus
an estimated working capital adjustment of $1.3 million, (ii) senior preferred
membership interests (the "Senior Preferred Membership Interests") of the Parent
with a liquidation value of approximately $115 million which are mandatorily
redeemable in 2013, (iii) junior preferred membership interests (the "Junior
Preferred Membership Interests") of the Parent with a liquidation value of
approximately $39.7 million which are mandatorily redeemable in 2013 and (iv)
junior common membership interests (the "Junior Common Membership Interests") of
the Parent with a fair market value of approximately $0.3 million, representing
approximately 34% of the voting membership interests of the Parent and an
approximately 33% residual future profits interest in the Parent (before giving
effect to any issuance of membership interests to Management Investors); (b)
Vectura acquired (i) Junior Preferred Membership Interests with a liquidation
value of approximately $59.4 million and (ii) Junior Common Membership Interests
with a fair market value of approximately $0.6 million, representing
approximately 15.8% of the voting membership interests of the Parent and an
approximately 55% residual future profits interest in the Parent (before giving
effect to any issuance of membership interests to Management Investors); and (c)
Vectura caused substantially all the consolidated assets of Vectura and its
subsidiaries, including NMI, to be contributed to NMI's subsidiary, NMI Holdings
LLC ("NMI Holdings"), and NMI then caused NMI Holdings to be contributed to the
Parent (and thereafter combined with the Company), through the NMI Contribution,
in exchange for (i) the assumption and immediate repayment of the Vectura Debt,
(ii) Junior Preferred Membership Interests with a liquidation value of $0.4
million (subject to post-closing working capital adjustments), (iii) senior
common membership interests (the "Senior Common Membership Interests") of the
Parent with a fair market value of approximately $3.4 million (with an
additional future profits interest of approximately $32.5 million) and (iv)
Junior Common Membership Interests with a fair market value of approximately
$0.1 million, representing approximately 3.2% of the voting membership interests
of the Parent and an 11% residual future profits interest in the Parent (before
giving effect to any issuance of membership interests to Management Investors).
In addition, (x) certain of the Management Investors acquired membership
interests in the Parent in amounts of voting Junior Common Membership Interests
representing 17% of all such interests and (y) the Independent Investors
acquired membership interests of the Parent in amounts of non-voting Junior
Common Membership Interests determined prior to the Closing and in amounts of
voting Junior Common Membership Interests representing 30% of all such
interests. It is anticipated that the Management Investors will acquire
membership interests in the Parent.
The Recapitalization Agreement contains various other provisions customary
for transactions of this size and type, including representations and warranties
with respect to the condition and operations of the business, covenants with
respect to the conduct of the business prior to the Closing (as defined),
post-closing working capital adjustment provisions, and various closing
conditions.
22
<PAGE> 28
The CSX Cash Distribution, the assumption and immediate repayment of the
Vectura Debt and the fees and expenses of the Transactions were funded by: (i)
$435.0 million of term loan borrowings by the Company pursuant to the Senior
Credit Facilities; (ii) $10.0 million of revolving credit borrowings by the
Company pursuant to the Senior Credit Facilities, (iii) the Offering, with
aggregate gross proceeds of $300.0 million from the issuance of the Notes; and
(iv) the Vectura Cash Contribution of approximately $60 million. Each of the
Transactions was conditioned upon each of the others, and consummation of all of
the Transactions occurred simultaneously.
Following consummation of the Recapitalization, the activities of the
Parent and the Company are subject to the constituent documents of the Parent.
See "Certain Relationships and Related Transactions."
SENIOR CREDIT FACILITIES
In connection with the Transactions, the Company and the Parent entered
into a credit agreement (the "Senior Credit Facilities") with certain financial
institutions to be parties thereto as lenders (the "Lenders") and The Chase
Manhattan Bank ("Chase Bank"), as administrative agent. The Senior Credit
Facilities are comprised of a $100.0 million revolving credit facility (the
"Revolving Credit Facility") maturing in 2005, and a term loan facility
aggregating $435.0 million, consisting of a Tranche B term loan facility
aggregating $200.0 million (the "Tranche B Term Loan") which matures in 2006 and
a Tranche C term loan facility aggregating $235.0 million (the "Tranche C Term
Loan" and, together with the Tranche B Term Loan, the "Term Loans") which
matures in 2007. The Tranche B Term Loan will amortize at the rate of $1.0
million per year for years one through five, $20.0 million for year six, $75.0
million for year seven and $100.0 million for year eight, and the Tranche C Term
Loan will amortize at the rate of $1.0 million per year for years one through
eight and $227.0 million for year nine. The borrowings under the Term Loans,
together with the aggregate gross proceeds from the issuance of the Notes,
borrowings under the Revolving Credit Facility and proceeds from the Vectura
Cash Contribution, were used to consummate the Recapitalization, to assume and
repay the Vectura Debt and to pay fees and expenses in connection with the
Transactions. In addition, the Revolving Credit Facility provides a source of
financing for future working capital and other general corporate purposes. See
"Description of the Senior Credit Facilities."
23
<PAGE> 29
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Issuers'
obligations under the Registration Rights Agreement. The Issuers will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer. The aggregate gross cash proceeds from the issuance of the
Notes, together with the borrowings under the Term Loans, borrowings under the
Revolving Credit Facility and cash proceeds from the Vectura Cash Contribution,
were used to fund the cash payments and debt assumption and repayment
contemplated by the Recapitalization Agreement and pay fees and expenses in
connection with the Transactions. See "The Transactions."
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS
Senior Credit Facilities(1)
Tranche B Term Loan.................................... $200.0
Tranche C Term Loan.................................... 235.0
Revolving Credit Facility.............................. 10.0
10 1/4% Senior Notes due 2008............................... 300.0
Parent Senior Preferred Membership Interests(2)............. 115.0
Parent Junior Preferred Membership Interests(2)............. 40.0
Parent Senior Common Membership Interests(2)................ 3.4
Parent Junior Common Membership Interests(2)................ 0.4
Vectura Cash Contribution to the Parent(3).................. 60.0
------
Total sources of funds............................ $963.8
======
USES OF FUNDS
Recapitalization(4)......................................... $851.3
Consideration for NMI Contribution(5)....................... 78.9
Estimated fees and expenses of the Transactions............. 27.5
Working capital............................................. 6.1
------
Total uses of funds............................... $963.8
======
</TABLE>
- ---------------
(1) The Company received commitments of up to $535.0 million for the Senior
Credit Facilities, of which $100.0 million are in the form of a Revolving
Credit Facility and $435.0 million are in the form of Term Loans, consisting
of a $200.0 million Tranche B Term Loan and a $235.0 million Tranche C Term
Loan. At June 30, 1998, the Company had drawn $435.0 million under the Term
Loans and had $10.0 million outstanding under the Revolving Credit Facility.
See "Description of the Senior Credit Facilities."
(2) Represents non-cash consideration. See "The Transactions."
(3) Reflects the issuance of $59.4 million of Junior Preferred Membership
Interests and $0.6 million of Junior Common Membership Interests in exchange
for a cash capital contribution of approximately $60 million. See "The
Transactions."
(4) Includes $696.3 million in cash proceeds (comprised of $695.0 million plus
$1.3 million which represents an estimated adjustment for working capital to
be finalized) and $155.0 million of non-cash consideration in the form of
membership interests to CSX Brown. See "The Transactions."
(5) Includes $75.0 million of cash to repay assumed debt and $3.9 million of
non-cash consideration in the form of membership interests in respect of the
NMI Contribution. See "The Transactions."
24
<PAGE> 30
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
26, 1998, as adjusted to give effect to the Transactions, including the sale of
the Notes pursuant to the Offering, as if they had occurred on June 26, 1998.
This table should be read in conjunction with the "Unaudited Pro Forma Combined
Financial Data," "Selected Historical Consolidated Financial Data" and the
consolidated historical financial statements of the Company and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
JUNE 26, 1998
---------------------
(IN MILLIONS)
<S> <C>
Long-term debt:
Senior Credit Facilities:
Tranche B Term Loan(1)................................. $200.0
Tranche C Term Loan(2)................................. 235.0
Revolving Credit Facility(3)........................... 10.0
10 1/4% Senior Notes due 2008............................. 300.0
------
Total long-term debt(4)........................... 745.0
------
Member's Equity(5)
Membership interest....................................... 218.9
Other capital............................................. 150.2
Deficit................................................... (512.4)
------
Total member's deficit............................ (143.3)
------
Total capitalization.............................. $601.7
======
</TABLE>
- ---------------
(1) The Tranche B Term Loan will amortize at the rate of $1.0 million per year
for years one through five, $20.0 million for year six, $75.0 million for
year seven and $100.0 million for year eight, resulting in a
weighted-average life of 7.3 years.
(2) The Tranche C Term Loan will amortize at the rate of $1.0 million per year
for years one through eight and $227.0 million for year nine resulting in a
weighted-average life of 8.8 years.
(3) The Revolving Credit Facility provides for revolving loans in the aggregate
principal amount of $100.0 million, matures in 2005. At closing, $10.0
million was drawn under the Revolving Credit Facility.
(4) Total long-term debt is net of $24.4 million of Terminal Revenue Refunding
Bonds which were defeased with funds invested in U.S. government obligations
deposited in an irrevocable trust.
(5) See "The Transactions" and "Use of Proceeds."
25
<PAGE> 31
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data have been
prepared by applying pro forma adjustments to the financial statements of
American Commercial Lines LLC (an indirect wholly owned subsidiary of CSX) and
subsidiaries included elsewhere in this Registration Statement. The unaudited
pro forma combined condensed statements of operations for the periods presented
give pro forma effect to the Transactions as if they had been consummated as of
December 28, 1996 and exclude certain nonrecurring items directly attributable
to the Transactions. The unaudited pro forma combined condensed balance sheet
gives pro forma effect to the Transactions as if they were consummated on June
26, 1998.
The pro forma adjustments are described in the accompanying notes and are
based upon available information and upon certain assumptions deemed reasonable
by management. The unaudited pro forma combined financial data should be read in
conjunction with the financial statements (including the notes thereto)
appearing elsewhere in this Prospectus.
The unaudited pro forma combined financial data are provided for
informational purposes only and should not be considered indicative of actual
results that would have been achieved had the Transactions been consummated on
the date or for the periods indicated and do not purport to indicate the balance
sheet data or results of operations as of any future date or for any future
period.
The pro forma adjustments reflect the Transactions as a recapitalization of
the Company and the acquisition of the assets of NMI Holdings using the purchase
method of accounting.
26
<PAGE> 32
AMERICAN COMMERCIAL LINES LLC
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCLUDED
EXCLUDED RECAPITALIZATION HISTORICAL ASSETS AND
HISTORICAL ASSETS AND PRO FORMA PRO FORMA VECTURA LIABILITIES
ACL LIABILITIES ADJUSTMENTS ACL GROUP, INC. AND OTHER
---------- ----------- ---------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents........... $4,396 (4,989)(a) $805,047(c) $81,102 $4,378 $(3,533)(g)
(722,000)(c) 1(h)
(1,352)(c)
Accounts Receivable, Net............ 68,266 68,266 20,099 (2,208)(g)
Materials and Supplies.............. 50,466 (8,572)(b) 41,894 2,707 (233)(g)
Deferred Income Taxes............... 1,288 (1,288)(f) --
Other Current Assets................ 10,847 214(a) 11,061 4,685 (2,483)(g)
90(h)
-------- --------- --------- -------- -------- --------
Total Current Assets.............. 135,263 (14,635) 81,695 202,323 31,869 (8,366)
Properties-Net....................... 457,341 (3,242)(b) 454,099 77,761 (1,430)(g)
18,689(h)
Restricted Investments............... 26,128 26,128
Pension Asset........................ 20,265 20,265
Other Assets......................... 32,586 24,500(d) 57,086 4,491 (1,312)(g)
(1,937)(h)
-------- --------- --------- -------- -------- --------
Total Assets...................... $671,583 $(17,877) $106,195 $759,901 $114,121 $5,644
======== ========= ========= ======== ======== ========
LIABILITIES
Current Liabilities
Accounts Payable.................... $13,465 $13,465 $20,718 $(1,245)(g)
(17)(h)
Accrued Payroll and Fringe
Benefits.......................... 15,516 (124)(a) 15,392 7,577 (701)(g)
15(h)
Due to Affiliates................... 18,329 (16,377)(a) 1,952
Short-Term Borrowings from
Affiliates........................ 74,656 (74,656)(a) --
Short-Term Borrowings............... 10,000(c) 10,000
Current Portion of Long-Term Debt... 2,000(c) 2,000 20,473 (1,553)(g)
2,050(h)
Other Current Liabilities........... 49,507 (5,231)(a) 44,276
-------- --------- --------- -------- -------- --------
Total Current Liabilities......... 171,473 (96,388) 12,000 87,085 48,768 (1,451)
Long-Term Note Payable to
Affiliate........................... 56,000 (56,000)(a) --
Deferred Income Taxes................ 7,778 (7,778)(f) --
Long-Term Debt....................... 41,504 (17,104)(a) 733,000(c) 757,400 38,231 (2,396)(g)
13,258(h)
Pension Liability.................... 24,158 24,158
Other Long-Term Liabilities.......... 40,854 (2,400)(a) 38,454 15,061 (9,142)(g)
542(h)
-------- --------- --------- -------- -------- --------
Total Liabilities................. 341,767 (179,670) 745,000 907,097 102,060 811
MANDATORILY REDEEMABLE PREFERRED
STOCK............................... 4,083 (4,083)(g)
STOCKHOLDER'S EQUITY/MEMBER'S EQUITY
Member's Equity..................... 6,006 (6,006)(e) 215,047
155,000(e)
60,047(c)
Common Stock........................ -- -- 1
Other Capital....................... 141,271 6,490(f) (1,352)(c) 150,218 45 7,920(g)
(11,814)(b) (2,500)(d) 996(h)
167,117(a) (148,994)(e)
Retained Earnings (Deficit)......... 182,539 (695,000)(e) (512,461) 7,932
-------- --------- --------- -------- -------- --------
Total Stockholder's
Equity/Member's Equity.......... 329,816 161,793 (638,805) (147,196) 7,978 8,916
-------- --------- --------- -------- -------- --------
Total Liabilities, Mandatorily
Redeemable Preferred Stock and
Stockholder's Equity/Member's
Equity.......................... $671,583 $(17,877) $106,195 $759,901 $114,121 $5,644
======== ========= ========= ======== ======== ========
<CAPTION>
ACQUISITION
PRO FORMA
ADJUSTMENTS PRO FORMA
----------- ---------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents........... $(75,500)(i) $6,448
Accounts Receivable, Net............ 86,157
Materials and Supplies.............. 44,368
Deferred Income Taxes............... --
Other Current Assets................ 13,353
--------- ---------
Total Current Assets.............. (75,500) 150,326
--
Properties-Net....................... (6,861)(j) 542,758
500(j)
Restricted Investments............... 26,128
Pension Asset........................ 20,265
Other Assets......................... (1,190)(j) 57,138
--------- ---------
Total Assets...................... $(83,051) $796,615
========= =========
LIABILITIES
Current Liabilities
Accounts Payable.................... (689)(i) $32,232
Accrued Payroll and Fringe
Benefits.......................... $1,100(k) 23,383
Due to Affiliates................... 1,952
Short-Term Borrowings from
Affiliates........................ --
Short-Term Borrowings............... 10,000
Current Portion of Long-Term Debt... (20,970)(i) 2,000
Other Current Liabilities........... 44,276
--------- ---------
Total Current Liabilities......... (20,559) 113,843
Long-Term Note Payable to
Affiliate........................... --
Deferred Income Taxes................ --
Long-Term Debt....................... (49,093)(i) 757,400
Pension Liability.................... 24,158
Other Long-Term Liabilities.......... (400)(i) 44,515
--------- ---------
Total Liabilities................. (70,052) 939,916
MANDATORILY REDEEMABLE PREFERRED
STOCK............................... --
STOCKHOLDER'S EQUITY/MEMBER'S EQUITY
Member's Equity..................... 3,895(e) 218,942
Common Stock........................ (1)(l) --
Other Capital....................... (8,961)(l) 150,218
Retained Earnings (Deficit)......... (7,932)(l) (512,461)
--------- ---------
Total Stockholder's
Equity/Member's Equity.......... (12,999) (143,301)
--------- ---------
Total Liabilities, Mandatorily
Redeemable Preferred Stock and
Stockholder's Equity/Member's
Equity.......................... $(83,051) $796,615
========= =========
</TABLE>
27
<PAGE> 33
AMERICAN COMMERCIAL LINES LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Represents the elimination of the intercompany borrowing from CSX, retained
liabilities under certain stock incentive plans maintained by CSX and
certain other indebtedness, including related accrued interest as set forth
in the Recapitalization Agreement. This adjustment also includes the
transfer of liabilities from CSX to ACL arising under certain employee
savings plans.
(b) Under the Recapitalization Agreement, barges with a book value of
approximately $11.8 million will be transferred to an affiliate of CSX and
leased back by ACL.
(c) Recapitalization
<TABLE>
<CAPTION>
TOTAL
---------
<S> <C> <C> <C>
Total Sources of Cash:
Borrowings under Tranche B Term Loan........... $ 200,000
Borrowings under Tranche C Term Loan........... 235,000
Proceeds from issuance of Senior Notes......... 300,000
Borrowings under the Revolving Credit
Facility..................................... 10,000
---------
Total Borrowings............................... 745,000
Issuance of Membership Interests............... 60,047
---------
$ 805,047
=========
</TABLE>
<TABLE>
<CAPTION>
RECAPITALIZATION ACQUISITION
PRO FORMA PRO FORMA TOTAL
---------------- ----------- ---------
<S> <C> <C> <C>
Total Uses of Cash:
Cash to CSX.................................... $(695,000) $(695,000)
Payment of debt issuance costs and fees related
to the Recapitalization...................... (27,000) $ (500) (27,500)
Payment of NMI Debt............................ (75,000) (75,000)
Working Capital................................ (6,195) (6,195)
Working Capital payment to CSX per
Recapitalization Agreement................... (1,352) (1,352)
--------- -------- ---------
$(729,547) $(75,500) $(805,047)
========= ======== =========
</TABLE>
The Recapitalization Agreement provides for a cash adjustment based on
levels in working capital at ACL at the Closing relative to agreed target
levels. The estimated working capital adjustment at closing resulted in a
payment to CSX of $1,352. However, such amount is subject to final
determination of both ACL and NMI working capital amounts at closing.
(d) The allocation of estimated costs and fees are as follows:
<TABLE>
<CAPTION>
RECAPITALIZATION ACQUISITION
PRO FORMA PRO FORMA TOTAL
---------------- ----------- -------
<S> <C> <C> <C>
Debt issuance costs............................ $24,500 $24,500
Recapitalization fees.......................... 2,500 2,500
NMI Contribution............................... $ 500 500
------- ------ -------
$27,000 $ 500 $27,500
------- ------ -------
</TABLE>
28
<PAGE> 34
AMERICAN COMMERCIAL LINES LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET -- (CONTINUED)
<TABLE>
<S> <C>
(e) Reflects Recapitalization of Assets and Liabilities:
Issuance of Membership Interests to Parent:
As part of the recapitalization of ACL.................... $155,000
As part of the NMI Contribution........................... 3,895
Elimination of historical members' equity................... (6,006)
Adjustment to eliminate historical other capital due to
Recapitalization.......................................... (148,994)
</TABLE>
(f) Elimination of deferred U.S. Federal and state income taxes due to ACL's
status as a limited liability company, which passes through its U.S. (but
not foreign) taxable income to its members who are responsible for income
taxes on such taxable income.
(g) Elimination of certain assets and liabilities of Vectura which are to be
excluded from the NMI Contribution under the Recapitalization Agreement.
(h) Reflects acquisition of net assets of NBL, Inc. and the elimination of the
historical carrying amount of the investment.
(i) Reflects the following:
<TABLE>
<S> <C>
Repayment of existing long-term debt, including current
portion and accrued interest.............................. $70,752
Prepayment penalties related to retirement of long-term
debt...................................................... 3,913
Payment of other liabilities................................ 335
Estimated allocated costs and fees.......................... 500
-------
$75,500
=======
</TABLE>
29
<PAGE> 35
AMERICAN COMMERCIAL LINES LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET -- (CONTINUED)
(j) The NMI Contribution will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16. The purchase price is less than
the fair market value of the net assets being acquired, based upon
preliminary estimates of their fair market values. Given the nature of these
estimates and assumptions, the final allocation of the purchase price may
differ from the allocations as described below. A final allocation of the
purchase price will be performed when additional information concerning
asset and liability valuations becomes available. A reconciliation of the
allocation of the purchase price follows:
<TABLE>
<S> <C>
Purchase price:
Purchase price......................................... $3,895
Transaction costs and fees............................. 500
--------
Total............................................. $4,395
--------
Allocation of purchase price:
Existing book value of NMI............................. $16,894
Liabilities assumed.................................... (4,948)
Elimination of existing capitalized financing fees and
NBL Inc. goodwill..................................... (1,190)
Estimated decrease in property, plant and equipment to
adjust to purchase price.............................. (6,861)
Transaction costs and fees............................. 500
--------
Total purchase price.............................. $4,395
========
</TABLE>
The Recapitalization Agreement provides for a cash adjustment based on
levels of working capital at NMI at the Closing relative to agreed target
levels. The computation is interrelated to the working capital of ACL. The
estimated working capital adjustment amounts at closing reduced the
originally contemplated member's equity by $1,105 from $5,000 resulting in
a purchase price of $3,895. However, such amount is subject to final
determination of both ACL and NMI working capital amounts at closing.
(k) Reflects estimated severance costs for approximately 70 administrative and
operational employees resulting from closing NMI headquarters.
(l) Adjustments to reflect purchase accounting
<TABLE>
<S> <C>
Elimination of common stock................................. $(1)
Elimination of historical stockholder's equity.............. (8,961)
Elimination of retained earnings............................ (7,932)
</TABLE>
30
<PAGE> 36
AMERICAN COMMERCIAL LINES LLC
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCLUDED RECAPITALIZATION HISTORICAL EXCLUDED
HISTORICAL AND OTHER PRO FORMA PRO FORMA VECTURA OPERATIONS
ACL OPERATIONS ADJUSTMENTS ACL GROUP, INC. AND OTHER
---------- ---------- ---------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE................. $618,233 $(4,861)(a) $613,372 $134,839 $(5,534)(f)
OPERATING EXPENSE
Materials, Supplies and Other.... 289,394 (2,718)(a) $(14,475)(b) 273,627 133,644 (5,603)(f)
1,426(e) (65,990)(g)
(3,827)(h)
Labor and Fringe Benefits........ 150,960 (4,887)(a) 365(b) 146,438 -- 36,102(g)
Fuel............................. 56,982 (15)(a) 56,967 -- 16,237(g)
Depreciation and Amortization.... 41,149 (208)(a) 40,615 -- 7,064(g)
(326)(d) 2,853(h)
Taxes, Other Than Income Taxes... 21,115 (357)(a) 20,758 -- (635)(f)
6,587(g)
-------- -------- -------- -------- -------- --------
559,600 (7,085) (14,110) 538,405 133,644 (7,212)
-------- -------- -------- -------- -------- --------
OPERATING INCOME.................. 58,633 2,224 14,110 74,967 1,195 1,678
OTHER EXPENSE (INCOME)
Interest Expense................. 3,720 (3,720)(a) 71,008(c) 71,008 6,828 (598)(f)
1,734(h)
Interest Expense, Affiliate...... 8,752 (8,752)(a) -- --
Other, Net....................... 1,930 6(a) 1,936 (4,097) 3,960(f)
(128)(h)
-------- -------- -------- -------- -------- --------
14,402 (12,466) 71,008 72,944 2,731 4,968
-------- -------- -------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES............................ 44,231 14,690 (56,898) 2,023 (1,536) (3,290)
INCOME TAXES...................... 18,287 (16,160)(a) 2,127 (3,953) 3,953(f)
-------- -------- -------- -------- -------- --------
NET EARNINGS (LOSS)............... $25,944 $30,850 $(56,898) $(104) $2,417 $(7,243)
======== ======== ======== ======== ======== ========
<CAPTION>
ACQUISITION
PRO FORMA
ADJUSTMENTS PRO FORMA
----------- ---------
<S> <C> <C>
OPERATING REVENUE................. $742,677
OPERATING EXPENSE
Materials, Supplies and Other.... $(1,300)(i) 327,201
(3,350)(k)
Labor and Fringe Benefits........ (3,450)(k) 179,090
Fuel............................. (100)(i) 73,104
Depreciation and Amortization.... (999)(j) 49,533
Taxes, Other Than Income Taxes... 26,710
-------- --------
(9,199) 655,638
-------- --------
OPERATING INCOME.................. 9,199 87,039
OTHER EXPENSE (INCOME)
Interest Expense................. (7,964)(l) 71,008
Interest Expense, Affiliate...... --
Other, Net....................... (168)(m) 1,503
-------- --------
(8,132) 72,511
-------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES............................ 17,331 14,528
INCOME TAXES...................... 2,127
-------- --------
NET EARNINGS (LOSS)............... $17,331 $12,401
======== ========
</TABLE>
31
<PAGE> 37
AMERICAN COMMERCIAL LINES LLC
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCLUDED RECAPITALIZATION HISTORICAL EXCLUDED ACQUISITION
HISTORICAL OPERATIONS PRO FORMA PRO FORMA VECTURA OPERATIONS PRO FORMA
ACL AND OTHER ADJUSTMENTS ACL GROUP, INC. AND OTHER ADJUSTMENTS
---------- ---------- ---------------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE............... $266,858 $(1,660)(a) $265,198 $63,484 $(3,626)(f)
OPERATING EXPENSE
Materials, Supplies and
Other........................ 122,152 (814)(a) $(7,134)(b) 114,917 64,306 (3,019)(f) (650)(i)
713(e) (32,254)(g) (1,675)(k)
(11)(h)
Labor and Fringe Benefits...... 73,259 21(a) 182(b) 73,462 -- 16,963(g) (1,725)(k)
Fuel........................... 22,659 (14)(a) 22,645 -- 6,712(g) (50)(i)
Depreciation and
Amortization................. 20,569 (103)(a) 20,326 -- 4,906(g) (500)(j)
(140)(d) 1,457(h)
Taxes, Other Than Income
Taxes........................ 11,027 (200)(a) 10,827 -- (770)(f)
3,673(g)
-------- ------- -------- -------- ------- -------- -------
249,666 (537) (6,952) 242,177 64,306 (2,343) (4,600)
-------- ------- -------- -------- ------- -------- -------
OPERATING INCOME................ 17,192 (1,123) 6,952 23,021 (822) (1,283) 4,600
OTHER EXPENSE (INCOME)..........
Interest Expense............... 2,097 (2,097)(a) 35,504(c) 35,504 3,248 (185)(f) (3,858)(l)
795(h)
Interest Expense, Affiliate.... 3,971 (3,971)(a) -- --
Other, Net..................... 687 (150)(a) 537 372 (362)(f) (66)(m)
(118)(h)
-------- ------- -------- -------- ------- -------- -------
6,755 (6,218) 35,504 36,041 3,620 130 (3,924)
-------- ------- -------- -------- ------- -------- -------
EARNINGS (LOSS) BEFORE INCOME
TAXES.......................... 10,437 5,095 (28,552) (13,020) (4,442) (1,413) 8,524
INCOME TAXES.................... (62,225) 62,362(a) 137 (1,424) 1,424(f)
-------- ------- -------- -------- ------- -------- -------
NET EARNINGS (LOSS)............. $72,662 $(57,267) $(28,552) $(13,157) $(3,018) $(2,837) $8,524
======== ======= ======== ======== ======= ======== =======
<CAPTION>
PRO FORMA
---------
<S> <C>
OPERATING REVENUE............... $325,056
OPERATING EXPENSE
Materials, Supplies and
Other........................ 141,614
Labor and Fringe Benefits...... 88,700
Fuel........................... 29,307
Depreciation and
Amortization................. 26,189
Taxes, Other Than Income
Taxes........................ 13,730
--------
299,540
--------
OPERATING INCOME................ 25,516
OTHER EXPENSE (INCOME)..........
Interest Expense............... 35,504
Interest Expense, Affiliate....
Other, Net..................... 363
--------
35,867
--------
EARNINGS (LOSS) BEFORE INCOME
TAXES.......................... (10,351)
INCOME TAXES.................... 137
--------
NET EARNINGS (LOSS)............. $(10,488)
========
</TABLE>
32
<PAGE> 38
AMERICAN COMMERCIAL LINES LLC
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EXCLUDED RECAPITALIZATION HISTORICAL EXCLUDED
HISTORICAL AND OTHER PRO FORMA PRO FORMA VECTURA OPERATIONS
ACL OPERATIONS ADJUSTMENTS ACL GROUP, INC. AND OTHER
---------- ---------- ---------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE................. $609,668 $(3,879)(a) $605,789 132,102 $(5,572)(f)
OPERATING EXPENSE
Materials, Supplies and Other.... 283,085 (2,171)(a) (14,373)(b) 267,967 130,574 (5,209)(f)
1,426(e) (63,835)(g)
(3,083)(h)
Labor and Fringe Benefits........ 152,201 (3,329)(a) 365(b) 149,237 -- 35,182(g)
Fuel............................. 49,302 (14)(a) 49,288 -- 14,565(g)
Depreciation and Amortization.... 41,589 (203)(a) 41,087 -- 7,663(g)
(299)(d) 2,873(h)
Taxes, Other Than Income Taxes... 21,217 (364)(a) 20,853 -- (946)(f)
6,425(g)
-------- -------- -------- -------- -------- --------
547,394 (4,954) (14,008) 528,432 130,574 (6,365)
-------- -------- -------- -------- -------- --------
OPERATING INCOME.................. 62,274 1,075 14,008 77,357 1,528 793
OTHER EXPENSE (INCOME)
Interest Expense................. 3,917 (3,917)(a) 71,008(c) 71,008 6,674 (492)(f)
1,638(h)
Interest Expense, Affiliate...... 8,457 (8,457)(a) -- --
Other, Net....................... 3,028 (309)(a) 2,719 (3,759) 3,697(f)
(253)(h)
-------- -------- -------- -------- -------- --------
15,402 (12,683) 71,008 73,727 2,915 4,590
-------- -------- -------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES............................ 46,872 13,758 (57,000) 3,630 (1,387) (3,797)
INCOME TAXES...................... (47,626) 49,494(a) 0 1,868 (3,799) 3,799(f)
-------- -------- -------- -------- -------- --------
NET EARNINGS (LOSS)............... $94,498 $(35,736) $(57,000) $1,762 $2,412 $(7,596)
======== ======== ======== ======== ======== ========
<CAPTION>
ACQUISITION
PRO FORMA
ADJUSTMENTS PRO FORMA
----------- ---------
<S> <C> <C>
OPERATING REVENUE................. $732,319
OPERATING EXPENSE
Materials, Supplies and Other.... $ (1,300)(i) 321,764
(3,350)(k)
Labor and Fringe Benefits........ (3,450)(k) 180,969
Fuel............................. (100)(i) 63,753
Depreciation and Amortization.... (999)(j) 50,624
Taxes, Other Than Income Taxes... 26,332
-------- --------
(9,199) 643,442
-------- --------
OPERATING INCOME.................. 9,199 88,877
OTHER EXPENSE (INCOME)
Interest Expense................. (7,820)(l) 71,008
Interest Expense, Affiliate...... --
Other, Net....................... (122)(m) 2,282
-------- --------
(7,942) 73,290
-------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES............................ 17,141 15,587
INCOME TAXES...................... 1,868
-------- --------
NET EARNINGS (LOSS)............... $17,141 $13,719
======== ========
</TABLE>
33
<PAGE> 39
AMERICAN COMMERCIAL LINES LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) Represents the elimination of the results of operations of ACL's wholly
owned subsidiary, Curtis Bay Company, certain terminal operations which will
be retained by CSX or an affiliate, certain stock incentive plans maintained
by CSX, interest expense related to the debt excluded in the
Recapitalization and historical U.S. Federal and state income taxes due to
ACL's status as a limited liability company, which passes through its U.S.
(but not foreign) taxable income to its members who are responsible for
income taxes on such taxable income.
(b) Elimination of management fee charged by CSX, less estimated incremental
stand-alone operating costs as follows:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE
YEAR ENDED ENDED MONTHS ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ---------- ------------
<S> <C> <C> <C>
Elimination of management fee charged by CSX
for certain administrative services......... $(15,024) $(7,410) $(14,922)
Estimated additional administrative expense
increases................................... 914 458 914
-------- ------- --------
$(14,110) $(6,952) $(14,008)
======== ======= ========
</TABLE>
(c) Pro forma interest expense is reflected as follows:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE
YEAR ENDED ENDED MONTHS ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ---------- ------------
<S> <C> <C> <C>
$200 million Tranche B Term Loan at
LIBOR(5.69%) + 2.50% (8.19%)................ $16,380 $8,190 $16,380
$235 million Tranche C Term Loan at
LIBOR(5.69%) + 2.75% (8.44%)................ 19,834 9,917 19,834
$300 million Senior Notes at an assumed rate
of 10.25%................................... 30,750 15,375 30,750
$10 million draw on the Revolving Credit
Facility at LIBOR (5.69%) + 2.25% (7.94%)... 794 397 794
Commitment fee of 0.5% on undrawn portion of
Revolving Credit Facility................... 450 225 450
------- ------- -------
68,208 34,104 68,208
Amortization of debt issuance costs of
$24,500..................................... 2,800 1,400 2,800
------- ------- -------
$71,008 $35,504 $71,008
======= ======= =======
</TABLE>
(d) Elimination of amortization expense associated with debt costs which have
been written off:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE
YEAR ENDED ENDED MONTHS ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ---------- ------------
<S> <C> <C> <C>
$326 $140 $299
==== ==== ====
</TABLE>
34
<PAGE> 40
AMERICAN COMMERCIAL LINES LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(e) Cost associated with rental of barges from CSX under operating lease:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
$1,426 $713 $1,426
====== ==== ======
</TABLE>
(f) Represents the elimination of the operating results of certain subsidiaries
excluded from NMI Contribution under the Recapitalization Agreement. The
adjustments include the elimination of all intercompany transactions between
the subsidiaries and historical U.S. Federal and state income taxes due to
NMI's status as a limited liability company which passes through its U.S.
Federal and state (but not foreign) taxable income to its members who are
responsible for income taxes on such taxable income.
(g) Reclassification in order to conform to ACL presentation.
(h) Reflects consolidation of individual operations of NBL, Inc. and the
elimination of the historical carrying value of non-consolidated operations.
(i) Reflects the following recurring operational cost savings:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
Purchase discounts from ACL lube oil vendor
extended to NMI........................... $100 $50 $100
Elimination of duplicate fleet locations and
operations................................ 1,300 650 1,300
------ ---- ------
$1,400 $700 $1,400
====== ==== ======
</TABLE>
(j) Reflects the adjustment to depreciation expense resulting from decrease of
$6,361 in property, plant and equipment, primarily barges and boats, from
historical carrying values and amortization expense of NBL, Inc. goodwill.
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
----------------- -------------- -------------
<S> <C> <C> <C>
Reduction of depreciation resulting
from purchase accounting............. $795 $398 $795
Reduction of historical amortization of
goodwill............................. 204 102 204
---- ---- ----
$999 $500 $999
==== ==== ====
</TABLE>
35
<PAGE> 41
AMERICAN COMMERCIAL LINES LLC
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS -- (CONTINUED)
(k) Reflects the following estimated recurring administrative cost savings:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
Elimination of duplicate NMI general and
administrative costs, including workforce
reductions of approximately 65 employees,
reduced occupancy expenses and
professional fees and the management fee
paid by NMI to Vectura.................... $7,250 $3,625 $7,250
NMI headquarters building rent during
transition period prior to facility
closing................................... (300) (150) (300)
Personnel costs of certain NMI employees
covered under employment agreements....... (150) (75) (150)
------ ------ ------
$6,800 $3,400 $6,800
====== ====== ======
</TABLE>
(l) Elimination of interest expense on repayment of NMI Debt.
(m) Elimination of amortization expense associated with the debt costs that have
been written off:
<TABLE>
<CAPTION>
SIX MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 26, JUNE 26, JUNE 26,
1997 1998 1998
------------ ------------ -------------
<S> <C> <C> <C>
$168 $66 $122
==== === ====
</TABLE>
36
<PAGE> 42
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of the Company for the five years ended December 31, 1993, December 30,
1994, December 29, 1995, December 27, 1996 and December 26, 1997. The selected
historical consolidated financial data as of and for the five years ended
December 31, 1993, December 30, 1994, December 29, 1995, December 27, 1996 and
December 26, 1997 were derived from the audited consolidated financial
statements of the Company which for the three years ended December 29, 1995,
December 27, 1996 and December 26, 1997 are included elsewhere in this
Registration Statement, together with the report thereon of Ernst & Young LLP,
independent auditors. The selected historical interim financial data of ACL as
of and for the six months ended June 27, 1997 and June 26, 1998 were derived
from the unaudited consolidated financial statements of ACL for such periods,
which, in the opinion of management of ACL, reflect all adjustments necessary to
present fairly the financial position and results of operations for the periods
presented, such adjustments being of a normal recurring nature. Other operating
data is derived from non-financial information maintained by the Company. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
consolidated financial statements and the notes thereto of ACL included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
---------------------------------------------------- -------------------
DEC. 31, DEC. 30, DEC. 29, DEC. 27, DEC. 26, JUNE 27, JUNE 26,
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Operating revenue...................... $417,234 $448,653 $553,582 $622,140 $618,233 $275,423 $266,858
Operating expense...................... 380,790 393,273 458,126 521,476 559,600 261,872 249,666
Operating income....................... 36,444 55,380 95,456 100,664 58,633 13,551 17,192
Other expense.......................... 2,369 1,446 1,808 2,726 1,930 (411) 687
Interest expense....................... 15,654 13,712 11,385 11,780 12,472 6,166 6,068
Earnings before income taxes........... 18,421 40,222 82,263 86,158 44,231 7,796 10,437
Income tax expense (benefit)........... 8,384 15,006 30,861 28,733 18,287 3,688 (62,225)
Net earnings........................... 10,037 25,216 51,402 57,425 25,944 4,108 72,662
OTHER OPERATING DATA:
Towboats (at period end)............... 134 128 127 148 145 147 145
Barges (at period end)................. 3,353 3,295 3,228 3,718 3,818 3,778 3,833
Ton-miles (millions, for period
ended)............................... 45,472 51,274 52,235 55,842 56,026 27,219 26,811
Tonnage (thousands, for period
ended)............................... 54,205 59,204 61,055 64,929 65,998 31,989 31,725
OTHER FINANCIAL DATA:
EBITDA(1).............................. $63,914 $86,208 $126,208 $135,419 $97,852 34,091 37,074
Depreciation and amortization.......... 29,839 32,274 32,560 37,481 41,149 20,129 20,569
Property additions..................... 10,448 11,950 33,425 90,551 51,500 38,212 25,034
Net cash provided (used) by:
Operating activities................. 47,890 42,820 99,080 113,620 52,069 (4,337) 12,673
Investing activities................. (15,940) (12,271) (36,504) (93,655) (49,300) (42,050) (51,022)
Financing activities................. (22,411) (26,278) (36,226) (52,484) (28,134) 38,262 43,826
Ratio of earnings to fixed charges(2).... 2.0x 3.4x 6.9x 5.8x 3.3x 1.8x 2.1x
STATEMENT OF FINANCIAL POSITION DATA (AT
PERIOD END):
Cash and cash equivalents.............. $26,182 $30,453 $56,803 $24,284 $(1,081) (679) 4,396
Working capital........................ 38,750 57,471 71,291 21,005 7,445 (19,298) (36,210)
Properties -- net...................... 422,692 394,115 394,717 449,221 460,295 467,835 457,341
Total assets........................... 612,397 607,699 658,499 667,095 632,132 656,763 671,583
Long-term debt, including current
portion.............................. 69,802 61,724 57,198 52,714 48,230 50,472 45,988
Shareholder's equity/member's equity... 236,814 255,030 285,932 292,557 299,501 287,166 329,816
</TABLE>
- ---------------
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is presented because management believes it is a widely
accepted financial indicator used by certain investors and securities
analysts to analyze and compare companies on the basis of operating
performance. EBITDA is not intended to represent cash flows for the period,
nor has it been presented as an alternative to operating income as an
indicator of operating performance and should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles. The Company understands that while
EBITDA is frequently used by securities analysts in the evaluation of
companies, EBITDA, as used herein, is not necessarily comparable to other
similarly titled captions of other companies due to potential
inconsistencies in the method of calculation. See the historical financial
statements of ACL and the related notes thereto included elsewhere herein.
(2) For purposes of computing the ratio of earnings to fixed charges, earnings
represent earnings before income taxes plus interest expense on
indebtedness, amortization of debt discount, the interest portion of fixed
rent expense, and undistributed earnings of affiliates accounted for using
the equity method. Fixed charges include interest on indebtedness (whether
expensed or capitalized), amortization of debt discount, and the interest
portion of fixed rent expense.
37
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations covers periods before the completion of the Transactions. In
connection with the Transactions, the Company entered into financing
arrangements and altered its capital structure. The results of operations and
financial condition for the periods subsequent to the consummation of the
Transactions will not necessarily be comparable to prior periods. See "The
Transactions," "Unaudited Pro Forma Combined Financial Data," "Selected
Historical Consolidated Financial Data", "Description of the Senior Credit
Facilities" and the audited financial statements and notes thereto included
elsewhere in this Prospectus.
OVERVIEW
ACL is an integrated marine transportation and service company, providing
barge transportation services. The Company supports its barging operations by
providing towboat and barge design and construction, terminal services and
ship-to-shore voice and data telecommunications services to the Company and
third parties. The Company is the leading provider of river barge transportation
throughout the Inland Waterways. In addition, since expanding its barge
transportation operations to South America in 1993, the Company has become the
leading provider of barge transportation services on the Orinoco River in
Venezuela and the Parana/Paraguay River system serving Argentina, Brazil,
Paraguay, Uruguay and Bolivia.
ACL derives its revenues primarily from the transportation of grain, coal,
steel and other bulk cargo and liquids in the United States and South America.
While the Company's customer base has remained relatively stable and certain of
its operations provide relatively steady rate levels and profit margins, its
results of operations can be impacted by a variety of external factors. ACL
seeks to enter into multi-year contracts at fixed prices (with inflation-indexed
escalation and fuel adjustment clauses) with its customers. Approximately 49% of
contracts, in tonnage terms, that will be in effect as of July 1, 1998 will be
for periods of greater than 18 months. As of July 1, 1998, ACL had contracted to
transport 69 million tons domestically in 1998, of which 64 million tons are
fixed as to price. The factors that can impact results include fluctuations in
rates for shipping grain, which in turn affect rates for shipping other dry
cargoes, weather and river conditions and fluctuations in fuel prices. Although
revenues from the Company's international operations are denominated in U.S.
dollars, the Company's results could be impacted by currency fluctuations.
The Company historically has pursued a strategy of growth through strategic
acquisitions and its results of operations have been significantly enhanced
thereby. The Company intends to continue to pursue a strategy of growth,
domestically through acquisitions and internationally by establishing operations
to serve customers along river systems outside the United States. ACL's
acquisitions have included SCNO Barge Lines in 1988, Hines, Inc. in 1991, The
Valley Line Company in 1992 and Continental Grain's barging operations in 1996.
As part of the Transactions, the Company will be integrating the operations of
NMI with its own operations. The size of ACL's fleet over the past three years,
and on a pro forma basis to reflect the NMI operations, is as follows:
DOMESTIC AND INTERNATIONAL FLEET
<TABLE>
<CAPTION>
PRO FORMA
DEC. 29, 1995 DEC. 27, 1996 DEC. 26, 1997 DEC. 26, 1997(1)
------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Barges
Covered hoppers........ 2,068 2,615 2,758 3,218
Open hoppers........... 924 865 811 857
Tankers................ 236 238 249 465
----- ----- ----- -----
Total............... 3,228 3,718 3,818 4,540
===== ===== ===== =====
Towboats................. 127 148 145 201
</TABLE>
- ---------------
(1) Reflects the addition of NMI fleet.
38
<PAGE> 44
The average age of the Company's domestic barge fleet is 18.5 years,
compared with an industry average of 15.8 years. These barges have an expected
life of approximately 25 to 30 years. In addition, ACL operates 189 towboats
domestically, with an average age of approximately 23 years. The Company expects
to incur significant capital expenditures in the future to maintain or grow the
size of its fleet. See "-- Liquidity and Capital Resources."
The Company intends to rapidly integrate the operations of NMI with those
of the Company. Vectura reported operating revenue (including in respect of NMI)
of $185.6 million, $141.6 million and $134.8 million during 1995, 1996 and 1997,
respectively, a loss from continuing operations before income taxes of $1.0
million and $1.5 million in 1995 and 1997, respectively, and income from
continuing operations before income taxes of $1.1 million in 1996. See
"Unaudited Pro Forma Combined Financial Data" for figures representing excluded
operations of Vectura not being combined as part of the NMI Contribution.
The Company's operations are conducted through a limited liability company,
as a result of which ACL will not itself generally be subject to U.S. Federal or
state income tax. Taxable income will be allocated to the equity holders of the
Parent and such holders will be responsible for income taxes on such taxable
income. The Company intends to make distributions to the Parent which, in turn,
will make distributions to its equity holders to enable them to meet all or a
portion of their tax obligations with respect to taxable income allocated to
them by the Company. The Limited Liability Company Agreement of the Parent (the
"LLC Agreement") reduces the amount of tax distributions to CSX (or its
affiliate) during the first nine years, which may make additional funds
available for use by the Company, subject to the discretion of the Parent.
Notwithstanding the foregoing, in certain circumstances the tax distribution
provisions of the LLC Agreement permit distributions which could exceed the
combined Federal, state, local and foreign income taxes that would be payable
with respect to taxable income of the Company for any given period if the
Company were a Delaware corporation filing separate tax returns. Such
distributions are permitted under the Indenture. See "Certain Relationships and
Related Transactions".
Prior to the Recapitalization, ACL participated in CSX's cash management
plan through which the Company's excess cash was advanced to CSX for investment
and its cash needs were funded by CSX. In addition, the Company obtained
insurance coverage through an insurance company owned by CSX and paid management
service fees to CSX of $14.5 million, $15.2 million and $15.0 million in 1995,
1996 and 1997, respectively. The Company anticipates that costs for
administrative services in the future will be approximately $1 million per year.
In connection with the Transactions all intercompany indebtedness was repaid,
and the Company incurred substantial third-party indebtedness. See "-- Liquidity
and Capital Resources -- Post-Transactions."
One of the Company's electric utility customers is in Chapter 11
proceedings. The contract with such customer for the transportation of coal is
at attractive margins. The Company expects that the contract will be
restructured during 1999 as a long-term contract having a term of at least 5
years as part of such proceedings, and that as a result the revenue from such
contract could be reduced by up to $12 to $16 million annually.
39
<PAGE> 45
RESULTS OF OPERATIONS
The following table sets forth certain condensed historical financial data
for the Company expressed as a percentage of operating revenue for each of the
three most recent fiscal years and for each of the two most recent first fiscal
quarters:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
------------------------------ -------------------
DEC. 29, DEC. 27, DEC. 26, JUNE 27, JUNE 26,
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Operating revenue................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expense................................... 82.8 83.8 90.5 95.1 93.6
----- ----- ----- ----- -----
Operating income.................................... 17.2 16.2 9.5 4.9 6.4
Other expense (income).............................. 0.2 0.5 0.3 (0.1) 0.3
Interest expense.................................... 2.1 1.9 2.0 2.2 2.3
----- ----- ----- ----- -----
Earnings before income taxes........................ 14.9 13.8 7.2 2.8 3.9
Income taxes........................................ 5.6 4.6 3.0 1.3 (23.3)
----- ----- ----- ----- -----
Net earnings........................................ 9.3% 9.2% 4.2% 1.5% 27.2%
===== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 26, 1998 COMPARED TO SIX MONTHS ENDED JUNE 27, 1997
Operating Revenue. Operating revenue for the six months ended June 26,
1998 decreased $8.6 million or 3.1% to $266.9 million from $275.4 million for
the same period in 1997. Domestic barging revenue decreased $22.6 million due to
lower rates and ton-miles, partially offset by $9.2 million in increased sales
to third party customers at Jeffboat and a $6.6 million increase in
international revenues, primarily due to volume. The decrease in revenues
attributable to lower ratios was approximately $16.0 million and was primarily
due to decreased demand for U.S. grain exports resulting from increased
production by foreign producers which negatively impacted rate per ton for dry
cargo generally. The decrease in domestic ton-miles was due in part to adverse
river conditions in early 1998, including extended periods of high water on the
Mississippi River, and in part to reduced grain exports.
Operating Expense. Operating expense for the six months ended June 26,
1998 decreased $12.2 million, or 4.7%, to $249.7 million from $261.9 million.
Domestic barging expenses decreased $24.6 million, partially offset by an
increase in international barging and Jeffboat expenses of $7.8 million and $6.3
million, respectively, both primarily due to increased volumes. The decrease in
domestic barging expenses was due to reduced levels of barge repair, improved
barge to towboat ratios, and reduced use of third party towing services. The
Company also benefited from decreases in fuel prices and a reduction in variable
costs related to reduced ton-miles during the first half of 1998.
Operating Income. Operating income for the six months ended June 26, 1998
increased $3.6 million to $17.2 million from $13.6 million for the same period
in 1997 due to the foregoing factors.
Other Expense (Income). Other expense for the six months ended June 26,
1998 increased $1.1 million to $0.7 million compared to income of $.4 million
for the same period in 1997. The increase is primarily due to an increase in
minority interest earnings in South America.
Earnings Before Income Taxes. Earnings before income taxes for the six
months ended June 26, 1998 increased $2.6 million to $10.4 million compared to
$7.8 million for the same period in 1997.
Income Taxes (Benefit). Income taxes for the six months ended June 26,
1998 decreased $65.9 million to a benefit of $62.2 million from an expense of
$3.7 million for the same period in 1997. The Company was reorganized as a
limited liability company in the second quarter of 1998. Due to the change in
the tax status, previously recognized deferred income taxes were reversed
resulting in a benefit of approximately $65 million.
Net Earnings. Net earnings for the six months ended June 26, 1998
increased $68.6 million to $72.7 million from $4.1 million for the same period
in 1997 due to the foregoing factors.
40
<PAGE> 46
YEAR ENDED DECEMBER 26, 1997 COMPARED TO YEAR ENDED DECEMBER 27, 1996
Operating Revenue. Operating revenue for the year ended December 26, 1997
decreased $3.9 million, or 0.6%, to $618.2 million from $622.1 million for 1996.
Domestic barging revenue decreased $30.0 million due to reduced ton-miles and
rate per ton. The decrease in domestic ton-miles, reducing revenue by
approximately $5.0 million, was due, in part, to adverse river conditions,
including severe flooding on the Ohio River and the Upper Mississippi River
during the first half of 1997 and, in part, to lower volume driven by reduced
U.S. grain exports primarily resulting from increased grain production by
foreign producers. Rates decreased approximately $28.0 million. During 1997,
rates were negatively impacted by industry-wide vessel overcapacity. The
reduction in grain exports also negatively impacted rate per ton for dry cargo
generally. The decrease in domestic barging revenue was partially offset by
$16.0 million in increased revenues from third-party customers at Jeffboat and a
$8.7 million increase in international revenues, primarily due to expansion in
Argentina.
Operating Expense. Operating expense for the year ended December 26, 1997
increased $38.1 million, or 7.3%, to $559.6 million from $521.5 million for
1996. Domestic barging expense increased $9.8 million primarily due to increased
operating costs as a result of ice and extreme flooding on the Ohio and
Mississippi Rivers, including barge repair, partially offset by improved
productivity resulting from the Company's on-going cost control program and
lower fuel prices. International barging expense increased $16.3 million due to
increased volumes and start-up expansion in Argentina. Jeffboat's expenses
increased $11.8 million primarily due to increased production levels.
Operating Income. Operating income for the year ended December 26, 1997
decreased $42.1 million, or 42.0% to $58.6 million from $100.7 million for 1996
due to the foregoing factors.
Earnings Before Income Taxes. Earnings before income taxes for the year
ended December 26, 1997 decreased $42.0 million, or 48.7% to $44.2 million from
$86.2 million for 1996.
Income Taxes. Income taxes for the year ended December 26, 1997 decreased
$10.4 million, or 36.4%, to $18.3 million from $28.7 million for 1996. This
decrease was due to lower domestic earnings before income taxes.
Net Earnings. Net earnings for the year ended December 26, 1997 decreased
$31.5 million, or 54.9% to $25.9 million from $57.4 million for 1996.
YEAR ENDED DECEMBER 27, 1996 COMPARED TO YEAR ENDED DECEMBER 29, 1995
Operating Revenue. Operating revenue for the year ended December 27, 1996
increased $68.5 million, or 12.4%, to $622.1 million from $553.6 million for
1995. Domestic barging revenue increased $59.5 million primarily due to
increased tonnage hauled as a result of the January 1996 acquisition of the
barging operations of Continental Grain and higher grain freight rates. Grain
freight rates were positively impacted by greater U.S. grain exports.
International barging revenue increased $9.8 million primarily from operations
in Argentina which commenced in 1996.
Operating Expense. Operating expense for the year ended December 27, 1996
increased $63.4 million, or 13.8%, to $521.5 million from $458.1 million for
1995. This increase was primarily due to increased expenses associated with the
Continental Grain barging operations and higher fuel prices and, to a lesser
extent, start-up costs in Argentina.
Operating Income. Operating income for the year ended December 27, 1996
increased $5.2 million, or 5.4%, to $100.7 million from $95.5 million for 1995,
due to the foregoing.
Earnings Before Income Taxes. Earnings before income taxes for the year
ended December 27, 1996 increased $3.9 million, or 4.7% to $86.2 million from
$82.3 million for 1995.
Income Taxes. Income taxes for the year ended December 27, 1996 decreased
$2.2 million, or 7.1%, to $28.7 million from $30.9 million for 1995. This
decrease was due to the effect of international tax planning initiatives.
41
<PAGE> 47
Net Earnings. Net earnings for the year ended December 27, 1996 increased
$6.0 million, or 11.7% ,to $57.4 million from $51.4 million for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historical
Historically, the Company has used cash generated from operations to fund
capital expenditures and acquisitions, repay third-party and intercompany debt
and pay dividends.
Net cash provided by operating activities totaled $99.1 million, $113.6
million and $52.1 million for fiscal 1995, 1996 and 1997, respectively. The
decrease in net cash from operating activities in fiscal 1997 compared to fiscal
1996 was primarily attributable to a decrease in net earnings. The increase in
net cash from operating activities in fiscal 1996 compared to fiscal 1995 was
primarily attributable to an increase in net earnings.
Net cash from operating activities was used primarily for capital
expenditures. Expenditures were $33.4 million, $90.6 million and $51.5 million
in fiscal 1995, 1996 and 1997, respectively. Expenditures in 1997 included $24.0
million for domestic marine equipment and $18.5 million for expansion into
Argentina. Expenditures in 1996 included $31.0 million for domestic marine
equipment, $26.0 million for expansion into Argentina and $17.7 million for the
purchase of the barge assets of Continental Grain. In each of fiscal 1995, 1996
and 1997 net cash from operating activities was also used to pay cash dividends
to CSX ($20.5 million in 1995, $36.8 million in 1996 and $19.0 million in 1997),
and to repay affiliate and long-term debt.
Post-Transactions
The Company's principal sources of liquidity are cash flow generated from
combined operations and borrowings under the $100.0 million Revolving Credit
Facility. The Company's principal uses of capital are to meet debt service
requirements, finance the Company's capital expenditures and strategic
acquisitions and provide working capital. The Company expects that capital
expenditures in 1998 will be approximately $66 million, $25 million of which had
been spent as of June 30, 1998. Approximately half of the 1998 capital
expenditures has been allocated to international expansion. Similar expenditures
are expected in future years to fund international expansion. The Company
expects over the next five years to spend significant capital to replace an
average of 140 barges per year to maintain current fleet size and to spend
additional amounts as part of its growth strategy. If unable to fund such
replacement, the Company may be required to delay or forgo capital expenditures.
The Company expects that ongoing requirements for debt service, capital
expenditures and working capital will be funded by internally generated cash
flow from the combined operations after the Recapitalization and borrowings
under the Senior Credit Facilities.
The Company incurred substantial indebtedness in connection with the
Transactions. The Company has approximately $745.0 million of indebtedness as
compared to $21.6 million of third-party indebtedness and $67.2 million of
indebtedness owed to CSX at June 26, 1998. The Company's debt service
obligations could have important consequences to holders of the Exchange Notes.
See "Risk Factors." Indebtedness is net of $24.4 million of Terminal Revenue
Refunding Bonds which were defeased with funds invested in U.S. government
obligations deposited in an irrevocable trust.
In connection with the Transactions, the Company and the Parent entered
into the Senior Credit Facilities with the Lenders and Chase, as administrative
agent. The Senior Credit Facilities are comprised of the $100.0 million
Revolving Credit Facility maturing in 2005, and a term loan facility aggregating
$435.0 million, consisting of the Tranche B Term Loan of $200.0 million which
matures in 2006 and the Tranche C Term Loan of $235.0 million which matures in
2007. The Tranche B Term Loan will amortize at the rate of $1.0 million per year
for years one through five, $20.0 million for year six, $75.0 million for year
seven and $100.0 million for year eight, and the Tranche C Term Loan will
amortize at the rate of $1.0 million per year for years one through eight and
$227.0 million for year nine. The borrowings under the Term Loans, together with
the aggregate gross proceeds from the issuance of the Notes, borrowings under
the Revolving Credit Facility and proceeds from the Vectura Cash Contribution,
were used to consummate the Recapitalization and pay fees and expenses in
connection with the Transactions. The Revolving Credit Facility will provide
financing for future working capital and other general corporate purposes. See
"Description of the Senior Credit Facilities."
42
<PAGE> 48
Based upon the current level of operations and anticipated growth,
including the NMI operations and cash flow that management expects to be derived
from those operations, management believes that future cash flow from
operations, together with available borrowings under the Senior Credit
Facilities, will be adequate to meet the Company's anticipated cash requirements
for the next 12 months, which include capital expenditures (for fleet
replacement and international expansion), working capital, interest payments and
scheduled principal payments. There can be no assurance, however, that the
Company's business, including the NMI operations, will continue to generate
sufficient cash flow from operations in the future to service its debt and make
necessary capital expenditures after satisfying liabilities arising in the
ordinary course of business. If unable to do so, the Company may be required to
refinance all or a portion of its existing debt, including the Exchange Notes,
to sell assets, to obtain additional financing (including, possibly, a
capitalized lease program) or to lease, in lieu of purchasing, additional marine
equipment. There can be no assurance that any such refinancing would be possible
or that any such sales of assets or additional financing could be achieved. See
"Risk Factors."
BACKLOG
The Company's backlog represents firm orders for barge transportation and
marine equipment. The backlog at December 27, 1996 was $1,226.9 million and at
December 28, 1997 was $1,120.7 million. The backlog ranges from one to eleven
years, with approximately 34% expected to be filled within one year.
SEASONALITY
The Company's business is seasonal, and its quarterly revenues and profits
historically have been lower during the first and second fiscal quarters of the
year (January through June) and higher during the third and fourth fiscal
quarters (July through December) due to the fall grain harvest. In addition,
working capital requirements fluctuate throughout the year. Adverse market or
operating conditions during the last four months of the year could have a
greater effect on the Company's business, financial condition and results of
operations than during other periods.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive Federal, state and local
environmental laws and regulations which, among other things, specify
requirements for the management of oil, hazardous wastes, and hazardous
substances and impose liability for releases of these materials into the
environment. As is the case with others in the maritime industry, a release of
oil, hazardous waste, hazardous substances or other pollutants into the
environment at or by the Company's properties or vessels, as a result of the
Company's current or past operations, or at a facility to which the Company has
shipped wastes, or the existence of historical contamination at any of the
Company's properties, could result in material liability to the Company. The
Company endeavors to conduct its operations in a manner that it believes reduces
such risks. The Company is in discussions with the EPA, the DOJ and local law
enforcement authorities regarding alleged violations of various environmental
laws and has also been identified as a PRP with respect to the cleanup of
certain waste disposal sites. See "Risk Factors -- Company-Specific
Risks -- Environmental, Health and Safety Requirements."
Federal, state and local governments could in the future enact laws or
regulations concerning environmental matters that affect the Company's
operations or facilities, increase the Company's costs of operation, or
adversely affect the demand for the Company's services. The Company cannot
predict the effect that such future laws or regulations could have on the
Company. Nor can the Company predict what environmental conditions may be found
to exist at the Company's current or past facilities or at other properties
where the Company or its predecessors have arranged for the disposal of wastes
and the extent of liability that may result from the discovery of such
conditions. It is possible that such future laws or undiscovered conditions
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company does not anticipate material
capital expenditures for environmental controls in the current or succeeding
fiscal year. See "Business -- Environmental Matters."
43
<PAGE> 49
YEAR 2000 ISSUE
In mid-1997, the Company formed a Year 2000 project team to identify
information technology and non-technology systems that require modification for
the Year 2000. A project plan has been developed with goals and target dates.
The Company's business areas are in various stages of this project plan. Certain
changes to the project plan were made to accommodate the integration of the
operations of National Marine, Inc. The Company currently expects to have
substantially completed programming changes and internal testing of internal
mission critical computer systems by July 1999, and to have begun significant
enterprise testing of mission critical systems in April 1999, with such
enterprise testing continuing through 1999. The Company currently expects to
have substantially completed remediation and testing of both information
technology and non- technology systems that the Company deems are of high
business value and priority by July 1999.
The Company incurred expenses of $0.9 million throughout 1997 and in the
first two quarters of 1998 related to this project, which represents
approximately 14% of its total information technology operating expense for the
related periods. The remaining cost of the Year 2000 project is presently
estimated at $2.6 million which will be expensed as incurred through 2000. A
portion of the total Year 2000 project expense is represented by existing staff
that has been or will be redeployed to this project. The Company does not
believe that the redeployment of existing staff will have a material adverse
effect on its business, results of operations or financial position. However,
the remaining cost and the date on which the Company believes it will complete
the Year 2000 project are based on management's current estimates, which are
derived utilizing numerous assumptions of future events including the continued
availability of certain staff resources, and are inherently uncertain.
As a part of its Year 2000 project, the Company is in communication with
its mission critical suppliers, large customers and financial institutions and
other significant third parties to assess their Year 2000 readiness. Risks
associated with any such third parties located outside the United States may be
higher insofar as it is generally believed that non-U.S. business may not be
addressing their Year 2000 issues on as timely a basis as U.S. businesses.
The Company believes its planning efforts are adequate to address its Year
2000 concerns. There can be no assurance, however, that the Company's efforts
will be successful in a task of this size and complexity. The Company is
currently assessing the consequences of its Year 2000 initiative not being
completed on schedule or its remediation efforts not being successful. Upon
completion of such assessment, the Company will begin contingency planning,
including efforts to address potential disruptions in third-party services, such
as telecommunications and electricity, on which the Company's systems and
operations rely. There can be no assurance that the Company's contingency plans
or its efforts with respect to third parties will prevent a material adverse
effect on the Company's business, results of operations or financial condition.
CHANGES IN ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This Statement requires that public business enterprises disclose
information about their products and services, operating segments, the
geographic areas in which they operate, and their major customers. Management
adopted the provisions of this Statement in 1997.
In 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained For Internal Use." This Statement requires
capitalization of (i) external direct costs of materials and services incurred
in developing or obtaining internal-use computer software; (ii) payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the internal-use computer software project and (iii) interest
costs incurred in developing computer software for internal use. Costs that are
considered to be related to research and development activities would be
expensed as incurred. Similarly, training and maintenance costs would be
expensed, and allocations to amounts capitalized of general and administrative
or
44
<PAGE> 50
overhead costs would not be permitted. Management adopted this Statement with
early application in 1997 with no significant effect on the financial
statements.
In February 1998, the FASB issued Statement No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits." The Statement
supersedes the disclosure requirements in Statements No. 87, "Employer's
Accounting for Pensions", No. 88, "Accounting for Settlements and Curtailments
of Defined Benefit Plans and for Termination Benefits", and No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions." Statement No. 132
eliminates certain existing disclosure requirements, but at the same time adds
new disclosures. The Company will adopt the provisions of this Statement in
1998.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income", which establishes new rules for the reporting of comprehensive income.
The purpose of reporting comprehensive income is to report all changes in equity
of an enterprise that result from recognized transactions and other economic
events of a period other than transactions with owners in their capacity as
owners. Statement No. 130 does not specify a format for the financial statement
that portrays the components of comprehensive income but requires that a Company
display an amount representing total comprehensive income for the periods
reported in the financial statement. The Company adopted Statement No. 130 in
the first quarter of 1998 but the adoption had no impact on the Company's
shareholder's equity or net earnings.
In April 1998, the AICPA issued Statement of Position No. 98-5, "Reporting
on the Costs of Start-Up Activities" (SOP 98-5) which requires costs of start-up
activities and organizational costs to be expensed as incurred. The Company has
historically expensed start-up costs. It will adopt SOP 98-5 in fiscal 1999, and
does not anticipate that it will have any significant impact on the Company's
financial statements.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. The accounting for changes
in the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and resulting designation. This statement is
effective for fiscal years beginning after June 15, 1999, but earlier
application is encouraged. The Company has not determined when it will adopt
Statement No. 133, but expects adoption will not have a significant effect on
its financial statements.
45
<PAGE> 51
BUSINESS
GENERAL
ACL is an integrated marine transportation and service company, providing
barge transportation services. The principal cargoes carried are grain, coal,
steel and other bulk commodities and liquids. The Company supports its barging
operations by providing towboat and barge design and construction, terminal
services and ship-to-shore voice and data telecommunications services to the
Company and third parties. The Company is the leading provider of river barge
transportation throughout the inland United States and Gulf Intracoastal
Waterway Systems, which include the Mississippi, Illinois, Ohio, Tennessee and
the Missouri Rivers and their tributaries and the Intracoastal canals that
parallel the Gulf Coast (collectively, the "Inland Waterways"). In addition,
since expanding its barge transportation operations to South America in 1993,
the Company has become the leading provider of barge transportation services on
the Orinoco River in Venezuela and the Parana/Paraguay River system serving
Argentina, Brazil, Paraguay, Uruguay and Bolivia. The Company believes that its
leadership position provides it with significant competitive advantages in terms
of its ability to generate revenue, manage costs and expand its operations. For
the twelve months ended June 26, 1998, pro forma for the Transactions, the
Company generated operating revenue, EBITDA and adjusted EBITDA of $732.3
million, $137.2 million and $146.2 million, respectively.
The Company's barge fleet is the largest in the United States and comprises
approximately 19% of the total dry cargo and 16% of the liquid cargo barge
capacity in the United States. The Company's domestic barge fleet consists of
3,068 covered and 776 open barges which are used for the transportation of dry
cargo including grain, steel, coal and other bulk cargoes and 446 tankers which
are used for the transportation of a variety of chemicals, petroleum and edible
oils. The Company's barge fleet is supported by the largest towboat fleet in the
United States, consisting of 189 towboats. The Company believes that the size of
its towboat fleet allows it to minimize the amount of idle barge time, thereby
increasing revenue per barge. The international fleet consists of 114 covered
and 113 open hopper barges, 13 tankers, 7 deck barges and 12 towboats.
The Company, through its Jeffboat LLC ("Jeffboat") subsidiary, designs and
manufactures towboats and barges for the Company and third-party customers.
Through its American Commercial Terminals LLC ("ACT") subsidiary, which operates
16 river terminal sites along the Inland Waterways, the Company supports its
barging operations with transfer and warehousing capabilities for steel, bulk,
liquid and other general commodity products moving between barge, truck and
rail. Through its Louisiana Dock Company LLC ("LDC") subsidiary, the Company
operates 22 facilities throughout the Inland Waterways that provide fleeting,
shifting, cleaning and repair services for both towboats and barges, primarily
to the Company as well as to third-party customers. The Company, through its
Waterway Communications System LLC ("Watercom") subsidiary, is the premier
provider of automated ship-to-shore voice and data telecommunications services
throughout the Inland Waterways.
COMPANY STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
Market Leadership. ACL is the premier provider of river barge
transportation in North America. The Company leads the industry in terms of
revenues, gross tons hauled and fleet size. ACL is the largest provider of dry
cargo transportation on the Inland Waterways, with leading positions in grain
and bulk cargo shipments. In addition, the Company is the second largest
provider of coal and liquid cargo river transportation. In recent years, ACL
also has become the leading provider of river barge transportation in South
America. The Company believes that its leadership position provides it with
significant competitive advantages in terms of its ability to generate revenues,
manage costs and expand its operations.
Full Service Fleet. ACL has the largest fleet on the Inland Waterways,
consisting of the largest number of hopper barges and towboats and the second
largest number of tankers in the industry. The Company's barge fleet is nearly
double the size of that of its largest competitor. The barge fleet meets all
current regulatory requirements and has already met the Federal requirement that
all tank barges be double-skinned by 2015. The size and diversity of ACL's fleet
allow it to service the most ports with the greatest frequency, thereby
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<PAGE> 52
providing superior customer service and maximizing profitable backhaul
opportunities. These advantages allow ACL to maximize the tonnage that a barge
can transport over a given time period, significantly enhancing the Company's
ability to generate revenues.
Long-standing Customer Relationships. ACL has a strong and diverse
customer base consisting of several of the leading industrial and agricultural
companies in the United States. The Company has a number of long-standing
customer relationships, with 20 of ACL's top 25 customers having been customers
of the Company for over 20 years. In many cases, these relationships have
resulted in multi-year contracts with these customers. Long-term contracts
generally provide for minimum tonnage or requirements guarantees, which allow
the Company to plan its logistics more effectively. A majority of the Company's
contracts for non-grain cargoes are also at a fixed price, increasing the
stability and predictability of operating revenue. As of July 1, 1998, ACL had
contracted to transport 69 million tons domestically in 1998, of which 64
million tons are fixed as to price.
Fully Integrated Operator. As a fully integrated inland river
transportation company, ACL believes it has a substantial cost advantage over
some of its competitors. Through effective coordination of its barging,
shipbuilding, terminals, fleeting, repair and communications services, ACL
reduces costs while maintaining each business unit's ability to generate
third-party revenues. In addition, the Company believes it is a technology
leader in the barging industry. ACL has made significant investments that allow
it to maximize operating efficiency through technologies such as real-time cargo
tracking. This investment in technology strengthens the Company's ability to
compete by lowering its cost structure and enhancing the quality of the services
and products provided.
Low Cost Operator. As a fully integrated operator, ACL believes it is able
to minimize costs through economies of scale and savings generated across its
vertically integrated business lines. In addition, the Company closely manages
operating expenses and continuously undertakes cost-cutting initiatives such as
a two-year staff review and restructuring effort, the adoption of best practices
and the utilization of process improvement teams. These initiatives have
resulted in aggregate first-year savings of at least $70 million since 1992.
Management believes that many of these savings are recurring in nature.
Successful Track Record of Integrating Acquisitions. Over the past several
years, ACL has been able to successfully complete and integrate multiple large
acquisitions, including SCNO Barge Lines, Inc., Hines, Inc., The Valley Line
Company and Continental Grain's barging operations. ACL believes that it will be
able to use this expertise to rapidly integrate the barge operations of NMI,
which are being combined with those of the Company as part of the
Recapitalization, permitting it to realize substantial synergies quickly. In
addition to the $17.7 million of synergies reflected in adjusted pro forma
EBITDA, ACL believes that the integration of NMI's operations into its fleet
will improve logistics and thus increase overall fleet capacity, resulting in
additional annual operating income of approximately $4 million by fiscal 1999.
The Company believes that its previous successes, combined with its size and
extensive organizational infrastructure, make it well-positioned to acquire
additional barging operators, thereby continuing to improve its cost structure
and service capability.
Management Experience. ACL's senior management team, which has an average
of 20 years with ACL and its affiliates and an average of more than 27 years of
transportation industry experience, is among the most qualified in the industry.
The management team has a detailed knowledge of each of the Company's businesses
and markets. Their knowledge and depth of experience will help ACL to continue
to improve its competitive position. In addition, the Management Investors will
own membership interests in the Parent.
BUSINESS STRATEGY
The Company's objective is to achieve stable earnings growth in its core
barging business as well as its shipbuilding, terminals and communications
operations. ACL will continue to build upon its reputation as a leader in the
inland river transportation industry. The key elements of the Company's strategy
are as follows:
Improve Operating Efficiency. ACL has focused its efforts on continuously
improving its cost structure and operating efficiency. As the largest and only
fully integrated barging company, ACL maintains a low cost structure through
economies of scale, investment in technology and savings generated from vertical
integration. In addition, ACL uses process improvement teams to target specific
areas for cost reduction and control. The Company establishes an annual cost
reduction target and assigns cross-functional process
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<PAGE> 53
improvement teams to recommend and implement actions to reduce costs and/or
increase efficiency in the targeted areas.
Grow Through Strategic Acquisitions. The Company intends to pursue
synergistic acquisitions in its core business lines. ACL believes that there
will continue to be opportunities to make such acquisitions that create value
through a combination of enhanced revenue opportunities and cost reductions. In
particular, some major companies have recently sold or are considering the sale
of their barging operations in an effort to focus on their core business lines.
In conjunction with these divestitures, companies often establish long-term
shipping contracts with the purchasers of their fleets in order to secure
reliable transportation for their cargoes. In 1996, ACL acquired Continental
Grain's barge fleet in such a transaction. Based upon the success of this
acquisition and other similar transactions, combined with the Company's ability
to provide long-term, reliable service to its customers, ACL believes that it is
particularly well-positioned to continue to grow through strategic acquisitions.
Expand Internationally. Over the past several years, the Company has
developed a targeted international expansion strategy. ACL initially implemented
this strategy by establishing operations to serve a new customer's shipping
needs along the Orinoco River in Venezuela. Since then, the focus of ACL's
international strategy has been to serve customers that require reliable,
low-cost transportation abroad. The Company works closely with current and
potential customers to establish mutually beneficial long-term contracts to
serve these needs. By following this strategy, ACL has become the leading
provider of barge transportation on the Orinoco River in Venezuela and the
Parana/Paraguay River system serving Argentina, Brazil, Paraguay, Uruguay and
Bolivia. Because the demand for transportation in South America is expected to
enjoy rapid and substantial growth, ACL has the opportunity to significantly
broaden the scope of its operations. Expansion possibilities include servicing
more multinational and local customers, broadening the array of cargoes
transported and servicing additional river systems.
ACL believes that its significant investment in the infrastructure,
training and customer service required to operate profitably in South America
will not be quickly or easily replicated by competitors. In addition, the
Company believes that its expansion strategy can be effectively applied to other
foreign markets.
Continue to Improve Quality. ACL has developed a reputation for having one
of the highest quality operations in the inland river transportation industry.
The Company has implemented a quality improvement process to ensure that
customer requirements are identified and that processes are in place to ensure
that those requirements are met. The Company seeks to involve the entire
workforce to continually improve these processes on an ongoing basis. The
Company's emphasis on quality allows it to provide a superior level of customer
service at a competitive price. This reputation as a quality leader enhances
ACL's ability to successfully secure valuable contracts and has allowed it to
build strong, profitable relationships with its customers.
Maintain Emphasis on Safety. Through continuous improvements, ACL has
greatly improved safety conditions since 1990. During this time, while headcount
increased 37% through acquisitions, international expansion and increased
Jeffboat production, the safety incident rate improved 69%. The key to ACL's
success in reducing workplace injuries has been broad-based work force
participation in all safety programs and processes.
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<PAGE> 54
INDUSTRY
Overview
The U.S. barge industry has experienced modest cargo tonnage growth over
the past ten years. Tonnage carried on the Inland Waterways has grown from 570
million tons in 1987 to 622 million tons in 1996 (the latest year for which data
are available). During this same time period, the overall barge fleet has grown
from 19,967 barges to 21,731 barges.
<TABLE>
<CAPTION>
TOTAL INLAND WATERWAYS
-----------------------------------------
TONNAGE BARGE FLEET
--------------------- -----------------
(IN MILLIONS)
<S> <C> <C>
1987 570 19,967
1988 588 20,197
1989 606 21,131
1990 623 21,352
1991 600 21,249
1992 621 20,799
1993 607 21,232
1994 618 21,156
1995 620 21,280
1996 622 21,731
</TABLE>
Since 1980, the industry has been consolidating as acquiring companies have
moved towards attaining the widespread geographic reach necessary to support
major national customers. The Company's management believes that the
consolidation process will continue. There are currently five major domestic
barging companies that operate more than 1,000 barges. There also are 17
mid-sized operators that operate over 200 barges, and approximately 13% of
barging capacity remains in the hands of small carriers that operate fewer than
200 barges. As the industry continues to consolidate, the Company believes that
it will be well-positioned to realize cost savings and synergies by merging
smaller operators into its existing network.
Primary Domestic Cargoes
Domestic barging focuses on five core commodity groups: grain, coal, steel,
bulk commodities and liquids.
Grain
The United States dominates the world production and export of coarse grain
(corn, barley, oats, sorghum and milo), and 70% of historical U.S. coarse grain
exports were exported through the Port of New Orleans via the Mississippi River,
the center of the Company's North American service area. Corn is the major
commodity, accounting for 93% of historical U.S. coarse grain exports through
the Port of New Orleans. During the 1990s, U.S. coarse grain exports averaged
57% of total world coarse grain exports, a figure that is projected to increase
to 65% by 2003. Most of this increase can be traced to three distinct trends:
increased consumption of coarse grain by China (forecasted by the U.S.
Department of Agriculture ("USDA") to be a net importer by 2003), increased
demand spurred by the overall world population annual growth rate (1.8%) and
improving living standards in developing economies.
While grain is not the largest category of barge transport in terms of
tonnage, it is a material driver for the industry's overall freight rate
structure for dry cargo movements. Because U.S. grain production and export
demand fluctuates, grain cargoes become the swing factor for the industry's
utilization rates. In years of high export demand and high domestic production,
grain transportation rates tend to increase as shippers compete for barge
availability. Rate pressure is exerted as shippers of other commodities using
covered barges compete for available capacity, causing the rates for all dry
commodities to increase. In years of lower domestic grain production or slack
export demand, grain transportation rates tend to decline, easing the rates on
alternative cargoes.
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<PAGE> 55
Coal
From a tonnage standpoint, coal is the barging industry's largest transport
commodity. Approximately 170 million tons of domestic coal were moved by water
in 1996 (the latest year for which industry data are available). There are three
primary sources of demand for coal: utilities (which generally represent over
80% of total demand), industrial and coke producers and exports. Demand,
particularly from utilities, remains fairly constant on a year-to-year basis and
transportation contracts with utilities are customarily multi-year, fixed price
contracts with escalation clauses. The Company believes that utility
deregulation should lead to increased demand for coal at river-served utility
plants.
Steel
Steel is a mature industry that in the recent past has experienced steady,
but modest overall growth. Total demand for finished steel products remains in
the 100-105 million ton range and riverborne tonnage has been approximately 9-10
million tons per year. However, new mini-mills and their feedstock plants are
being located with river access to provide for low-cost transportation,
providing an excellent growth opportunity for the barging industry. Industry
sources estimate that an additional 14 million tons of mini-mill steel-making
capacity will have come on line during the 1990s. The Company believes that
continued growth in mini-mills should spur demand for scrap and iron ore,
providing additional opportunities for domestic barge operators.
Bulk Commodities
Because barging provides a low-cost transportation alternative for high
mass/high volume cargoes, many bulk commodity shippers choose barging as their
preferred mode of transportation. The primary bulk commodities shipped by
domestic barges include alumina, salt, scrubber sorbents, cement, fertilizer and
forest products. Criton Corporation ("Criton") estimates that, over the next
three years, river-served alumina shipments will remain constant in the 3.0-3.5
million ton range, while fertilizer and salt shipments will remain stable at
11.5 and 6.0 million tons, respectively. In addition, Criton estimates that,
over the next three years, overall demand for cement should remain constant,
while forest products shipments should experience some growth due to strong
export demand as well as increased production by domestic chip mills along the
Mississippi River system.
Liquids
Liquid cargo transportation provides attractive margins, while exhibiting
relatively steady rate levels and profit margin opportunities. Chemicals are the
primary liquid cargo handled by liquid barge carriers. These chemicals include:
caustic soda, styrene, methanol, ethylene glycol and propylene oxide. Annual
growth for these chemicals is expected to be at least 2-3% over the next three
years. Approximately 84% of the production capacity of the above-mentioned
chemicals is located on the Inland Waterways. The other primary liquid
commodities shipped by domestic barges include petroleum products, edible oils,
including soybean oil, molasses and ethanol. Annual growth for petroleum
products, edible oil and ethanol is expected to be from 1-3%, 1% and 1%,
respectively, over the next three years. Safety and quality control are
essential factors in serving this market.
Pricing
There are essentially three forms of pricing in the barging industry: spot
pricing, annual pricing and long-term contract pricing. Spot pricing is
determined by a competitive marketplace where barge operators provide their
services at the then current rate. The St. Louis Merchants Exchange serves as an
indicator of barge transportation spot rates.
Pricing for annual and long-term contracts involves forecasts of demand
conditions. On a customer specific level, there are several important factors in
determining barge contract rates. In particular, contracts for larger volumes
and longer distances will normally generate lower costs per ton-mile due to the
efficiencies gained from carrying full barge loads and the savings associated
with keeping towboats fully utilized. In
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<PAGE> 56
addition, longer term contracts generally provide for fixed pricing with
escalation formulas and help to stabilize earnings and produce predictable
minimum cash flows.
Marine Equipment Description
The barging industry uses two types of equipment to move freight: towboats
and barges. The combination of a towboat, which provides power and navigation,
and barges, which carry the freight, is referred to as a tow. A tow usually
consists of one towboat and from five to 40 barges depending upon the horsepower
of the towboat, the river conditions, the load and empty mix of the tow, the
direction of travel and the commodity carried.
Open Hopper Barges
The open hopper barge is a double-skinned open hopper box without covers.
Its inner shell forms the cargo hold. Open hoppers are multi-purpose vessels
that carry a wide range of commodities that require no protection from the
elements. The most common usage is the transportation of coal. A typical new
open hopper barge costs approximately $250,000 and has an expected life of
approximately 25 years if it remains uncovered.
Covered Hopper Barges
The covered hopper barge is an open hopper barge with a set of eight or
nine covers mounted upon it. There are two types of covers: rolling covers and
lift covers. Both types of covered hopper barges are used for cargo that needs
to be protected from the elements, with lift covers used primarily for grain and
rolling covers used for other bulk commodities such as steel, paper, alumina,
salt and cement. A typical new covered hopper barge costs approximately $300,000
and has an expected life of approximately 25 years as a covered hopper barge and
up to an additional five years as an open hopper barge once the cover is
removed.
Tank Barges
There are three basic types of tank barges ("tankers") that are currently
in use by the domestic barge industry. In the past the most common tanker was
the single-skinned type which had a bow and stern void. While these tankers were
less costly to manufacture than a double skinned tank barge, any puncture of
that single skin would result in a cargo spill and possible environmental
damage. Due to these concerns, new environmental legislation requires that these
tankers be phased-out by 2015. The single-skinned tanker is being replaced by
the double-skinned tanker, which consists of an inner cargo compartment or group
of compartments surrounded by a void space on the bow, stern, sides, and bottom.
A third type of tanker has independent cylindrical tanks which are similar to a
hopper type barge. These tankers most often carry cargoes either under pressure
or at high or low temperatures. Tanker costs range from approximately $700,000
for a typical new 10,000 barrel capacity tanker up to approximately $1,500,000
for a typical new 30,000 barrel capacity tanker, and has an expected life of
approximately 30 years.
Deck Barges
Deck barges are a box type hull with a well-supported deck. Some will have
a coaming around the deck area to contain the cargoes they move without
spillage. Deck barges are used to transport machinery, containers, vehicles,
heavy equipment, sand, stone and gravel. In addition, deck barges are used by
dredging companies to move dredge material and by the logging industry to
transport logs. A typical new deck barge costs approximately $250,000 and has an
expected life of approximately 30 years.
Towboats
Towboats are the most expensive floating equipment in a barging operation.
A typical new towboat can range in price from $1 million to $8 million depending
upon the horsepower that it generates. Horsepower is the key statistic used to
compare different towboats since the value of a towboat lies in the number of
barges that it can effectively push and maneuver. Much of barging logistics is
dedicated to generating optimal barge/
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<PAGE> 57
horsepower matches while minimizing the time that towboats remain in port. The
average towboat has an expected life of approximately 40 years.
COMPANY OPERATIONS
Domestic Barging
ACL is the leading provider of barge transportation in the United States,
operating over nearly 11,000 miles of the Inland Waterways and transporting a
wide variety of commodities, including coal, corn, soybeans, liquids, steel and
bulk commodities. ACL is ranked first in the United States in terms of revenues,
barges operated and gross tons hauled. With 3,844 dry cargo hopper barges and
446 tankers, all of which are double-skinned tankers, ACL's barge fleet accounts
for 19% of the domestic industry's dry cargo fleet and 16% of the tanker fleet.
Of ACL's 3,844 dry cargo hopper barges and 446 tankers, 765 and 40 are operated
by ACL pursuant to charter agreements, respectively. The charter agreements have
expiration dates ranging from one to four years. The Company expects generally
to be able to renew such charter agreements as they expire.
DOMESTIC FLEET PROFILE BY BARGE TYPE(1)
<TABLE>
<CAPTION>
AVERAGE AGE
-------------------
% OF TOTAL TOTAL
BARGE BARGE
NUMBER FLEET COMPANY FLEET
------ ------------- ------- --------
<S> <C> <C> <C> <C>
BARGES
Covered hoppers.................................. 3,068 24.7% 17.2 15.9
Open hoppers..................................... 776 12.2% 22.7 13.5
Tankers.......................................... 446 15.9% 19.7 20.5
----- ---- ---- ----
Total.................................... 4,290 18.9% 18.5 15.9
===== ==== ==== ====
</TABLE>
- ---------------
(1) Excludes marine equipment used in international operations. See
"-- International Barging."
In addition, ACL operates 189 towboats with an average age of approximately
23 years. No comparative industry data is available with respect to towboats. Of
ACL's 189 towboats, 45 are operated by ACL pursuant to charter agreements. The
charter agreements have expiration dates ranging from one to five years. The
Company expects to be able to renew such charter agreements as they expire.
The size and diversity of ACL's towboat fleet allows it to deploy the
towboats to the portions of the Inland Waterways where they can most effectively
operate. For example, ACL's towboats that have in excess of 8,000 horsepower
operate with tow sizes of 30 to 35 barges along the lower Mississippi River
where the river channels are wider and there are no restricting locks and dams.
ACL's 5,600 horsepower towboats operate along the Ohio, upper Mississippi and
Illinois Rivers where the river channels are narrower and restricting locks and
dams are more prevalent. ACL deploys its smaller horsepower towboats for shuttle
and harbor services.
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<PAGE> 58
DOMESTIC TOWBOATS BY HORSEPOWER(1)
<TABLE>
<CAPTION>
NUMBER OF AVERAGE
HORSEPOWER TOWBOATS AGE
---------- --------- -------
<S> <C> <C>
6,700 - 10,500.............................................. 16 20.5
5,000 - 6,500............................................... 53 23.5
1,950 - 4,900............................................... 35 25.2
1,800 and below............................................. 85 22.1
--- ----
Total.................................................. 189 22.9
=== ====
</TABLE>
- ---------------
(1) Towboats owned and chartered.
ACL's barging operations focus on five core commodity groups: grain, coal,
steel, bulk cargo and liquids. In terms of annual riverborne tonnage, ACL is the
leading grain transporter in the industry and is the second largest liquids
transporter in the United States. In terms of tonnage, bulk/steel is ACL's
largest transport commodity with coal and grain second and third, respectively.
Bulk/steel is also the Company's largest source of revenue, with grain and
liquids transport second and third, respectively.
ACL DOMESTIC BARGING OPERATIONS BY COMMODITY
<TABLE>
<CAPTION>
1995 1996 1997
-------------------------------- -------------------------------- --------------------------------
REVENUE % TONNAGE % REVENUE % TONNAGE % REVENUE % TONNAGE %
------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
(DOLLARS AND TONNAGE IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Grain................ $146 26.0 14 19.7 $162 26.3 18 24.7 $134 23.1 17 23.0
Coal................. 94 16.8 25 35.2 89 14.5 22 30.1 88 15.1 22 29.7
Bulk/Steel........... 136 24.2 21 29.6 169 27.5 23 31.5 158 27.2 24 32.4
Liquids.............. 108 19.3 11 15.5 110 17.9 10 13.7 116 20.0 11 14.9
Other(1)............. 77 13.7 -- 0.0 85 13.8 -- 0.0 85 14.6 -- 0.0
---- ----- -- ----- ---- ----- -- ----- ---- ----- -- -----
Total........ $561 100.0 71 100.0 $615 100.0 73 100.0 $581 100.0 74 100.0
==== ===== == ===== ==== ===== == ===== ==== ===== == =====
</TABLE>
- ---------------
(1) Includes towing and demurrage.
To support the Company's domestic barging operations, ACL operates 22
shore-based facilities throughout the Inland Waterways that provide fleeting,
shifting, cleaning and repair services for both towboats and barges, including
five towboat dry-docks and nine barge dry-docks.
International Barging
ACL launched its international barging operations in South America in 1993.
The Company currently operates on the Orinoco River, with headquarters in Puerto
Ordaz, Venezuela, and on the Parana/Paraguay River system, with headquarters in
Rosario, Argentina. A significant portion of the Company's planned capital
expenditures for the next few years will be dedicated to international growth.
While South American operations generated only 5% of ACL's 1997 operating
revenue, management expects revenues from South American operations to increase
significantly in the coming years. The Company's expansion in South America has
been effected by introducing new equipment and technology to the South American
river systems, transplanting systems used in the United States and developing
new processes to meet local requirements. ACL expects to use its expertise to
expand its barging operations into new regions. For fiscal years 1996 and 1997,
the Company's international operations generated revenue of $27.4 million and
$36.0 million, generated operating profit of $10.6 million and $3.0 million, and
had assets of $72.5 million and $89.5 million, respectively.
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<PAGE> 59
INTERNATIONAL FLEET PROFILE BY BARGE TYPE
<TABLE>
<CAPTION>
NUMBER AVERAGE AGE
------ -----------
<S> <C> <C>
BARGES
Covered hoppers........................................... 114 5.0
Open hoppers.............................................. 113 15.2
Tankers................................................... 13 4.6
Deck...................................................... 7 2.9
--- ----
Total............................................. 247 9.6
=== ====
</TABLE>
Of ACL's international barge fleet, 19 dry cargo barges are operated by ACL
pursuant to charter agreements with expiration dates of one year. The Company
expects generally to be able to renew such charter agreements as they expire. In
addition, ACL operates 12 towboats in South America.
Barge and Towboat Design and Manufacturing
Jeffboat manufactures both towboats and barges for the Company and
third-party customers primarily for inland river service, but also produces
equipment for coastal and offshore markets. Jeffboat has long been recognized as
a leader in inland marine technology, incorporating designs and propulsion
systems derived from ongoing model basin studies. Jeffboat also provides
around-the-clock vessel repair services, including complete dry-docking
capabilities, back-up support for emergency cargo salvage and equipment
recovery, and full machine shop facilities for repair and storage of towboat
propellers, rudders and shafts.
The Company is Jeffboat's largest customer. Approximately 28% of Jeffboat's
1998 shipbuilding capacity is committed to ACL. The Company believes that the
partnership between its barging operations and Jeffboat is a competitive
advantage for ACL, permitting optimization of construction schedules and asset
utilization between ACL's internal requirements and sales to third-party
customers and giving Jeffboat's engineers an opportunity to collaborate with
ACL's barge operations on innovations that optimize towboat performance and
barge life.
Terminals
The Company's ACT subsidiary operates 16 river terminal sites along the
Inland Waterways. Most terminals offer transfer and warehousing capabilities for
steel, bulk, liquid and other general commodity products moving between barge,
truck and rail. Seven of the facilities in the Memphis and Arkansas areas are
jointly owned with Mid-South Terminal Company, L.P., an unaffiliated third
party. The focus of the Company's terminal operations is to support ACL's core
barging operations. As a result, the terminal group primarily pursues
opportunities that fit well with ACL's barging patterns and the majority of the
terminals' tonnage is transported by ACL barges. ACT operates terminal
facilities in Jeffersonville, Indiana, Louisville, Kentucky, Cincinnati, Ohio,
Evansville, Indiana, Guntersville, Alabama, Omaha and Nebraska City, Nebraska,
St. Louis, Missouri, Memphis, Tennessee, West Memphis, Arkansas, Helena,
Arkansas, Osceola, Arkansas, Pine Bluff, Arkansas and Fort Smith, Arkansas.
Ship-to-Shore Telecommunications Services
Watercom is the premier provider of automated ship-to-shore voice and data
telecommunications services throughout the Inland Waterways. Watercom is
comprised of 55 shore stations with approximately 1,000 installed units on
towboats and other vessels throughout the Inland Waterways. Through the Watercom
connection, customers can send and receive both phone calls and faxes, receive
data to on-board computers and maintain radio communications for all areas where
there is no phone connection. The Company is able to utilize this technology to
integrate towboat locations with ACL's barge tracking software to obtain
relative tracking of its towboat locations and thereby provide its barging
customers with real-time updates of cargo arrivals.
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<PAGE> 60
CUSTOMERS
The Company's main domestic barging customers include many of the nation's
major industrial and agricultural companies. The Company enters into a wide
variety of short and long-term contracts with these customers ranging from
annual one-year contracts to multi-year extended contracts with inflation
adjustments. Approximately 50% of ACL's annual capacity is currently under
multi-year contracts. ACL's top 25 domestic barging customers accounted for 43%
of ACL's fiscal 1997 pro forma consolidated operating revenue. No customer, or
group of customers under common control, accounted for more than 10% of the
Company's fiscal 1997 pro forma consolidated operating revenue.
SALES AND MARKETING
The Company's sales and marketing department manages its sales efforts by
commodity, with specialized market knowledge in each area. In addition to
negotiating annual and multi-year contracts, the sales and support staff
maintains contact with customers to fulfill day-to-day contractual requirements.
The primary efforts of the sales staff are oriented toward building and
maintaining long-term relationships with the major shippers in each commodity
area. The distribution services group matches daily customer shipping
requirements to the barge fleet locations for maximum logistical efficiency.
Where possible, the sales force also works closely with customers to package
complete transportation arrangements through Company terminal locations.
The Company is implementing a 24-hour planning center, scheduled to be
operational by the fall of 1998, to provide around-the-clock customer contact
and planning capability. In addition to superior customer service, another
anticipated benefit of the Planning Center is improved communication between
vessels and office staff for improved logistics and asset utilization.
COMPETITION
The Company's barging operations compete on the basis of price, service and
equipment availability. Primary competitors of the Company's barging operations
include other barge lines, railroads, trucks and pipelines. Barge transportation
provides the lowest unit cost of delivery of any major form of transportation
for high volume, bulk products, delivering 12% of the volume of U.S. freight for
2% of the total U.S. freight cost, according to data available from the USDT.
One standard hopper barge has the equivalent carrying capacity of 15 railcars or
58 trucks. In areas where shippers have access to water transportation, the rate
per ton-mile is significantly less than rail rates and approximately 10% to 20%
of truck rates. While it is generally less expensive to move large volumes of
certain liquids by pipeline when both the origin and destination have a direct
connection to the pipeline, barge transportation of liquids has greater
flexibility with respect to the origins and destinations that can be served.
The Company considers Jeffboat's major competitor to be Trinity Industries
Inc. which operates seven inland shipyards and which the Company estimates
manufactures approximately 63% of the new supply of barges. The Company believes
that in addition to Trinity, Jeffboat's other competitors include Bollinger
Machine Shop and Shipyard, Inc. and Galveston Shipbuilding Company for barges
and Halter Marine, Inc. and Quality Shipyards, Inc. for towboats, all of which
are located primarily on the Gulf of Mexico.
Competition within the barging industry for major commodity contracts is
intense. There are a number of companies offering transportation services on the
Inland Waterways. Carriers compete not only on the basis of commodity shipping
rates, but also with respect to value-added services, including more convenient
and flexible scheduling, more timely information and better equipment. The
Company believes its vertical integration provides it with a competitive
advantage. ACL utilizes its tow and barge repair and vessel fleeting facilities,
Jeffboat's shipbuilding capabilities, ACT's geographically broad-based terminals
and Watercom's ship-to-shore voice and data telecommunications services to offer
a combination of competitive pricing and high quality service.
55
<PAGE> 61
The following table sets forth the leading domestic barge operators in the
United States:
<TABLE>
<CAPTION>
DRY CARGO
- -------------------------------------------
% OF TOTAL
BARGES BARGE FLEET
------ -----------
<S> <C> <C>
ACL(1)............... 3,844 19.3%
Midland.............. 2,298 11.6%
ARTCO................ 1,890 9.5%
Ingram............... 1,586 8.0%
Peavey............... 1,523 7.7%
------ ----
Top 5................ 11,141 56.1%
Total................ 19,875
======
</TABLE>
<TABLE>
<CAPTION>
LIQUID
- -------------------------------------------
% OF TOTAL
BARGES BARGE FLEET
------ -----------
<S> <C> <C>
Kirby................ 513 18.3%
ACL(1)............... 446 15.9%
Hollywood............ 255 9.1%
Marathon............. 169 6.0%
Ingram............... 129 4.6%
----- ----
Top 5................ 1,512 53.8%
Total................ 2,809
=====
</TABLE>
<TABLE>
<CAPTION>
ALL BARGES
- -------------------------------------------
% OF TOTAL
BARGES BARGE FLEET
------ -----------
<S> <C> <C>
ACL(1)............... 4,290 18.9%
Midland.............. 2,298 10.1%
ARTCO................ 1,960 8.6%
Ingram............... 1,715 7.6%
Peavey............... 1,523 6.7%
------ ----
Top 5................ 11,786 51.9%
Total................ 22,684
======
</TABLE>
- ---------------
(1) Pro forma for the NMI Contribution.
PROPERTIES
The Company operates numerous land-based facilities that support its
overall marine operations. These facilities include a major new construction
shipyard, two repair shipyards, 16 terminal facilities for cargo transfer and
handling throughout the river system, 22 facilities for the staging, interchange
and repair of barges and towboats and a corporate office complex in
Jeffersonville, Indiana.
The significant facilities among these properties include:
- The Jeffboat shipbuilding facility in Jeffersonville, Indiana is the
largest single shipyard facility on the Inland Waterways. It is situated
on 86 acres with 5,600 feet of frontage on the Ohio River across from
Louisville, Kentucky. There are 38 buildings on the property comprising a
total of 305,000 square feet under roof.
- The LDC repair shipyard and office facility in Harahan, Louisiana is
located on 94 acres of property along the Mississippi River immediately
upstream from New Orleans. The facility includes several drydocks,
machine shop, warehouse and office facility.
- The Company's main office complex is located on 22 acres in
Jeffersonville, Indiana. The main building has approximately 140,000
square feet and five outlying buildings have a total of 25,000 square
feet.
GOVERNMENT REGULATION
General
The Company's business is materially affected by government regulation in
the form of international treaties, conventions, national, state and local laws
and regulations, and laws and regulations of the flag nations of the Company's
vessels, including laws relating to the discharge of materials into the
environment. Because such conventions, laws and regulations are regularly
reviewed and revised by the issuing governmental bodies, the Company is unable
to predict the ultimate costs or impacts of compliance. In addition, the Company
is required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses and certificates with respect to its business
operations. The kinds of permits, licenses and certificates required depend upon
such factors as the country of registry, the commodity transported, the waters
in which the vessel operates, the nationality of the vessel's crew, the age of
the vessel and the status of the Company as owner, operator or charterer. The
Company believes that it currently has or can readily attain all permits,
licenses and certificates necessary to permit its vessels to operate in their
current trades. See "-- Environmental Matters."
The Company's domestic transportation operations are subject to regulation
by the United States Coast Guard, Federal laws, state laws and certain
international conventions.
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<PAGE> 62
The Company's inland tank barges are inspected by the United States Coast
Guard and carry certificates of inspection. The Company's towing vessels and dry
cargo barges are not subject to United States Coast Guard inspection
requirements.
Jones Act
The Jones Act is a Federal cabotage law that restricts domestic marine
transportation in the United States to vessels built and registered in the
United States. Furthermore, the Jones Act requires that the vessels be manned by
United States citizens and owned by United States citizens. For corporations to
qualify as U.S. citizens for the purpose of domestic trade, 75% of the
corporations' beneficial stockholders must be United States citizens. The
Company presently meets all of the requirements of the Jones Act for its owned
vessels.
Compliance with United States ownership requirements of the Jones Act is
very important to the operations of the Company and the loss of Jones Act status
could have a significant negative effect for the Company. The Company monitors
the citizenship requirements under the Jones Act of its employees and beneficial
equity holders and will take action as necessary to ensure compliance with the
Jones Act requirements.
During the past several years, the Jones Act cabotage laws have been
challenged by interests seeking to facilitate foreign flag competition for trade
reserved for U.S. flag vessels under the Jones Act. These efforts have been
consistently defeated by large margins in the United States Congress. The
Company believes that continued efforts may be made to modify or eliminate the
cabotage provisions of the Jones Act. If such efforts are successful so as to
permit foreign competition, it could have an adverse effect on the Company.
User Fees and Fuel Tax
Federal legislation requires that inland marine transportation companies
pay a user fee in the form of a tax based on propulsion fuel used by vessels
engaged in trade along inland waterways that are maintained by the Army Corps of
Engineers. Such user fees are designed to help defray the costs associated with
replacing major components of the waterway system, including dams and locks, and
to build new projects. A significant portion of the inland waterways on which
the Company's vessels operate are maintained by the Corps of Engineers.
The Company presently pays a Federal fuel tax of 24.4 cents per gallon. In
the future, existing user fees may be increased, and additional user fees
imposed, to defray the costs of inland waterways infrastructure and navigation.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive Federal, state and local
environmental laws and regulations which, among other things, specify
requirements for the management of oil, hazardous wastes, and hazardous
substances and impose liability for releases of these materials into the
environment. The Company devotes resources toward achieving and maintaining
compliance with environmental requirements. The Company believes, except as
otherwise set forth herein, that it is in material compliance with environmental
requirements and that noncompliance is not likely to have a material adverse
effect on the Company. However, there can be no assurance that the Company will
be at all times in material compliance with all environmental requirements. The
Company does not anticipate material capital expenditures for environmental
controls in the current or succeeding fiscal year.
As is the case with others in the maritime industry, a release of oil,
hazardous waste, hazardous substances or other pollutants into the environment
at or by the Company's properties or vessels, as a result of the Company's
current or past operations, or at a facility to which the Company has shipped
wastes, or the existence of historical contamination at any of the Company's
properties, could result in material liability to the Company. The Company
conducts loading and unloading of dry commodities, liquids and scrap materials
in and near waterways. Such operations present a potential that some such
materials might be spilled into a
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<PAGE> 63
waterway thereby exposing the Company to potential liability. While the amount
of such liability could be material, the Company endeavors to conduct its
operations in a manner that it believes reduces such risks.
Federal, state and local governments could in the future enact laws or
regulations concerning environmental matters that affect the Company's
operations or facilities, increase the Company's costs of operation, or
adversely affect the demand for the Company's services. The Company cannot
predict the effect that such future laws or regulations could have on the
Company. Nor can the Company predict what environmental conditions may be found
to exist at the Company's current or past facilities or at other properties
where the Company or its predecessors have arranged for the disposal of wastes
and the extent of liability that may result from the discovery of such
conditions. It is possible that such future laws or undiscovered conditions
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The EPA and the DOJ have alleged that the Mid-South Terminal Company
("MSTC") violated provisions of the Federal Clean Water Act by spilling scrap
metal into the McKellar Lake during barge loading operations at an MSTC terminal
located near Memphis, Tennessee. The Company holds a 50% interest in MSTC, which
is a joint venture between American Commercial Terminal-Memphis, Inc. and Mid-
South Terminal Company L.P. DOJ indicated it may bring criminal charges against
MSTC with regard to the alleged violations. MSTC has been engaged in discussions
with the DOJ to resolve this matter. Based on these discussions, the Company
anticipates that a fine is likely to be assessed by DOJ. The Company anticipates
that any fine assessed by DOJ is not likely to be material. As part of the
resolution, MSTC may be required to remove spilled scrap metal from the lake.
Tiger Shipyard ("Tiger") entered a plea of no contest in Louisiana State
District Court on September 25, 1998 to one count of a multiple count indictment
concerning alleged environmental infractions during the early 1990's. The one
count pertained to alleged non-permitted discharge of contaminated barge wash
water into the Mississippi River. As part of a comprehensive plea agreement,
Tiger agreed to pay a fine of $420,000. The State District Court dismissed all
other counts against the Company, dismissed all counts against all individual
employees, and the United States Attorney's Office for the Middle District of
Louisiana also agreed to close its investigation involving the Company. This
plea agreement was not related to the facts and circumstances involved with
Tiger's petition for reimbursement from the Federal Superfund for other clean up
activities and costs. Tiger intends to proceed with that claim.
Vectura has received an order from the EPA under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the
Federal Superfund clean-up statute, regarding contamination at the former Dravo
Mechling property in Seneca, Illinois. The Order required that Vectura perform
site sampling and possible future remediation at the site. Based on the
investigation of the site to date, the Company and its consultants believe that
extensive further remediation will be unnecessary but are awaiting the EPA's
review and proposed clean-up standards. The Company believes that its liability
at the Seneca site is not likely to be material.
The Company is involved as a potentially responsible party ("PRP") with
respect to the clean-up of hazardous waste disposal sites (Superfund Sites)
identified under CERCLA and similar state laws. While CERCLA authorizes joint
and several liability for remediation costs at clean-up or remediation sites, as
a practical matter, such costs are typically allocated among the waste
generators and other involved parties.
Jeffboat was named a PRP at the Third Site in Zionsville, Indiana. Jeffboat
estimates that its share of costs for the remaining phases of clean-up at the
Third Site will not be material. Jeffboat has also received notice of potential
liability with regard to waste allegedly transhipped from the Third Site to the
Four County Landfill in Rochester, Indiana. At this time, there is no estimate
of Jeffboat's potential liability with respect to the Four County Landfill, but
the Company does not believe such liability is likely to be material.
American Commercial Barge Line was named as a PRP at the Southern
Shipbuilding facility in Slidell, Louisiana. At this time, there is no estimate
of potential liability with regard to the Southern Shipbuilding site, but the
Company does not believe such liability is likely to be material.
The Company has also received notice that certain barges formerly owned by
SCNO Barge Line, Inc. and The Valley Line Company (companies from which ACL
purchased assets) also allegedly sent waste to
58
<PAGE> 64
the Southern Shipbuilding Superfund site prior to ACL's purchase of such assets
from these companies. ACL believes that it is not responsible for such waste and
also believes it is indemnified for such claims under the respective Asset
Purchase Agreements. The Company has provided notice of claims for
indemnification pursuant to such Asset Purchase Agreements.
NMI has been named as a PRP at the SBA Shipyard site in Houma, Louisiana.
The Company believes that its share of costs at the SBA Shipyard site is not
likely to be material.
Because CERCLA liability is retroactive, it is possible in the future that
the Company may be identified as a PRP with respect to other waste disposal
sites, where wastes generated by the Company have been transported and disposed.
As of June 26, 1998, the Company had accruals of approximately $1.1 million
for environmental matters including $400,000 for Tiger Shipyard which was paid
in September 1998. Given the uncertainties associated with such matters, there
can be no assurance that liabilities will not exceed reserves.
OCCUPATIONAL HEALTH AND SAFETY MATTERS
The Company's domestic vessel operations are primarily regulated by the
United States Coast Guard for occupational health and safety standards. The
Company's domestic shore operations are subject to the United States
Occupational Safety and Health Administration regulations. While there can be no
assurance that the Company is at all times in complete compliance with all such
regulations, the Company believes that it is in material compliance with such
regulations, and that any noncompliance is not likely to have a material adverse
effect on the Company. There can be no assurance, however, that claims will not
be made against the Company for work related illness or injury, or that the
further adoption of occupational health and safety regulations in the United
States or in foreign jurisdictions in which the Company operates will not
adversely affect the Company's business, financial condition and results of
operations.
The Company endeavors to reduce employee exposure to hazards incident to
its business through safety programs, training and preventive maintenance
efforts. The Company emphasizes safety performance in all of its operating
divisions. The Company believes that its safety performance consistently places
it among the industry leaders as evidenced by what it believes are lower injury
frequency levels than many of its competitors. The Company participates in the
American Waterway Operators Responsible Carrier Program which is oriented to
enhancing safety in vessel operations.
INTELLECTUAL PROPERTY
The Company registers some of its material trademarks, tradenames and
copyrights and has acquired patent protection for some of its proprietary
processes. The Company has current trademark rights to conduct its business.
INSURANCE
The Company maintains protection and indemnity insurance ("P&I") to cover
liabilities arising out of the ownership and operation of marine vessels. The
Company maintains hull and machinery insurance policies on each of its vessels
in amounts related to the value of each vessel. Each vessel is insured at its
current fair market value; however, hull damage claims are subject to an annual
aggregate deductible of $2.0 million. The Company maintains coverage for
shore-side properties, shipboard consumables and inventory, spare parts,
worker's compensation, and general liability risks. The Company maintains
primary insurance and third party guaranty agreements as to its statutory
liabilities for discharges of oil or hazardous substances under the Oil
Pollution Act of 1990. In the future, the Company may elect to self-insure such
primary statutory liability amounts; however, the Company currently maintains
and expects to continue to maintain excess coverage for pollution liability. All
insurance policies have been obtained and arranged through the Aon Insurance
Brokerage Syndicate, other brokers or direct placement with commercial insurers,
and maintained with underwriters in the U.S., British and other markets.
Insurance premiums for the coverages described above will vary from year to year
depending upon the Company's loss record and market conditions. In order to
59
<PAGE> 65
reduce premiums, the Company maintains certain per occurrence deductible, annual
aggregate deductible and self-insured retention levels that it believes are
prudent and generally consistent with those maintained by other shipping
companies.
LEGAL PROCEEDINGS
The Company is named as a defendant in various lawsuits that have arisen in
the ordinary course of its business. Claimants seek damages of various amounts
for personal injuries, property damage and other matters. All material claims
asserted under lawsuits of this description and nature are covered by insurance
policies. The Company is not aware of any litigation that would be deemed
material to the financial condition, results of operations or liquidity of the
Company that is not covered by insurance coverages and policies. For a
discussion of environmental legal proceedings, see "-- Environmental Matters."
EMPLOYEES
As of June 30, 1998, on a consolidated basis, the Company employed
approximately 4,140 individuals. Of this total, 745 individuals were engaged in
shore-side management and administrative functions, 2,110 individuals were
employed as boat officers and crew members on the Company's marine vessels,
1,140 individuals were engaged in production and repair activities at the
Company's shipyard facilities, 70 individuals were employed by the Company's
Watercom communication unit, and 75 individuals were employed in production and
hourly work activities at the Company's terminals. Approximately 1,025 of the
Company's U.S. shore-side employees are represented by unions. Most of these
unionized employees (approximately 985) are represented by the International
Brotherhood of Teamsters at the Company's Jeffboat shipyard facility.
The Company's combined barging operations employ 540 boat officers as
pilots and captains. On April 4, 1998, a labor organization, Pilots Agree,
called for an industry-wide work stoppage. Twenty-eight of the Company's boat
officers joined the work stoppage. The National Labor Relations Board, in a
previous ruling, held that the Company's pilots and captains are supervisors
and, therefore, are not covered by the National Labor Relations Act. The Company
has refused to recognize or bargain with Pilots Agree. The work stoppage has
terminated and had no effect on the Company's marine operations.
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<PAGE> 66
MANAGEMENT
EXECUTIVE OFFICERS OF THE PARENT AND ACL; BOARD OF MANAGERS OF THE PARENT
The Executive Officers of the Parent and ACL are:
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael C. Hagan.......................... 51 President and Chief Executive Officer
Robert W. Greene III...................... 58 President -- Jeffboat and American
Commercial Terminals
Michael A. Khouri......................... 48 Sr. Vice President -- Corporate Services
Daniel J. Marquitz........................ 55 Sr. Vice President -- Marketing &
Distribution Services
Martin K. Pepper.......................... 44 Sr. Vice President -- International
Larry J. Weas............................. 62 Vice President -- Human Resources
William N. Whitlock....................... 56 Sr. Vice President -- Transportation
Services
James J. Wolff............................ 40 Sr. Vice
President -- Finance/Administration and
Chief Financial Officer
</TABLE>
The members of the Board of Managers of the Parent (the "Board of
Managers") are as follows.
BOARD OF MANAGERS OF THE PARENT
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David Wagstaff III........................ 60 Chairman
Stuart Agranoff........................... 49 Member
Steven Anderson........................... 50 Member
Mark G. Aron.............................. 55 Member
David H. Baggs............................ 39 Member
Ellen M. Fitzsimmons...................... 38 Member
Paul R. Goodwin........................... 55 Member
Michael C. Hagan.......................... 51 Member
Richard E. Mayberry, Jr................... 45 Member
David F. Thomas........................... 48 Member
</TABLE>
MICHAEL C. HAGAN President & Chief Executive Officer, graduated from
Brescia College with a B.S. in Business Administration and joined the Company in
1970. He has served as President and Chief Executive Officer of American
Commercial Lines since 1991. Prior to that, he held a series of positions of
increasing responsibility with ACL and CSX.
ROBERT W. GREENE III is a graduate of Georgia Tech with a B.S. in Chemical
Engineering. He received his MBA from Harvard Business School in 1963. He began
his career with ACL in 1968. In 1980 he was named President of Jeffboat and was
appointed President-Chief Operating Officer of American Commercial Marine
Service Company (now named American Commercial Terminals) in 1986.
MICHAEL A. KHOURI is a 1971 graduate of Tulane University with a B.A. in
Economics. He received his J.D. from the University of Louisville -- Brandeis
Law School in 1980 and completed the Advanced Management Program at Harvard
Business School in 1996. He was named chief legal officer in 1988. Prior to
joining ACL in 1979, he worked at the Crounse Corporation.
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<PAGE> 67
DANIEL J. MARQUITZ received a B.S. degree in Business from Washington
University as well as an A.D. in Transportation/Traffic Management. He joined
ACL as chief sales and marketing officer in 1992 after serving with several
commodity and transportation companies. From 1987 until he came to ACL, he was
the President of The Valley Line Company -- Sequa Corporation.
MARTIN K. PEPPER is a 1976 graduate of Tulane University with a B.S. in
Mechanical Engineering. He received his MBA from Harvard Business School in
1980. Prior to joining ACL in 1997 as VP for fleet maintenance, he served for
sixteen years as an operations officer with Canal Barge Line and served in sales
and marketing for Tidewater Barge Line from 1990 to 1997. He was appointed chief
of international business development in August 1998.
LARRY J. WEAS graduated from the University of Louisville with a B.S.
degree in Commerce and earned his Masters Degree in Counseling from the
University of North Florida. He joined a CSX predecessor railroad in 1953 and
has served in a number of staff and human resource positions with CSX before
joining ACL as its chief human resource officer in 1992.
WILLIAM N. WHITLOCK is a 1964 graduate of the University of
Louisville -- Speed Scientific School with a B.S. in Engineering. He devoted
fifteen years of his career to the U.S. Army Corps of Engineers in positions of
increasing authority prior to joining ACL in 1979. He has served as the chief
transportation officer since 1982.
JAMES J. WOLFF graduated from the University of Texas in 1979 with a B.A.
degree. From 1979 to 1986, he was with Texas Gas Exploration, a CSX subsidiary.
In 1986, he joined CSX and transferred to ACL in 1992 as Senior Vice
President -- Finance. He was appointed chief of international business
development in 1996 and returned to the CFO position in August 1998.
DAVID WAGSTAFF III has served as President and Chief Executive Officer of
Vectura Group, Inc. since 1993. He was previously the Principal in a private
consulting business and has worked in various executive capacities at the
Equitable Life Assurance Company and Citicorp.
STUART AGRANOFF graduated from Fordham University with a B.S. degree in
1973. Mr. Agranoff has served as Vice President and Chief Financial Officer of
Citicorp Venture Capital, Ltd., Court Square Capital Limited, 399 Venture
Partners, Inc. and Citicorp Capital Investors, Ltd. since 1998. From 1981 until
1988, he was Vice President and Chief Financial Officer of Citicorp Corporate
Finance. Mr. Agranoff has served on the Board of Directors of Beverage Canners
and Farm Fresh. He is currently also a director for Express Messenger and is a
general partner of Murphy & Partners.
STEVEN A. ANDERSON has served as President and Chief Executive Officer of
Hancor, Inc., a manufacturer of plastic drainage pipes, and as a turnaround
consultant to Citicorp Venture Capital, Ltd. since 1993. Prior to that, he
served as a Director, Credit Officer in the Capital Markets and Treasury Group
for Swiss Bank Corporation from 1992 to 1993. He has also served as Vice
President for the North America Business Risk Review and as Vice President for
the Investment Banking Group of Citibank, N.A. from 1990 to 1992 and from 1974
to 1986, respectively. From 1986 to 1990, Mr. Anderson served as Corporate Vice
President responsible for the Fixed Income Credit Department in Drexel, Burnham
and Lambert's London office.
MARK G. ARON is Executive Vice President -- Law and Public Affairs for CSX.
He has served in various executive positions with CSX since 1981.
DAVID H. BAGGS has served as Assistant Vice President -- Corporate Strategy
since August 1994. He has held various finance and planning positions with CSX
since 1985.
ELLEN M. FITZSIMMONS has been General Counsel -- Corporate of CSX since
September 1997. She has served in various legal positions with CSX since 1991.
PAUL R. GOODWIN has been Executive Vice President -- Finance and Chief
Financial Officer of CSX since April 1995. Prior thereto, he was Executive Vice
President, Finance & Administration of CSX's principal subsidiary, CSX
Transportation, Inc., which provides rail transportation services.
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<PAGE> 68
RICHARD E. MAYBERRY, JR. has been a Managing Director of Citicorp Capital
Investors, Ltd. for over five years. Mr. Mayberry is currently a director of a
number of private companies.
DAVID F. THOMAS has been President of 399 Venture Partners, Inc. since
December 1994. In addition, Mr. Thomas has been a Managing Director of Citicorp
Venture Capital, Ltd., an affiliate of 399 Venture Partners, Inc., for over five
years. Mr. Thomas is currently a director of Lifestyles Furnishings
International Ltd., Galey & Lord, Inc., Anvil Knitwear, Inc., Stage Stores,
Inc., Neenah Foundry Company, Plainwell, Inc. and a number of private companies.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company or its
predecessor for 1997 of those persons who served as (i) the chief executive
officer during 1997 and (ii) the other four most highly compensated executive
officers of the Company or its predecessor for 1997 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------- -----------------------------
OTHER
ANNUAL RESTRICTED SECURITIES
COMPEN- STOCK UNDERLYING TOTAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) AWARD(S)(2) OPTIONS(3) COMPENSATION
- --------------------------- ---- -------- -------- --------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael C. Hagan............ 1997 $300,000 $225,000 $7,190 $304,854 20,000 $837,044
Daniel J. Marquitz.......... 1997 187,000 130,000 5,935 130,487 11,000 453,422
William N. Whitlock......... 1997 152,000 90,000 5,097 110,856 9,000 357,953
James J. Wolff.............. 1997 132,000 70,000 9,816 86,916 8,000 298,732
Michael A. Khouri........... 1997 132,000 70,000 8,340 76,214 7,700 286,554
</TABLE>
- ---------------
(1) Consists of automobile payments and medical examinations.
(2) Consists of bonus paid in the form of shares of CSX's common stock ("CSX
Shares") (valued as of date of grant).
(3) Represents options to acquire CSX Shares granted during 1997.
The following table sets forth option grants to the Named Executive
Officers for fiscal 1997:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO
UNDERWRITING EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED(1) FISCAL YEAR(2) PRICE DATE(3) VALUE(4)
---- ------------------ -------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Michael C. Hagan........... 20,000 0.5% $46.5625 4/17/07 $339,800
Daniel J. Marquitz......... 11,000 0.3% 46.5625 4/17/07 186,890
William N. Whitlock........ 9,000 0.2% 46.5625 4/17/07 152,910
James J. Wolff............. 8,000 0.2% 46.5625 4/17/07 135,920
Michael A. Khouri.......... 7,700 0.2% 46.5625 4/17/07 130,823
</TABLE>
- ---------------
(1) Represents options to acquire CSX Shares.
(2) Represents percent of total options granted by CSX to its and its
subsidiaries' employees.
(3) The expiration date of each option listed above held by Messrs. Hagan, Wolff
and Khouri will be amended to July 31, 2001 upon the consummation of the
Transactions.
(4) Grant date value has been determined using the Black-Scholes pricing model.
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<PAGE> 69
No options were exercised by any of the Named Executive Officers during
fiscal 1997. The following table sets forth the number of securities underlying
unexercised options held by each of the Named Executive Officers and the value
of such options at the end of fiscal 1997:
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBERS OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END AT FISCAL YEAR-END(1)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(2)
---- ----------------- ---------------------
<S> <C> <C>
Michael C. Hagan........................................... 123,608/40,002 $594,864/$192,510
Daniel J. Marquitz......................................... 44,534/21,866 214,320/105,230
William N. Whitlock........................................ 45,400/18,000 218,488/86,625
James J. Wolff............................................. 28,600/16,432 137,638/79,079
Michael A. Khouri.......................................... 43,714/15,866 210,374/76,355
</TABLE>
- ---------------
(1) Represents options to purchase CSX Shares.
(2) Value of unexercised options at fiscal year-end represents the difference
between the exercise price of any outstanding in-the-money options and
$51.375, the mean value of CSX Shares on December 26, 1997.
The following table sets forth Long-Term Incentive Plan awards to each of
the Named Executive Officers in fiscal 1997:
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD UNTIL
SHARES, UNITS OR MATURATION OR
NAME OTHER RIGHTS(1) PAYOUT(2)
- ---- ---------------- -------------------
<S> <C> <C>
Michael C. Hagan............................................ 6,600 3 years
Daniel J. Marquitz.......................................... 2,825 3 years
William N. Whitlock......................................... 2,400 3 years
James J. Wolff.............................................. 1,925 3 years
Michael A. Khouri........................................... 1,650 3 years
</TABLE>
- ---------------
(1) Represents the number of performance shares granted on December 9, 1997,
pursuant to CSX's 1987 Long-Term Performance Stock Plan for the 1998-2000
cycle. The final payouts in CSX Shares will be based on the Company's Return
on Invested Capital as a percentage of CSX's Cost of Capital over the
three-year period. The estimated threshold payout was calculated at 13% of
the performance shares granted on December 9, 1997, and assumes a specified
minimum level of financial performance by the Company. The estimated target
payout was calculated at 67% of the performance shares granted and
represents the number of shares that would be awarded if a specified
intermediate level of financial performance is achieved by the Company. The
maximum equals 100% of the performance shares granted on December 9, 1997.
(2) Such period was reduced to 90 days following the consummation of the
Transactions.
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In addition, certain of the Named Executive Officers received a one-time
bonus in connection with the Transactions from CSX determined by CSX.
Each of the Named Executive Officers and certain other management employees
of ACL are beneficiaries of a severance pay plan of the Company pursuant to
which those employees under certain circumstances will receive either one year
or two years' of base salary, bonus and benefits upon their termination of
employment with the Company. This plan by its terms will remain in effect until
April 17, 2000.
Mr. Hagan has entered into an employment agreement with CSX (the "Hagan
Employment Agreement") which by its terms will remain in effect for three years
after the closing of the Recapitalization. Pursuant to the Hagan Employment
Agreement, in the event that at any time during the term of the agreement, Mr.
Hagan's employment is terminated by the Company (other than for cause) or Mr.
Hagan resigns with good reason (which includes resignation by Mr. Hagan for any
reason during the 30-day period after the first anniversary of the closing of
the Recapitalization), CSX will pay Mr. Hagan severance benefits that include
three years of base salary, bonus and benefits.
BENEFIT PLANS
The Company maintains various qualified and non-qualified benefit plans for
its employees. All salaried, full time employees are covered or will be covered
by an ERISA qualified defined benefit retirement plan and are eligible to
participate in a 401(k) savings plan that includes a partial Company match
feature. Hourly employees with certain of the Company's subsidiaries have
separate ERISA qualified defined benefit plans and are eligible to participate
in separate 401(k) savings plans.
The Company maintains a self-insured general welfare health plan for
employees. The plan has appropriate levels of employee deductible, and maximum
benefit levels. Employees may elect to participate in certain approved HMO plans
in lieu of the Company sponsored plan.
The Company has provided to certain members of management various
non-qualified benefit and deferred compensation plans. These plans include
deferred salary plans, deferred bonus plans, salary continuation with whole life
plans, stock bonus plans, stock option plans and stock purchase/loan plans.
The Company reserves the right to add, amend, change, tie off and/or
terminate any or all qualified or non-qualified benefit plans at any time and to
alter, amend, add to and/or restrict employee participation to the extent
permitted by applicable Federal or state law or regulation.
COMPENSATION OF BOARD OF MANAGERS
The Company will reimburse members of the Board of Managers for any
out-of-pocket expenses incurred by them in connection with services provided in
such capacity. In addition, the Company may compensate members of the Board of
Managers for services provided in such capacity.
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SECURITY OWNERSHIP
The Parent owns all of the outstanding equity interests of the Company. The
following table sets forth certain information regarding the approximate
beneficial ownership of the Parent's equity interests held by (i) each person
(other than members of the Board of Managers and executive officers of the
Company) known to the Company to own more than 5% of the outstanding membership
interests of the Parent and (ii) members of the Board of Managers of the Company
(without giving effect to membership interests to be beneficially owned by
Management Investors).
<TABLE>
<CAPTION>
FULLY DILUTED VOTING
SENIOR PREFERRED JUNIOR PREFERRED SENIOR COMMON JUNIOR COMMON JUNIOR COMMON
NAME AND ADDRESS OF BENEFICIAL MEMBERSHIP MEMBERSHIP MEMBERSHIP MEMBERSHIP MEMBERSHIP
OWNER INTERESTS INTERESTS INTERESTS(1) INTERESTS(2) INTERESTS
- ------------------------------ ---------------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Vectura Group, Inc. ........ -- 59.7 % -- 52.1 % 15.8%
National Marine, Inc. ...... -- .4 % 100.0 % 10.6 % 3.2%
CSX Corporation............. 100.0 % 39.9 % -- 32.8 % 34.0%
Management Investors(3)..... -- -- -- 1.6 % 17.0%
Independent Investors....... -- -- -- 2.9 % 30.0%
</TABLE>
- ---------------
(1) Represents residual future profits interests in the Parent of up to $32.5
million.
(2) Represents both voting and non-voting junior common membership interests of
the Parent.
(3) The amount of non-voting Junior Common Membership Interests to be issued to
the Management Investors will be determined, which issuance will dilute the
other investors on a pro rata basis.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AFFILIATE AGREEMENTS
The Company has entered into agreements or arrangements with CSX,
subsidiaries of CSX and Vectura. These agreements and business arrangements are
for the purpose of either providing or obtaining rail services for multi-modal
transportation packages, real estate and office lease arrangements, charter and
lease arrangements for certain river barges and provision of certain
transitional administrative services, as described herein. Also, the Company
leases certain barges from JEM Transportation, Inc. on a year-to-year basis.
Daniel J. Marquitz, an executive officer of the Company, is a principal in JEM
Transportation, Inc.
The Company's arrangement with Vectura and its lease with JEM
Transportation, as well as the Company's multi-modal arrangements with CSX and
its subsidiaries and the Company's transition services agreement with CSX, are
each on terms and conditions that the Company believes are in the aggregate not
materially more burdensome to the Company than would be obtained on an
arm's-length basis among unaffiliated parties.
PARENT LIMITED LIABILITY COMPANY AGREEMENT
Upon the consummation of the Recapitalization, CSX and the Investors
(collectively, the "Members") entered into the LLC Agreement. The LLC Agreement
governs the relative rights and duties of the Members. The following description
summarizes certain terms of the LLC Agreement. The following description does
not purport to be complete and is qualified in its entirety by reference to the
LLC Agreement.
The business and affairs of the Parent are managed by a Board of Managers
having duties comparable to a corporate board of directors. The Board of
Managers is composed of ten individuals as follows: four shall be designated by
CSX, two shall be designated by Vectura and NMI collectively (the "Vectura
Parties"), one shall be the current CEO of ACL Holdings, one shall be the
current CEO of Vectura and two shall be independent of CSX and Vectura (and
their affiliates) designated by holders of a majority of the voting Junior
Common Membership Interests. CSX's and the Vectura Parties' rights to designate
individuals to the Board of Managers is dependent in part on such party's
continuing to hold membership interests of the Parent in specified amounts.
As long as CSX holds specified amounts of Parent membership interests, CSX
will be entitled to veto rights with respect to the following transactions,
howsoever directly or indirectly structured, subject to certain exceptions:
(i) any merger or other acquisition transaction (other than the acquisition of
new capital assets as part of the regular capital budgeting process) involving
consideration of $250 million or more; (ii) any transaction through which the
Parent, the Company or its subsidiary would become a Subchapter C corporation
(other than certain specified transactions); (iii) any amendment to the limited
liability company agreement of the Parent, the Company or its subsidiary which
would adversely affect CSX; (iv) any definition of "Excess Cash Flow,"
"Restricted Payments" and "Change of Control" (and related definitions regarding
the Senior Preferred Membership Interests) in financing agreements; and
(v) transactions with affiliates.
As long as the Vectura Parties hold specified amounts of Parent membership
interests and subject to CSX's veto rights described above, the Vectura Parties
will be entitled to veto rights with respect to the following transactions,
howsoever directly or indirectly structured, subject to certain exceptions: (i)
certain material financings, acquisitions, divestitures, public equity offerings
or capital expenditures; (ii) equity investment programs for management of the
Parent and its subsidiaries; and (iii) transactions with affiliates. In
addition, the Vectura Parties will have the right, subject to CSX's veto rights,
to cause an Initial Public Offering or Sale of ACL (each as defined in the LLC
Agreement).
Membership Interests. The Parent was authorized to issue Senior Preferred
Membership Interests, Junior Preferred Membership Interests, Senior Common
Membership Interests and Junior Common Membership Interests in amounts
sufficient to consummate the Recapitalization. The Senior Preferred Membership
Interests and the Junior Preferred Membership Interests are collectively
referred to as the "Preferred Membership Interests" and the Senior Common
Membership Interests and the Junior Common Membership Interests are collectively
referred to as the "Common Membership Interests." The Junior
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Common Membership Interests are divided into voting membership interests and
non-voting membership interests of the Parent, and collectively represent the
residual future profits interests in the Parent. The holders of non-voting
Junior Common Membership Interests may at any time, by a majority vote of such
holders, convert all such interests into voting Junior Common Membership
Interests. Holders of the Preferred Membership Interests are entitled to return
of capital contributions prior to any distributions made to holders of the
Common Membership Interests.
Each Preferred Membership Interest has an initial Redemption Value of $100,
which compounds annually at the rate per year of 11.02% (the "Preferred Rate").
The Senior Common Membership Interests represent an aggregate capital interest
of $3,389,091 and an aggregate future profits interest in the Parent of
$32,500,000 (subject to certain adjustments) and accrue a compounded annual
yield at the Preferred Rate on a notional principal amount of $35,889,091. As to
dividends, distributions and liquidations, except as otherwise provided and
except with respect to redemptions of Membership Interests held by Management
Investors upon their termination, Senior Preferred Membership Interests rank
senior to Junior Preferred Membership Interests, Junior Preferred Membership
Interests rank senior to Senior Common Membership Interests and Senior Common
Membership Interests rank senior to Junior Common Membership Interests. At the
Parent's option, Senior Preferred Membership Interests may be exchanged into
current-pay subordinated notes containing the same features as such Membership
Interests at any time contemporaneously with or following the Parent's
conversion to a Subchapter C corporation.
Senior Preferred Membership Interests have the benefit of covenants
respecting restricted payments (providing that the Parent may pay no cash in
respect of any membership interests ranking junior in priority to the Senior
Preferred Membership Interests until all Senior Preferred Membership Interests
have been redeemed, except with respect to redemptions of membership interests
held by Management Investors upon their termination or tax distributions
pursuant to the LLC Agreement), affiliate transactions, no issuance of
membership interests senior in priority to the Senior Preferred Membership
Interests and delivery of financial statements.
Junior Common Membership Interests are allocated into voting and non-voting
interests. All other classes of membership interests will be non-voting, except
as otherwise explicitly provided or as provided by law. The Parent will
mandatorily redeem all Senior Preferred Membership Interests and Junior
Preferred Membership Interests in year 15 at the amount of the Redemption Value
(plus accrued and unpaid yield thereon) of such membership interests at such
time. Optional redemptions of such membership interests and Senior Common
Membership Interests shall be permitted at the Parent's option at any time,
subject to the priority of such membership interests (other than in certain
cases), without premium or penalty, provided that CSX's consent will be required
to redeem its Senior Preferred Membership Interests in certain cases. Holders of
Preferred Membership Interests have the option to have such interests redeemed
at the Redemption Value (plus accrued but unpaid yield thereon) upon
consummation of a Change of Control.
In addition, the LLC Agreement: (i) restricts the transfer of the equity
interests of the Parent; (ii) grants tag-along rights on certain transfers of
equity interests of the Parent (as described below); (iii) requires CSX and the
Investors to consent to a sale of the Parent to an independent third party if
such sale is approved by the Board of Managers of the Parent (as described
below); and (iv) grants preemptive rights on certain issuances of equity
interests of the Parent. Certain of the foregoing provisions of the Members
Agreement will terminate upon the consummation of a Qualified Public Offering or
a Sale of ACL (each as defined in the LLC Agreement).
The Vectura Parties and CSX may participate pro rata (based on ownership of
Junior Common Membership Interests) in any sale or transfer of Parent equity
securities by the other (other than certain specified transactions) and in any
control transaction howsoever structured, subject to certain limitations. In
addition, CSX may participate pro rata (based on ownership of Junior Preferred
Membership Interests) in any sale or transfer of Junior Preferred Membership
Interests by the Vectura Parties, subject to certain limitations. In the event
of a sale of all of the Parent approved by its Board of Managers (whether by
sale of membership interests, all or substantially all assets or businesses,
merger or otherwise), each holder of membership interests shall consent to,
approve and participate in such transaction on the same terms and
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conditions. Any such transaction shall also be a change of control, and any such
transaction which would not also otherwise trigger tag-along rights shall
trigger a liquidation of the Parent.
Distributions. The holders of Senior Preferred Membership Interests are
entitled to receive distributions from the Parent in an amount equal to the
Redemption Value (plus accrued and unpaid yield thereon) of such interests prior
to distributions (other than Tax Distributions described below) in respect of
any other membership interests of the Parent. The holders of Junior Preferred
Membership Interests are entitled to receive distributions from the Parent in an
amount equal to the Redemption Value (plus accrued and unpaid yield thereon) of
such interests prior to distributions (other than Tax Distributions described
below) in respect of any other membership interests of the Parent, except Senior
Preferred Membership Interests.
Subject to certain restrictions contained in the LLC Agreement and any
restrictions contained in any financing agreements to which the Parent is a
party, and subject to the requirement of quarterly Tax Distributions described
below, the Board of Managers may make distributions, whether in cash, property
or securities of the Parent, at any time or from time to time, in the following
order of priority: first, to the holders of Senior Preferred Membership
Interests, an amount determined by the Redemption Value (plus accrued and unpaid
yield thereon) of such interests (as defined and described in the LLC
Agreement); second, to the holders of Junior Preferred Membership Interests, an
amount determined by the Redemption Value (plus accrued and unpaid yield
thereon) of such interests (as defined and described in the LLC Agreement);
third, pro rata to the holders of the Senior Common Membership Interests to the
extent of any unpaid yield (based on a notional principal amount of $35.9
million) and principal (based on a notional principal amount of $35.9 million)
thereon; and fourth, thereafter, pro rata in accordance with capital accounts
(as defined in the LLC Agreement) or a cash waterfall producing identical
results.
The Company's operations are conducted in the form of a limited liability
company. As a result, in general, neither the Company nor the Parent is subject
to U.S. Federal or state income taxes. Instead, taxable income from the
operations of the Company and its noncorporate subsidiaries are allocated to the
equity holders of the Parent, and such holders are directly liable for income
taxes on such income. The LLC Agreement requires the Parent to make quarterly
distributions ("Tax Distributions") to its members to enable each member to
satisfy some or all of its tax liability resulting from its equity interest in
the Parent. Tax Distributions to each member generally will be computed by
multiplying the taxable income allocated to the member from the Parent by the
assumed tax rate applicable to that member. The assumed tax rate (i) for a
corporate member will be the highest marginal Federal income tax rate applicable
to a corporation plus 2.3%, and (ii) for each other member will be an assumed
highest marginal blended Federal, state and local income tax rate applicable to
an individual. Such distributions are permitted under the Indenture. See
"Description of the Exchange Notes -- Certain Covenants -- Restricted Payments."
Tax Distributions otherwise payable to CSX under the above formula may be
reduced (to not below zero) in three ways. First, CSX's tax distributions will
be reduced by $4.0 million in each of the Company's first five years of
operation and by $6 million in each of the Company's following four years of
operation (the "Annual Exclusion"). Second, any income allocated by the Parent
to CSX in respect of the accruing yield on the Senior Preferred Membership
Interests held by CSX will be excluded from the computation of CSX's tax
distributions. Third, taxes incurred by CSX attributable to the recognition of
Built-In Gain (through asset sales or otherwise) will in some circumstances be
excluded from the computation of CSX's tax distributions. For this purpose,
"Built-In Gain" means the excess of the fair market value of the assets
originally contributed by CSX to the Company as of the date of the
Recapitalization over the tax basis of those assets measured as of the date of
contribution. In general, subject to certain exceptions and limitations, upon
the recognition of any Built-In Gain by CSX, the Parent may elect to either (i)
accelerate the Annual Exclusion to the extent of any resulting tax in inverse
chronological order beginning with year nine, (ii) distribute to CSX in the year
in which the Built-In Gain is recognized an additional Tax Distribution equal to
one-half of the resulting tax to CSX, or (iii) make additional distributions to
CSX on its Senior Preferred Membership Interests (in the amount of the resulting
Built-In Gain tax) by accelerating prior to year nine the time at which such
distributions would otherwise be required to commence under the LLC Agreement.
CSX is also entitled to Tax Distributions in such amount as is required so
that CSX's "unreimbursed tax amount" does not exceed $85.0 million. CSX's
unreimbursed tax amount is the excess of its taxes at the
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assumed corporate tax rate on taxable income allocated to CSX by the Parent
(excluding allocations in respect of the accruing yield on the Senior Preferred
Membership Interests and allocations of Built-In Gain arising by reason of
certain extraordinary transactions) over Tax Distributions. In addition, CSX is
entitled to Tax Distributions equal to the tax at the assumed corporate tax rate
on any Built-In Gain arising from a sale-leaseback transaction.
Further, as part of the tax distribution provisions of the LLC Agreement,
the Senior Preferred Membership Interests are entitled to distributions
beginning at the end of year nine in an amount equal to the product of the
assumed corporate tax rate and the Senior Preferred Membership Interest annual
accrual, including the full annual accrual for year nine.
In certain circumstances, it is possible that the distributions referred to
in the foregoing paragraphs could exceed the combined Federal, state, local and
foreign income taxes that would be payable with respect to taxable income of the
Company for any given period if the Company were a Delaware corporation filing
separate tax returns. Such distributions are permitted under the Indenture. See
"Description of the Exchange Notes -- Certain Covenants -- Restricted Payments."
The Senior Preferred Membership Interests are entitled to distributions
beginning in year six equal to the lesser of excess cash flow and an annual
limit. The annual limit is $7.5 million in each of years six through ten and $10
million in each of years 11 through 15, increased in any year by the excess, if
any, of the annual limit for prior years over the amounts distributed in such
prior years as described in this paragraph.
Liquidating distributions will be made among the members pro rata in
accordance with capital accounts or a cash waterfall producing identical
results.
PARENT REGISTRATION RIGHTS AGREEMENTS
The Parent, CSX Brown and the Investors, entered into a registration rights
agreement (the "Parent Registration Rights Agreement"). Under the Parent
Registration Rights Agreement, CSX Brown and the Vectura Parties have the right,
subject to certain conditions, to require the Parent to register any or all of
their common equity interests of the Parent under the Securities Act at the
Parent's expense. In addition, all holders of registrable securities are
entitled to request the inclusion of any Common Membership Interests of the
Parent subject to the Parent Registration Rights Agreement in any registration
statement (excluding certain registration statements, including any registration
statement in connection with an Initial Public Offering (as defined in the
Parent Registration Rights Agreement)) at the Parent's expense whenever the
Parent proposes to register any of its Common Membership Interests under the
Securities Act. In connection with all such registrations, the Parent has agreed
to indemnify all holders of registrable securities against certain liabilities,
including liabilities under the Securities Act.
TRANSITION SERVICES AGREEMENT
The Company and CSX entered into a transition services agreement (the
"Transition Services Agreement"), pursuant to which CSX will provide to the
Company certain services that it had previously provided to the Company's
predecessor. Such transitional services will be provided for at least six months
and may include such services as general accounting, legal and computer systems
support, tax planning and benefits administration, as well as various other
transitional services.
OTHER ARRANGEMENTS
In connection with the Recapitalization, the Company has agreed to
indemnify CSX and Vectura and their respective affiliates with respect to
liabilities related to the business of the Company.
The Company and CSX were parties to a lease agreement, pursuant to which
the Company agreed to lease from CSX newly constructed and existing marine
equipment with a fair market value of approximately $12 million for a term of
ten years and with a rental of approximately $119,000 per month. In addition,
ACBL de Venezuela, C.A. ("ACBL Venezuela"), a subsidiary of the Company, entered
into charter agreements with Shell Venezuela, S.A. ("Shell") for ACBL Venezuela
to charter to Shell eight barges for Shell's use in connection with oil drilling
operations. In July 1998, CSX terminated its interest in the lease and its
rights to an assignment of ACBL Venezuela's interest in the charter in exchange
for a payment of $3.4 million from the Company.
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DESCRIPTION OF THE SENIOR CREDIT FACILITIES
The following is a summary of the material terms of the Senior Credit
Facilities that are entered into by the Company, the Parent, the Lenders and
Chase Bank, as administrative agent. The following summary is qualified in its
entirety by reference to the Senior Credit Facilities, copies of which will be
made available to prospective holders of the Exchange Notes upon request.
THE FACILITIES
Structure. The Senior Credit Facilities provide for (i) the Revolving
Credit Facility providing for revolving loans to the Company and the issuance of
letters of credit for the account of the Company in an aggregate principal
amount (including the aggregate stated amount of letters of credit) of up to
$100.0 million due 2005 and (ii) the Term Loans in an aggregate principal amount
of $435.0 million, consisting of a $200.0 million Tranche B Term Loan due 2006
and a $235.0 million Tranche C Term Loan due 2007.
Availability. Availability under the Senior Credit Facilities is subject
to various conditions precedent typical of bank loans, and the commitment of the
Lenders to provide financing under the Senior Credit Facilities is also subject
to, among other things, the absence of any event, condition or circumstance that
has had or is reasonably likely to have a material adverse effect on the
business assets, operations, condition (financial or otherwise), contingent
liabilities, prospects or material agreements of the Parent, the Company and its
subsidiaries, taken as a whole. The full amount of the Term Loans was required
to be drawn at the closing of the Transactions and amounts repaid or prepaid
will not be able to be reborrowed. Amounts under the Revolving Credit Facility
are available on a revolving basis.
INTEREST
Borrowings under the Senior Credit Facilities will bear interest at a rate
per annum equal (at the Company's option) to: (a) an adjusted London inter-bank
offered rate ("LIBOR") plus a percentage based on the Company's financial
performance or (b) a rate equal to the highest of Chase's published prime rate,
a certificate of deposit rate plus 1% and the Federal Funds effective rate plus
0.50% ("ABR") plus, in each case, a percentage based on the Company's financial
performance. The borrowing margins applicable to the Senior Credit Facilities
initially are (i) with respect to loans under the Revolving Credit Facility,
2.25% for LIBOR loans and 1.25% for ABR loans, (ii) with respect to loans under
the Tranche B Term Loan, 2.50% for LIBOR loans and 1.50% for ABR Loans and (iii)
with respect to loans under the Tranche C Term Loan, 2.75% for LIBOR loans and
1.75% for ABR loans. Amounts outstanding under the Senior Credit Facilities not
paid when due bear interest at a default rate equal to 2.00% above the rates
otherwise applicable to the loans under the Senior Credit Facilities.
FEES
The Company has agreed to pay certain fees with respect to the Senior
Credit Facilities, including (i) fees on the unused commitments of the lenders
equal to 0.50% on the undrawn portion of the commitments in respect of the
Senior Credit Facilities (subject to a reduction based on the Company's
financial performance); (ii) letter of credit fees on the aggregate face amount
of outstanding letters of credit equal to the then applicable borrowing margin
for LIBOR loans under the Revolving Credit Facility and the standard fronting,
issuance and drawing fees for the letter of credit issuing bank; (iii) annual
administration fees; and (iv) agent, arrangement and other similar fees.
SECURITY; GUARANTEES
The obligations of the Company under the Senior Credit Facilities are
irrevocably guaranteed, jointly and severally, by the Parent and by each
existing and subsequently acquired or organized domestic subsidiary of the
Company. In addition, the Senior Credit Facilities and the guarantees thereunder
are secured by substantially all of the assets of the Parent, the Company (other
than the Company's interest in the capital stock of any foreign subsidiaries)
and its domestic subsidiaries (collectively, the "Collateral"), including but
not limited to (i) a first priority pledge of all the membership interests of
the Company and of each existing
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and subsequently acquired or organized domestic subsidiary of the Company and
(ii) a perfected first priority security interest in, and mortgage on,
substantially all tangible and intangible assets of the Parent, the Company
(other than the Company's interest in greater than 65% of the capital stock of
each of the Company's foreign subsidiaries) and the guarantors (including, but
not limited to, accounts receivable, documents, inventory, equipment, investment
property, general intangibles, real property, cash and cash accounts and
proceeds of the foregoing), in each case subject to certain exceptions.
COMMITMENT REDUCTIONS AND REPAYMENTS
The Tranche B Term Loan will mature on the date that is eight years after
the closing of the Transactions. The Tranche B Term Loan will amortize quarterly
in annual amounts equal to (i) $1.0 million in each of the first five years of
the Tranche B Term Loan, (ii) $20.0 million in the sixth year thereof, (iii)
$75.0 million in the seventh year thereof and (iv) $100.0 million in the eighth
year thereof. The Tranche C Term Loan will mature on the date that is nine years
after the closing of the Transactions. The Tranche C Term Loan will amortize
quarterly in annual amounts equal to (i) $1.0 million in each of the first eight
years of the Tranche C Term Loan and (ii) $227.0 million in the ninth year
thereof. In addition, the Term Loans are subject to mandatory prepayment and
reductions in an amount equal to (i) 100% of the net cash proceeds of certain
equity issuances by the Parent, the Company or any of its subsidiaries, (ii)
100% of the net cash proceeds of certain debt issuances of the Parent, the
Company or any of its subsidiaries, (iii) 50% of the Company's excess cash flow
and (iv) 100% of the net cash proceeds of certain asset sales or other
dispositions of property by the Parent, the Company or any of its subsidiaries,
in each case subject to certain exceptions.
AFFIRMATIVE, NEGATIVE AND FINANCIAL COVENANTS
The Senior Credit Facilities contain a number of covenants that, among
other things, restrict the ability of the Parent, the Company and its
subsidiaries to dispose of assets, incur additional indebtedness, incur or
guarantee obligations, prepay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, make investments, loans or
advances, make acquisitions, engage in mergers or consolidations, change the
business conducted by the Parent, the Company and its subsidiaries, make capital
expenditures, or engage in certain transactions with affiliates and otherwise
restrict certain corporate activities. In addition, the Senior Credit Facilities
require the Company to comply with specified financial ratios and tests,
including maximum leverage ratios, minimum interest coverage ratios, minimum
fixed charge coverage ratios and a minimum net worth test. The Senior Credit
Facilities also contain provisions that prohibit any modifications of the
Indenture in any manner adverse to the lenders under the Senior Credit
Facilities and that limit the Company's ability to refinance or otherwise prepay
the Notes without the consent of such lenders.
EVENTS OF DEFAULT
The Senior Credit Facilities contain customary events of default, including
non-payment of principal, interest or fees, violation of covenants, inaccuracy
of representations or warranties in any material respect, cross default to
certain other indebtedness, bankruptcy, ERISA events, material judgments and
liabilities, actual or asserted invalidity of security interests and change of
control.
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DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to an Indenture (the
"Indenture") between the Issuers and United States Trust Company of New York, as
trustee (the "Trustee"). The terms of the Exchange Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Exchange Notes are
subject to all such terms, and prospective holders of Exchange Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth below
under "-- Certain Definitions." For purposes of this summary, the term "Company"
refers only to American Commercial Lines LLC and not to any of its Subsidiaries.
The Exchange Notes will be general unsecured senior obligations of the
Issuers, will rank pari passu in right of payment with all existing and future
senior indebtedness of the Issuers and will rank senior in right of payment to
all subordinated indebtedness of the Issuers. The Issuers' obligations under the
Exchange Notes will be fully, unconditionally, jointly and severally guaranteed
on a senior basis (the "Subsidiary Guarantees") by the Company's domestic
Subsidiaries (other than ACL Capital, any Accounts Receivable Subsidiary and
certain Subsidiaries of the Company without substantial assets or operations).
See "-- Subsidiary Guarantees."
The Exchange Notes will be effectively subordinated in right of payment to
any secured debt of the Issuers or the Subsidiary Guarantors to the extent of
the value of the assets serving as security for such secured debt. As of June
30, 1998, the Issuers and the Subsidiary Guarantors had approximately $445
million in outstanding secured indebtedness under the Senior Credit Facilities
to which the Exchange Notes are effectively subordinated. Approximately $90.0
million is available for additional borrowings under the Senior Credit
Facilities. The Exchange Notes will be effectively subordinated to all
liabilities of subsidiaries of the Issuers which are not Subsidiary Guarantors,
initially the Foreign Subsidiaries (as defined). As of June 30, 1998, the
Foreign Subsidiaries had no outstanding indebtedness other than inter-company
indebtedness. The Indenture permits the Issuers and their Subsidiaries to incur
additional indebtedness (including senior indebtedness), subject to certain
limitations. See "Description of the Senior Credit Facilities."
The operations of the Company are conducted in part through its
Subsidiaries and, therefore, the Company will be dependent in part upon the cash
flow of such Subsidiaries to meet its obligations, including its obligations
under the Exchange Notes. All of the existing domestic Restricted Subsidiaries
of the Company (other than ACL Capital and certain Subsidiaries of the Company
without substantial assets or operations) are, and all future domestic
Restricted Subsidiaries of the Company other than any Accounts Receivable
Subsidiary are expected to be, Subsidiary Guarantors. As of the date of the
Indenture, all of the Company's Subsidiaries other than River Terminal
Properties, L.P. will be Restricted Subsidiaries. However, under certain
circumstances, the Company will be able to designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be
subject to many of the restrictive covenants set forth in the Indenture.
ACL Capital is a wholly owned subsidiary of the Company that was
incorporated in Delaware solely for the purpose of serving as a co-issuer of the
Senior Notes in order to accommodate the issuance of the Senior Notes by the
Company. The Company believes that certain prospective holders of the Exchange
Notes may be restricted in their ability to purchase debt securities of limited
liability companies, such as the Company, unless such debt securities are
jointly issued by a corporation. ACL Capital does not have any operations or any
assets (other than the $100.00 contributed to it in connection with its
formation) and does not have any revenues. As a result, prospective holders of
the Exchange Notes should not expect ACL Capital to participate in servicing the
interest and principal obligations on the Exchange Notes. See "-- Certain
Covenants -- Restrictions on Activities of ACL Capital."
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PRINCIPAL, MATURITY AND INTEREST
The Senior Notes are limited in aggregate principal amount to $300.0
million and will mature on June 30, 2008. Interest on the Exchange Notes is
payable in cash at a rate of 10 1/4% per annum semiannually in arrears on June
30 and December 31 of each year, commencing December 31, 1998, to Holders of
record on the immediately preceding June 15 and December 15.
Additional Senior Notes may be issued from time to time, subject to the
provisions of the Indenture described below under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Equity."
Interest on the Exchange Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium and Liquidated Damages, if
any, and interest on the Exchange Notes will be payable at the office or agency
of the Issuers maintained for such purpose within the City and State of New York
or, at the option of the Issuers, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders of the Exchange Notes at their
respective addresses set forth in the register of Holders of Exchange Notes;
provided, that all payments of principal, premium and Liquidated Damages, if
any, and interest with respect to Exchange Notes the Holders of which have given
wire transfer instructions to the Issuers will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Issuers, the Issuers' office or
agency in New York under the Indenture will be the office of the Trustee
maintained for such purpose. The Exchange Notes will be issued in denominations
of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Issuers' payment obligations under the Exchange Notes will be fully,
unconditionally, jointly and severally guaranteed by the Subsidiary Guarantors.
The Subsidiary Guarantee of each Subsidiary Guarantor will rank pari passu with
other Senior Debt of such Subsidiary Guarantor and the amounts for which a
Subsidiary Guarantor will be liable under other guarantees, if any, issued by
such Subsidiary Guarantor from time to time with respect to Senior Debt. The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law.
See, however, "Risk Factors -- Risks Relating to the Exchange
Notes -- Fraudulent Transfer."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Senior Notes, the Indenture,
and the Registration Rights Agreement; (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists; and (iii) the Issuers
would be permitted by virtue of the Company's pro forma Fixed Charge Coverage
Ratio, immediately after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Equity";
provided, that the merger of any Subsidiary Guarantor with or into the Company
or another Subsidiary Guarantor under circumstances where the Company or such
Subsidiary Guarantor, as applicable, is the surviving Person shall not be
subject to the foregoing provisions.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Subsidiary Guarantor) or the Person acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee;
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provided, that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "-- Certain
Covenants -- Asset Sales."
OPTIONAL REDEMPTION
The Exchange Notes are redeemable at any time at the option of the Issuers,
in whole or in part, upon not less than 30 nor more than 60 days' notice, in
cash at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on June 30 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.............................................. 105.125%
2004.............................................. 103.417%
2005.............................................. 101.708%
2006 and thereafter............................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to June 30, 2001, the
Issuers may on any one or more occasions redeem up to 35% of the aggregate
principal amount of the Senior Notes originally issued at a redemption price of
110.25% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date with the net cash
proceeds of one or more Equity Offerings; provided, that at least 65% of the
aggregate principal amount of the Senior Notes originally issued remains
outstanding immediately after the occurrence of such redemption (excluding
Senior Notes held by the Company and its Subsidiaries); and provided further,
that such redemption shall occur within 60 days of the date of the closing of
such Equity Offerings.
At any time prior to June 30, 2003, the Exchange Notes may be redeemed, in
whole or in part, at the option of the Issuers at any time within 180 days after
a Change of Control, upon not less than 30 nor more than 60 days prior notice
mailed by first-class mail to the registered address of each Holder of such
Exchange Notes, at a redemption price equal to 100% of the principal amount
thereof, together with accrued and unpaid interest thereon to the redemption
date plus the Applicable Premium, together with Liquidated Damages, if any,
thereon to the redemption date. Holders of the Exchange Notes will also have
certain rights to require the Issuers to make an offer to repurchase their
Exchange Notes upon a Change of Control or an Asset Sale. See "-- Repurchase at
the Option of Holders -- Change of Control" and "-- Certain Covenants -- Asset
Sales."
"Applicable Premium" means, with respect to any Exchange Note at any
redemption date, the greater of (i) 1.0% of the principal amount of such
Exchange Note and (ii) the excess of (A) the present value at such time of (1)
the redemption price of such Exchange Note at June 30, 2003, such redemption
price being set forth in the table above) plus (2) all required interest
payments due on such Exchange Note through June 30, 2003, computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
principal amount of such Exchange Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
redemption date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the redemption date to June 30, 2003; provided, however, that if the
period from the redemption date to June 30, 2003 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the redemption date to June 30, 2003 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
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SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which such Senior Notes are listed, or, if such Senior Notes are not
so listed, on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate; provided, that no Senior Notes of $1,000 or less
shall be redeemed in part. Notices of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
Holder of Senior Notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any Senior Note is to be redeemed in part
only, the notice of redemption that relates to such Senior Note shall state the
portion of the principal amount thereof to be redeemed. A new Senior Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Senior Note. Senior
Notes called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Senior Notes or portions
of them called for redemption.
MANDATORY REDEMPTION
The Issuers are not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, if the Issuers do not redeem
all of the Senior Notes as described under "-- Optional Redemption" or if a
Change of Control occurs on or after June 30, 2003, each Holder of Notes will
have the right to require the Issuers to make an offer to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Senior
Notes pursuant to the offer described below (the "Change of Control Offer") at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of repurchase (in either case, the "Change of Control Payment"). Within 60 days
following any Change of Control, the Issuers will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Senior Notes on the date specified in such notice,
which date shall be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (the "Change of Control Payment Date"), pursuant to
the procedures required by the Indenture and described in such notice. The
Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Senior
Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Issuers. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided, that each such new Senior Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Issuers will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Senior
Notes to require that the Issuers repurchase or redeem the Senior Notes in the
event of a takeover, recapitalization or similar transaction. The Senior Credit
Facilities prohibit the Issuers from purchasing any Senior Notes prior to final
maturity of the Term Loans, and may also provide that
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certain change of control events with respect to the Issuers would constitute a
default thereunder. Any New Credit Facility or other future credit or financing
agreement or other agreements to which the Issuers may become party may contain
similar restrictions and provisions. In the event a Change of Control occurs at
a time when the Issuers are prohibited from purchasing Senior Notes, the Issuers
could seek the consent of necessary parties to the purchase of Senior Notes or
could attempt to renegotiate, refinance or extinguish the agreements that
contain any such prohibition. If the Issuers do not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing Senior
Notes. Any failure by the Issuers to repurchase tendered Senior Notes, as a
result of any such conflict with other agreements or otherwise, would constitute
an Event of Default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facilities.
The Issuers are not required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
The following are definitions applicable to the foregoing covenant:
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Parent or a wholly owned subsidiary of the
Parent or any Principal (as defined below) or Principals, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Parent (except any
recapitalization of the Parent in contemplation of an initial public offering of
Capital Stock of the Parent or its successor) or ACL Capital, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals, becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Issuers (measured by voting power rather than number of shares), (iv) the first
day on which a majority of the members of the Board of Managers are not
Continuing Directors or (v) the first day on which the Parent or the Company
fails to own 100% of the issued and outstanding Equity Interests of ACL Capital.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Issuers to repurchase such Senior Notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Citicorp" means Citicorp, a Delaware corporation, or any successor thereto
by merger or consolidation.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Managers who (i) was a member of such Board of Managers on the
date of the Indenture or (ii) was nominated for election or elected to such
Board of Managers with the approval of (A) a majority of the Continuing
Directors who were members of such Board of Managers at the time of such
nomination or election or (B) one or more of the Principals pursuant to the LLC
Agreement.
"CSX" means CSX Corporation, a Virginia corporation, or any successor
thereto by merger or consolidation.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation, or any
successor thereto by merger or consolidation.
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"Management Investors" means the officers and employees of the Parent, the
Company or a Subsidiary of the Company who acquire Voting Stock of the Parent or
the Company on or after the date of the Indenture.
"Principals" means (i) CSX, Vectura, CVC and the Management Investors; (ii)
any Related Party of a Person referred to in clause (i); and (iii) any Person or
group of Persons which holds, directly or indirectly, Equity Interests in the
Parent so long as a majority of the Voting Stock in the Parent is beneficially
owned by the Persons referred to in clauses (i) and (ii).
"Related Party" means (a) with respect to CSX (i) CSX, any direct or
indirect wholly owned subsidiary of CSX, and any officer, director or employee
of CSX or any wholly owned subsidiary of CSX, (ii) any spouse or lineal
descendant (including by adoption and stepchildren) of the officers, directors
and employees referred to in clause (a)(i) above or (iii) any trust, corporation
or partnership 100%-in-interest of the beneficiaries, stockholders or partners
of which consists of one or more of the persons described in clause (a)(i) or
(ii) above; (b) with respect to CVC (i) Citicorp, any direct or indirect wholly
owned subsidiary of Citicorp, and any officer, director or employee of CVC,
Citicorp or any wholly owned subsidiary of Citicorp, (ii) any spouse or lineal
descendant (including by adoption and stepchildren) of the officers, directors
and employees referred to in clause (b)(i) above or (iii) any trust, corporation
or partnership 100%-in-interest of the beneficiaries, stockholders or partners
of which consists of one or more of the persons described in clause (b)(i) or
(ii) above; (c) with respect to Vectura (i) Vectura, any direct or indirect
wholly owned subsidiary of Vectura, and any officer, director or employee of
Vectura or any wholly owned subsidiary of Vectura, (ii) any spouse or lineal
descendant (including by adoption and stepchildren) of the officers, directors
and employees referred to in clause (c)(i) above or (iii) any trust, corporation
or partnership 100%-in-interest of the beneficiaries, stockholders or partners
of which consists of one or more of the persons described in clause (c)(i) or
(ii) above; and (d) with respect to any officer or employee of the Parent, the
Company or a Subsidiary of the Company (i) any spouse or lineal descendant
(including by adoption and stepchildren) of such officer or employee and (ii)
any trust, corporation or partnership 100%-in-interest of the beneficiaries,
stockholders or partners of which consists of such officer or employee, any of
the persons described in clause (d)(i) above or any combination thereof.
"Vectura" means Vectura Group, Inc., a Delaware corporation, or any
successor thereto by merger or consolidation.
CERTAIN COVENANTS
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Managers set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided, that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are contemporaneously
(subject to ordinary settlement periods) converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may, at its option, (a) apply such Net Proceeds to repay Senior
Debt, or (b) apply such Net Proceeds to the acquisition of a majority of the
assets of, or a majority of the Voting Stock of, another Permitted Business, the
making of a capital expenditure or the acquisition of other long-term assets
that are used or useful in a Permitted Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce revolving credit
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borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Indenture provides that the Issuers will be
required to make an offer to all Holders of Senior Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of Senior Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of repurchase, in accordance with the
procedures set forth in the Indenture. To the extent that any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If
the aggregate principal amount of Senior Notes tendered into such Asset Sale
Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Senior
Notes to be purchased on a pro rata basis among the Holders of Senior Notes,
based upon the aggregate outstanding principal amount of the Senior Notes. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. The Issuers will be entitled to reduce any obligation to make an
Asset Sale Offer under the Indenture by an amount equal to the aggregate
principal amount of Senior Notes purchased by the Issuers in transactions other
than those in which Senior Notes were redeemed or required to be purchased by
the Issuers pursuant to the terms of the Indenture) within the previous 365 days
immediately preceding the date on which the aggregate amount of Excess Proceeds
exceeds $10.0 million.
Notwithstanding the first paragraph of this section, the Company and its
Restricted Subsidiaries will be permitted to consummate an Asset Sale without
complying with such first paragraph if (i) the Company or the applicable
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value of the assets or other
property sold, issued or otherwise disposed of (as evidenced by a resolution of
the Board of Managers and in the case of consideration with a fair market value
in excess of $5 million, accompanied by a valuation opinion issued by an
accounting, appraisal or investment banking firm of national standing) and (ii)
at least 75% of the consideration for such Asset Sale constitutes a controlling
interest in a business of the type described in the "Business Activities"
covenant, long-term assets used or useful in such business and/or cash or Cash
Equivalents; provided that any cash or Cash Equivalents received by the Company
or any of its Restricted Subsidiaries in connection with any Asset Sale
permitted to be consummated under this paragraph shall be added to the Excess
Proceeds.
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company or to
the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Issuers) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Senior Notes, except a payment of interest or principal at Stated Maturity;
or (iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable fourquarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed
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Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Equity"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (including Restricted Payments
permitted by clauses (i), (iv), (vi) and (viii) of the next succeeding
paragraph and excluding Restricted Payments permitted by clauses (ii),
(iii), (v), (vii), (ix) and (x) of the next succeeding paragraph), is less
than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
proceeds (including the fair market value of non-cash proceeds determined
in good faith by the Board of Managers) received by the Company since the
date of the Indenture as a contribution to its equity capital or from the
issue or sale of Equity Interests of the Company (other than Disqualified
Stock of the Company) or from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests or Disqualified Stock or convertible
debt securities sold to a Subsidiary of the Company), plus (iii) to the
extent that any Restricted Investment that was made after the date of the
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial
amount of such Restricted Investment, plus (iv) 50% of any dividends
received by the Company or a Wholly Owned Restricted Subsidiary after the
date of the Indenture from an Unrestricted Subsidiary of the Company, to
the extent that such dividends were not otherwise included in Consolidated
Net Income of the Company for such period, plus (v) to the extent that any
Unrestricted Subsidiary is redesignated as a Restricted Subsidiary after
the date of the Indenture, the lesser of (A) the fair market value of the
Company's Investment in such Subsidiary as of the date of such
redesignation or (B) such fair market value as of the date on which such
Subsidiary was originally designated as an Unrestricted Subsidiary. Any
non-cash contribution or series of related non-cash contributions to equity
capital in excess of $5.0 million in fair market value shall be included in
the foregoing sum only if accompanied by a supporting valuation opinion
issued by an accounting, appraisal or investment banking firm of national
standing.
The foregoing provisions will not prohibit: (i) the payment of any dividend
otherwise prohibited hereunder within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indenture; (ii) the redemption, repurchase, retirement,
defeasance or other acquisition of (A) any Indebtedness that is subordinated to
the Senior Notes or (B) any Equity Interests of the Company, in each case in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, Permitted Refinancing
Indebtedness of the Company that is subordinated to the Senior Notes, or Equity
Interests of the Company (other than any Disqualified Stock of the Company), or
from the net cash proceeds of a common equity capital contribution to the
Company; provided, that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c) (ii) of the preceding paragraph;
(iii) the defeasance, retirement, redemption, repurchase or other acquisition of
Indebtedness that is subordinated to the Senior Notes with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) the redemption,
repurchase, retirement, defeasance or other acquisition of any indebtedness
following a Change of Control pursuant to provisions of such Indebtedness
substantially similar to those described under the "-- Repurchase at the Option
of Holders -- Change of Control" covenant above after the Company shall have
complied with the provisions under such covenant, including the payment of the
applicable Change of Control Payment; (v) the payment of any dividend by a
Subsidiary of the Company other than any Restricted Subsidiary or by a Foreign
Subsidiary, in each case to the holders of such Subsidiary's Equity Interests on
a pro rata basis; (vi) so long as any Senior Notes are outstanding and no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction, (A) the repurchase, redemption or other acquisition or
retirement for value by the Company, or the distribution by the Company to the
Parent of funding to permit the repurchase, redemption
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or other acquisition or retirement for value by the Parent, of any Equity
Interests of the Parent, the Company or any Subsidiary of the Company held by
any member of the Company's (or any of its Subsidiaries') management or by any
former employee of the Company or any of its Subsidiaries pursuant to any equity
subscription agreement or stock option agreement; provided, that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed the sum of $5.0 million in any twelve-month period or
$10.0 million in the aggregate, plus the cash proceeds of any "key man" life
insurance policy received by the Company with respect to the owner of, and any
cash proceeds paid to the Company in connection with the issuance or exercise
of, any management or employee Equity Interests so acquired, and excluding
repurchases of Equity Interests deemed to occur upon exercise of stock options
if such Equity Interests represent a portion of the exercise price of such
options, and (B) the making of loans or advances to employees of the Company or
the Parent, in the ordinary course of business, but in any event not to exceed
$2.0 million in the aggregate outstanding at any one time; (vii) so long as the
Company is a limited liability company (or a corporation filing consolidated,
combined or unitary tax returns with the Parent), distributions to the Parent as
sole member (or shareholder) of the Company in an aggregate amount, with respect
to any period after March 31, 1998, not to exceed the amount payable with
respect to such period by the Parent to the holders of its Equity Interests
pursuant to the tax distribution provisions of the LLC Agreement as in effect on
the date of the Indenture; provided, that at any time upon irrevocable election
of the Parent on written notice to the Company, such distributions shall
thereafter be permitted in an amount not to exceed the Tax Amount (calculated
without regard to any net operating loss or other carryforward from periods
prior to the effective date of such election to the extent such carryforwards
are not actually usable under applicable law) for the Company with respect to
any such period; (viii) distributions with respect to any period after December
31, 1997, to the Parent in an amount not to exceed the operating expenses of the
Parent for such period, but only to the extent such costs (A) are directly
related to the general and administrative expenses of the Parent, the Company or
its Restricted Subsidiaries and not to any other business, subsidiary or
investment of the Parent, (B) are not otherwise paid for by the Company or its
Restricted Subsidiaries and (C) are not payments in respect of any Equity
Interests or Indebtedness of the Parent or of any Affiliate of the Parent;
provided, that the aggregate amount of any such distributions in any
twelve-month period shall not exceed $3.0 million; (ix) any Permitted
Investment; and (x) cash payments by the Company or its subsidiaries in
connection with the consummation of the Transactions.
The Board of Managers may designate any Restricted Subsidiary, other than
ACL Capital, to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Managers whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $10.0 million. Not later than the date of making any Restricted
Payment, the Issuers shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant entitled "-- Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
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Incurrence of Indebtedness and Issuance of Preferred Equity
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, that the Issuers may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and the Company's Subsidiaries may incur
Indebtedness if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2.00
to 1, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock had been issued, as the case may be, at the beginning of
such four-quarter period.
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, incur any Indebtedness that is contractually
subordinated in right of payment to any other Indebtedness of the Company or any
Subsidiary thereof unless such Indebtedness is also contractually subordinated
in right of payment to the Senior Notes on substantially identical terms;
provided, that no Indebtedness of the Company or any Subsidiary thereof shall be
deemed to be contractually subordinated in right of payment to any other
Indebtedness of the Company or any Subsidiary thereof solely by virtue of being
unsecured. In addition, the Indenture provides that the Company will not, and
will not permit any of its Subsidiaries to, incur any Indebtedness secured by a
Lien other than pursuant to a New Credit Facility and other than a Permitted
Lien unless contemporaneously therewith effective provision is made to secure
the Senior Notes equally and ratably with, or in the case of Indebtedness
subordinated in right of payment to the Senior Notes, on a senior basis to, such
Indebtedness for so long as such Indebtedness is so secured by a Lien.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuers or any Restricted Subsidiary of term
Indebtedness under the Senior Credit Facilities or another New Credit
Facility; provided, that the aggregate principal amount of all term
Indebtedness (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) outstanding under all New Credit Facilities after
giving effect to such incurrence does not exceed an amount equal to $435
million less the aggregate amount of all scheduled repayments of the
principal of any term Indebtedness under a New Credit Facility (other than
repayments that are immediately reborrowed) that have been made since the
date of the Indenture;
(ii) the incurrence by the Issuers or any Restricted Subsidiary of
revolving credit Indebtedness and letters of credit under the Senior Credit
Facilities or a New Credit Facility; provided, that the aggregate principal
amount of all revolving credit Indebtedness (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Subsidiaries thereunder) outstanding after giving
effect to such incurrence does not exceed an amount equal to $100 million
less the aggregate amount of all Net Proceeds of Asset Sales applied
permanently to repay revolving credit Indebtedness (which is accompanied by
a corresponding permanent commitment reduction and is not available to be
reborrowed) pursuant to the covenant described above under the caption
"--Asset Sales";
(iii) the incurrence by the Company and its Subsidiaries of Existing
Indebtedness;
(iv) the incurrence by the Issuers of Indebtedness represented by the
Senior Notes and the incurrence by the Subsidiary Guarantors of
Indebtedness represented by the Subsidiary Guarantees;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations or
Purchase Money Indebtedness, at any time outstanding in an aggregate
principal amount not to exceed 10% of Total Assets;
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(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture
to be incurred under the first paragraph hereof or clauses (i), (ii),
(iii), (iv), (v), (vi) or (ix) of this paragraph;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness owing to and held by any Wholly Owned
Restricted Subsidiary or owing to and held by the Company; provided, that
(i) if one of the Issuers is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the Senior Notes and (ii) (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a Wholly
Owned Restricted Subsidiary thereof shall be deemed to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause (vii)
and (B) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Wholly Owned Restricted Subsidiary
thereof shall be deemed to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations incurred with respect to any
Indebtedness or Obligation that is permitted by the terms of the Indenture
to be outstanding;
(ix) the incurrence by the Company or any Subsidiary Guarantor of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $25
million;
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of
the Company that was not permitted by this clause (x);
(xi) the incurrence of Indebtedness of the Company and its Restricted
Subsidiaries (including letters of credit) in respect of performance bonds,
bankers' acceptances, letters of credit, performance, bid, surety or appeal
bonds or similar bonds and completion guarantees provided by the Company
and its Restricted Subsidiaries in the ordinary course of their business
and consistent with past practices and which do not secure other
Indebtedness;
(xii) Indebtedness of the Company and its Restricted Subsidiaries
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, in any case incurred in connection
with the disposition of any business, assets or Subsidiary of the Company
(other than Guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Subsidiary for the purpose of
financing such acquisition), in an aggregate principal amount not to exceed
the gross proceeds actually received by the Company or any Restricted
Subsidiary of the Company in connection with such disposition;
(xiii) Indebtedness of the Company or a Restricted Subsidiary owed to
(including obligations in respect of letters of credit for the benefit of)
any Person in connection with worker's compensation, health, disability or
other employee benefits or property, casualty or liability insurance
provided by such Person to the Company or such Restricted Subsidiary,
pursuant to reimbursement or indemnification obligations to such Person, in
each case incurred in the ordinary course of business and consistent with
past practices;
(xiv) the Guarantee by the Issuers or any Restricted Subsidiary of
Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
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(xv) the incurrence by Foreign Subsidiaries of additional Indebtedness
in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (xv), not to exceed $20.0 million; and
(xvi) Indebtedness incurred in connection with a transaction pursuant
to and in compliance with the caption entitled "-- Sales of Accounts
Receivable."
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xvi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuers shall, in their sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
The Indenture provides that the Company will not permit any of its
Restricted Subsidiaries other than Subsidiary Guarantors to incur any
Indebtedness (including Acquired Debt) other than (i) intercompany Indebtedness
owing to the Company or a Wholly Owned Restricted Subsidiary of the Company
permitted under clause (vii) above or (ii) Indebtedness permitted under clause
(xv) above; provided, that Restricted Subsidiaries other than Subsidiary
Guarantors may incur Indebtedness (including Acquired Debt) other than
Indebtedness permitted under clause (vii) above in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
such Indebtedness so incurred and any Indebtedness permitted under clause (xv)
above, in an amount not to exceed 30% of the total consolidated assets of such
Restricted Subsidiaries in the aggregate, calculated in accordance with GAAP, if
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
would have been at least 2.00 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if such additional
Indebtedness had been incurred at the beginning of such four-quarter period.
Liens
The Indenture provides that the Issuers will not, and will not permit any
of their Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Senior Credit Facilities as in effect as of the date of the
Indenture, any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, and any other New
Credit Facility permitted under the Indenture; provided, that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements, refinancings or New Credit Facilities are no more restric-
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tive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in the Senior Credit Facilities as in effect
on the date of the Indenture, (c) Indebtedness incurred by Restricted
Subsidiaries other than Subsidiary Guarantors, incurred in compliance with the
covenant described in the last paragraph under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Equity," (d) the Indenture and the Notes,
(e) applicable law, (f) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided, that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (g)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (h) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (f) above on the property so
acquired, (i) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (j)
Permitted Refinancing Indebtedness, provided, that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (k) secured Indebtedness otherwise permitted
to be incurred pursuant to the provisions of the covenant described above under
the caption "-- Liens" that limits the right of the debtor to dispose of the
assets securing such Indebtedness, (l) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business,
(m) protective liens filed in connection with sale-leaseback transactions
permitted under the caption "-- Sale and Leaseback Transactions," (n) Permitted
Debt incurred pursuant to clauses (v), (viii), (xi), (xiii) or (xv) of the
covenant described under the caption "Incurrence of Indebtedness and Issuance of
Preferred Equity," (o) purchase money obligations or other Indebtedness or
contractual requirements incurred in connection with or permitted by the
covenant described under the caption "-- Sales of Accounts Receivable" and (p)
restrictions on cash or other deposits or net worth imposed by customers under
contracts entered into in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Issuers may not consolidate or merge with
or into (whether or not such Issuer is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) such Issuer is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than one of the Issuers) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made is a corporation or limited liability company organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than one of the Issuers) or the entity or
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Issuers
under the Registration Rights Agreement, the Senior Notes and the Indenture
pursuant to supplemental indentures in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; (iv) except in the case of a merger or consolidation of one of the
Issuers with or into a Wholly Owned Restricted Subsidiary of the Company, the
Issuer or the entity or Person formed by or surviving any such merger or
consolidation (if other than one of the Issuers), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, (A) be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Equity" and (B) have Consolidated Net
Worth in an amount not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and (v) the Company will have delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or
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transfer and such supplemental indenture (if any) comply with the Indenture.
Notwithstanding the foregoing, the Company is permitted to reorganize as a
corporation; provided, that the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States confirming that the holders of the
Senior Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of such reorganization and will be subject to Federal
income tax in the same manner and at the same times as would have been the case
if such reorganization had not occurred, and certain other conditions are
satisfied.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Issuers deliver to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Managers set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Managers and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Company of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees and payments in respect
of indemnification obligations owing to directors, officers or other individuals
under the charter or by-laws of the Company or the Parent or pursuant to written
agreements with any such Person, (iv) Restricted Payments and Permitted
Investments that are permitted by the provisions of the Indenture described
above under the caption "-- Restricted Payments," (v) transactions pursuant to
agreements in effect as of the date of the Indenture disclosed in or
contemplated by "Certain Relationships and Related Transactions" or disclosed
elsewhere in this Prospectus, (vi) transactions effected in compliance with the
terms of sales permitted as described under the caption "-- Sales of Accounts
Receivable" and (vii) Permitted Affiliate Transactions.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided, that the Issuers may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the caption "-- Incurrence of
Additional Indebtedness and Issuance of Preferred Equity" and (b) incurred a
Lien to secure such Indebtedness pursuant to the covenant described above under
the caption "-- Liens," (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Managers and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the Issuers apply the proceeds of
such transaction in compliance with, the covenant described above under the
caption "-- Asset Sales."
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Restrictions on Preferred Stock of Subsidiaries
The Indenture provides that the Company will not permit any of its
Restricted Subsidiaries to issue any preferred stock, or permit any Person to
own or hold an interest in any preferred stock of any such Subsidiary, except
for preferred stock issued to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
Business Activities
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than (i) Permitted
Businesses and (ii) the making of Permitted Investments and engaging in a
business in connection with any such Permitted Investment, except to such extent
as would not be material to the Company and its Restricted Subsidiaries taken as
a whole.
Restrictions on Activities of ACL Capital
The Indenture provides that ACL Capital may not hold any assets (other than
the $100.00 contributed to it in connection with its formation), become liable
for any obligations other than its obligations under the Senior Notes or engage
in any business activities; provided, that ACL Capital may be a co-obligor with
respect to Indebtedness if the Company is primary obligor of such Indebtedness
and the net proceeds of such Indebtedness are received by the Company or one or
more of the Company's Subsidiaries other than ACL Capital.
Payments for Consent
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Senior Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Senior Notes unless such
consideration is offered to be paid or is paid to all Holders of the Senior
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Additional Subsidiary Guarantees
The Indenture provides that if the Issuers or any of their Restricted
Subsidiaries shall acquire or create another domestic Subsidiary after the date
of the Indenture, then such newly acquired or created Subsidiary shall become a
Subsidiary Guarantor and execute supplemental indentures and deliver an Opinion
of Counsel, in accordance with the terms of the Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Issuers will furnish to the Holders of Senior Notes and prospective purchasers
upon request (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Issuers were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Issuers and
their consolidated Subsidiaries and, with respect to the annual information
only, a report thereon by the Issuers' certified independent accountants and
(ii) all current reports that would be required to be filed with the Commission
on Form 8-K if the Issuers were required to file such reports, in each case
within the time periods specified in the Commission's rules and regulations. In
addition, following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Issuers will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, (x) at
all times that the Commission does not accept the filings provided for in the
preceding sentence or (y) such filings provided for in the preceding sentence do
not
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contain all of the information required to be delivered pursuant to Rule
144A(d)(4), the Issuers have agreed to make available to any holder of Senior
Notes, to securities analysts and to prospective holders of such Senior Notes,
the information required by Rule 144A(d)(4) under the Securities Act.
SALES OF ACCOUNTS RECEIVABLE
The Company may, and any of its Restricted Subsidiaries may, sell at any
time and from time to time, accounts receivable and notes receivable and related
assets to an Accounts Receivable Subsidiary; provided that (i) the aggregate
consideration received in each such sale is at least equal to the aggregate fair
market value of the receivables sold, as determined by the Board of Managers in
good faith, (ii) no less than 80% of the consideration received in each such
sale consists of either cash or a promissory note (a "Promissory Note") which is
subordinated to no Indebtedness or obligation (except that it may be
subordinated to the financial institutions or other entities providing the
financing to the Accounts Receivable Subsidiary with respect to such accounts
receivable (the "Financier")) or an Equity Interest in such Accounts Receivable
Subsidiary; provided further that the initial sale will include all accounts
receivable of the Company and/or its Restricted Subsidiaries that are party to
such arrangements that constitute eligible receivables under such arrangements,
(iii) the cash proceeds received from the initial sale less reasonable and
customary transaction costs will be deemed to be Net Proceeds and will be
applied in accordance with the second paragraph of the covenant described above
under the caption entitled "-- Certain Covenants -- Asset Sales," and (iv) the
Company and its Restricted Subsidiaries will sell all accounts receivable that
constitute eligible receivables under such arrangements to the Accounts
Receivable Subsidiary no less frequently than on a weekly basis.
The Company (i) will not permit any Accounts Receivable Subsidiary to sell
any accounts receivable purchased from the Company or any of its Restricted
Subsidiaries to any other person except on an arm's-length basis and solely for
consideration in the form of cash or Cash Equivalents, (ii) will not permit the
Accounts Receivable Subsidiary to engage in any business or transaction other
than the purchase, financing and sale of accounts receivable of the Company and
its Restricted Subsidiaries and activities incidental thereto, (iii) will not
permit any Accounts Receivable Subsidiary to incur Indebtedness in an amount in
excess of the book value of such Accounts Receivable Subsidiary's total assets,
as determined in accordance with GAAP, (iv) will, at least as frequently as
monthly, cause the Accounts Receivable Subsidiary to remit to the Company as
payment on the outstanding balance of the Promissory Notes, all available cash
or Cash Equivalents not held in a collection account pledged to a Financier, to
the extent not applied to pay or maintain reserves for reasonable operating
expenses of the Accounts Receivable Subsidiary or to satisfy reasonable minimum
operating capital requirements and (v) will not, and will not permit any of its
Subsidiaries to, sell accounts receivable to any Accounts Receivable Subsidiary
upon the occurrence of certain events of bankruptcy or insolvency with respect
to such Accounts Receivable Subsidiary.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Senior Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Senior Notes; (iii)
failure by the Company or any of its Subsidiaries to comply with the provisions
described under the caption "-- Repurchase at the Option of Holders -- Change of
Control"; (iv) failure by the Company or any of its Subsidiaries for 30 days
after notice to comply with any of its other agreements in the Indenture or the
Senior Notes; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $7.5 million or more;
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(vi) failure by the Company or any of its Subsidiaries to pay final judgments
aggregating in excess of $7.5 million, which judgments are not paid, discharged
or stayed for a period of 30 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Subsidiaries; and (viii)
except as permitted by the Indenture, any Subsidiary Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Subsidiary Guarantor, or any Person
acting on behalf of any Subsidiary Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all such Senior Notes to be due and payable immediately. Upon such
declaration, the principal of such Senior Notes, premium, if any, and accrued
and unpaid interest on such Senior Notes shall be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Issuers, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without further action or notice. Holders of the Senior Notes
may not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
such Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, such Senior Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, MEMBERS AND STOCKHOLDERS
No director, officer, employee, incorporator, member or stockholder of the
Issuers, as such, shall have any liability for any obligations of the Issuers
under the Senior Notes, the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Senior Notes
by accepting a Senior Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Senior Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of
their obligations discharged with respect to the outstanding Senior Notes
("Legal Defeasance") except for (i) the rights of Holders of outstanding Senior
Notes to receive payments in respect of the principal of, premium and Liquidated
Damages, if any, and interest on such Senior Notes when such payments are due
from the trust referred to below, (ii) the Issuers' obligations with respect to
the Senior Notes concerning issuing temporary Senior Notes, registration of
Senior Notes, mutilated, destroyed, lost or stolen Senior Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuers obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Issuers may, at their
option and at any time, elect to have the obligations of the Issuers released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Senior Notes.
In the event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation and insolvency
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events) described under "-- Events of Default and Remedies" will no longer
constitute an Event of Default with respect to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Senior Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Issuers must specify
whether the Senior Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel in the United States confirming
that (A) the Issuers have received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable Federal income tax law, in either case to
the effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Senior Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred; (iii) in the case of Covenant Defeasance, the Issuers shall have
delivered to the Trustee an Opinion of Counsel in the United States confirming
that the Holders of the outstanding Senior Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit); (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement or
instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Issuers must have delivered to the Trustee an Opinion of Counsel
to the effect that as of the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Issuers must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Issuers with the intent of preferring the Holders of
Senior Notes over the other creditors of the Issuers with the intent of
defeating, hindering, delaying or defrauding creditors of the Issuers or others;
and (viii) the Issuers must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or exchange
any Senior Note selected for redemption. Also, the Issuers are not required to
transfer or exchange any Senior Note for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Senior Notes may be amended or supplemented with the consent of the Holders
of at least a majority in principal amount of such Senior Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, such Senior Notes), and any existing
default or compliance with any provision of the Indenture or the Senior Notes
may be waived with the consent of the Holders of a majority in principal amount
of such then outstanding Senior Notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, such Senior Notes).
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Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than the provisions relating to the covenants described
above and entitled "-- Repurchase at the Option of Holders -- Change of Control"
and "-- Certain Covenants -- Asset Sales"),(iii) reduce the rate of or change
the time for payment of interest on any Senior Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
on the Senior Notes (except a rescission of acceleration of the Senior Notes by
the Holders of at least a majority in aggregate principal amount of such Senior
Notes and a waiver of the payment default that resulted from such acceleration),
(v) make any Senior Note payable in money other than that stated in the Senior
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Senior Notes to receive
payments of principal of or premium, if any, or interest on the Senior Notes,
(vii) waive a redemption payment with respect to any Senior Note (other than the
provisions relating to the covenants described above and entitled "-- Repurchase
at the Option of Holders -- Change of Control" and "-- Certain
Covenants -- Asset Sales") or (viii) make any change in the foregoing amendment
and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Issuers and the Trustee may amend or supplement the Indenture or the
Senior Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of the Issuers' obligations to Holders of
Senior Notes in the case of the merger, consolidation or sale of all or
substantially all of the Issuers' assets, to make any change that would provide
any additional rights or benefits to the Holders of Senior Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder, or
to comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should the Trustee become a creditor of the Issuers, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if the Trustee acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
GOVERNING LAW
The Indenture provides that it and the Senior Notes will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain copies of the Indenture and
Registration Rights Agreement without charge by writing to the Issuers at 1701
East Market St., Jeffersonville, IN 47130, Attention: Secretary.
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Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Accounts Receivable Subsidiary" means a Wholly Owned Subsidiary of the
Company (i) which is formed solely for the purpose of, and which engages in no
activities other than activities in connection with, financing accounts
receivable and/or notes receivable and related assets of the Company and/or its
Restricted Subsidiaries, (ii) which is designated by the Board of Managers as an
Accounts Receivables Subsidiary pursuant to a resolution set forth in an
Officers' Certificate and delivered to the Trustee, (iii) that has total assets
at the time of such designation with a book value not exceeding $100,000 plus
the reasonable fees and expenses required to establish such Accounts Receivable
Subsidiary and any accounts receivable financing, (iv) no portion of
Indebtedness or any other obligation (contingent or otherwise) of which (a) is
at any time recourse to or obligates the Company or any Restricted Subsidiary of
the Company in any way, other than pursuant to (I) representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with the sale of accounts receivable and/or notes receivable to such
Accounts Receivable Subsidiary or (II) any guarantee of any such accounts
receivable financing by the Company that is permitted to be incurred pursuant to
the covenant described under the caption entitled "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Equity," or
(b) subjects any property or asset of the Company or any Restricted Subsidiary
of the Company, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to (I) representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with sales of accounts receivable and/or notes receivable or (II) any
guarantee of any such accounts receivable financing by the Company that is
permitted to be incurred pursuant to the covenant described under the caption
entitled "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Equity," (v) with which neither the Company nor any Restricted
Subsidiary of the Company has any contract, agreement, arrangement or
understanding other than contracts, agreements, arrangements or understandings
entered into in the ordinary course of business in connection with sales of
accounts receivable and/or notes receivable in accordance with the description
under the caption "-- Sales of Accounts Receivable" and fees payable in the
ordinary course of business in connection with servicing accounts receivable
and/or notes receivable and (vi) with respect to which neither the Company nor
any Restricted Subsidiary of the Company has any obligation (a) to subscribe for
additional shares of Capital Stock or other Equity Interests therein or make any
additional capital contribution or similar payment or transfer thereto other
than in connection with the sale of accounts receivable and/or notes receivable
to such Accounts Receivable Subsidiary in accordance with the description under
the caption "-- Sales of Accounts Receivable" or (b) to maintain or preserve
solvency or any balance sheet item, financial condition, level of income or
results of operations thereof.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than (A) in the ordinary course of business consistent with
past practices or (B) sales or other dispositions of accounts receivable and/or
notes
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receivable and related assets to the Accounts Receivable Subsidiary in
accordance with the description under the caption "-- Sales of Accounts
Receivable" (provided, that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company and its Subsidiaries taken
as a whole will be governed by the provisions of the Indenture described above
under the caption "-- Repurchase at the Option of Holders -- Change of Control"
and/or the provisions described above under the caption "-- Certain Covenants --
Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset
Sale covenant), and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Issuers to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Issuers or to another Wholly Owned
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Issuers or to another Wholly Owned Restricted
Subsidiary; (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments";
(iv) any disposition of damaged, worn out or otherwise obsolete property in the
ordinary course of business, so long as such property is no longer necessary for
the proper conduct of a Permitted Business; (v) any sale or discount without
recourse (other than recourse for a breach of a representation or warranty) of
accounts receivable arising in the ordinary course of business, but only in
connection with the collection or compromise thereof; and (vi) sales or
transfers (a) among Foreign Subsidiaries or (b) from the Issuers or a Wholly
Owned Restricted Subsidiary to a Foreign Subsidiary to the extent, in the case
of this clause (b), the consideration received by the Company or any Wholly
Owned Restricted Subsidiary of the Company in any such transaction consists
solely of cash or Cash Equivalents.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Managers" means (i) for so long as the Company is a limited
liability company, the board of managers or management committee of the Company,
if it has such a board or committee, and if it does not, the board of managers
or management committee of the manager of the Company, (ii) if the Company is
not a limited liability company at the relevant time, the board of directors or
other analogous body of the Company, and (iii) any committee or subcommittee
thereof duly authorized to act on behalf of such board of managers, such board
of directors or such other analogous body.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The amount of Indebtedness represented by a
Capital Lease Obligation shall be the capitalized amount of the liability in
respect of such obligation determined in accordance with GAAP, and the Stated
Maturity thereof shall be the date of the last scheduled payment of rent or any
other amount due under the relevant lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having
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capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition and
(vi) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) through (v) of this
definition.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits or the Tax Amount of such Person and its Subsidiaries for such period,
to the extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such Person
and its Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, plus (vi) one-time cash payments made
in connection with the Transactions in an amount not to exceed $3.0 million, in
each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of such Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the Company by such Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person (ii) the Net Income of any Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded and (v)
the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the Company or one of its Subsidiaries.
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"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common equityholders of such
Person and its consolidated Restricted Subsidiaries as of such date, plus (b)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of the Indenture
in the book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (ii) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Restricted Subsidiaries
and (iii) all unamortized debt discount and expense and unamortized deferred
charges as of such date, in each case, determined in accordance with GAAP.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, that any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
the issuers thereof to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that such issuers may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a primary offering of Capital Stock (other than
Disqualified Stock) of (i) the Company; or (ii) the Parent to the extent the net
proceeds thereof are contributed to the Company as a common equity capital
contribution (other than Disqualified Stock).
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness (other than Indebtedness under the Senior Credit Facilities) of the
Company and its Subsidiaries in existence on the date of the Indenture, until
such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest of such Person and
its Restricted Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend
payments or other distributions (and non-cash dividend payments in the case of a
Person that is a Restricted Subsidiary) on any series of preferred equity of
such Person times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person (or in the case of a person that is a
partnership or limited liability company, the combined federal, state, local and
foreign income tax rate that was or would have been utilized to calculate the
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Tax Amount of such Person), expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred equity subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred equity, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Foreign Subsidiary" means each of ACBL de Venezuela, C.A. (a Venezuelan
compania anonima), ACBL Hidrovias, S.A. (an Argentine sociedad anonima), ACBL
Hidrovias, Ltd. (a Bermuda corporation), ACBL Argentina, Ltd. (a Bermuda
corporation), ACBL Venezuela, Ltd. (a Bermuda corporation), ACBL Castle Harbour,
Ltd. (a Bermuda corporation), ACL Venezuela, Ltd. (a Bermuda corporation),
Venco, Ltd. (a Bermuda corporation) and any future Restricted Subsidiary of the
Company that is organized under the laws of any jurisdiction other than the
United States or any State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements or other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates and (ii) foreign exchange contracts, currency swap agreements or other
similar agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates, in each case provided that such
obligations are entered into solely to protect such Person against fluctuations
in interest rates or currency exchange rates and not for purposes of
speculation.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations, the balance deferred and unpaid of the
purchase price of any property, Attributable Debt or any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade
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payable, if and to the extent any of the foregoing (other than letters of
credit, Attributable Debt and Hedging Obligations) would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP, as well as
all Indebtedness of others secured by a Lien on any asset of such Person
(whether or not such Indebtedness is assumed by such Person) and, to the extent
not otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person for any period, (i) the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of dividends on preferred interests, excluding, however,
(a) any gain (but not loss), together with any related provision for taxes or
distributions in respect of taxes made under clause (vii) of the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments,"
on such gain (but not loss), realized in connection with (1) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (2) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (b) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for taxes
or distributions in respect of taxes made under clause (vii) of the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments,"
on such extraordinary or nonrecurring gain (but not loss) less (ii) in the case
of any Person that is a partnership or limited liability company, distributions
in respect of taxes made under clause (vii) of the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments," of such person
for such period.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, any taxes (or distributions in respect of taxes
permitted under clause (vii) of the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments"), and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
"New Credit Facility" means, with respect to the Company and its
Subsidiaries, one or more debt facilities (including, without limitation,
facilities available under the Senior Credit Facilities) or commercial
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paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Senior Notes and any New Credit Facility) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities and obligations
payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by any two of the Chief
Executive Officer, the Chief Financial Officer, the President, any Vice
President, the Treasurer or the Secretary, of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee and who may be an employee of or counsel to the
Parent, the Company or the Trustee.
"Permitted Affiliate Transactions" means (i) management, support, service
and consulting arrangements with CSX pursuant to the Transition Services
Agreement and any payments for fees and expenses thereunder made; provided, that
such payments shall not exceed $3.0 million in the aggregate, (ii) railroad
transportation and related services provided to the Company and its Subsidiaries
in the ordinary course of business and consistent with past practices; provided,
that any such transactions are on terms that are not materially less favorable
to the Company or its Subsidiaries than those that would have been obtained in a
comparable transaction with an unrelated Person and (iii) transactions pursuant
to any contract or agreement in effect on the date of the Indenture as the same
may be amended, modified or replaced from time to time so long as such
amendment, modification or replacement is not materially less favorable to the
Company and its Restricted Subsidiaries than the contract or agreement as in
effect on the date of the Indenture.
"Permitted Business" means any of the businesses and any other businesses
ancillary or complementary to the businesses engaged in by the Company and its
respective Restricted Subsidiaries on the date of the Indenture.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary that is a Subsidiary Guarantor and is engaged in a
Permitted Business; (b) any Investment in Cash Equivalents; (c) any Investment
by the Company or any Restricted Subsidiary of the Company in a Person, if as a
result of or in connection with such Investment (i) such Person becomes a
Restricted Subsidiary of the Company that is a Subsidiary Guarantor of the
Company and is engaged in a Permitted Business or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company that is a Subsidiary Guarantor of the Company and is
engaged in a Permitted Business; (d) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"-- Certain Covenants -- Asset Sales" or from a sale that was made pursuant to
and in compliance with the requirements described under the caption "-- Sales of
Accounts Receivable."; (e) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company; (f)
any Investment by the Company or any Wholly Owned Restricted Subsidiary of the
Company involving the contribution of assets to a Restricted Subsidiary of the
Company that is a not Subsidiary Guarantor in exchange for the incurrence by
such Restricted Subsidiary of Indebtedness owed to the Company or any Wholly
Owned Restricted Subsidiary of the Company that is a
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Subsidiary Guarantor; (g) Investments in an Accounts Receivable Subsidiary made
in connection with the formation of an Accounts Receivable Subsidiary; and (h)
other Investments in any Person having an aggregate fair market value (measured
on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (h) that are at the time outstanding, not to exceed
5% of Total Assets.
"Permitted Liens" means (i) Liens on assets of the Company or Restricted
Subsidiaries of the Company to secure Senior Debt of the Company or such
Subsidiaries in an amount not to exceed $535.0 million minus the aggregate
amount of principal payments at Stated Maturity made on Indebtedness under a New
Credit Facility since the date of the Indenture that was otherwise permitted by
the terms of the Indenture to be incurred; (ii) Liens in favor of the Issuers;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with one of the Company or any Subsidiary of the Company;
provided, that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or any Subsidiary of the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided, that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens existing on the date of the Indenture; (vii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided, that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; and (ix) Liens incurred
in the ordinary course of business of the Issuers or any Subsidiary of the
Issuers with respect to obligations that do not exceed $5.0 million at any one
time outstanding and that (a) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Issuers or such Subsidiary; (x) Liens with respect
to current wages of the master and crew and for wages of a stevedore when
employed directly by the Company or any Subsidiary of the Company, or by the
charterer, operator, master or agent of any of the vessels owned or operated by
the Company or any Subsidiary of the Company, and for salvage (including
contract salvage) and general average and (xi) Liens with respect to Permitted
Debt incurred pursuant to clauses (v), (viii), (ix), (xi), (xiii) and (xv) of
the covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Equity."
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided, that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Senior Notes on terms at least as favorable to the Holders of Senior
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
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"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset or assets (including Capital Stock), any
conditional sale obligation, any obligation under any title retention agreement
or any other purchase money obligation or (ii) incurred to finance the
acquisition by the Company or a Restricted Subsidiary of such asset or assets,
including additions and improvements; provided, that the average life of such
Indebtedness is less than the anticipated useful life of assets having an
aggregate fair market value representing more than 50% of the aggregate fair
market value of all assets so acquired and that such Indebtedness is incurred
within 180 days after the acquisition by the Company or Restricted Subsidiary of
such asset, or is in existence with respect to any asset or other property at
the time such asset or property is acquired.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means that certain Credit Agreement, by and
among the Company, certain Subsidiaries of the Company and The Chase Manhattan
Bank, as Agent, providing for revolving credit borrowings and term loans,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"Senior Debt" means (i) all Indebtedness outstanding under a New Credit
Facility and all Hedging Obligations with respect thereto, (ii) any other
Indebtedness permitted to be incurred under the terms of the Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides that
it is subordinated in right of payment to the Senior Notes and (iii) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (v) any Indebtedness or
Obligation which is subordinate or junior in any respect (other than as a result
of the Indebtedness being unsecured) to any other Indebtedness or obligation of
the Company, (w) any liability for federal, state, local or other taxes owed or
owing, (x) any Indebtedness of the Issuers to any of their Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means each of American Commercial Barge Line LLC (a
Delaware limited liability company), American Commercial Marine Service LLC (a
Delaware limited liability company), Louisiana Dock Company LLC (a Delaware
limited liability company), Waterway Communication System LLC (a Delaware
limited liability company), American Commercial Terminals LLC (a Delaware
limited liability company), American Commercial Terminals-Memphis LLC (a
Delaware limited liability company), Jeffboat LLC (a Delaware limited liability
company), American Commercial Lines International LLC (a Delaware limited
liability company), Orinoco TASA LLC (a Delaware limited liability company),
Orinoco TASV LLC (a Delaware limited liability company), Breen TAS LLC (a
Delaware limited liability
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company), Bullard TAS LLC (a Delaware limited liability company), Shelton TAS
LLC (a Delaware limited liability company), Lemont Harbor & Fleeting Services
LLC (a Delaware limited liability company), Tiger Shipyard LLC (a Delaware
limited liability company), Wilkinson Point LLC (a Delaware limited liability
company), Houston Fleet LLC (a Delaware limited liability company) and any other
Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"Tax Amount" means, with respect to any Person for any period, the combined
federal, state, local and foreign income taxes that would be paid by such Person
if it were a Delaware corporation filing separate tax returns with respect to
such Person's actual taxable income for such period; provided, that in
determining the Tax Amount for a period, the effect thereon of any net operating
loss carryforwards or other carryforwards, such as alternative minimum tax
carryforwards, that would have arisen if such Person were a Delaware corporation
shall be taken into account to the extent they would be taken into account under
applicable law. Notwithstanding anything to the contrary, Tax Amount shall not
include taxes resulting from such Person's reorganization as or change in status
to a corporation. In no event shall the Tax Amount for any year or other period
be less than zero.
"Total Assets" means, at any date of determination, the total consolidated
assets of the Company and its Restricted Subsidiaries, as set forth on the
Company's then most recent consolidated balance sheet.
"Unrestricted Subsidiary" means River Terminal Properties, L.P. and any
Subsidiary (other than ACL Capital ) or any successor to any of them that is
designated by the Board of Managers as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Managers; but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of managers or board of directors that is
not a director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Managers shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Managers
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "-- Certain Covenants -- Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "Incurrence of Indebtedness and Issuance of Preferred Equity," the
Issuers shall be in default of such covenant). The Board of Managers of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Equity," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
managers or management committee of a limited liability company, the board of
directors of a corporation or other analogous body of such Person.
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"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were originally sold by the Company on June 23, 1998 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Notes to qualified institutional buyers in reliance on
Rule 144A under the Securities Act and to certain persons outside the United
States pursuant to Regulation S under the Securities Act that agreed to comply
with certain transfer restrictions and other conditions. As a condition to the
Purchase Agreement, the Issuers entered into the Registration Rights Agreement
with the Initial Purchaser pursuant to which the Issuers have agreed to: (i)
file a registration statement (the "Exchange Offer Registration Statement") with
the Commission on or prior to 60 days after the closing of the Offering (the
"Closing"), (ii) use their best efforts to have the Exchange Offer Registration
Statement declared effective by the Commission on or prior to 150 days after the
Closing of the Offering, (iii) unless the Exchange Offer would not be permitted
by applicable law or Commission policy, the Issuers will commence the Exchange
Offer and use their best efforts to issue on or prior to 30 business days after
the date on which the Exchange Offer Registration Statement was declared
effective by the Commission (the "Effective Date"), Exchange Notes in exchange
for all Notes tendered prior thereto in the Exchange Offer and (iv) if obligated
to file the Shelf Registration Statement, the Issuers will use their best
efforts to file the Shelf Registration Statement with the Commission on or prior
to 60 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 150 days
after such obligation arises. If (a) the Issuers fail to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Issuers fail to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Issuers will pay Liquidated Damages to each Holder of Notes with
respect to which any such Registration Default shall be applicable, with respect
to the first 90-day period immediately following the occurrence of the first
such Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Notes held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 principal amount
of Notes with respect to each subsequent 90-day period until all such
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages for all such Registration Defaults of $0.25 per week per $1,000
principal amount of Notes. All accrued Liquidated Damages will be paid by the
Issuers on each damages payment date to the Global Note Holder by wire transfer
of immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to the
Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above. Upon the effectiveness of the
Exchange Offer Registration Statement, the Issuers will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for New Notes. The Company will keep the Exchange Offer
open for not less than 20 business days (or longer, if required by applicable
law) after the Effective Date. For each Note surrendered to the Company pursuant
to the Exchange Offer, the holder of such Note will receive an Exchange Note
having a principal amount equal to that of the surrendered Note. Interest on
each Exchange Note will accrue from the date of its original issue.
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Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Issuers believe that the
Exchange Notes would in general be freely tradeable after the Exchange Offer
without further registration under the Securities Act. However, any purchaser of
Notes who is an "affiliate" of the Company or who intends to participate in the
Exchange Offer for the purpose of distributing the Exchange Notes: (i) will not
be able to rely on the interpretation of the staff of the Commission; (ii) will
not be able to tender its Notes in the Exchange Offer; and (iii) must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any sale or transfer of the Notes, unless such sale or
transfer is made pursuant to an exemption from such requirements.
If (i) the Issuers are not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Issuers prior to the 20th day
following consummation of the Exchange Offer that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the New Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) that it is a broker-dealer and owns Notes acquired directly from the Issuers
or an affiliate of the Issuers, the Issuers will file with the Commission a
Shelf Registration Statement to cover resales of the Notes by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Issuers will use their
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note until (i) the date
on which such Note has been exchanged by a person other than a broker-dealer for
an Exchange Note in the Exchange Offer, (ii) following the exchange by a
broker-dealer in the Exchange Offer of a Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Securities
Act.
Upon the effectiveness of the Exchange Offer Registration Statement, unless
it would not be permitted by applicable law or Commission policy, the Company
will promptly commence the Exchange Offer to enable each Holder of the Notes
(other than Holders who are affiliates (within the meaning of the Securities
Act) of the Company or underwriters (as defined in the Securities Act) with
respect to the Exchange Notes) to exchange the Notes for Exchange Notes. If
applicable, the Company shall keep the Shelf Registration Statement continuously
effective for, under certain circumstances, at least two years after the Closing
of the Offering.
The Issuers (i) shall make available for a period of up to one year from
the consummation of the Exchange Offer a prospectus meeting the requirements of
the Securities Act to any broker-dealer for use in connection with any resale of
any such Exchange Notes and (ii) shall pay all expenses incident to the Exchange
Offer (including the expense of one counsel to the Holders covered thereby) and
will indemnify certain holders of the Notes (including any broker-dealer)
against certain liabilities, including liabilities under the Securities Act. A
broker-dealer which delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Exchange and
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of Notes who wishes to exchange such Notes for Exchange Notes
in the Exchange Offer will be required to make representations in the Letter of
Transmittal that (a) it is not an "affiliate" of the Issuers (within the meaning
of Rule 405 of the Securities Act); (b) it is not engaged in and does not intend
to engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer; (c) it is acquiring the Exchange Notes in its ordinary course of
business; and (d) if it is a Participating Broker-Dealer holding Notes acquired
for its own account as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting
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the requirements of the Securities Act in connection with any resale of Exchange
Notes received in respect of such Exchange Notes pursuant to the Exchange Offer.
The Commission has taken the position and the Issuers believe that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Exchange and Registration Rights Agreement,
the Company is required to allow Participating Broker-Dealers and other persons,
if any, subject to similar prospectus delivery requirements to use the
prospectus contained in the Exchange Offer Registration Statement in connection
with the resale of such Exchange Notes.
If the holder is a Participating Broker-Dealer, it will be required to
include a representation in such Participating Broker-Dealer's letter of
transmittal with respect to the Exchange Offer that such Participating
Broker-Dealer has not entered into any arrangement or understanding with the
Company or any affiliate of the Issuers to distribute the Exchange Notes.
For so long as the Notes are outstanding, the Issuers will continue to
provide to holders of the Notes and to prospective purchasers of the Notes the
information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the Registration Rights Agreement contains a
discussion of all material elements thereof, but does not purport to be complete
and is qualified in its entirety by reference to all provisions of the
Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuers will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes accepted
in the Exchange Offer. Holders may tender some or all of their Notes pursuant to
the Exchange Offer. However, Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that: (i) the Exchange Notes bear a Series B designation and
a different CUSIP Number from the Notes; (ii) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof; and (iii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The Exchange Notes
will evidence the same debt as the Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $300,000,000 aggregate principal amount
of Notes were outstanding. The Issuers have fixed the close of business on
, 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
The Issuers intend to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Notes when,
as and if the Issuers have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purpose of receiving the Exchange Notes from the Issuers.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of
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Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Issuers, in their sole discretion, extend the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Notwithstanding the
foregoing, the Issuers will not extend the Expiration Date beyond ,
1998.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-- Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the Exchange Notes. Such
interest will be paid with the first interest payment on the Exchange Notes on
December 31, 1998. Interest on the Notes accepted for exchange will cease to
accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually in arrears on June
30 and December 31, of each year, commencing on December 31, 1998, to Holders of
record on the immediately preceding June 15 and December 15.
PROCEDURES FOR TENDERING
Only a holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Notes, Letter of
Transmittal and other required documents must be completed and received by the
Exchange Agent at the address set forth below under "Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. Delivery of the Notes may
be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the
Issuers the representations set forth above in the eighth paragraph under the
heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE
HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
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CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE
AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE
SENT TO THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. See "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of the
Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Notes at the book-entry transfer facility, The Depository Trust Company (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Notes by causing such Book-Entry Transfer Facility to
transfer such Notes into the Exchange Agent's account with respect to the Notes
in accordance with the Book-Entry Transfer Facility's procedures for such
transfer. Although delivery of the Notes may be effected through book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility,
an appropriate Letter of Transmittal properly completed and duly executed with
any required signature guarantee and all other required documents must in each
case be transmitted to and received or confirmed by the Exchange Agent at its
address set forth below on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
The Depositary and DTC have confirmed that the Exchange Offer is eligible
for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange Offer
by causing DTC to transfer Notes to the Depositary in accordance with DTC's ATOP
procedures for transfer. DTC will then send an Agent's Message to the
Depositary.
The term "Agent's Message" means a message transmitted by DTC, received by
the Depositary and forming part of the confirmation of a book-entry transfer,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering Notes which are the subject of such book-entry
confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Issuers may enforce such
agreement against such participant. In the case of an Agent's Message relating
to guaranteed delivery, the term means a message transmitted by DTC and received
by the Depositary, which states that DTC has received an express acknowledgment
from the participant in
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DTC tendering Notes that such participant has received and agrees to be bound by
the Notice of Guaranteed Delivery.
Notwithstanding the foregoing, in order to validly tender in the Exchange
Offer with respect to Securities transferred pursuant to ATOP, a DTC participant
using ATOP must also properly complete and duly execute the applicable Letter of
Transmittal and deliver it to the Depositary. Pursuant to authority granted by
DTC, any DTC participant which has Notes credited to its DTC account at any time
(and thereby held of record by DTC's nominee) may directly provide a tender as
though it were the registered holder by so completing, executing and delivering
the applicable Letter of Transmittal to the Depositary. DELIVERY OF DOCUMENTS TO
DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Issuers in their sole discretion, which determination will be
final and binding. The Issuers reserve the absolute right to reject any and all
Notes not properly tendered or any Notes the Issuer's acceptance of which would,
in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve
the right in their sole discretion to waive any defects, irregularities or
conditions of tender as to particular Notes. The Issuer's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Notes must be cured
within such time as the Issuers shall determine. Although the Issuers intend, to
notify holders of defects or irregularities with respect to tenders of Notes,
neither the Issuers, the Exchange Agent nor any other person shall incur any
liability for failure to give such notification. Tenders of Notes will not be
deemed to have been made until such defects or irregularities have been cured or
waived. Any Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Notes and the principal amount of Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer
of such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent upon five New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
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WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Notes in the Exchange Offer, a telegram, telex, letter or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Notes register the transfer of such Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Notes are to
be registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuers, whose determination shall be final and binding on
all parties. Any Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Notes so withdrawn are validly retendered. Any
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange Exchange Notes for, any Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Issuers, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Issuers or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Issuers, might materially impair the ability of the Issuers
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval
the Issuers shall, in their sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Issuers determine in their sole discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Notes and
return all tendered Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Notes (see
"-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn.
109
<PAGE> 115
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Delivery to an address other than as set forth above will not constitute a
valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is face value, as reflected in the Issuers accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes will
be recognized by the Issuers. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only: (i) to the Issuers (upon redemption thereof or otherwise); (ii) so
long as the Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
a transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Issuers); (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act; or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
RESALES OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Issuers believe that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with person to participate, in the distribution
of the Exchange Notes, will be allowed to resell the Exchange Notes to the
public without further registration under the Securities Act
110
<PAGE> 116
and without delivering to the purchasers of the Exchange Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated in
such no-action letters or any similar interpretive letters, and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Issuers in the Letter of Transmittal that (a) it is not an "affiliate" of
the Issuers (within the meaning of Rule 405 of the Securities Act); (b) it is
not engaged in and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Exchange
Notes to be issued in the Exchange Offer; (c) it is acquiring the Exchange Notes
in its ordinary course of business; and (d) if it is a Participating
Broker-Dealer holding Notes acquired for its own account as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of such
Exchange Notes pursuant to the Exchange Offer. As indicated above, each
Participating Broker-Dealer that receives an Exchange Note for its own account
in exchange for Notes must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion (including the opinion of special counsel
described below) is based upon current provisions of the Internal Revenue Code
of 1986, as amended, applicable Treasury regulations, judicial authority and
administrative rulings and practice. There can be no assurance that the Internal
Revenue Service (the "Service") will not take a contrary view, and no ruling
from the Service has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. The Issuers recommend that
each holder consult such holder's own tax advisor as to the particular tax
consequences of exchanging such holder's Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
Kirkland & Ellis, special counsel to the Issuers, has advised the Issuers
that in its opinion, the exchange of the Notes for Exchange Notes pursuant to
the Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Notes. Rather, the Exchange Notes received by a
holder will be treated as a continuation of the Notes in the hands of such
holder. Accordingly, there will be no federal income tax consequences to holders
solely as a result of the exchange of Notes for Exchange Notes pursuant to the
Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of Exchange Notes received in respect of such Notes pursuant to the
Exchange Offer. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Notes
111
<PAGE> 117
where such Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of up to one year
from the consummation of the Exchange Offer, it will make this Prospectus, as
amended or supplemented, available to any Participating Broker-Dealer for use in
connection with any such resale. In addition, until , 1998, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Issuers will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Notes in the ordinary course of
business and who is not participating, does not intend to participate, and has
no arrangement or understanding with person to participate, in the distribution
of the Exchange Notes, will be allowed to resell the Exchange Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction and such a secondary resale transaction
should be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act, unless an exemption from registration
is otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Notes, where such Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. The Issuers have agreed that, for a period of up
to one year from the consummation of the Exchange Offer, they will make this
Prospectus available to any Participating Broker-Dealer for use in connection
with any such resale.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Exchange Notes
offered hereby will be passed upon for the Company by Kirkland & Ellis, New
York, New York.
112
<PAGE> 118
EXPERTS
The consolidated financial statements of American Commercial Lines, Inc. as
of December 27, 1996 and December 26, 1997 and for each of the three fiscal
years in the period ended December 26, 1997, included in this Prospectus and in
the Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as stated in their report thereon appearing herein and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Vectura Group, Inc. and
subsidiaries as of and for the year ended December 31, 1997, included in this
Prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
113
<PAGE> 119
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AMERICAN COMMERCIAL LINES, INC.
Report of Independent Auditors.............................. F-2
Audited Consolidated Financial Statements
Consolidated Statement of Earnings and Retained Earnings for
the fiscal years ended December 29, 1995, December 27,
1996 and December 26, 1997................................ F-3
Consolidated Statement of Cash Flows for the fiscal years
ended December 29, 1995, December 27, 1996 and December
26, 1997.................................................. F-4
Consolidated Statement of Financial Position at December 27,
1996 and December 26, 1997................................ F-5
Notes to Consolidated Financial Statements.................. F-6
AMERICAN COMMERCIAL LINES LLC
Condensed Unaudited Consolidated Interim Financial
Statements
Condensed Consolidated Statement of Earnings and Retained
Earnings for the six months ended June 27, 1997 and June
26, 1998.................................................. F-24
Condensed Consolidated Statement of Cash Flows for the six
months ended June 27, 1997 and June 26, 1998.............. F-25
Condensed Consolidated Statement of Financial Position at
December 26, 1997 and June 26, 1998....................... F-26
Notes to Condensed Consolidated Financial Statements........ F-27
VECTURA GROUP, INC. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-38
Audited Consolidated Financial Statements
Consolidated Balance Sheet at December 31, 1997............. F-39
Consolidated Statement of Income for the year ended December
31, 1997.................................................. F-41
Consolidated Statement of Stockholders' Equity for the year
ended December 31, 1997................................... F-42
Consolidated Statement of Cash Flows for the year ended
December 31, 1997......................................... F-43
Notes to Consolidated Financial Statements.................. F-44
Unaudited Consolidated Balance Sheet at June 30, 1998....... F-61
Unaudited Consolidated Statements of Income (Loss) for the
six months ended June 30, 1997 and 1998................... F-63
Unaudited Statements of Cash Flows for the six months ended
June 30, 1997 and 1998.................................... F-64
Notes to Consolidated Interim Financial Statements.......... F-65
</TABLE>
F-1
<PAGE> 120
REPORT OF INDEPENDENT AUDITORS
To the Shareholder
of American Commercial Lines, Inc.
We have audited the accompanying consolidated statements of financial
position of American Commercial Lines, Inc. (a wholly-owned subsidiary of CSX
Corporation) and subsidiaries as of December 27, 1996 and December 26, 1997, and
the related consolidated statements of earnings and retained earnings and cash
flows for each of the three fiscal years in the period ended December 26, 1997.
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. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Commercial Lines, Inc. and subsidiaries at December 27, 1996 and
December 26, 1997, and the consolidated results of their operations and their
cash flows for each of the three fiscal years in the period ended December 26,
1997, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Louisville, Kentucky
January 30, 1998, except
for Note 11, as to which
the date is June 5, 1998
F-2
<PAGE> 121
AMERICAN COMMERCIAL LINES, INC.
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
DEC. 29, DEC. 27, DEC. 26,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUE.......................................... $553,582 $622,140 $618,233
OPERATING EXPENSE
Materials, Supplies and Other............................ 240,627 267,300 289,394
Labor and Fringe Benefits................................ 122,306 138,341 150,960
Fuel..................................................... 41,955 58,747 56,982
Depreciation and Amortization............................ 32,560 37,481 41,149
Taxes, Other Than Income Taxes........................... 20,678 19,607 21,115
-------- -------- --------
458,126 521,476 559,600
-------- -------- --------
OPERATING INCOME........................................... 95,456 100,664 58,633
OTHER EXPENSE
Interest Expense......................................... 4,343 4,034 3,720
Interest Expense, Affiliate -- Net....................... 7,042 7,746 8,752
Other, Net............................................... 1,808 2,726 1,930
-------- -------- --------
13,193 14,506 14,402
-------- -------- --------
EARNINGS BEFORE INCOME TAXES............................... 82,263 86,158 44,231
INCOME TAXES............................................... 30,861 28,733 18,287
-------- -------- --------
NET EARNINGS............................................... 51,402 57,425 25,944
RETAINED EARNINGS, BEGINNING OF YEAR....................... 83,860 114,762 121,387
-------- -------- --------
135,262 172,187 147,331
CASH DIVIDENDS PAID........................................ 20,500 36,800 19,000
DIVIDEND OF NET PENSION ASSETS............................. -- 14,000 --
-------- -------- --------
RETAINED EARNINGS, END OF YEAR............................. $114,762 $121,387 $128,331
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 122
AMERICAN COMMERCIAL LINES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------
DEC. 29, DEC. 27, DEC. 26,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings............................................. $51,402 $57,425 $25,944
Adjustments to Reconcile Net Earnings to Net Cash
Provided:
Depreciation and Amortization......................... 32,560 37,481 41,149
Deferred Income Taxes................................. 3,738 (794) 90
Other Operating Activities............................ (2,014) 1,526 3,216
Changes in Operating Assets and Liabilities:
Accounts Receivable................................. (7,840) (13,048) 10,818
Materials and Supplies.............................. (11,357) 6,301 14,062
Other Current Assets................................ 1,481 (273) (5,157)
Due to Affiliates................................... 377 (903) (844)
Other Current Liabilities........................... 30,733 25,905 (37,209)
-------- -------- --------
Net Cash Provided by Operating Activities........... 99,080 113,620 52,069
INVESTING ACTIVITIES
Property Additions....................................... (33,425) (90,551) (51,500)
Proceeds from Property Dispositions...................... 2,968 1,054 3,411
Other Investing Activities............................... (6,047) (4,158) (1,211)
-------- -------- --------
Net Cash Used by Investing Activities............... (36,504) (93,655) (49,300)
FINANCING ACTIVITIES
Short-Term Borrowing from Affiliate...................... -- -- 6,550
Long-Term Debt Repaid.................................... (4,526) (4,484) (4,484)
Affiliate Debt Repaid.................................... (11,200) (11,200) (11,200)
Cash Dividends Paid...................................... (20,500) (36,800) (19,000)
-------- -------- --------
Net Cash Used by Financing Activities............... (36,226) (52,484) (28,134)
Net Increase (Decrease) in Cash and Cash Equivalents....... 26,350 (32,519) (25,365)
Cash and Cash Equivalents at Beginning of Year............. 30,453 56,803 24,284
-------- -------- --------
Cash and Cash Equivalents at End of Year............ $56,803 $24,284 $(1,081)
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 123
AMERICAN COMMERCIAL LINES, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 27, DEC. 26,
1996 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents................................. $24,284 $(1,081)
Accounts Receivable -- Net................................ 89,599 77,449
Materials and Supplies.................................... 47,588 33,526
Deferred Income Taxes..................................... 1,619 1,378
Other Current Assets...................................... 3,678 10,167
-------- --------
Total Current Assets................................... 166,768 121,439
PROPERTIES -- NET........................................... 449,221 460,295
NET PENSION ASSET........................................... 16,455 19,091
OTHER ASSETS................................................ 34,651 31,307
-------- --------
Total Assets........................................... $667,095 $632,132
======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable.......................................... $33,775 $13,714
Accrued Payroll and Fringe Benefits....................... 17,990 16,131
Due to Affiliates......................................... 26,168 27,599
Short Term Borrowings from Affiliate...................... -- 6,550
Accrued Claims and Insurance Premiums..................... 5,197 6,620
Deferred Revenue.......................................... 11,614 7,894
Other Current Liabilities................................. 51,019 35,486
-------- --------
Total Current Liabilities.............................. 145,763 113,994
LONG-TERM NOTE PAYABLE TO AFFILIATE......................... 78,400 67,200
DEFERRED INCOME TAXES....................................... 71,453 71,302
LONG-TERM DEBT.............................................. 48,230 43,746
OTHER LONG-TERM LIABILITIES................................. 30,692 36,389
-------- --------
374,538 332,631
-------- --------
SHAREHOLDER'S EQUITY
Common Stock, No Par Value, Authorized 2,000 Shares;
Issued and Outstanding 1,001 Shares.................... 6,006 6,006
Other Capital............................................. 165,164 165,164
Retained Earnings......................................... 121,387 128,331
-------- --------
Total Shareholder's Equity............................. 292,557 299,501
-------- --------
Total Liabilities and Shareholder's Equity............. $667,095 $632,132
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 124
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The operations of American Commercial Lines, Inc. ("ACL") include barge
transportation together with related terminal, marine construction and repair,
and communications services along inland waterways. Barge transportation
services include the movement of grain, coal, liquids, and other bulk products
in the United States and South America and account for the majority of the
Company's revenues. ACL's operations in South America are concentrated in
Venezuela and along the Parana/Paraguay River system. Terminal, marine
construction and repair, and communications services are provided to customers
in marine transportation and other related industries in the United States. ACL
has long term contracts with some customers. A long term coal contract may be
restructured in 1998.
ACL is a wholly-owned subsidiary of CSX Corporation ("CSX").
Principles of Consolidation
The Consolidated Financial Statements reflect the results of operations,
cash flows and financial position of ACL and its majority-owned subsidiaries as
a single entity. All significant intercompany accounts and transactions have
been eliminated.
Investments in companies that are not majority-owned are carried at either
cost or equity, depending on the extent of control.
Fiscal Year
ACL follows an annual fiscal reporting period which ends on the last Friday
in December. The financial statements presented are for the fiscal years ended
December 29, 1995, December 27, 1996 and December 26, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates in
reporting the amounts of certain revenues and expenses for each fiscal year and
certain assets and liabilities at the end of each fiscal year. Actual results
may differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include short-term investments with a maturity of
less than three months when purchased.
Accounts Receivable
ACL maintains an allowance for doubtful accounts based upon the expected
collectibility of accounts receivable. Allowances for doubtful accounts of
$1,496 and $1,254 have been applied as a reduction of accounts receivable at
December 27, 1996 and December 26, 1997, respectively.
F-6
<PAGE> 125
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Materials and Supplies
Materials and Supplies are carried at average cost and consist of the
following:
<TABLE>
<CAPTION>
DEC. 27, DEC. 26,
1996 1997
-------- --------
<S> <C> <C>
Raw Materials $14,070 $5,917
Work in Process 13,679 7,243
Parts and Supplies 19,839 20,366
------- -------
$47,588 $33,526
======= =======
</TABLE>
Revenue Recognition
Barge transportation revenue is recognized proportionately as shipments
move from origin to destination. Terminal, repair and communication revenue is
recognized as services are provided. Marine construction revenue, and related
expense, is primarily recognized on the completed-contract method.
Properties
Properties, at cost, consist of the following:
<TABLE>
<CAPTION>
DEC. 27, DEC. 26,
1996 1997
-------- --------
<S> <C> <C>
Land $17,786 $17,097
Buildings and Improvements 39,378 40,305
Equipment 596,961 639,116
-------- --------
654,125 696,518
Less Accumulated Depreciation 204,904 236,223
-------- --------
$449,221 $460,295
======== ========
</TABLE>
Provisions for depreciation of properties are based on the estimated useful
service lives computed on the straight-line method.
Accounting Pronouncement
ACL elected early adoption of Statement of Financial Accounting Standards
No. 131 "Disclosures about Segments of an Enterprise and Related Information"
("Statement No. 131"). Statement No. 131 establishes standards for the way
certain enterprises report information about operating segments in interim and
annual financial statements. The statement also establishes standards for
related disclosures with respect to services or products, geographic areas of
operation and major customers.
Other
Certain prior year data have been reclassified to conform to the 1997
presentation.
NOTE 2. ACQUISITION
Effective January 12, 1996, ACL acquired certain marine vessels and other
assets from ContiCarriers and Terminals, Inc., a wholly-owned barge
transportation subsidiary of Continental Grain Company, for a cash purchase
price of $21 million. The acquisition was accounted for by the purchase method
of accounting.
F-7
<PAGE> 126
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. RELATED PARTIES
Cash and cash equivalents at December 27, 1996 includes $16,838,
representing the amount due from CSX for ACL's participation in the CSX cash
management plan. Short term borrowings from affiliate of $6,550 at December 26,
1997 reflects the amount due to CSX for participation in the plan. Under this
plan, excess cash is advanced to CSX for investment and CSX makes cash funds
available to its subsidiaries as needed for use in their operations. CSX is
committed to repay (or require payment of) all amounts on demand should
circumstances require. The subsidiaries are charged for borrowings or
compensated for investments based on returns earned by the plan portfolio.
Interest income (expense) related to the Company's investment in/borrowings from
the plan was $1,781, $97 and $(1,889) in 1995, 1996 and 1997, respectively.
As of December 26, 1997, ACL has an outstanding loan with a CSX affiliate
with a principal balance of $78,400. The loan agreement calls for twelve annual
principal payments of $11,200 on January 2 of each year. Interest accrues at the
rate of 8.75% per annum, and interest expense for 1995, 1996 and 1997, was
$8,823, $7,843 and $6,863, respectively. Interest payments during 1995, 1996 and
1997 were $9,317, $8,337, and $7,357, respectively, and the interest payable at
December 27, 1996 and December 26, 1997 was $3,952 and $3,458, respectively, and
is included in due to affiliates in the statement of financial position.
ACL maintains insurance coverage which transfers substantially all risk of
loss, subject to coverage limits, related to various personal injury and
property damage claims, to an insurance company owned by CSX. Accordingly, loss
reserve accruals for such claims are not required, except for minimal per claim
deductible amounts. ACL paid premiums of approximately $6,788, $7,215, and
$6,350 to a CSX affiliate during 1995, 1996, and 1997, respectively.
Included in Materials, Supplies and Other operating expenses are amounts
related to a management service fee charged by CSX of $14,472 in 1995, $15,228
in 1996, and $15,024 in 1997.
NOTE 4. INCOME TAXES
ACL is included in the consolidated federal income tax return of CSX. The
consolidated federal income tax liability is allocated to ACL as though ACL had
filed a separate consolidated return subject to certain consolidated elections
determined by CSX. As of December 27, 1996 and December 26, 1997, federal income
taxes payable to CSX were $8,475 and $10,750, respectively, and are included in
due to affiliates in the statement of financial position. ACL made federal
income tax payments to CSX of $11,232, $28,919 and $12,765 during 1995, 1996 and
1997, respectively.
Earnings from domestic and foreign operations and related income tax
expense are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Earnings (Loss) Before Income Taxes:
-- Domestic.................................... $77,320 $79,183 $46,643
-- Foreign..................................... 4,943 6,975 (2,412)
------- ------- -------
Total............................................ $82,263 $86,158 $44,231
======= ======= =======
Income Tax Expense (Benefit):
Current -- Federal.................................. $22,175 $26,200 $15,040
-- State.................................... 2,548 2,597 1,030
-- Foreign.................................. 2,400 730 2,127
------- ------- -------
Total Current.................................... $27,123 $29,527 $18,197
======= ======= =======
</TABLE>
F-8
<PAGE> 127
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Deferred -- Federal................................. $3,763 $(410) $3
-- State................................... (25) (384) 87
-- Foreign................................. -- -- --
------- ------- -------
Total Deferred................................... 3,738 (794) 90
------- ------- -------
Total Expense.................................... $30,861 $28,733 $18,287
======= ======= =======
</TABLE>
Income tax computed at federal statutory rates reconciled to income tax
expense is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Tax at Federal Statutory Rate......................... $28,792 $30,155 $15,481
State Income Taxes, Net............................... 1,640 1,438 726
Foreign Operations, Net............................... 570 (1,790) 3,183
Other Items........................................... (141) (1,070) (1,103)
------- ------- -------
Total Income Tax Expense......................... $30,861 $28,733 $18,287
======= ======= =======
</TABLE>
The significant components of deferred tax assets and liabilities include:
<TABLE>
<CAPTION>
DEC. 27, DEC. 26,
1996 1997
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Other Post-retirement Benefits............................ $6,417 $6,910
Other Items............................................... 7,293 8,702
-------- --------
Total.................................................. $13,710 $15,612
======== ========
Deferred Tax Liabilities:
Accelerated Depreciation.................................. $(75,501) $(76,363)
Pension Obligation........................................ (6,895) (7,648)
Other Items............................................... (1,148) (1,525)
-------- --------
Total.................................................. (83,544) (85,536)
-------- --------
Net deferred tax liability.................................. $(69,834) $(69,924)
======== ========
</TABLE>
ACL has not recorded domestic deferred or additional foreign income taxes
applicable to undistributed earnings of foreign subsidiaries that are considered
to be indefinitely reinvested. Such earnings as of December 27, 1996 and
December 26, 1997 amounted to $8,157 and $11,620, respectively. These amounts
may become taxable upon their remittance as dividends or upon the sale or
liquidation of the foreign subsidiaries. It is not practicable to determine the
amount of net additional income tax that may be payable if such earnings were
repatriated.
Examinations of CSX consolidated federal income tax returns, which include
ACL, have been completed through 1990. Returns for 1991 through 1993 are
currently under examination. Management believes adequate provision has been
made for any adjustments that might be assessed.
F-9
<PAGE> 128
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. LONG-TERM DEBT
Long-term debt, excluding note payable to affiliate, consists of the
following:
<TABLE>
<CAPTION>
DEC. 27, DEC. 26,
1996 1997
-------- --------
<S> <C> <C>
U.S. Government Guaranteed Ship Financing Bonds:
1976 Issue-due serially through 2001, 5.90% to 6.263%..... $5,771 $4,197
1977 Issue-due serially through 2002, 7.555% to 7.565%.... 8,710 7,248
1980 Issue-due serially through 2004, 6.85%............... 7,939 6,939
1991 Issue-due serially through 2016, 8.125%.............. 5,894 5,446
Terminal Facilities Revenue Refunding Bonds, due in 2010,
7.75%..................................................... 24,400 24,400
------- -------
Total.................................................. 52,714 48,230
Less current maturities..................................... 4,484 4,484
------- -------
Total Long-Term Debt................................... $48,230 $43,746
======= =======
</TABLE>
Maturities on long-term debt outstanding as of December 26, 1997 for the
years 1998 through 2002 are $4,484, $4,242, $3,845, $3,266 and $2,848,
respectively.
Interest payments on long-term debt amounted to $4,486 in 1995, $4,169 in
1996 and $3,855 in 1997.
Towboats and barges of ACL with a net book value of $42,571 are subject to
liens under the U.S. Government Guaranteed Ship Financing Bonds agreements. A
terminal with a net book value of $16,572 is also subject to lien.
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
ACL's long-term debt and long-term note payable to affiliate are the only
financial instruments of ACL's with a fair value significantly different than
their carrying amounts.
<TABLE>
<CAPTION>
1996 1997
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Long-Term Debt.............................. $52,714 $55,518 $48,230 $52,127
Long-Term Note Payable to Affiliate......... $89,600 $97,572 $78,400 $85,630
</TABLE>
The above fair values have been estimated using discounted cash flow
analyses based upon ACL's current incremental borrowing rates for similar types
of borrowing arrangements.
The carrying amounts of cash and cash equivalents and current assets and
current liabilities qualifying as financial instruments approximate fair value
due to the short-term maturities of these instruments.
NOTE 7. EMPLOYEE BENEFIT PLANS
Pension and Related Plans
ACL sponsors or participates in defined benefit pension plans covering both
salaried and hourly employees, including participation for certain employees in
the combined CSX Pension Plan for which ACL is allocated a portion of the net
pension expense. The plans provide for eligible employees to receive benefits
based on years of service and either compensation rates near retirement or a
predetermined multiplier factor. Contributions to the plans are sufficient to
meet the minimum funding standards set forth in the Employee Retirement Income
Security Act of 1974, as amended. Plan assets consist primarily of common
stocks, corporate bonds and cash and cash equivalents. Substantially all assets
of the various plans are invested in the CSX Corporation Master Pension Trust, a
master trust.
F-10
<PAGE> 129
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the components of net periodic pension expense (income) for
ACL's defined benefit pension plans, including the allocation from the CSX
Pension Plan, is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------ -------
<S> <C> <C> <C>
Service Cost........................................... $505 $626 $661
Interest Cost on Projected Benefit Obligation.......... 1,199 1,251 1,297
Actual Return on Plan Assets........................... (6,033) (2,811) (8,762)
Net Amortization and Deferral.......................... 2,997 (192) 5,405
ACL share of CSX Pension Plan.......................... (668) 694 1,600
------- ------ -------
Net Pension Expense (Income)........................... $(2,000) $(432) $201
======= ====== =======
</TABLE>
The following actuarial assumptions were used in determining net pension
income and the net pension asset:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Discount Rate.............................................. 7.50% 7.50% 7.50%
Estimated Long-Term Rate of Salary Increases............... 5.00% 5.00% 5.00%
Expected Long-Term Rate of Return on Assets................ 9.75% 9.50% 9.50%
</TABLE>
The funded status of the plans and the amounts reflected in the
accompanying statement of financial position at year end are as follows:
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 30,
1996 1997
--------- ---------
(AT VALUATION DATE)
<S> <C> <C>
Plan Assets at Fair Value................................... $34,583 $42,694
------- -------
Actuarial Present Value of Projected Benefit Obligations:
Accumulated Benefit Obligations:
Vested................................................. (17,036) (18,428)
Nonvested.............................................. (440) (663)
------- -------
(17,476) (19,091)
------- -------
Excess of Plan Assets Over Projected Benefit Obligations.... 17,107 23,603
Unrecognized Prior Service Cost............................. 1,169 1,025
Unrecognized Net Loss (Gain)................................ 1,561 (3,784)
Unrecognized Initial Net Asset.............................. (1,900) (1,424)
ACL share of CSX Pension Plan............................... (1,466) (266)
Recognition of Minimum Liability............................ (16) (63)
------- -------
Net Pension Asset at Year-End............................... $16,455 $19,091
======= =======
</TABLE>
During 1996, ACL transferred approximately $23 million in pension assets,
$14 million after-tax, to CSX through a dividend.
ACL also sponsors certain contributory defined contribution plans covering
eligible employee groups. ACL contributions to such plans are based upon a
percentage of employee contributions and were $1,376, $1,530 and $1,649 in 1995,
1996 and 1997, respectively.
Certain ACL employees are covered by union-sponsored,
collectively-bargained, multiemployer defined benefit pension plans.
Contributions to such plans, which are based upon union contracts, were
approximately $136, $161 and $87 in 1995, 1996 and 1997, respectively.
F-11
<PAGE> 130
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Post-retirement Benefit Plans
In addition to the defined benefit pension and related plans, ACL has a
defined benefit post-retirement plan covering most full-time salaried employees.
The plan provides medical benefits and is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing features such
as deductibles and coinsurance. The accounting for the health care plan
anticipates future cost-sharing changes to the written plan that are consistent
with ACL's expressed intent to increase the retiree contribution rate annually.
Net periodic post-retirement benefit expense included the following
components:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service Cost............................................. $802 $782 $839
Interest Cost............................................ 1,078 1,296 1,373
Amortization of Prior Service Cost....................... (568) (319) (501)
------ ------ ------
Net Periodic Post-retirement Benefit Expense............. $1,312 $1,759 $1,711
====== ====== ======
</TABLE>
ACL's current policy is to fund the cost of the post-retirement health care
benefits on a pay-as-you-go basis, as in prior years. The amounts recognized in
ACL's statement of financial position at December 27, 1996 and December 26, 1997
are as follows:
<TABLE>
<CAPTION>
SEPT. 30, SEPT. 30,
1996 1997
--------- ---------
(AT VALUATION DATE)
<S> <C> <C>
Accumulated Post-retirement Benefit Obligation:
Retirees.................................................. $12,194 $11,813
Fully Eligible Active Plan Participants................... 2,959 3,165
Other Active Plan Participants............................ 3,329 3,332
------- -------
Total.................................................. 18,482 18,310
Unrecognized Prior Service Cost............................. 907 339
Unrecognized Net Loss....................................... (2,515) (405)
Claim Payments, October 1 through Year-End.................. (90) (125)
------- -------
Net Post-retirement Benefit Obligation at Year-End........ $16,784 $18,119
======= =======
</TABLE>
The net post-retirement benefit obligation was determined using the
assumption that the health care cost trend rate for retirees was 9.50% for
1997-1998, decreasing gradually to a 5.50% trend rate by 2005 and remaining at
that level thereafter. A 1% increase in the assumed health care cost trend rate
would have increased the accumulated post-retirement benefit obligation as of
December 26, 1997 by $1,394 and the aggregate of the service and interest cost
components of net periodic post-retirement benefit expense for 1997 by $207.
The discount rate used in determining the accumulated post-retirement
benefit obligation was 7.50% for 1995, 1996 and 1997.
NOTE 8. LEASE OBLIGATIONS
ACL leases buildings, data processing hardware and operating equipment
under various operating leases and charter agreements which expire from 1998 to
2015 and which generally have renewal options at similar terms. Certain vessel
leases also contain purchase options at prices approximating fair value of the
leased vessels. Rental expense in 1995, 1996 and 1997 under continuing
obligations was approximately $19,893, $35,201 and $40,585, respectively.
F-12
<PAGE> 131
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 26, 1997, minimum lease payments under non-cancelable operating
leases total $16,228 for 1998, $13,144 for 1999, $8,578 for 2000, $3,784 for
2001, $2,029 for 2002 and $4,570 thereafter.
NOTE 9. CONTINGENCIES
A number of legal actions are pending against ACL in which claims are made
in substantial amounts. While the ultimate results of pending litigation cannot
be predicted with certainty, management does not currently expect that
resolution of these matters will have a material adverse effect on the
consolidated results of operations, financial position and cash flows of ACL.
NOTE 10. BUSINESS SEGMENTS
ACL has two reportable business segments -- barging and construction. The
Company's barging segment includes barge transportation operations in North and
South America and ACL's domestic fleeting facilities that provide fleeting,
shifting, cleaning and repair services at various locations along the inland
waterways. The construction segment constructs marine equipment for ACL's
domestic and international fleets as well as external customers.
ACL evaluates performance based on segment earnings, which is defined as
operating income, before income taxes and excluding the management services fee
paid to CSX. The accounting policies of the reportable segments are consistent
with those described in the summary of significant accounting policies.
Intercompany sales are transferred at cost.
ACL's reportable segments are business units that offer different products
or services. The reportable segments are managed separately because they provide
distinct products and services to internal and external customers.
<TABLE>
<CAPTION>
REPORTABLE SEGMENTS
------------------------ ALL OTHER
BARGING CONSTRUCTION SEGMENTS(1) TOTAL
-------- ------------ ----------- --------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 29, 1995
Revenues from external customers............. 439,107 86,302 28,173 553,582
Intersegment revenues........................ -- 6,211 2,717 8,928
Depreciation expense......................... 26,898 739 4,035 31,672
Segment earnings (loss)...................... 104,165 (599) 6,362 109,928
Property additions........................... 20,599 3,207 9,619 33,425
YEAR ENDED DECEMBER 27, 1996
Revenues from external customers............. 508,435 84,729 28,976 622,140
Intersegment revenues........................ -- 33,172 3,397 36,569
Depreciation expense......................... 30,913 929 4,181 36,023
Segment earnings............................. 104,298 4,327 7,267 115,892
Segment assets............................... 548,982 64,692 53,421 667,095
Property additions........................... 82,667 6,663 1,221 90,551
</TABLE>
F-13
<PAGE> 132
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
REPORTABLE SEGMENTS
------------------------ ALL OTHER
BARGING CONSTRUCTION SEGMENTS(1) TOTAL
-------- ------------ ----------- --------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 26, 1997
Revenues from external customers............. $487,106 $100,711 $30,416 $618,233
Intersegment revenues........................ -- 33,263 4,204 37,467
Depreciation expense......................... 32,982 1,569 4,124 38,675
Segment earnings............................. 56,832 8,507 8,318 73,657
Segment assets............................... 529,301 50,907 51,924 632,132
Property additions........................... 47,827 2,635 1,038 51,500
</TABLE>
- ---------------
(1) Financial data for segments below the reporting thresholds is attributable
to two operating segments -- a segment operating terminals along the U.S.
inland waterways and a segment providing voice and data communications to
marine companies operating on the U.S. inland waterways.
The following is a reconciliation of ACL's segments' revenues and profits
to ACL's consolidated totals.
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Total revenues from external customers..................... $553,582 $622,140 $618,233
Intersegment revenues...................................... 8,928 36,569 37,467
Elimination of intersegment revenues....................... (8,928) (36,569) (37,467)
-------- -------- --------
Operating revenue.......................................... $553,582 $622,140 $618,233
======== ======== ========
PROFITS
Total segment earnings..................................... $109,928 $115,892 $73,657
Unallocated amounts:
Management services fee charged by CSX................... (14,472) (15,228) (15,024)
Interest expense......................................... (4,343) (4,034) (3,720)
Interest expense, affiliate -- net....................... (7,042) (7,746) (8,752)
Other, net............................................... (1,808) (2,726) (1,930)
-------- -------- --------
Earnings before income taxes............................... $82,263 $86,158 $44,231
======== ======== ========
</TABLE>
Geographic Information
<TABLE>
<CAPTION>
REVENUES PROPERTIES -- NET
-------------------------------- --------------------
1995 1996 1997 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
United States....................... $536,000 $594,783 $582,185 $417,724 $406,709
South America....................... 17,582 27,357 36,048 31,497 53,586
-------- -------- -------- -------- --------
Total............................... $553,582 $622,140 $618,233 $449,221 $460,295
======== ======== ======== ======== ========
</TABLE>
Revenues are attributed to countries based on the location of the service
provided. Properties represent the only long lived assets of the company.
Major Customer
Revenues from one customer of the barging segment represented approximately
12% and 11% of ACL's consolidated revenues in 1996 and 1997, respectively.
F-14
<PAGE> 133
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. SUBSEQUENT EVENT
On April 20, 1998, CSX announced that it will convey ACL to a venture
formed with Vectura Group, Inc. ("Vectura") for approximately $850 million in
cash and securities. As part of the transaction, National Marine, Inc. ("NMI"),
a wholly-owned subsidiary of Vectura, will be combined with ACL. The transaction
is subject to customary conditions, including the arrangement of financing.
Closing of the transaction is anticipated in the second quarter of 1998.
Vectura, CSX and NMI will hold approximately 55%, 34% and 11%, respectively, of
the junior common membership interests in the venture which shall be allocated
between voting and non-voting interests (before giving effect to any issuance to
certain management investors and independent investors).
In connection with the formation of the new venture, ACL will become part
of a new entity, American Commercial Lines LLC. American Commercial Lines LLC
plans to issue certain debt in connection with the recapitalization of the
parent company, American Commercial Lines Holdings LLC. American Commercial
Lines LLC's payment obligations under the proposed debt offering are to be
guaranteed by ACL's domestic subsidiaries, other than ACL Capital Corp. (which
will be formed in connection with the transaction), any Accounts Receivable
Subsidiary (as defined in the indentures with respect to such debt) and certain
subsidiaries of the company without substantial assets or operations (the
"Subsidiary Guarantors"). Such guarantees are full, unconditional and joint and
several. Separate financial statements of the Subsidiary Guarantors are not
presented because ACL's management has determined that they would not be
material to investors. The following supplemental financial information sets
forth on a combined basis, condensed consolidated statements of financial
position, statements of earnings and statements of cash flows for the Subsidiary
Guarantors, ACL's non-guarantor subsidiaries and for ACL.
F-15
<PAGE> 134
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 29, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING REVENUE............................ $536,000 $17,582 $ -- $553,582
OPERATING EXPENSE
Materials, Supplies and Other.............. 233,924 6,703 -- 240,627
Labor and Fringe Benefits.................. 119,604 2,702 -- 122,306
Fuel....................................... 41,439 516 -- 41,955
Depreciation and Amortization.............. 32,195 365 -- 32,560
Taxes, Other Than Income Taxes............. 20,677 1 -- 20,678
-------- ------- ------- --------
447,839 10,287 -- 458,126
-------- ------- ------- --------
OPERATING INCOME............................. 88,161 7,295 -- 95,456
OTHER EXPENSE (INCOME)
Interest Expense........................... 4,343 -- -- 4,343
Interest Expense, Affiliate -- Net......... 7,042 1,117 (1,117) 7,042
Other, Net................................. (544) 1,235 1,117 1,808
-------- ------- ------- --------
10,841 2,352 -- 13,193
-------- ------- ------- --------
EARNINGS BEFORE INCOME TAXES................. 77,320 4,943 -- 82,263
INCOME TAXES................................. 28,852 2,009 -- 30,861
-------- ------- ------- --------
NET EARNINGS................................. $48,468 $2,934 $ -- $51,402
======== ======= ======= ========
</TABLE>
F-16
<PAGE> 135
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING REVENUE.............................. $594,783 $27,357 $ -- $622,140
OPERATING EXPENSE
Materials, Supplies and Other................ 257,934 9,366 -- 267,300
Labor and Fringe Benefits.................... 134,366 3,975 -- 138,341
Fuel......................................... 56,550 2,197 -- 58,747
Depreciation and Amortization................ 36,241 1,240 -- 37,481
Taxes, Other Than Income Taxes............... 19,607 -- -- 19,607
-------- ------- ------- --------
504,698 16,778 -- 521,476
-------- ------- ------- --------
OPERATING INCOME............................... 90,085 10,579 -- 100,664
OTHER EXPENSE (INCOME)
Interest Expense............................. 4,034 -- -- 4,034
Interest Expense, Affiliate -- Net........... 7,746 1,333 (1,333) 7,746
Other, Net................................... (878) 2,271 1,333 2,726
-------- ------- ------- --------
10,902 3,604 -- 14,506
-------- ------- ------- --------
EARNINGS BEFORE INCOME TAXES................... 79,183 6,975 -- 86,158
INCOME TAXES................................... 28,095 638 -- 28,733
-------- ------- ------- --------
NET EARNINGS................................... $51,088 $6,337 $ -- $57,425
======== ======= ======= ========
</TABLE>
F-17
<PAGE> 136
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING REVENUE............................ $582,185 $36,048 $ -- $618,233
OPERATING EXPENSE
Materials, Supplies and Other.............. 270,050 19,344 -- 289,394
Labor and Fringe Benefits.................. 143,844 7,116 -- 150,960
Fuel....................................... 53,698 3,284 -- 56,982
Depreciation and Amortization.............. 37,809 3,340 -- 41,149
Taxes, Other Than Income Taxes............. 21,114 1 -- 21,115
-------- ------- ------- --------
526,515 33,085 -- 559,600
-------- ------- ------- --------
OPERATING INCOME............................. 55,670 2,963 -- 58,633
OTHER EXPENSE (INCOME)
Interest Expense........................... 3,720 -- -- 3,720
Interest Expense, Affiliate -- Net......... 8,752 2,026 (2,026) 8,752
Other, Net................................. (3,445) 3,349 2,026 1,930
-------- ------- ------- --------
9,027 5,375 -- 14,402
-------- ------- ------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES.......... 46,643 (2,412) -- 44,231
INCOME TAXES................................. 16,209 2,078 -- 18,287
-------- ------- ------- --------
NET EARNINGS (LOSS).......................... $30,434 $(4,490) $ -- $25,944
======== ======= ======= ========
</TABLE>
F-18
<PAGE> 137
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 29, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings............................... $48,468 $2,934 $ -- $51,402
Adjustments to Reconcile Net Earnings to
Net Cash Provided:
Depreciation and Amortization........... 32,195 365 -- 32,560
Deferred Income Taxes................... 3,738 -- -- 3,738
Other Operating Activities.............. (2,183) 169 -- (2,014)
Changes in Operating Assets and
Liabilities:
Accounts Receivable................... (6,895) (945) -- (7,840)
Materials and Supplies................ (11,094) (263) -- (11,357)
Other Current Assets.................. 1,719 (840) 602 1,481
Due to Affiliates..................... 377 -- -- 377
Other Current Liabilities............. 26,554 4,179 -- 30,733
-------- ------- ------- --------
Net Cash Provided by Operating
Activities....................... 92,879 5,599 602 99,080
INVESTING ACTIVITIES
Property Additions......................... (32,414) (1,011) -- (33,425)
Proceeds from Property Dispositions........ 2,968 -- -- 2,968
Other Investing Activities................. 1,909 62 (8,018) (6,047)
-------- ------- ------- --------
Net Cash Used by Investing
Activities....................... (27,537) (949) (8,018) (36,504)
FINANCING ACTIVITIES
Borrowings from Affiliate.................. -- -- -- --
Long-Term Debt Repaid...................... (4,526) -- -- (4,526)
Affiliate Debt Repaid...................... (11,200) (4,280) 4,280 (11,200)
Cash Dividends Paid........................ (20,500) (3,160) 3,160 (20,500)
Other Financing Activities................. -- 24 (24) --
-------- ------- ------- --------
Net Cash Used by Financing
Activities....................... (36,226) (7,416) 7,416 (36,226)
Net Increase (Decrease) in Cash and Cash
Equivalents................................ 29,116 (2,766) -- 26,350
Cash and Cash Equivalents at Beginning of
Year....................................... 26,810 3,643 -- 30,453
-------- ------- ------- --------
Cash and Cash Equivalents at End of
Year............................. $55,926 $877 $ -- $56,803
======== ======= ======= ========
</TABLE>
F-19
<PAGE> 138
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings............................... $51,088 $6,337 $ -- $57,425
Adjustments to Reconcile Net Earnings to
Net Cash Provided:
Depreciation and Amortization........... 36,241 1,240 -- 37,481
Deferred Income Taxes................... (800) 6 -- (794)
Other Operating Activities.............. (10) 1,536 -- 1,526
Changes in Operating Assets and
Liabilities:
Accounts Receivable................... (6,127) (6,921) -- (13,048)
Materials and Supplies................ 8,206 (1,905) -- 6,301
Other Current Assets.................. 180 (453) -- (273)
Due to Affiliates..................... (903) -- -- (903)
Other Current Liabilities............. 22,945 2,960 -- 25,905
--------- -------- -------- --------
Net Cash Provided by Operating
Activities......................... 110,820 2,800 -- 113,620
INVESTING ACTIVITIES
Property Additions......................... (59,472) (31,079) -- (90,551)
Proceeds from Property Dispositions........ 1,054 -- -- 1,054
Other Investing Activities................. (36,626) 913 31,555 (4,158)
--------- -------- -------- --------
Net Cash Used by Investing
Activities......................... (95,044) (30,166) 31,555 (93,655)
FINANCING ACTIVITIES
Borrowings from Affiliate.................. -- 20,627 (20,627) --
Long-Term Debt Repaid...................... (4,484) -- -- (4,484)
Affiliate Debt Repaid...................... (11,200) (3,945) 3,945 (11,200)
Cash Dividends Paid........................ (36,800) (2,765) 2,765 (36,800)
Other Financing Activities................. -- 17,638 (17,638) --
--------- -------- -------- --------
Net Cash (Used in) Provided by
Financing Activities............... (52,484) 31,555 (31,555) (52,484)
Net Increase (Decrease) in Cash and Cash
Equivalents................................ (36,708) 4,189 -- (32,519)
Cash and Cash Equivalents at Beginning of
Year....................................... 55,926 877 -- 56,803
--------- -------- -------- --------
Cash and Cash Equivalents at
End of Year........................ $19,218 $5,066 $ -- $24,284
========= ======== ======== ========
</TABLE>
F-20
<PAGE> 139
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings (Loss)......................... $30,434 $(4,490) $ -- $25,944
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Provided:
Depreciation and Amortization............ 37,809 3,340 -- 41,149
Deferred Income Taxes.................... 103 (13) -- 90
Other Operating Activities............... 1,918 1,298 -- 3,216
Changes in Operating Assets and
Liabilities:
Accounts Receivable.................... 5,952 4,866 -- 10,818
Materials and Supplies................. 14,248 (186) -- 14,062
Other Current Assets................... (5,820) 663 -- (5,157)
Due to Affiliates...................... (844) -- -- (844)
Other Current Liabilities.............. (35,925) (1,284) -- (37,209)
-------- -------- -------- --------
Net Cash Provided by Operating
Activities.......................... 47,875 4,194 -- 52,069
INVESTING ACTIVITIES
Property Additions.......................... (26,114) (25,386) -- (51,500)
Proceeds from Property Dispositions......... 3,452 (41) -- 3,411
Other Investing Activities.................. (21,435) (1,228) 21,452 (1,211)
-------- -------- -------- --------
Net Cash Used by Investing
Activities.......................... (44,097) (26,655) 21,452 (49,300)
FINANCING ACTIVITIES
Short-Term Borrowing from Affiliate......... 6,550 23,984 (23,984) 6,550
Long-Term Debt Repaid....................... (4,484) -- -- (4,484)
Affiliate Debt Repaid....................... (11,200) (4,000) 4,000 (11,200)
Cash Dividends Paid......................... (19,000) (2,370) 2,370 (19,000)
Other Financing Activities.................. -- 3,838 (3,838) --
-------- -------- -------- --------
Net Cash (Used in) Provided by
Financing Activities................ (28,134) 21,452 (21,452) (28,134)
Net (Decrease) Increase in Cash and Cash
Equivalents................................. (24,356) (1,009) -- (25,365)
Cash and Cash Equivalents at Beginning of
Year........................................ 19,218 5,066 -- 24,284
-------- -------- -------- --------
Cash and Cash Equivalents at End of
Year................................ $(5,138) $4,057 $ -- $(1,081)
======== ======== ======== ========
</TABLE>
F-21
<PAGE> 140
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 27, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents.................. $19,218 $5,066 $ -- $24,284
Accounts Receivable -- Net................. 76,518 13,081 -- 89,599
Materials and Supplies..................... 45,166 2,422 -- 47,588
Deferred Income Taxes...................... 1,624 (5) -- 1,619
Other Current Assets....................... 2,211 1,467 -- 3,678
-------- ------- -------- --------
Total Current Assets.................... 144,737 22,031 -- 166,768
PROPERTIES -- NET............................ 417,723 31,498 -- 449,221
NET PENSION ASSET............................ 16,455 -- -- 16,455
OTHER ASSETS................................. 72,241 18,955 (56,545) 34,651
-------- ------- -------- --------
Total Assets............................... $651,156 $72,484 $(56,545) $667,095
======== ======= ======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable........................... $25,390 $8,385 $ -- $33,775
Accrued Payroll and Fringe Benefits........ 17,874 116 -- 17,990
Due to Affiliates.......................... 26,200 (32) -- 26,168
Accrued Claims and Insurance Premiums...... 5,197 -- -- 5,197
Deferred Revenue........................... 11,614 -- -- 11,614
Other Current Liabilities.................. 48,458 2,561 -- 51,019
-------- ------- -------- --------
Total Current Liabilities............... 134,733 11,030 -- 145,763
LONG-TERM NOTE PAYABLE TO AFFILIATE.......... 78,400 24,813 (24,813) 78,400
DEFERRED INCOME TAXES........................ 71,469 (16) -- 71,453
LONG-TERM DEBT............................... 48,230 -- -- 48,230
OTHER LONG-TERM LIABILITIES.................. 25,767 4,925 -- 30,692
-------- ------- -------- --------
358,599 40,752 (24,813) 374,538
-------- ------- -------- --------
SHAREHOLDER'S EQUITY
Common Stock................................. 6,006 36 (36) 6,006
Other Capital................................ 165,164 25,560 (25,560) 165,164
Retained Earnings............................ 121,387 6,136 (6,136) 121,387
-------- ------- -------- --------
Total Shareholder's Equity.............. 292,557 31,732 (31,732) 292,557
-------- ------- -------- --------
Total Liabilities and Shareholder's
Equity................................ $651,156 $72,484 $(56,545) $667,095
======== ======= ======== ========
</TABLE>
F-22
<PAGE> 141
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents........................ $(5,138) $4,057 $ -- $(1,081)
Accounts Receivable -- Net....................... 69,234 8,215 -- 77,449
Materials and Supplies........................... 30,918 2,608 -- 33,526
Deferred Income Taxes............................ 1,371 7 -- 1,378
Other Current Assets............................. 13,383 804 (4,020) 10,167
-------- ------- -------- --------
Total Current Assets.......................... 109,768 15,691 (4,020) 121,439
PROPERTIES -- NET.................................. 406,709 53,586 -- 460,295
NET PENSION ASSET.................................. 19,091 -- -- 19,091
OTHER ASSETS....................................... 80,611 20,183 (69,487) 31,307
-------- ------- -------- --------
TOTAL ASSETS.................................. $616,179 $89,460 $(73,507) $632,132
======== ======= ======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable................................. $10,351 $3,363 $ -- $13,714
Accrued Payroll and Fringe Benefits.............. 16,016 115 -- 16,131
Due to Affiliates................................ 27,562 4,057 (4,020) 27,599
Short Term Borrowings from Affiliate............. 6,550 -- -- 6,550
Accrued Claims and Insurance Premiums............ 6,620 -- -- 6,620
Deferred Revenue................................. 7,894 -- -- 7,894
Other Current Liabilities........................ 29,256 6,230 -- 35,486
-------- ------- -------- --------
Total Current Liabilities..................... 104,249 13,765 (4,020) 113,994
LONG-TERM NOTE PAYABLE TO AFFILIATE................ 67,200 29,722 (29,722) 67,200
DEFERRED INCOME TAXES.............................. 71,318 (16) -- 71,302
LONG-TERM DEBT..................................... 43,746 -- -- 43,746
OTHER LONG-TERM LIABILITIES........................ 30,165 6,224 -- 36,389
-------- ------- -------- --------
316,678 49,695 (33,742) 332,631
-------- ------- -------- --------
SHAREHOLDER'S EQUITY
Common Stock....................................... 6,006 36 (36) 6,006
Other Capital...................................... 165,164 40,453 (40,453) 165,164
Retained Earnings.................................. 128,331 (724) 724 128,331
-------- ------- -------- --------
Total Shareholder's Equity.................... 299,501 39,765 (39,765) 299,501
-------- ------- -------- --------
Total Liabilities and Shareholder's Equity.... $616,179 $89,460 $(73,507) $632,132
======== ======= ======== ========
</TABLE>
F-23
<PAGE> 142
AMERICAN COMMERCIAL LINES, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 27, JUNE 26,
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
OPERATING REVENUE........................................... $275,423 $266,858
OPERATING EXPENSE
Materials, Supplies and Other............................. 128,461 122,152
Labor and Fringe Benefits................................. 72,018 73,259
Fuel...................................................... 30,339 22,659
Depreciation and Amortization............................. 20,129 20,569
Taxes, Other Than Income Taxes............................ 10,925 11,027
-------- --------
261,872 249,666
-------- --------
OPERATING INCOME............................................ 13,551 17,192
OTHER EXPENSE (INCOME)
Interest Expense.......................................... 1,900 2,097
Interest Expense, Affiliate -- Net........................ 4,266 3,971
Other, Net................................................ (411) 687
-------- --------
5,755 6,755
-------- --------
EARNINGS BEFORE INCOME TAXES................................ 7,796 10,437
INCOME TAXES (BENEFIT)...................................... 3,688 (62,225)
-------- --------
NET EARNINGS................................................ 4,108 72,662
RETAINED EARNINGS, BEGINNING OF PERIOD...................... 121,387 128,331
-------- --------
125,495 200,993
DIVIDENDS/DISTRIBUTIONS..................................... 9,500 18,454
-------- --------
RETAINED EARNINGS, END OF PERIOD............................ $115,995 $182,539
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-24
<PAGE> 143
AMERICAN COMMERCIAL LINES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 27, JUNE 26,
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net Earnings.............................................. $4,108 $72,662
Adjustments to Reconcile Net Earnings to Net Cash Provided
(Used):
Depreciation and Amortization.......................... 20,129 20,569
Deferred Income Taxes.................................. 836 (63,601)
Other Operating Activities............................. (219) 5,377
Changes in Operating Assets and Liabilities:
Accounts Receivable.................................. 14,951 10,403
Materials and Supplies............................... (5,056) (17,211)
Other Current Assets................................. (1,421) (2,013)
Due to Affiliates.................................... (852) (306)
Other Current Liabilities............................ (36,813) (13,207)
-------- --------
Net Cash Provided by (Used in) Operating
Activities.......................................... (4,337) 12,673
INVESTING ACTIVITIES
Property Additions........................................ (38,212) (25,034)
Proceeds from Property Dispositions....................... 903 3,150
Restricted Investments.................................... (26,128)
Other Investing Activities................................ (4,741) (3,010)
-------- --------
Net Cash Used by Investing Activities................ (42,050) (51,022)
FINANCING ACTIVITIES
Short Term Borrowing from Affiliates...................... 61,204 68,106
Long-Term Debt Repaid..................................... (2,242) (2,242)
Affiliate Debt Repaid..................................... (11,200) (11,200)
Cash Dividends Paid....................................... (9,500) (9,500)
Other Financing........................................... -- (1,338)
-------- --------
Net Cash Provided by Financing Activities............ 38,262 43,826
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents........ (8,125) 5,477
Cash and Cash Equivalents at Beginning of Period............ 7,446 (1,081)
-------- --------
Cash and Cash Equivalents at End of Period........... $(679) $4,396
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
F-25
<PAGE> 144
AMERICAN COMMERCIAL LINES, INC.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 26, JUNE 26,
1997* 1998
-------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents................................. $(1,081) $4,396
Accounts Receivable, Net.................................. 77,449 68,266
Materials and Supplies.................................... 33,526 50,466
Deferred Income Taxes..................................... 1,378 1,288
Other Current Assets...................................... 10,167 10,847
-------- --------
Total Current Assets................................... 121,439 135,263
PROPERTIES -- NET........................................... 460,295 457,341
RESTRICTED INVESTMENTS...................................... 26,128
PENSION ASSET............................................... 19,091 20,265
OTHER ASSETS................................................ 31,307 32,586
-------- --------
Total Assets........................................... $632,132 $671,583
======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable.......................................... $13,714 $13,465
Accrued Payroll and Fringe Benefits....................... 16,131 15,516
Due to Affiliates......................................... 27,599 18,329
Short Term Borrowings from Affiliate...................... 6,550 74,656
Accrued Claims and Insurance Premiums..................... 6,620 4,858
Deferred Revenue.......................................... 7,894 11,581
Other Current Liabilities................................. 35,486 33,068
-------- --------
Total Current Liabilities.............................. 113,994 171,473
LONG-TERM NOTE PAYABLE TO AFFILIATE......................... 67,200 56,000
DEFERRED INCOME TAXES....................................... 71,302 7,778
LONG-TERM DEBT.............................................. 43,746 41,504
PENSION LIABILITY........................................... -- 24,158
OTHER LONG-TERM LIABILITIES................................. 36,389 40,854
-------- --------
332,631 341,767
-------- --------
SHAREHOLDER'S EQUITY/MEMBER'S EQUITY
Common Stock/Member's Interest.............................. 6,006 6,006
Other Capital............................................... 165,164 141,271
Retained Earnings........................................... 128,331 182,539
-------- --------
Total Shareholder's Equity/Member's Equity............. 299,501 329,816
-------- --------
Total Liabilities and Shareholder's Equity/Member's
Equity................................................ $632,132 $671,583
======== ========
</TABLE>
- ---------------
* Derived from the audited December 26, 1997 consolidated statement of financial
position.
See accompanying Notes to Condensed Consolidated Financial Statements.
F-26
<PAGE> 145
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
American Commercial Lines LLC ("ACL" or the "Company") is a wholly-owned
subsidiary of CSX Corporation at June 26, 1998. During the second quarter of
1998, CSX contributed all assets and liabilities of American Commercial Lines,
Inc. to form ACL. The accompanying financial statements as of and for the six
months ended June 26, 1998 include the operations of both entities on a
continuing basis. See also Note 10 regarding subsequent event.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position at December 26, 1997 and June 26, 1998, the results of its
operations and its cash flows for the six months ended June 27, 1997 and June
26, 1998, such adjustments being of a normal recurring nature. Operating results
for the six months ended June 26, 1998 are not necessarily indicative of the
results that may be expected for the fiscal year ended December 25, 1998.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these financial
statements be read in conjunction with the 1997 audited consolidated financial
statements and the notes related thereto.
The Company's fiscal year is composed of 52 weeks ending on the last Friday
in December. The financial statements presented are for the 26 weeks ended June
27, 1997 and June 26, 1998, and the fiscal year ended December 26, 1997.
NOTE 2. MATERIAL AND SUPPLIES
Materials and Supplies are carried at average cost and consist of the
following:
<TABLE>
<CAPTION>
DEC. 26, JUNE 26,
1997 1998
-------- --------
<S> <C> <C>
Raw Materials............................................... $ 5,917 $ 8,052
Work in Process............................................. 7,243 23,161
Parts and Supplies.......................................... 20,366 19,253
------- -------
$33,526 $50,466
======= =======
</TABLE>
NOTE 3. RESTRICTED INVESTMENTS
In June 1998, the Company deposited approximately $26 million into an
escrow fund which, together with future income earned on such amount, is to be
used to repay $24.4 million principal of Terminal Revenue Refunding Bonds plus
redemption premium and interest thereon. The escrow funds are invested in U.S.
Government obligations, which are stated at cost which approximates fair value,
are classified as held-to-maturity, and are irrevocably pledged and assigned
solely for the payment of principal, redemption premium and interest on the
Terminal Facilities Revenue Refunding Bonds.
NOTE 4. INCOME TAXES
ACL was reorganized as a limited liability company in the second quarter of
1998. As such, ACL passes through its U.S. Federal and state (but not foreign)
taxable income to its member who is responsible for income taxes on such taxable
income. All of ACL's corporate subsidiaries were converted to limited liability
companies (except for the foreign subsidiaries) on June 30, 1998 prior to the
recapitalization (see Note 10). Due to the change in the tax status, the Company
reversed previously recognized deferred income taxes resulting in a benefit of
approximately $65 million. The Company reversed an additional $6 million of
deferred income taxes as a tax benefit on June 30, 1998 resulting from the
change in tax status of the subsidiaries.
F-27
<PAGE> 146
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The components of income tax expense (benefit) computed at federal
statutory rate follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 27, JUNE 26,
1997 1998
-------- --------
<S> <C> <C>
Tax at Federal Statutory Rate............................... $2,729 $ 3,653
State Income Taxes, Net..................................... 190 239
Foreign Operations, net..................................... 1,155 2,542
Tax effect of income taxable to member resulting from change
of tax status and other items............................. (386) (3,168)
Reversal of previously established deferred income taxes
resulting from change of tax status....................... (65,491)
------ --------
Total Income Tax Expense (Benefit).......................... $3,688 $(62,225)
====== ========
</TABLE>
NOTE 5. DIVIDENDS/DISTRIBUTIONS
Dividends/Distributions to CSX consist of $9,500 paid in cash in both 1997
and 1998. In addition, 1998 includes $1,650 accrued distribution related to
income taxes and $7,304 in net assets of certain terminal operations which were
distributed pursuant to the recapitalization (see Note 10). Revenues and
operating income of the terminal operations are not material.
NOTE 6. EMPLOYEE BENEFIT PLAN
Prior to January 1, 1998, certain employees of ACL participated in the
combined CSX Pension Plan for which ACL was allocated a portion of the annual
net pension expense. CSX determined that it would spin-off the assets and
liabilities in the CSX Pension Plan attributable to ACL employees to a
newly-created plan sponsored by ACL. The plan spin-off was completed in June
1998. This transfer of assets and benefit liabilities resulted in the Company
recording a pension liability of approximately $24 million and a corresponding
reduction to other capital. The assets transferred to the new plan of
approximately $52 million were determined based on regulations established under
the Employee Retirement Income Security Act of 1974 ("ERISA"). The benefits to
be received by ACL participants will not change as a result of the spin-off.
The Company also continues to sponsor other defined benefit pension plans,
in connection with which the Company has a pension asset of approximately $20
million at June 26, 1998.
NOTE 7. CONTINGENCIES
A number of legal actions are pending against ACL in which claims are made
in substantial amounts. While the ultimate results of pending litigation cannot
be predicted with certainty, management does not currently expect that
resolution of these matters will have a material adverse effect on the
consolidated results of operations, financial position and cash flows of ACL.
F-28
<PAGE> 147
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 8. BUSINESS SEGMENTS (IN $000's)
<TABLE>
<CAPTION>
REPORTABLE SEGMENTS
----------------------- ALL OTHER
BARGING CONSTRUCTION SEGMENTS(1) TOTAL
-------- ------------ ----------- --------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 27, 1997
Revenues from external customers................... $232,339 $28,090 $14,994 $275,423
Intersegment revenues.............................. -- 30,344 2,136 32,480
Segment earnings................................... 16,050 1,223 3,790 21,063
SIX MONTHS ENDED JUNE 26, 1998
Revenues from external customers................... $216,338 $37,318 $13,202 $266,858
Intersegment revenues.............................. -- 11,065 1,994 13,059
Segment earnings................................... 16,830 4,150 3,622 24,602
</TABLE>
- ---------------
(1) Financial data for segments below the reporting thresholds is attributable
to two operating segments -- a segment operating terminals along the U.S.
inland waterways and a segment providing voice and data communications to
marine companies operating on the U.S. inland waterways.
The following is a reconciliation of ACL's revenues from external customers
and segment earnings to ACL's consolidated totals.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 27, JUNE 26,
1997 1998
-------- --------
<S> <C> <C>
REVENUES
Revenues from external customers............................ $275,423 $266,858
Intersegment revenues....................................... 32,480 13,059
Elimination of intersegment revenues........................ (32,480) (13,059)
-------- --------
Operating revenue........................................... $275,423 $266,858
======== ========
PROFIT
Total segment earnings...................................... $ 21,063 $ 24,602
Unallocated amounts:
Management service fee charged by CSX..................... (7,512) (7,410)
Interest expense.......................................... (1,900) (2,097)
Interest expense, affiliate -- net........................ (4,266) (3,971)
Other, net................................................ 411 (687)
-------- --------
Earnings before income taxes................................ $ 7,796 $ 10,437
======== ========
</TABLE>
F-29
<PAGE> 148
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE 9. CHANGES IN ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This Statement requires that public business enterprises disclose
information about their products and services, operating segments, the
geographic areas in which they operate, and their major customers. Management
adopted the provisions of this Statement in 1997.
In 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained For Internal Use." This Statement requires
capitalization of (i) external direct costs of materials and services incurred
in developing or obtaining internal-use computer software; (ii) payroll and
payroll-related costs for employees who are directly associated with and who
devote time to the internal-use computer software project and (iii) interest
costs incurred in developing computer software for internal use. Costs that are
considered to be related to research and development activities would be
expensed as incurred. Similarly, training and maintenance costs would be
expensed, and allocations to amounts capitalized of general and administrative
or overhead costs would not be permitted. Management adopted this Statement with
early application in 1997 with no significant effect on the financial
statements.
In February 1998, the FASB issued Statement No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits." The Statement
supersedes the disclosure requirements in Statements No. 87, "Employer's
Accounting for Pensions", No. 88, "Accounting for Settlements and Curtailments
of Defined Benefit Plans and for Termination Benefits", and No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions." Statement No. 132
eliminates certain existing disclosure requirements, but at the same time adds
new disclosures. The Company will adopt the provisions of this Statement in
1998.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income", which establishes new rules for the reporting of comprehensive income.
The purpose of reporting comprehensive income is to report all changes in equity
of an enterprise that result from recognized transactions and other economic
events of a period other than transactions with owners in their capacity as
owners. Statement No. 130 does not specify a format for the financial statement
that portrays the components of comprehensive income but requires that a Company
display an amount representing total comprehensive income for the periods
reported in the financial statement. The Company adopted Statement No. 130 in
the first quarter of 1998 but the adoption had no impact on the Company's
shareholder's equity or net earnings.
In April 1998, the AICPA issued Statement of Position No. 98-5, "Reporting
on the Costs of Start-Up Activities" (SOP 98-5) which requires costs of start-up
activities and organizational costs to be expensed as incurred. The Company has
historically expensed start-up costs. It will adopt SOP 98-5 in fiscal 1999, and
does not anticipate that it will have any significant impact on the Company's
financial statements.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. If
certain conditions are met, a derivative may be specifically designated as (a) a
hedge of the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment, (b) a hedge of the exposure to
variable cash flows of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an unrecognized
firm commitment, an available-for-sale security, or a foreign-currency-dominated
forecasted transaction. The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation. This statement is effective for
F-30
<PAGE> 149
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
fiscal years beginning after June 15, 1999, but earlier application is
encouraged. The Company has not determined when it will adopt Statement No. 133,
but expects adoption will not have a significant effect on its financial
statements.
NOTE 10. SUBSEQUENT EVENT
On June 30, 1998, the Company's parent, American Commercial Lines Holdings
LLC ("Holdings"), completed a recapitalization in a series of transactions in
which the barge business of Vectura Group, Inc. ("Vectura") and its subsidiaries
were combined with that of the Company. The Company issued $735 million in new
debt ($435 million in Senior Credit Facilities and $300 million in 10 1/4%
Senior Notes), Vectura contributed certain of its assets and liabilities
(referred to as the NMI contribution) plus $60 million in cash and the Company
paid a $696 million distribution, including a working capital adjustment, to CSX
and $75 million of existing liabilities of Vectura. In addition, CSX contributed
to the capital of the Company approximately $166 million of existing debt owed
to CSX.
The transactions described above will be accounted for as a
recapitalization of the Company with the NMI contribution accounted for by the
purchase method of accounting in accordance with Accounting Principles Board
Opinion No. 16. The purchase price of $3.9 million is less than the fair value
of the net assets being acquired, resulting in a reduction of long-term assets
of approximately $6.4 million.
The $735 million of debt issued by the Company is guaranteed by the
Company's domestic subsidiaries, other than ACL Capital Corp. (which was formed
in connection with the transaction), any Accounts Receivable Subsidiary (as
defined in the indentures with respect to such debt) and certain subsidiaries of
the Company without substantial assets or operations (the "Subsidiary
Guarantors"). Such guarantees are full, unconditional and joint and several.
Separate financial statements of the Subsidiary Guarantors are not presented
because management has determined that they would not be material to investors.
The following supplemental financial information sets forth on a combined basis,
condensed consolidated statements of financial position, statements of earnings
and statements of cash flows for the Subsidiary Guarantors, non-guarantor
subsidiaries and for the Company.
F-31
<PAGE> 150
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED JUNE 27, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING REVENUE............................ $264,590 $10,833 $ -- $275,423
OPERATING EXPENSE
Materials, Supplies and Other.............. 121,533 6,928 -- 128,461
Labor and Fringe Benefits.................. 69,239 2,779 72,018
Fuel....................................... 29,195 1,144 30,339
Depreciation and Amortization.............. 18,663 1,466 20,129
Taxes, Other Than Income Taxes............. 10,925 -- 10,925
-------- ------- ---- --------
249,555 12,317 -- 261,872
-------- ------- ---- --------
OPERATING INCOME (LOSS)...................... 15,035 (1,484) -- 13,551
OTHER EXPENSE (INCOME)
Interest Expense........................... 1,900 -- -- 1,900
Interest Expense, Affiliate -- Net......... 4,266 983 (983) 4,266
Other, Net................................. (1,278) (116) 983 (411)
-------- ------- ---- --------
4,888 867 -- 5,755
-------- ------- ---- --------
EARNINGS (LOSS) BEFORE INCOME TAXES.......... 10,147 (2,351) -- 7,796
INCOME TAXES................................. 3,355 333 -- 3,688
-------- ------- ---- --------
NET EARNINGS (LOSS).......................... $ 6,792 $(2,684) $ -- $ 4,108
======== ======= ==== ========
</TABLE>
F-32
<PAGE> 151
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUE................................. $249,464 $17,394 $ -- $266,858
OPERATING EXPENSE
Materials, Supplies and Other................... 110,194 11,958 -- 122,152
Labor and Fringe Benefits....................... 68,790 4,469 -- 73,259
Fuel............................................ 21,355 1,304 -- 22,659
Depreciation and Amortization................... 18,240 2,329 -- 20,569
Taxes, Other Than Income Taxes.................. 10,973 54 -- 11,027
-------- ------- ------- --------
229,552 20,114 -- 249,666
-------- ------- ------- --------
OPERATING INCOME (LOSS)........................... 19,912 (2,720) -- 17,192
OTHER EXPENSE (INCOME)
Interest Expense................................ 2,097 -- -- 2,097
Interest Expense, Affiliate -- Net.............. 3,971 1,531 (1,531) 3,971
Other, Net...................................... (1,265) 421 1,531 687
-------- ------- ------- --------
4,803 1,952 -- 6,755
-------- ------- ------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES............... 15,109 (4,672) -- 10,437
INCOME TAXES (BENEFIT)............................ (62,320) 95 -- (62,225)
-------- ------- ------- --------
NET EARNINGS (LOSS)............................... $ 77,429 $(4,767) $ -- $ 72,662
======== ======= ======= ========
</TABLE>
F-33
<PAGE> 152
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 27,
1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings (Loss)........................ $ 6,792 $ (2,684) $ -- $ 4,108
Adjustments to Reconcile Net Earnings
(Loss) to Net Cash (Used in) Provided:
Depreciation and Amortization........... 18,663 1,466 -- 20,129
Deferred Income Taxes................... 836 -- -- 836
Other Operating Activities.............. 558 (777) -- (219)
Changes in Operating Assets and
Liabilities:
Accounts Receivable................... 9,418 5,533 -- 14,951
Materials and Supplies................ (4,476) (580) -- (5,056)
Other Current Assets.................. (1,224) (197) -- (1,421)
Due to Affiliates..................... (852) -- -- (852)
Other Current Liabilities............. (34,229) (2,584) -- (36,813)
-------- -------- -------- --------
Net Cash (Used in) Provided by
Operating Activities............. (4,514) 177 -- (4,337)
INVESTING ACTIVITIES
Property Additions......................... (13,541) (24,671) -- (38,212)
Proceeds from Property Dispositions........ 903 -- -- 903
Other Investing Activities................. (26,281) (1,224) 22,764 (4,741)
-------- -------- -------- --------
Net Cash Used by Investing
Activities....................... (38,919) (25,895) 22,764 (42,050)
FINANCING ACTIVITIES
Short-Term Borrowing from Affiliate........ 61,204 13,984 (13,984) 61,204
Long-Term Debt Repaid...................... (2,242) -- -- (2,242)
Affiliate Debt Repaid...................... (11,200) -- -- (11,200)
Cash Dividends Paid........................ (9,500) (2,370) 2,370 (9,500)
Other Financing Activities................. -- 11,150 (11,150) --
-------- -------- -------- --------
Net Cash Provided by Financing
Activities....................... 38,262 22,764 (22,764) 38,262
Net (Decrease) Increase in Cash and Cash
Equivalents................................ (5,171) (2,954) -- (8,125)
Cash and Cash Equivalents at Beginning of
Period..................................... 2,380 5,066 -- 7,446
-------- -------- -------- --------
Cash and Cash Equivalents at End of
Period........................... $ (2,791) $ 2,112 $ -- (679)
======== ======== ======== ========
</TABLE>
F-34
<PAGE> 153
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 26,
1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings (Loss).............................. $ 77,429 $ (4,767) $ -- $ 72,662
Adjustments to Reconcile Net Earnings (Loss) to
Net Cash Provided:
Depreciation and Amortization............... 18,240 2,329 -- 20,569
Deferred Income Taxes....................... (63,601) -- -- (63,601)
Other Operating Activities.................. 863 4,514 -- 5,377
Changes in Operating Assets and Liabilities:
Accounts Receivable...................... 14,797 (4,394) -- 10,403
Materials and Supplies................... (16,792) (419) -- (17,211)
Other Current Assets..................... (7,659) 5,646 -- (2,013)
Due to Affiliates........................ (306) -- -- (306)
Other Current Liabilities................ (12,567) (640) -- (13,207)
-------- -------- -------- --------
Net Cash (Used in) Provided by Operating
Activities............................. 10,404 2,269 -- 12,673
INVESTING ACTIVITIES
Property Additions............................... (7,535) (17,499) -- (25,034)
Proceeds from Property Dispositions.............. 2,897 253 -- 3,150
Restricted Investments........................... (26,128) (26,128)
Other Investing Activities....................... (16,061) (1,947) 14,998 (3,010)
-------- -------- -------- --------
Net Cash Used by Investing Activities.... (46,827) (19,193) 14,998 (51,022)
FINANCING ACTIVITIES
Borrowings from Affiliate........................ 68,106 4,000 (4,000) 68,106
Long-Term Debt Repaid............................ (2,242) -- -- (2,242)
Affiliate Debt Repaid............................ (11,200) -- -- (11,200)
Cash Dividends Paid.............................. (9,500) (4,345) 4,345 (9,500)
Other Financing Activities....................... (1,338) 15,343 (15,343) (1,338)
-------- -------- -------- --------
Net Cash Used by Financing Activities.... 43,826 14,998 (14,998) 43,826
Net (Decrease) Increase in Cash and Cash
Equivalents...................................... 7,403 (1,926) -- 5,477
Cash and Cash Equivalents at Beginning of Year..... (5,138) 4,057 -- (1,081)
-------- -------- -------- --------
Cash and Cash Equivalents at End of
Period................................. $ 2,265 $ 2,131 $ -- $ 4,396
======== ======== ======== ========
</TABLE>
F-35
<PAGE> 154
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents........................ $ (5,138) $ 4,057 $ -- $ (1,081)
Accounts Receivable -- Net....................... 69,234 8,215 -- 77,449
Materials and Supplies........................... 30,918 2,608 -- 33,526
Deferred Income Taxes............................ 1,371 7 -- 1,378
Other Current Assets............................. 13,383 804 (4,020) 10,167
-------- ------- -------- --------
Total Current Assets..................... 109,768 15,691 (4,020) 121,439
PROPERTIES -- NET.................................. 406,709 53,586 -- 460,295
NET PENSION ASSET.................................. 19,091 -- -- 19,091
OTHER ASSETS....................................... 80,611 20,183 (69,487) 31,307
-------- ------- -------- --------
TOTAL ASSETS............................. $616,179 $89,460 $(73,507) $632,132
======== ======= ======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable................................. $ 10,351 $ 3,363 $ -- $ 13,714
Accrued Payroll and Fringe Benefits.............. 16,016 115 -- 16,131
Due to Affiliates................................ 27,562 4,057 (4,020) 27,599
Short Term Borrowings from Affiliate............. 6,550 -- -- 6,550
Accrued Claims and Insurance Premiums............ 6,620 -- -- 6,620
Deferred Revenue................................. 7,894 -- -- 7,894
Other Current Liabilities........................ 29,256 6,230 -- 35,486
-------- ------- -------- --------
Total Current Liabilities................ 104,249 13,765 (4,020) 113,994
LONG-TERM NOTE PAYABLE TO AFFILIATE................ 67,200 29,722 (29,722) 67,200
DEFERRED INCOME TAXES.............................. 71,318 (16) -- 71,302
LONG-TERM DEBT..................................... 43,746 -- -- 43,746
PENSION LIABILITY.................................. -- -- -- --
OTHER LONG-TERM LIABILITIES........................ 30,165 6,224 -- 36,389
-------- ------- -------- --------
316,678 49,695 (33,742) 332,631
-------- ------- -------- --------
SHAREHOLDER'S EQUITY
Common Stock....................................... 6,006 36 (36) 6,006
Other Capital...................................... 165,164 40,453 (40,453) 165,164
Retained Earnings (Deficit)........................ 128,331 (724) 724 128,331
-------- ------- -------- --------
Total Shareholder's Equity............... 299,501 39,765 (39,765) 299,501
-------- ------- -------- --------
Total Liabilities and Shareholder's
Equity................................. $616,179 $89,460 $(73,507) $632,132
======== ======= ======== ========
</TABLE>
F-36
<PAGE> 155
AMERICAN COMMERCIAL LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
CONDENSED COMBINING STATEMENT OF FINANCIAL POSITION AT JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents...................... $ 2,265 $ 2,131 $ -- $ 4,396
Accounts Receivable -- Net..................... 55,657 12,609 -- 68,266
Materials and Supplies......................... 47,439 3,027 -- 50,466
Deferred Income Taxes.......................... 1,281 7 -- 1,288
Other Current Assets........................... 18,603 (4,842) (2,914) 10,847
-------- -------- -------- --------
Total Current Assets........................ 125,245 12,932 (2,914) 135,263
PROPERTIES -- NET................................ 388,838 68,503 -- 457,341
RESTRICTED INVESTMENTS........................... 26,128 -- -- 26,128
NET PENSION ASSET................................ 20,265 -- -- 20,265
OTHER ASSETS..................................... 91,280 22,130 (80,824) 32,586
-------- -------- -------- --------
TOTAL ASSETS................................ $651,756 $103,565 $(83,738) $671,583
======== ======== ======== ========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable............................... $ 9,461 $ 4,004 $ -- $ 13,465
Accrued Payroll and Fringe Benefits............ 15,459 57 -- 15,516
Due to Affiliates.............................. 18,353 2,890 (2,914) 18,329
Short Term Borrowings from Affiliate........... 74,656 -- -- 74,656
Accrued Claims and Insurance Premiums.......... 4,858 -- -- 4,858
Deferred Revenue............................... 11,581 -- -- 11,581
Other Current Liabilities...................... 28,000 5,068 -- 33,068
-------- -------- -------- --------
Total Current Liabilities................... 162,368 12,019 (2,914) 171,473
LONG-TERM NOTE PAYABLE TO AFFILIATE.............. 56,000 45,883 (45,883) 56,000
DEFERRED INCOME TAXES............................ 7,794 (16) -- 7,778
LONG-TERM DEBT................................... 41,504 -- -- 41,504
PENSION LIABILITY................................ 24,158 -- -- 24,158
OTHER LONG-TERM LIABILITIES...................... 30,116 10,738 -- 40,854
-------- -------- -------- --------
321,940 68,624 (48,797) 341,767
-------- -------- -------- --------
SHAREHOLDER'S EQUITY/MEMBER'S EQUITY
Common Stock/Member's Interest................... 6,006 40 (40) 6,006
Other Capital.................................... 141,271 44,737 (44,737) 141,271
Retained Earnings (Deficit)...................... 182,539 (9,836) 9,836 182,539
-------- -------- -------- --------
Total Shareholder's Equity/Member's
Equity.................................... 329,816 34,941 (34,941) 329,816
-------- -------- -------- --------
Total Liabilities and Shareholder's Equity/
Member's Equity........................... $651,756 $103,565 $(83,738) $671,583
======== ======== ======== ========
</TABLE>
F-37
<PAGE> 156
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Vectura Group, Inc.:
We have audited the accompanying consolidated balance sheet of Vectura
Group, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Vectura Group, Inc. and
Subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana
June 5, 1998
F-38
<PAGE> 157
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $178
Accounts and notes receivable, net (Note 4)............... 19,964
Prepaid expenses.......................................... 2,205
Inventories (Note 5)...................................... 2,806
Current portion of deferred income taxes (Note 14)........ 2,242
Proceeds due from sale of investment (Note 3)............. 5,772
Other current assets...................................... 47
--------
Total current assets................................... 33,214
--------
Notes receivable............................................ 29
Note receivable -- unconsolidated affiliate................. 1,312
Vessels, property and equipment:
Land and buildings........................................ 3,720
Floating equipment........................................ 105,711
Other equipment........................................... 10,147
--------
119,578
Less -- Accumulated depreciation.......................... (38,934)
--------
Net vessels, property and equipment.................... 80,644
Other assets................................................ 2,864
--------
Total assets...................................... $118,063
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-39
<PAGE> 158
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt (Note 7)................ $18,532
Accounts payable.......................................... 17,754
Accrued compensation and employee benefits................ 467
Accrued workers' compensation and other insurance......... 596
Accrued expenses.......................................... 3,091
Other current liabilities................................. 2,690
--------
Total current liabilities.............................. 43,130
Long-term Debt (Note 7)..................................... 43,423
Investments (Note 6)........................................ 1,761
Reserve for workers' compensation and other insurance....... 756
Deferred income taxes payable (Note 14)..................... 4,753
Other liabilities........................................... 8,596
--------
Total liabilities...................................... 102,419
--------
Commitments and contingencies (Notes 11, 17 and 18)
Mandatorily redeemable preferred stock (Note 12)............ 4,037
Stockholders' equity (Note 12):
Common stock, par value $.01 per share -- Authorized,
28,000 shares Issued and outstanding, 390 shares....... 1
Additional paid-in capital................................ 45
Retained earnings......................................... 11,561
--------
Total stockholders' equity............................. 11,607
--------
Total liabilities and stockholders' equity........... $118,063
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-40
<PAGE> 159
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS EXCEPT EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES
OUTSTANDING)
<TABLE>
<S> <C>
OPERATING REVENUE........................................... $134,839
OPERATING EXPENSES.......................................... 126,233
----------
Gross profit........................................... 8,606
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 7,411
----------
Income from operations................................. 1,195
----------
OTHER INCOME (EXPENSE):
Interest and dividend income.............................. 56
Interest expense.......................................... (6,884)
Equity in loss of unconsolidated affiliates............... (162)
Gain on sale of investments (Note 3)...................... 3,912
Gain on disposition of capital assets and other items,
net.................................................... 347
----------
(2,731)
----------
Loss from operations before income taxes............... (1,536)
BENEFIT FROM INCOME TAXES (Note 14)......................... (3,953)
----------
NET INCOME.................................................. 2,417
PREFERRED DIVIDENDS AND ACCRETION........................... (1,323)
----------
NET INCOME TO COMMON SHAREHOLDERS........................... $1,094
==========
EARNINGS PER SHARE:
Basic..................................................... $2,805.13
==========
Diluted................................................... $149.25
==========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic..................................................... 390
==========
Diluted................................................... 7,330
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-41
<PAGE> 160
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 (Note 12)............... $1 $43 $10,467 $10,511
1997 net income.................................. -- -- 2,417 2,417
Warrants issued.................................. -- 3 -- 3
Issuance costs of capital stock.................. -- (1) -- (1)
Dividends accrued -- Class E..................... -- -- (1,027) (1,027)
Preferred stock accretion........................ -- -- (296) (296)
-- --- ------- -------
Balance, December 31, 1997 (Note 12)............... $1 $45 $11,561 $11,607
== === ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-42
<PAGE> 161
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income................................................ $2,417
Adjustments to reconcile net income to net cash generated
by operating activities --
Depreciation and amortization.......................... 7,524
Loss of unconsolidated affiliates...................... 162
Deferred income taxes.................................. (2,379)
Gain on disposition of capital assets.................. (439)
Increase in accounts receivable........................ (2,238)
Decrease in inventories................................ 331
Increase in accounts payable........................... 4,252
Decrease in workers' compensation and other
insurance............................................. (554)
Decrease in accrued expenses........................... (2,248)
Gain on sale of subsidiary............................. (3,912)
Other items............................................ 2,001
-------
Cash generated by operating activities............... 4,917
-------
INVESTING ACTIVITIES:
Purchase of vessels, property and equipment............... (169)
Proceeds from sale of vessels, property and equipment..... 816
Collections of notes receivable........................... 73
Decrease in investments and other assets.................. 123
-------
Cash generated by investing activities............... 843
-------
FINANCING ACTIVITIES:
Payments of long-term debt................................ (9,549)
Net borrowings under revolving loan facilities............ 501
Increase in long-term debt................................ 1,139
Borrowings to pay off existing debt....................... 1,465
Issuance of securities (Note 12).......................... 122
-------
Cash utilized by financing activities................ (6,322)
-------
DECREASE IN CASH AND CASH EQUIVALENTS....................... (562)
CASH AND CASH EQUIVALENTS, beginning of year................ 740
-------
CASH AND CASH EQUIVALENTS, end of year...................... $178
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-43
<PAGE> 162
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
1. ORGANIZATION:
Vectura Group, Inc. (the Company or Vectura), a Delaware corporation
headquartered in New Orleans, Louisiana, is a holding company with interests in
companies which provide marine transportation and cargo handling services.
Vectura's operations are principally those of three wholly-owned subsidiaries:
National Marine, Inc. (National Marine); MariTrend, Inc. (MariTrend) and Vectura
Cargo Services, Inc. (VCSI). Vectura also has a minority interest in Viking
Maritec, Inc. (Viking), a marine vessel design, engineering and project
management organization; and an interest in NBL, Inc. (NBL), a holding company
(see Note 18). NBL's wholly-owned subsidiary, NMS, Inc. (NMS), leases a fleet of
tank barges to National Marine.
National Marine, headquartered in New Orleans, Louisiana, is a provider of
barge transportation services and operates a fleet of approximately 700 barges
and 50 towboats on the Mississippi, Illinois and Ohio rivers and on the
Intracoastal Waterway along the Gulf of Mexico. Major commodities transported
include a wide array of petrochemical products, grain, coal, steel and
limestone. MariTrend, headquartered in New Orleans, Louisiana, is engaged in the
supply of stevedoring and terminal services in the Port of New Orleans. VCSI,
formed in 1993, owned Ryan-Walsh, Inc. (Ryan-Walsh), a provider of cargo
handling and marine terminal services, which operated in approximately 25 port
locations, principally along the Atlantic and Gulf Coasts. On April 18, 1995,
VCSI sold the stock of Ryan-Walsh (see Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all of its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Investments in companies in which
ownership interests range from 20% to 50% are accounted for under the equity
method. Ownership interests of less than 20% are accounted for under the cost
method. See Note 18 for a discussion regarding the ownership of NBL.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid debt instruments purchased
with an original maturity of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost of the
Company's inventories, including fuel, repair parts and consumable inventories,
is determined principally by the first-in, first-out (FIFO) method.
Vessels, Property and Equipment
Vessels, property and equipment are stated at cost. Depreciation for
financial reporting purposes is computed using the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings............................................ 20 years
Barges............................................... 25-35 years
Towboats............................................. 35 years
Leasehold Improvements............................... Remaining term of lease
</TABLE>
For income tax purposes, depreciation is calculated using accelerated
methods. Depreciation expense charged to operations for the year ended December
31, 1997 was $7.3 million.
F-44
<PAGE> 163
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Expenditures for maintenance and repairs which do not materially extend the
lives of the assets are expensed currently. With respect to its river
transportation operations, the Company accrues expense for engine overhauls
based on towboat utilization. Upon retirement or other disposition of property,
applicable cost and accumulated depreciation or amortization are removed from
the accounts. Any gains or losses are included in earnings.
During 1995, the Company adopted Statement of Financial Accounting
Standards (SFAS) 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." The adoption of this statement did not
materially impact the financial position of the Company.
Outstanding Checks
Outstanding checks, representing checks written and released but not
presented to the bank for payment, are included in accounts payable. The Company
uses current deposits and credit borrowings to cover checks presented for
payment. The amount of outstanding checks at December 31, 1997 was $1.4 million.
Revenue Recognition
The Company recognizes revenue from its river transportation operations
ratably over the duration of each trip. Revenue from stevedoring and other
services is recognized upon completion of each assignment.
Income Taxes
Vectura files a consolidated federal income tax return which includes all
consolidated subsidiaries and NBL. The Company has determined that requisite
ownership criteria have been met for tax purposes, which require NBL to be
consolidated.
Deferred income taxes are provided for temporary differences between
financial and taxable income. These differences result principally from the use
of accelerated depreciation methods for tax purposes, workers' compensation
reserves and other provisions made for financial statement purposes.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported revenues and expenses during the reporting period. Actual results
may differ from those estimates.
Self-Insurance
The Company is liable for insurance claims cost under $25,000 per
occurrence and up to an aggregate cost of $500,000 per year under its hull,
machinery and tower's liability insurance program. The Company is a member of
the West of England Ship Owners Mutual Insurance Association, which provides
protection and indemnification insurance to the Company. Personal injury and
cargo claims are covered by this policy with a $50,000 per occurrence
deductible. Loss reserves are recorded as short-term or long-term liabilities
based on the Company's estimates of the timing of the eventual settlement. The
Company is liable for supplemental calls (premiums) for the policy years
February 20, 1996 to February 20, 1997 and February 20, 1997 to February 20,
1998 based on the club's claims experience for those years. Based on the club's
current financial position, any supplemental calls appear unlikely. For the
policy year February 20, 1998 to February 20, 1999, the Company has secured
insurance to cover any supplemental calls after a $117,000 buffer or
"deductible."
The Company is self-insured for certain health care benefits up to $60,000
per individual for those employees who participate in the Company's group health
insurance plan.
F-45
<PAGE> 164
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 130, "Reporting Comprehensive
Income" and SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information." SFAS 130 establishes standards for reporting and display of
comprehensive income in the financial statements. Comprehensive income is the
total of net income and all other nonowner changes in equity. SFAS 131 requires
that companies disclose segment data based on how management makes decisions
about allocating resources to segments and measuring their performance. In
February 1998, the FASB issued SFAS 132, "Employer's Disclosures About Pensions
and Other Postretirement Benefits." SFAS 130, 131 and 132 are effective for
fiscal years beginning after December 15, 1997. Adoption of SFAS 130 and 131 is
not expected to have a significant effect on the Company's financial position or
results of operations. SFAS 132 is not expected to have any impact on the
Company's financial statements.
Earnings per Share
Effective December 15, 1997, the Company adopted SFAS 128, "Earnings per
Share." Accordingly, the Company reports two measures of earnings per share
(EPS), basic and diluted. Basic EPS is calculated by dividing income available
to common shareholders by the weighted-average number of common shares
outstanding for the applicable period, without adjustment for potential common
shares outstanding in the form of options, warrants, convertible securities or
contingent stock agreements. For the calculation of diluted EPS, the number of
common shares outstanding are increased by the number of additional common
shares that would have been outstanding if the dilutive potential common shares
had been issued, determined using the treasury stock method where appropriate.
Under the Company's present capital structure, the calculation of diluted EPS
includes the dilutive impact of outstanding stock warrants.
Basic and diluted earnings per share for the year ended December 31, 1997
was calculated as follows (Net Income in thousands):
<TABLE>
<CAPTION>
PER SHARE
NET INCOME SHARES AMOUNT
---------- ------ ---------
<S> <C> <C> <C>
Basic Earnings per Share:
Income available to common shareholders................... $1,094 390 $2,805.13
=========
Impact of stock warrants (Note 12)........................ -- 6,940
------ -----
Diluted Earnings per Share:
Income available to common shareholders plus assumed
exercise of stock warrants............................. $1,094 7,330 $149.25
====== ===== =========
</TABLE>
3. NET BOOK VALUE OF SUBSIDIARY SOLD:
In 1994, management made the strategic decision to exit the cargo handling
and marine terminal service business operated by Ryan-Walsh. On April 18, 1995,
VCSI sold the stock of Ryan-Walsh to a third party for future contingent
consideration based on Ryan-Walsh's performance in certain areas. A $1.6 million
loss on sale was recognized in 1995. This loss was attributable to VCSI
establishing a $1.7 million reserve primarily associated with legal
indemnifications provided to the buyer by VCSI and Vectura, the transfer of $1.1
million of investment tax credits and alternative minimum tax credits related to
Ryan-Walsh, and the elimination of the negative investment in Ryan-Walsh by VCSI
at April 18, 1995. As part of the agreement, MariTrend entered into a bareboat
charterparty with Ryan-Walsh to lease a crane barge for up to twelve months with
an option to purchase the barge at any time during the twelve months. In
February 1996, MariTrend exercised its option. Finally, VCS Realty was required
to purchase certain equipment used at the ROBAS II facility that was previously
leased to Ryan-Walsh by a third party. During 1996, a review of the legal
indemnifications
F-46
<PAGE> 165
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
provided to the buyer by VCSI and Vectura resulted in VCSI increasing this
reserve by $950,000. Prior to year end 1997, an agreement was reached with the
purchaser of Ryan-Walsh regarding a contingent consideration payment that was
due under the terms of the stock purchase agreement. As a result, $5.8 million
of income was accrued at year end 1997. A reserve of $1.9 million, net of $1.1
million of anticipated additional future contingent consideration, was accrued
to cover certain indemnifications provided to the purchaser. The net gain of
$3.9 million was recognized in the 1997 consolidated statement of income and is
presented as a component of "Gain on sale of investments." In February 1998, the
cash payment was received. In management's opinion, the resolution of any
liabilities under the indemnifications mentioned above will not have a material
effect on the Company.
4. ACCOUNTS AND NOTES RECEIVABLE:
Receivables at December 31, 1997 include (in thousands):
<TABLE>
<S> <C>
Trade receivables, net of allowance for doubtful accounts of
$688,000.................................................. $19,962
Notes receivable and other, net of allowance for doubtful
accounts of $281,000...................................... 2
-------
$19,964
=======
</TABLE>
The Company has pledged essentially all receivables to financial
institutions under its revolving loan facilities (see Note 7).
5. INVENTORIES:
Inventories at December 31, 1997 consist of the following (in thousands):
<TABLE>
<S> <C>
Fuel........................................................ $1,021
Repair parts and supplies................................... 1,785
------
$2,806
======
</TABLE>
The Company has pledged all inventories to financial institutions under its
revolving loan facilities (see Note 7).
6. INVESTMENTS:
Investments in an unconsolidated affiliate, NBL (see Note 18), totaled
$(1,771,000) at December 31, 1997.
F-47
<PAGE> 166
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT:
Long-term debt at December 31, 1997 consists of the following (in
thousands):
<TABLE>
<S> <C>
Floating rate loan and security agreement (10.0% at December
31, 1997) expiring January 2000........................... $17,770
13.0% first-preferred ship mortgage payable August 1999..... 750
10.48% first-preferred ship mortgage payable monthly through
July 2001................................................. 3,408
10.96% first-preferred ship mortgage payable monthly through
July 2001................................................. 4,283
10.134% first-preferred ship mortgage payable monthly
through May 2003.......................................... 4,169
9.71% first-preferred ship mortgage payable monthly through
April 2003................................................ 3,287
9.8% first-preferred ship mortgage payable quarterly through
October 1999.............................................. 4,322
11.0% first-preferred ship mortgage payable monthly through
August 2004............................................... 6,037
11.48% first-preferred ship mortgage payable quarterly
through April 2002........................................ 4,783
12.4% first-preferred fleet mortgage payable monthly through
February 1999............................................. 1,676
10.375% first-preferred ship mortgage payable quarterly
through September 1999.................................... 1,692
13.0% first-preferred ship mortgage payable monthly through
February 1999............................................. 819
11.0% first-preferred ship mortgage payable monthly through
October 2000.............................................. 2,000
13.0% mortgage payable November 1999........................ 1,250
6.10% insurance finance note payable monthly through
September 1998............................................ 1,463
Other notes with varying interest rates..................... 4,246
-------
61,955
Less -- Current portion..................................... 18,532
-------
$43,423
=======
</TABLE>
Following is a description of the terms and conditions of the Company's
revolving loan and credit facility, as well as its other major debt instruments:
Loan and Security Agreement
National Marine had a loan and security agreement with a bank that provided
a line of credit totaling $25.0 million. The agreement, which was amended in
March 1996, provided for a $12.0 million revolving loan facility and a $13.0
million credit line, which was available for supplemental loans or letter of
credit accommodations. Interest was charged on borrowings under the revolver at
a bank's prime rate plus 1.75% and under the supplemental loan facility at the
same prime rate plus 2.0%. In March 1997, the agreement was again amended. The
amended agreement consists of a $12.0 million revolving loan facility and a
$11.6 million credit line, which is available for supplemental loans or letter
of credit accommodations. The term was extended to January 1, 2000 with interest
rates reduced to 1.5% and 1.75% over the bank's prime rate for the revolver and
credit line, respectively. The credit line is reduced by $235,000 each month.
National Marine has pledged as collateral essentially all of its current assets
and certain equipment with a book value as of December 31, 1997 of $10.5
million. In addition, certain affiliates of National Marine guarantee this
obligation. As of December 31, 1997, the amount outstanding under the revolving
loan portion of the agreement was $8.1 million.
The facility contains certain restrictive covenants related to net worth,
incurrence of debt, sale of assets, working capital and certain related party
transactions (see Note 8).
F-48
<PAGE> 167
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Ship Mortgages
The 13.0% first-preferred ship mortgage is payable in monthly installments
of interest of $8,000. The principal becomes due August 1999. The loan is
collateralized by floating equipment with a book value of $697,000 as of
December 31, 1997.
The 10.48% first-preferred ship mortgage is payable in monthly installments
of principal and interest of $67,000 through June 2001, with the remaining
balance due July 2001. The loan is collateralized by floating equipment with a
book value of $2.3 million as of December 31, 1997.
The 10.96% first-preferred ship mortgage is payable in monthly installments
of principal and interest of $86,000 through June 2001, with the remaining
balance due July 2001. The loan is collateralized by floating equipment with a
book value of $6.7 million as of December 31, 1997.
The 10.134% first-preferred ship mortgage is payable in monthly
installments of principal and interest of $83,000 through April 2003, with the
remaining balance due May 2003. The loan is collateralized by floating equipment
with a book value of $6.2 million as of December 31, 1997.
The 9.71% first-preferred ship mortgage is payable in monthly installments
of principal and interest of $66,000 through April 2003. The loan is
collateralized by floating equipment with a book value of $5.0 million as of
December 31, 1997.
The 9.8% first-preferred ship mortgage is payable in quarterly installments
of principal and interest of $181,000 through July 1999, with the remaining
balance due in October 1999. The loan is collateralized by floating equipment
with a book value of $4.6 million as of December 31, 1997.
The 11.0% first-preferred ship mortgage is payable in monthly installments
of principal and interest of $107,000 through July 2000 and thereafter monthly
installments of principal and interest of $109,000 through August 2004. The loan
is collateralized by floating equipment with a book value of $6.4 million as of
December 31, 1997.
The 11.48% first-preferred ship mortgage is payable in quarterly
installments of principal and interest of $183,000 through January 2002, with
the remaining principal plus interest due April 2002. The loan is collateralized
by floating equipment with a book value of $6.4 million as of December 31, 1997.
The 13.0% first-preferred fleet mortgage was issued for the purchase of
used hopper barges and tank barges that were previously leased from a third
party. In March 1997 the Company amended the mortgage and borrowed an additional
$1.0 million at 12%. The amended mortgage is payable in monthly installments of
principal and interest of $62,332 through January 1999 with the remaining
principal plus interest due February 1999. The loan is collateralized by
floating equipment with a book value of $980,569 as of December 31, 1997.
The 10.375% first-preferred ship mortgage is payable in equal quarterly
installments of principal and interest of $268,000 through September 1999. The
loan is collateralized by floating equipment with a book value of $1.7 million
as of December 31, 1997.
The 13.0% first-preferred ship mortgage was issued for the purchase of a
crane barge that was previously accounted for as a capital lease. The mortgage
requires monthly installments of principal and interest of $25,000 through
January 1999 with the remaining balance due February 1999. The loan is
collateralized by floating equipment with a book value of $1.2 million as of
December 31, 1997.
The 11.0% first-preferred ship mortgage is payable in monthly installments
of interest of $18,000 through April 1998 and thereafter monthly installments of
principal of $11,000 plus interest through September 2000 with the remaining
balance due October 2000. The loan is collateralized by floating equipment with
a book value of $3.2 million as of December 31, 1997.
F-49
<PAGE> 168
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Debt Agreements
The 13.0% mortgage is payable in monthly installments of interest of
$14,000. The principal becomes due November 1999. The loan is collateralized by
land, building, improvements and equipment with a book value of $2.2 million as
of December 31, 1997.
The 6.10% rate is for financing of insurance premiums and is payable in
monthly installments of principal and interest of $179,967 through September
1998. The note is collateralized by the value of unexpired premiums, which have
been assigned to the lender.
The Company's other notes as of December 31, 1997, include a mortgage
totaling $872,000, a $2.3 million demand promissory note to a related party,
$434,000 outstanding under a revolving loan facility, capital lease obligations
of $111,000 and other 9.0% fixed rate notes totaling $478,000.
Scheduled payments on long-term debt are as follows (in thousands):
1998 -- $10,001; 1999 -- $14,914; 2000 -- $9,652; 2001 - $7,258; 2002 -- $6,541;
thereafter -- $5,062. At December 31, 1997, payments not included in the above
schedule that are applicable to revolving loan facilities expected to be renewed
or replaced upon expiration (primarily in the year 2000) totaled $8.5 million.
The agreements described above contain restrictive covenants relative to
certain related party transactions, dividends, investments, incurrence of debt,
sale of assets and financial ratios. The most restrictive covenant requires that
the Company maintain minimum working capital of $1 (excluding its revolving
credit facility) and net worth of $20.0 million (see Note 8).
8. COVENANTS UNDER CREDITOR AGREEMENTS:
At December 31, 1997, the Company and NMS were not in compliance with
certain covenants under agreements with their creditors. Subsequently, the
Company and NMS obtained waivers from all applicable parties regarding all
events of noncompliance through that date, and forbearance was received with
respect to financial measurement-related covenants under their respective
agreements through January 1, 1999.
National Marine guarantees the debt obligations of its affiliate, NMS. As
of December 31, 1997, NMS owed approximately $16.2 million under loan
obligations guaranteed by National Marine.
9. RETIREMENT PLAN:
The Company has a noncontributory defined benefit plan covering
substantially all of its employees. Benefits are based on years of credited
service and employee compensation near retirement. The Company's funding policy
is to make contributions in accordance with the requirements of the Employee
Retirement Income Security Act of 1974. Assets of the plan are currently
invested in a short-term investment fund. Effective June 30, 1996, the Company
adopted a resolution ceasing future benefit accruals under its defined benefit
plan. As a result, the plan incurred a curtailment in 1996 as defined in
accordance with SFAS 88, "Employers Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits." Due to the
ceasing of any future benefit accruals, a pretax gain of $1.3 million was
recognized in 1996.
Pension credit for the year ended December 31, 1997 is as follows (in
thousands):
<TABLE>
<S> <C>
Interest cost............................................... $452
Return on plan assets....................................... (446)
Net amortization and deferrals.............................. (192)
-----
$(186)
=====
</TABLE>
F-50
<PAGE> 169
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The funded status of the plan at December 31, 1997 is as follows (in
thousands):
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations........................... $6,604
Effect of future salary increases......................... --
------
Total projected benefit obligations......................... $6,604
Plan assets at fair value................................... 7,986
------
Projected benefit obligations less than plan assets......... (1,382)
Unrecognized net gain....................................... 1,302
------
Noncurrent pension asset.................................... $(80)
======
</TABLE>
The assumptions used in determining pension expense and funded status
information shown above were as follows at December 31, 1997:
<TABLE>
<S> <C>
Discount rate............................................... 7.25%
Long-term rate of return on assets.......................... 8.00%
Rate of increase in compensation............................ N/A
</TABLE>
The Company also has a defined contribution plan covering substantially all
of its employees who have completed one year of service. Participants may
contribute a percentage of their compensation to their individual accounts, up
to the Internal Revenue Service maximum, which is partially matched by the
Company. The defined contribution plan expense was $411,273 in 1997.
10. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
The Company provides certain health care and life insurance benefits to its
employees who retired prior to January 1, 1993. Most of the employees who
retired from the Company were eligible for those benefits. Effective January 1,
1993, the Company instituted a fixed percentage contribution into a qualified
tax deferred 401(k) plan in lieu of providing postretirement health care and
life insurance benefits for employees who retired after December 31, 1992.
However, the Company provides a special subsidy to help defer the cost of
postretirement health care coverage to those employees who were age 56 or older
on January 1, 1993 and that will have ten or more years of continuous service at
retirement. In addition, with the sale of Connex Pipe Systems, Inc. in 1991, the
Company maintained responsibility for postretirement health care and life
insurance benefits for certain Connex employees, primarily those already
retired. At that time, the Company established a reserve for the cost of
providing these postretirement health care and life insurance benefits.
Effective January 1, 1995, the Company adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
requires the Company to recognize the estimated cost of providing these benefits
during the working careers of those employees who could become eligible for such
benefits when they retire. The cost of providing these benefits was previously
recognized in the period in which the benefits were paid, except for those costs
relating to Connex employees discussed above that were charged against the
reserve. Below are the results of adopting this standard.
No funds are segregated for future postretirement obligations. The Company
is amortizing its accumulated postretirement benefit obligation (APBO) over a
20-year period. The APBO in 1997 was calculated using a discount rate of 7.25%
and health care cost trend rate of 8.5% in 1997, gradually declining to 6.0% in
2003. If the health care cost trend rates were increased 1%, the accumulated
postretirement benefit obligation as of December 31, 1997 would have increased
$6,007. The effect of this change would not result in a material impact to
service and interest cost for 1997.
F-51
<PAGE> 170
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Postretirement benefit cost for 1997 includes the following components:
<TABLE>
<S> <C>
Service cost................................................ $6,000
Interest cost............................................... 86,839
Amortization of transition amount........................... 36,432
--------
Postretirement benefit cost................................. $129,271
========
</TABLE>
The postretirement benefit plan's funded status reconciled with the amount
included in the Company's consolidated balance sheet at December 31, 1997 is as
follows:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees and related beneficiaries.......................... $1,035,831
Other fully eligible participants........................... 163,442
Other active participants not fully eligible................ 36,964
----------
Accumulated postretirement benefit obligation............... 1,236,237
Unrecognized transition obligation.......................... (295,778)
Unrecognized net losses..................................... (20,582)
----------
Accrued postretirement benefit liability.................... $919,877
==========
</TABLE>
11. COMMITMENTS AND CONTINGENT LIABILITIES:
The Company has various lease agreements for floating equipment, which
include certain restrictive covenants related to dividends, net worth,
incurrence of debt, sale of assets, guarantees and certain related party
transactions. Additionally, the Company has pledged to one lessor certain
floating equipment which had a book value of $3.8 million as of December 31,
1997 as collateral for the rental payments.
In November 1997, the Company extended a charter with NMS for an eight-year
period (see Note 16). As discussed in Note 8, the Company's primary operating
subsidiary, National Marine, guarantees the debt obligations of its affiliate,
NMS, which as of December 31, 1997 represented a contingent liability of
approximately $16.2 million.
Future minimum rental payments required under operating leases with
noncancelable lease terms in excess of one year as of December 31, 1997 are as
follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $12,351
1999........................................................ 12,058
2000........................................................ 11,721
2001........................................................ 10,447
2002........................................................ 14,854
Thereafter.................................................. 21,395
-------
$82,826
=======
</TABLE>
Rental expense under noncancelable operating leases for the year ended
December 31, 1997 was $13.1 million. Additionally, the Company enters into
charter agreements for barges and towboats for terms of less than one year. The
Company's short-term charter expense for the year ended December 31, 1997 was
$15.8 million.
As of December 31, 1997 the Company was not in compliance with certain
covenants pursuant to an operating lease related to two marine vessels, and the
lessor has not waived its rights with respect to the covenant violations through
1998. The Company is current with regard to all required lease payments, and
F-52
<PAGE> 171
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
based on the terms of the lease agreement including remedies available to the
lessor with respect to the lease covenant violations, management believes that
this matter will result in no significant impact to the Company's financial
condition or results of operations.
12. STOCKHOLDERS' EQUITY:
PLAN OF RECAPITALIZATION
On December 30, 1996, a Plan of Recapitalization (the "Plan") became
effective whereby all of the issued and outstanding common stock of the Company
was converted into: (1) .05 shares of common stock of the same class as the
converted shares and (2) .475 shares of the Company's Class E, Series 1,
preferred stock. In addition, the Plan authorized the issuance to the current
shareholders of up to 3,000 shares of the Company's Class E, Series 2, preferred
stock at $1,000 per share and stock purchase warrants at $10 per warrant
exercisable for an aggregate of 6,860 shares of the Company's common stock, with
an exercise price of $100 per share of common stock received. Purchase of these
securities by any current shareholder was pro rata based on the number of shares
of common stock held by each shareholder versus the total number of shares of
common stock outstanding. The first closing, which occurred on December 30,
1996, resulted in the issuance of 2,880.77 shares of Class E, Series 2,
preferred stock and 6,587.36 warrants, generating a total of $2,952,000. These
proceeds were used to extinguish debt on December 30, 1996. The remaining
securities were sold at the second closing on January 30, 1997. Further
information regarding the preferred stock and warrants is discussed below.
MANDATORILY REDEEMABLE PREFERRED STOCK
The preferred stock is nonvoting and has a par value of $.01 per share. The
Company is authorized to issue 15,000 shares of preferred stock. Dividends on
each class are cumulative and payable, when declared by the Board of Directors
of the Company, at the following rates, except as modified below: Class B and C
at 13.5% of redemption value ($1,000 per share), Class A and D at 10% of
redemption value ($1,000 per share), and Class E, Series 1 and 2 at 10% of
redemption value ($1,000 per share) with such dividend rate increasing by 1% per
annum over the previous year's rate on each anniversary of the date of issuance.
Dividends of $1.0 million were in arrears at December 31, 1997.
Class A, C and E preferred stock are convertible into debt, under certain
circumstances, in an amount equal to redemption value plus unpaid cumulative
dividends.
The Company may, at its option, call each class of preferred stock at
redemption value plus unpaid dividends. Mandatory redemption requirements exist
for all classes of preferred stock at $1,000 per share plus unpaid dividends. On
September 30, 1996, 1,440 shares of Class A preferred stock, 222 shares of Class
C preferred stock and 610 shares of Class D preferred stock scheduled for
redemption at various times during 1997 were redeemed for liquidation value plus
accrued dividends totaling $2.3 million. Mandatorily redeemable preferred stock
outstanding at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Class E, Series 1, Shares................................... 3,705.00
Class E, Series 2, Shares................................... 3,000.00
</TABLE>
As of December 31, 1997, mandatorily redeemable preferred stock as
reflected in the accompanying balance sheet was comprised of the following
(dollars in thousands):
<TABLE>
<S> <C>
3,705 shares of Class E, Series 1, converted from Class B
and Class C common stock.................................. $741
3,000 shares of Class E, Series 2, issued at $1 per share... 3,000
Preferred stock accretion................................... 296
------
$4,037
======
</TABLE>
F-53
<PAGE> 172
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The mandatory redemption date for the Class E preferred stock listed above
is December 31, 2006. At December 31, 1997, the aggregate liquidation value of
preferred stock was $7.7 million, and the aggregate redemption value of
preferred stock was $6.7 million. The difference between the carrying value and
redemption value of the Company's preferred stock is being accreted through
earnings over the ten-year period ending December 31, 2006 (the redemption
date).
On March 31, 1993, certain shareholders of Class C and D preferred shares
agreed to extend their redemption dates from 1993 to 1994. Subsequent to
December 31, 1993, these same shareholders agreed to a further extension of
their redemption dates from 1994 to 1997. Also, certain Class D shares
originally scheduled for redemption in 1994 were extended to 1997. Redemption of
Class A preferred shares scheduled for 1994 through 1996 were extended to 1997.
Dividends on the Class C preferred shares continued to accrue at 13.5% per annum
through February 27, 1995, at which time the rate increased to 14.0% per annum
through maturity in 1997. Dividends on the Class D shares accrued at 13.5% per
annum through May 1, 1995, and 14.0% per annum thereafter through maturity in
1997, except for those Class D shares originally scheduled for redemption in
1994 which accrued dividends at 10.0% per annum until May 1, 1994. Dividends on
Class A preferred shares accrued at 10.0% per annum up to the originally
scheduled maturity date and 14.0% per annum thereafter, except for those Class A
shares whose original redemption date was 1994. The dividends on these Class A
shares accrued at 13.5% through March 30, 1995, and 14.0% thereafter.
Common Stock
The Company has three classes of common stock: Class A, Class B and Class
C. All classes have the same rights and privileges except for voting and Class
B's and Class C's rights of conversion. Class C common stock is owned by the
Company's officers and, in the aggregate, represents 50.5% of the Company's
voting rights. Class B common stock is majority-owned by an institutional
investor and represents 49.5% of the Company's voting rights. Class B and Class
C shares are convertible to Class A common at the option of the majority
stockholder of Class B or when the percentage of Class B shares outstanding
falls below 45% of the total outstanding shares of common stock. Upon the sale
or transfer of Class B shares, such shares are convertible to Class A or C
shares at the option of the majority stockholder of Class B common stock.
Conversion of Class B shares as discussed above would result in a redistribution
of stockholder voting rights.
Warrants
As noted in the Plan of Recapitalization above, the Company authorized the
issuance of up to 3,000 shares of the Company's Class E, Series 2, preferred
stock at $1,000 per share and stock purchase warrants at $10 per warrant
exercisable for an aggregate of 6,596.10 shares of the Company's Class B common
stock and 813.90 shares of the Company's Class C common stock. Such purchase was
pro rata as discussed above. These warrants are exercisable for $100 per share
at any time prior to December 31, 2006. These warrants were attached to the
preferred stock and could not be purchased separately except for 550 warrants,
which were issued in December 1996 to the Company's management.
13. PHANTOM STOCK RIGHTS PLAN:
In 1990, the Company's Board of Directors approved the Phantom Stock Rights
Plan (the 1990 Plan), a deferred compensation plan for senior management. The
1990 Plan allowed participants to share in the capital appreciation of the
Company through the issuance of rights which were valued as stock equivalents.
The 1990 Plan, as amended in 1991, permitted 1,750 rights to be issued over a
four-year period. Accumulated value under the 1990 Plan was originally scheduled
to be paid in cash on March 31, 1997. In addition, Ryan-Walsh senior management
participated in the 1990 Plan. Any payout to these former employees is
predicated upon the final outcome regarding the contingent consideration and
outstanding liabilities discussed in Note 3. In March 1997, the Company's Board
of Directors approved the 1997 Phantom Stock Plan (the 1997 Plan), a
F-54
<PAGE> 173
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
deferred compensation plan for senior management and key employees. It is
similar to the 1990 Plan in that it allows participants to share in the capital
appreciation of the Company. Current employees were provided the option of
carrying forward their existing rights from the 1990 Plan into the 1997 Plan or
cashing out. Total accumulated value of the 1997 Plan as of December 31, 1997
was $399,000 and is included in "Other liabilities" in the consolidated balance
sheet.
Compensation credit, determined under a book value formula, was $43,000 in
1997. At December 31, 1997, there were 477 rights outstanding under the 1997
Plan. The 1997 Plan matures on April 1, 2001 with accumulated value being paid
in cash at that time.
14. INCOME TAXES:
The benefit from income taxes for the year ended December 31, 1997 consists
of the following (in thousands):
<TABLE>
<S> <C>
Current --
Federal................................................... $(2,233)
State..................................................... 21
-------
(2,212)
-------
Deferred.................................................... (1,741)
-------
Total....................................................... $(3,953)
=======
</TABLE>
A reconciliation of the effective income tax rate to the federal statutory
rate on loss before income taxes for the year ended December 31, 1997 is as
follows:
<TABLE>
<S> <C>
Statutory rate.............................................. (35.0)%
Unconsolidated affiliate loss............................... 3.7
Expired investment tax credits.............................. 22.3
Nontaxable gain on sale of subsidiary....................... (89.2)
Deferred tax adjustment..................................... (167.1)
State income taxes and other items.......................... 7.9
------
(257.4)%
======
</TABLE>
F-55
<PAGE> 174
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes are provided for temporary differences in the
recognition of revenue and expenses for financial reporting and income tax
purposes. These differences consist principally of depreciation expense,
workers' compensation reserves, investment tax credit carryforwards and net
operating loss carryforwards. At December 31, 1997, the Company had investment
tax credit carryforwards of approximately $86,000, expiring in years through
1999. The Company also had net operating loss carryforwards of approximately
$24.6 million, expiring in years through 2012. The significant components of
deferred tax assets and liabilities at December 31, 1997 include:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $8,605
Alternative minimum tax credit............................ 3,061
Accounting reserves....................................... 3,539
Other..................................................... 85
--------
Total............................................. 15,290
Deferred tax liabilities:
Accelerated depreciation.................................. (14,632)
Other..................................................... (3,169)
--------
Total............................................. (17,801)
--------
Net deferred tax liability.................................. $(2,511)
========
</TABLE>
As discussed previously under Note 2, Summary of Significant Accounting
Policies: Income Taxes, NBL is included for tax purposes in the consolidated
federal income tax return filed by Vectura. Were NBL to be consolidated with
Vectura for financial reporting purposes, Vectura would report a net
consolidated deferred tax liability of $10.2 million.
SFAS 109, "Accounting for Income Taxes," requires that a valuation
allowance be provided when it is more likely than not that some portion of a
deferred tax asset will not be realized. Although there can be no assurance that
the Company will generate specific levels of taxable income in any particular
fiscal year, management believes that it is more likely than not that net
deductible temporary differences will reverse during periods in which the
Company will generate sufficient taxable income to permit the utilization of
such deductions.
Accordingly, management has determined that no valuation allowances are
required at December 31, 1997.
15. SUPPLEMENTAL CASH FLOW DISCLOSURES:
The following noncash transactions are not reflected in the Company's
consolidated statement of cash flows for the year ended December 31, 1997.
- Repair of several out-of-service barges and other capital expenditures,
which were financed by various first-preferred ship mortgages totaling
$3.3 million.
- The Company accrued dividends of $1.0 million with a corresponding
increase in noncurrent liabilities.
- The Company accreted $0.3 million of the difference between the carrying
value and redemption value of its preferred stock.
- The Company financed its insurance premiums through short-term debt
totaling $1.9 million.
- A capital lease obligation of $0.1 million.
F-56
<PAGE> 175
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest paid during the year ended December 31, 1997 was $6.4 million.
Payments for federal income taxes in 1997 was $0.2 million.
16. RELATED PARTY TRANSACTIONS:
The Company charters floating equipment from NMS, a wholly-owned subsidiary
of NBL. In November 1997, the charter agreement was amended to an eight-year
term with a significant reduction in rate. Charter expense for the year ended
December 31, 1997 was $4.2 million.
At December 31, 1997 the Company had receivables from NBL of $2.2 million.
In November 1997, NMS repaid $1.1 million of amounts due to the Company.
The Company provides various administrative and support services to NBL.
Administrative fees of $250,000 were charged to NBL for year ended December 31,
1997.
17. LITIGATION:
The Company's Seneca, Illinois, property is located along the Illinois
River, immediately outside the city limits of Seneca, Illinois. Prior to 1988,
the property was owned at various times by a number of companies including the
predecessor of National Marine. The various owners used it to construct barges,
process and package oil, grease, and other automobile chemicals, handle
pesticides and other chemicals, and store various chemicals. Although National
Marine has owned the property since 1988, it has never conducted any operations
on it.
In 1990, the Illinois Environmental Protection Agency (IEPA) issued a
notice pursuant to the Illinois Environmental Protection Act to the former
owners and lessees of the property, as well as to the Company, offering them the
opportunity to remediate contamination that the IEPA claimed was on the
property. Throughout the next several years, the Company contested the necessity
of doing the remediation that the state proposed and contested its own
liability. Beginning in 1995, the Company submitted proposed remediation plans
to the state. In May 1996, the IEPA asked that the U.S. Environmental Protection
Agency (U.S. EPA) become involved in the site.
In July 1996, the U.S. EPA notified the Company that it was potentially
liable under the Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) for necessary remediation at the property. Also in July 1996, the
Company began its remediation of the property based on plans that it had
submitted to the state and to which the state had no objection. Remediation
activities continued through December 1996. In addition to the remediation
activities, the Company also demolished and removed the buildings that were on
the property. Based on the work that the Company has done, it appears that there
is no threat to human health or the environment at the property.
In the fall of 1996, the Company began discussion with the IEPA regarding a
resolution of any remaining concerns the state might have under the new state
"Brownfields" legislation, which allows the state to officially declare that no
further remediation is necessary at a site that has been cleaned up such that
there is no threat to health or to the environment.
In December 1996, the U.S. EPA issued a Unilateral Administrative Order
pursuant to CERCLA requiring the Company to submit plans for sampling and
possible further remediation at the property. A sampling plan was submitted to
the U.S. EPA, and it was accepted. The sampling was completed in August 1997,
and a report has been sent to the U.S. EPA. Results of the sampling and possible
solutions were reviewed by the Company, outside counsel and an environmental
consultant. The U.S. EPA also reviewed the sample report, and a meeting was held
on March 12, 1998 at which time the Company explained its view that, under
applicable standards, only minimal further remedial steps appear necessary. The
U.S. EPA said it would respond by providing its own view of the applicable
cleanup standards. The U.S. EPA planned to take
F-57
<PAGE> 176
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional samples at the site on April 1, 1998. The Company expects to meet
with the U.S. EPA for continued discussions concerning cleanup standards and
additional remedial measures, if any. Throughout its dealings with the IEPA and
the U.S. EPA, the Company has maintained that it has no liability for clean up
of the site.
The Company has instituted legal action against various parties, some of
whom are former employees, alleging fraud, breach of fiduciary duty and other
improper actions which the Company alleges caused the diversion of funds to
other entities. Several of the defendant parties have been convicted or have
pled guilty to federal charges based on actions related in the above suit. The
Company is reviewing options regarding restitution and damages in light of this
development.
On July 27, 1994, a search was undertaken by agents of the U.S. EPA and
other federal and state agencies at the Company's Port Allen, Louisiana, site.
The search was triggered, in part, by allegations of illegal discharges into the
Mississippi River. In conjunction with this matter, the U.S. EPA requested that
the Company negotiate and enter into an Administrative Order of Consent to
conduct an environmental assessment and possible removal action concerning the
alleged dumping into the Mississippi River. After an agreement on the terms of
an Administrative Order of Consent could not be reached, on March 15, 1995, the
U.S. EPA issued a Unilateral Administrative Order to the Company for a removal
action associated with the alleged discharges. The Company has conducted a
removal action and has sought reimbursement of its previously expensed costs
from the federal Superfund under CERCLA. The cost reimbursement proceeding is
pending. The Company has denied any liability but is cooperating with all
federal and state agencies. To date, to the Company's knowledge no evidence has
been found of illegal discharges by the Company into the Mississippi River. The
U.S. Attorney's Office had advised the Company that a grand jury investigation
would proceed, though, to the Company's knowledge, no actions have been taken to
date. Recently, the U.S. Attorney's Office has indicated that there are no
grounds for criminal action against the Company. However, the Parish of West
Baton Rouge, Louisiana has indicated that it intends to proceed with a criminal
prosecution with respect to this matter. On April 29, 1998, West Baton Rouge
Parish filed charges against Tiger Shipyard, Inc., a wholly-owned subsidiary of
National Marine, and seven employees. The Company believes that no criminal
activities were conducted by Tiger Shipyard, Inc. or any of its employees with
respect to this matter. Although the ultimate outcome of these charges is
currently uncertain, the Company believes that the matter will be resolved with
no significant adverse impact to the Company's financial condition or results of
operations.
In March 1996, the Company received a letter sent on behalf of SBA
Shipyards, Inc. (SBA) regarding the Company's interest in participating in the
voluntary funding of certain environmental remediation and closure activities at
SBA's facility. SBA has identified the Company as a potential responsible party
at SBA's facility relating to alleged cleaning services performed by SBA for or
on behalf of the Company during the period from 1977 to 1993. In the Company's
opinion, it is not possible at this time to identify either the potential scope
of any required participation in SBA's cleanup or the potential cost of any such
participation to the Company. A customer group has been formed to address the
issues. Discussions with the U.S. EPA and SBA are ongoing.
The Company is a defendant in several lawsuits resulting from the ordinary
course of business. Management believes that the outcome of such suits will not
have a material adverse effect on the Company's financial position or results of
operations.
18. NBL, INC. OWNERSHIP:
In 1993, the Company acquired an option to purchase 50% of the stock of
NBL. In February 1993, the Company exercised its rights under a stock pledge
agreement with a former officer to take ownership of the remaining 50% of the
stock of NBL. This stock was contributed to Armada Marine Corporation, a wholly-
owned subsidiary of National Marine. In 1996, Armada was merged into National
Marine. Notwithstanding
F-58
<PAGE> 177
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the above, the former officer referenced above has made a claim of ownership of
said stock in pending litigation. As a result, management has accounted for this
50% interest in NBL as a contingent asset. Therefore, the Company is accounting
for this 50% interest in NBL on the cost basis, which is recorded at a nominal
value. The remaining 50% of the stock held by the Company is being accounted for
under the equity method.
When the contingent claim no longer exists for the 50% of NBL, the entity
will be consolidated with Vectura. Below is a condensed unaudited summary of
Vectura's results and a summarized balance sheet for the year ended December 31,
1997, as if NBL were a consolidated entity (in thousands):
<TABLE>
<CAPTION>
ADJUSTMENTS/ CONSOLIDATED
VECTURA NBL ELIMINATIONS VECTURA/NBL
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues............................. $134,839 $4,156 $(4,156) $134,839
======== ======== ======= ========
Net income (loss).................... $2,417 $(324) $162 $2,255
======== ======== ======= ========
Deferred income tax
benefit -- current................. $2,242 $ -- $ -- $2,242
Other current assets................. 30,972 59 (41) 30,990
-------- -------- ------- --------
Total current assets................. 33,214 59 (41) 33,232
Net vessels, property, and
equipment.......................... 80,644 19,981 -- 100,625
Other assets......................... 4,205 4,372 (3,990) 4,587
-------- -------- ------- --------
Total assets......................... $118,063 $ 24,412 $(4,031) $138,444
======== ======== ======= ========
Current portion of long-term debt.... $18,532 $2,050 $ -- $20,582
Other current liabilities............ 24,598 133 (46) 24,685
-------- -------- ------- --------
Total current liabilities............ 43,130 2,183 (46) 45,267
Long-term debt....................... 43,423 14,179 (2,350) 55,252
Deferred income taxes................ 4,753 7,654 -- 12,407
Other liabilities.................... 11,113 3,939 (3,401) 11,651
-------- -------- ------- --------
Total liabilities.................... 102,419 27,955 (5,797) 124,577
Mandatorily redeemable preferred
stock.............................. 4,037 -- -- 4,037
Stockholders' equity................. 11,607 (3,543) 1,766 9,830
-------- -------- ------- --------
Total liabilities and stockholders
equity............................. $118,063 $ 24,412 $(4,031) $138,444
======== ======== ======= ========
</TABLE>
19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of Vectura's financial instruments are as follows
at December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -------
<S> <C> <C>
Debt........................................................ $61,955 $62,806
Mandatorily redeemable preferred stock...................... $4,037 --
</TABLE>
Long-Term Debt
The fair value of the Company's revolving loan facilities and other
floating rate debt instruments is estimated to be equivalent to their carrying
value. The fair value of the Company s fixed rate debt is based on the rates at
which the Company was able to secure new financings in 1997.
F-59
<PAGE> 178
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mandatorily Redeemable Preferred Stock
The Company determined that it was not practicable to determine the fair
value of its mandatorily redeemable preferred stock.
Accounts Receivable and Payable
The fair value of the Company's accounts receivable and payable is
estimated to be equivalent to their respective carrying values.
20. SUBSEQUENT EVENTS:
The Company and its subsidiary, National Marine, (collectively the "Vectura
Parties") have entered into a recapitalization agreement with CSX Corporation
(CSX) whereby the Vectura Parties and CSX intend to contribute their respective
companies' marine transportation assets and liabilities (marine operations) to a
limited liability company, American Commercial Lines LLC (ACL). The marine
operations of the Vectura Parties include their interest in the assets and
liabilities of NBL, Inc. In addition to its marine operations, the Company will
also contribute $60.0 million to ACL, the funding for which is expected to be
generated through equity contributions to be received by the Company from its
shareholders. In connection with the recapitalization transaction, ACL is
expected to raise approximately $735 million through certain public and private
debt financing arrangements, a portion of the proceeds of which will be used to
retire the existing debt of the contributed marine operations (including the
Vectura Parties' currently outstanding debt of approximately $75 million).
In exchange for their contributions to ACL, the Vectura Parties will
receive consideration in the form of certain common and preferred membership
interests and future profits interests.
Substantially all of the Company's key operating assets will be contributed
to ACL pursuant to the recapitalization transaction, and the primary business
operations of the Vectura Parties after the recapitalization will consist of the
Vectura Parties' interests in ACL and the Company's stevedoring and terminalling
operations conducted through its subsidiary, MariTrend.
F-60
<PAGE> 179
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1998
(UNAUDITED)
-----------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $4,378
Accounts and notes receivable, net........................ 20,099
Prepaid expenses.......................................... 2,303
Inventories............................................... 2,707
Current portion of deferred income taxes.................. 2,242
Other current assets...................................... 140
--------
Total current assets................................... 31,869
--------
Notes receivable............................................ 27
Note receivable -- unconsolidated affiliate................. 1,312
Vessels, property and equipment:
Land and buildings........................................ 3,784
Floating equipment........................................ 106,848
Other equipment........................................... 10,004
--------
120,636
Less -- Accumulated depreciation.......................... (42,875)
--------
Net vessels, property and equipment.................... 77,761
Other assets................................................ 3,152
--------
Total assets...................................... $114,121
========
</TABLE>
F-61
<PAGE> 180
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30,
1998
(UNAUDITED)
-----------
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $20,473
Accounts payable.......................................... 20,718
Accrued compensation and employee benefits................ 564
Accrued workers' compensation and other insurance......... 830
Income taxes payable...................................... 94
Accrued expenses.......................................... 3,390
Other current liabilities................................. 2,699
--------
Total current liabilities.............................. 48,768
Long-term debt.............................................. 38,231
Investments................................................. 2,054
Reserve for workers' compensation and other insurance....... 1,413
Deferred income taxes payable............................... 3,237
Other liabilities........................................... 8,357
--------
Total liabilities...................................... 102,060
--------
Mandatorily redeemable preferred stock...................... 4,083
Stockholders' equity:
Common stock, par value $.01 per share --
Authorized, 28,000 shares
Issued and outstanding, 390 shares..................... 1
Additional paid-in capital................................ 45
Retained earnings......................................... 7,932
--------
Total stockholders' equity............................. 7,978
--------
Total liabilities and stockholders' equity........ $114,121
========
</TABLE>
F-62
<PAGE> 181
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(DOLLARS IN THOUSANDS EXCEPT LOSS PER SHARE AND WEIGHTED AVERAGE SHARES
OUTSTANDING)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
(UNAUDITED)
------------------------
1997 1998
---------- ----------
<S> <C> <C>
OPERATING REVENUE........................................... $66,221 $63,484
OPERATING EXPENSES.......................................... 63,463 60,443
---------- ----------
Gross profit........................................... 2,758 3,041
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 3,913 3,863
---------- ----------
Loss from operations................................... (1,155) (822)
OTHER INCOME (EXPENSE):
Interest and dividend income.............................. 43 68
Interest expense.......................................... (3,445) (3,316)
Equity in loss of unconsolidated affiliates............... (70) (292)
Gain (loss) on disposition of capital assets and other
items, net............................................. 36 (80)
---------- ----------
(3,436) (3,620)
---------- ----------
Loss from operations before income taxes............... (4,591) (4,442)
BENEFIT FROM INCOME TAXES................................... (1,578) (1,424)
---------- ----------
NET LOSS.................................................... (3,013) (3,018)
PREFERRED DIVIDENDS AND ACCRETION........................... (604) (611)
---------- ----------
NET LOSS TO COMMON SHAREHOLDERS............................. $(3,617) $(3,629)
========== ==========
LOSS PER SHARE:
Basic..................................................... $(9,274.36) $(9,305.13)
========== ==========
Diluted................................................... $(493.45) $(495.09)
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic..................................................... 390 390
========== ==========
Diluted................................................... 7,330 7,330
========== ==========
</TABLE>
F-63
<PAGE> 182
VECTURA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED)
--------------------
1997 1998
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $(3,013) $(3,018)
Adjustments to reconcile net loss to net cash generated by
operating activities:
Depreciation and amortization.......................... 3,782 3,745
Losses of unconsolidated affiliates.................... 70 292
Deferred income taxes.................................. 106 (55)
Gain on disposition of capital assets.................. (154) (32)
Decrease in accounts receivable........................ 3,740 5,636
Decrease in inventories................................ 246 98
Increase in accounts payable........................... 2,844 2,963
Increase (decrease) in worker's compensation and other
insurance............................................. (35) 136
Decrease in accrued expenses........................... (2,858) (1,576)
Other items............................................ -- 1,711
------- -------
Cash generated by operating activities............ 4,728 9,900
INVESTING ACTIVITIES:
Purchase of vessels, property and equipment............... (7) (15)
Proceeds from sale of vessels, property and equipment..... 369 115
(Increase) decrease in investments and other assets....... (371) 3
------- -------
Cash (utilized) generated by investing
activities...................................... (9) 103
FINANCING ACTIVITIES:
Payments of long-term debt................................ (5,221) (7,065)
Net borrowings (repayments) under revolving loan
facilities............................................. (2,724) 1,262
Increase in long-term debt................................ 1,000 --
Borrowings to repay existing debt......................... 1,470 --
Issuance of securities.................................... 121 --
------- -------
Cash utilized by financing activities............. (5,354) (5,803)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS....................... (635) 4,200
CASH AND CASH EQUIVALENTS, beginning of period.............. 740 178
------- -------
CASH AND CASH EQUIVALENTS, end of period.................... 105 4,378
======= =======
</TABLE>
F-64
<PAGE> 183
VECTURA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF INTERIM PERIOD PRESENTATION
The unaudited interim consolidated financial statements as of June 30, 1998
and for the six months ended June 30, 1997 and 1998 are presented immediately
before the transaction described in Note 2 below and have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission (SEC).
Certain information and note disclosure normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations. However,
all adjustments that, in the opinion of management, are necessary for fair
presentation have been included. The results for the six months ended June 30,
1998 are not necessarily indicative of the results to be expected for the fiscal
year ending December 31, 1998.
2. SUBSEQUENT EVENT
The Company and its subsidiary, National Marine, (collectively the "Vectura
Parties") consummated a recapitalization transaction with CSX Corporation (CSX)
whereby the Vectura Parties and CSX contributed their respective companies'
marine transportation assets and liabilities (marine operations) to a limited
liability company, American Commercial Lines LLC (ACL). The marine operations
contributed by the Vectura Parties included their interest in the assets and
liabilities of NBL, Inc. In addition to its marine operations, the Company
contributed $60.0 million to ACL, the funding for which was generated through
equity contributions received by the Company from its shareholders. In
connection with the recapitalization transaction, ACL raised approximately $745
million through certain public and private debt financing arrangements, a
portion of the proceeds of which were used to retire the existing debt of the
contributed marine operations.
In exchange for their contributions to ACL, the Vectura Parties received
consideration in the form of certain common and preferred membership interests
and future profits interests.
Substantially all of the Company's key operating assets were contributed to
ACL pursuant to the recapitalization transaction, and the primary business
operations of the Vectura Parties after the recapitalization consist of the
Vectura Parties' interests in ACL and the Company's stevedoring and terminalling
operations conducted through its subsidiary, MariTrend.
F-65
<PAGE> 184
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUERS OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE NOTES
OFFERED HEREBY NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY OF THE EXCHANGE NOTES TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN OR IN
THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 14
The Transactions..................... 22
Use of Proceeds...................... 24
Capitalization....................... 25
Unaudited Pro Forma Combined
Financial Data..................... 26
Selected Historical Consolidated
Financial Data..................... 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 38
Business............................. 46
Management........................... 61
Security Ownership................... 66
Certain Relationships and Related
Transactions....................... 67
Description of the Senior Credit
Facilities......................... 71
Description of the Exchange Notes.... 73
The Exchange Offer................... 103
Certain Federal Income Tax
Consequences....................... 111
Plan of Distribution................. 111
Legal Matters........................ 112
Experts.............................. 113
Index to Financial Statements........ F-1
</TABLE>
[ACL LOGO]
AMERICAN COMMERCIAL LINES LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL
MARINE SERVICE LLC
LOUISIANA DOCK COMPANY LLC
WATERWAY COMMUNICATIONS SYSTEM LLC
AMERICAN COMMERCIAL TERMINALS LLC
AMERICAN COMMERCIAL
TERMINALS-MEMPHIS LLC
JEFFBOAT LLC
AMERICAN COMMERCIAL
LINES INTERNATIONAL LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
BREEN TAS LLC
BULLARD TAS LLC
SHELTON TAS LLC
LEMONT HARBOR & FLEETING SERVICES LLC
TIGER SHIPYARD LLC
WILKINSON POINT LLC
HOUSTON FLEET LLC
OFFER TO EXCHANGE SERIES B
10 1/4% SENIOR NOTES DUE 2008
FOR SERIES A 10 1/4% SENIOR NOTES
DUE 2008
PROSPECTUS
, 1998
<PAGE> 185
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Each of ACL, the Parent and the Subsidiary Guarantors is a limited
liability company organized under the laws of the State of Delaware. Section
18-108 of the Delaware Limited Liability Company Act (the "DLLCA") provides
that, subject to such standards and restrictions, if any, as are set forth in
its limited liability company agreement, a limited liability company may, and
shall have the power to, indemnify and hold harmless any member or manager or
other persons from and against any and all claims and demands whatsoever.
Article XI of the Parent's Limited Liability Company Agreement (the "Parent
LLC Agreement") provides, among other things, that the Parent shall indemnify
and hold harmless any Member, Representative or any direct or indirect officer,
director, stockholder or partner of a Member (each an "Indemnitee") to the
fullest extent permitted under the DLLCA, as the same exists or as thereafter
amended, substituted or replaced (but, in the case of any such amendment,
substitution or replacement only to the extent that such amendment, substitution
or replacement permits the Parent to provide broader indemnification rights than
the Parent is providing immediately prior to such amendment), against all
expenses, costs, liabilities, damages and losses (including reasonable
attorney's fees and expenses and amounts paid in settlement) incurred by any
such Indemnitee in connection with any action, suit or proceeding to which such
Indemnitee may be made a party or otherwise involved or with which it shall be
threatened by reason of its being a Representative, or any direct or indirect
officer, director, stockholder or partner of a Member or while acting as (or on
behalf of) a Member on behalf of the Parent or in the Parent's interest;
provided that (unless the Board otherwise consents) no Indemnitee shall be
indemnified for any expenses, liabilities and losses suffered that are
attributable to such Indemnitee's gross negligence, willful misconduct or
knowing violation of law or for any present or future breaches of any
representations, warranties or covenants by such Indemnitee contained herein or
in the other agreements with the Parent. The Parent LLC Agreement further
provides that expenses, including attorneys' fees, incurred by any such
Indemnitee in defending a proceeding shall be paid by the Parent in advance of
the final disposition of such proceeding, including any appeal therefrom, upon
receipt of an undertaking by or on behalf of such Indemnitee to repay such
amount if it shall ultimately be determined that such Indemnitee is not entitled
to be indemnified by the Parent.
The Parent LLC Agreement defines "Member" as each Person who (a) is an
initial signatory to the Parent LLC Agreement, or has been admitted to the
Company as a Member in accordance with the provisions of Article II of the
Parent LLC Agreement, and (b) has not ceased to be a Member in accordance with
the provisions of the Parent LLC Agreement or for any other reason. The Parent
LLC Agreement defines "Person" as an individual, a partnership, a corporation,
an association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof. In addition, as used in the
Parent LLC Agreement, each member of the Parent's Board is referred to as a
"Representative." According to the Parent LLC Agreement, the Parent shall have
power to purchase and maintain insurance on behalf of any Indemnitee or any
Person who is or was an agent of the Parent against any liability asserted
against such Person and incurred by such Person in any such capacity, or arising
out of such Person's status as an agent, whether or not the Parent would have
the power to indemnify such Person against such liability under the provisions
of Section 11.1 of the Parent LLC Agreement or under Applicable Law (as defined
therein).
Section 16 of the Amended and Restated Limited Liability Company Agreements
of the Company and the Subsidiary Guarantors (the "LLC Agreements") provides,
among other things, that, except as limited by law any member, manager, officer
or employee of the Company or the Subsidiary Guarantors shall be indemnified and
held harmless to the fullest extent permitted under the DLLCA (including
indemnification for negligence, gross negligence and breach of fiduciary duty to
the extent so authorized) from and against any and all claims and demands
arising by reason of the fact that such person is, or was a member, manager,
officer or employee of the Company or the Subsidiary Guarantors.
II-1
<PAGE> 186
ACL Capital (the "Corporation") is a Delaware corporation. Section 145 of
the General Corporation Law of the State of Delaware provides that a Delaware
corporation may indemnify any person or persons who were, are or are threatened
to be made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, were or are threatened
to be made, a party to any threatened, pending or completed action or suit by or
in the right of the corporation by reasons of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interest, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
The Certificate of Incorporation of the Corporation provides that a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director; except for liability (i) for breach of the director's duty
of loyalty to the Corporation 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 Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
Article VI of the Bylaws of the Corporation 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 (hereinafter a "proceeding"), by reason of the fact that he, or a
person of whom he is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the Corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may thereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment) against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith. Article VI of the
Bylaws of the Corporation further provides that the right to indemnification
conferred in Article VI of the Bylaws of the Corporation shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that the payment of such expenses incurred by a director or
officer of the Corporation in his capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to any employee
benefit plan) in advance of the final disposition of such proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it should be
determined ultimately that such director or officer is not entitled to be
indemnified under this section or otherwise. The Corporation may, by action of
its board of directors, provide indemnification to
II-2
<PAGE> 187
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145. The
Corporation's Bylaws provide for the maintenance of insurance under the
circumstances described in Section 145.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrants pursuant to the foregoing provisions, the registrants have been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
<TABLE>
<C> <S>
+2.1 Recapitalization Agreement dated as of April 17, 1998 by and
among CSX Corporation, Vectura Group, Inc., the Parent, the
Company and National Marine, Inc.
+3.1 Certificate of Formation of the Parent
+3.2 Form of Certificate of Formation of the Company and the
Subsidiary Guarantors
+3.3 Form of Limited Liability Company Agreement for the
Subsidiary Guarantors
+3.4 Amended and Restated Limited Liability Company Agreement of
the Parent
+3.5 Amended and Restated Limited Liability Company Agreement of
the Company
+3.6 Certificate of Incorporation of ACL Capital
+3.7 By-laws of ACL Capital
+4.1 Indenture dated as of June 30, 1998 by and among the
Company, ACL Capital and the Subsidiary Guarantors and the
United States Trust Company of New York, as trustee
+4.2 Purchase Agreement dated as of June 23, 1998 among the
Company, ACL Capital and the Subsidiary Guarantors,
Wasserstein Perella Securities, Inc. and Chase Securities
Inc.
+4.3 Registration Rights Agreement dated as of June 23, 1998 by
and among the Company, ACL Capital and the Subsidiary
Guarantors, Wasserstein Perella Securities, Inc. and Chase
Securities Inc.
+4.4 Registration Rights Agreement dated as of June 30, 1998 by
and among the Company, Vectura Group, Inc., National Marine,
Inc., CSX Brown Corp., Stuart Agranoff and Steven Anderson
and each Person whose name is set forth on Schedule I
therein
5.1 Opinion and consent of Kirkland & Ellis.
8.1 Opinion Regarding Tax Matters
+10.1 Credit Agreement dated as of June 30, 1998 among the
Company, the Parent, the Lenders (as defined therein) and
the Chase Manhattan Bank, as issuing bank, as administrative
agent, as security trustee and as collateral agent
12.1 Statement of Computation of Ratios.
+21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
+24.1 Powers of Attorney (included in signature page).
+25.1 Statement of Eligibility of Trustee on Form T-1.
27.1 Financial Data Schedule.
+99.1 Form of Letter of Transmittal.
+99.2 Form of Notice of Guaranteed Delivery.
+99.3 Form of Tender Instructions.
</TABLE>
- ---------------
+ Previously filed.
II-3
<PAGE> 188
ITEM 22. UNDERTAKINGS.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering; and
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Rule 3-19 of the chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Act need not be furnished, provided, that
the registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial statements.
Notwithstanding the foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the Act or Rule 3-19
of this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Form F-3.
(1) Each undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) Each registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of
II-4
<PAGE> 189
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
Each undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Each undersigned registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
Each undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 190
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
AMERICAN COMMERCIAL LINES LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-6
<PAGE> 191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
ACL CAPITAL CORP.
By: *
-------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-7
<PAGE> 192
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
AMERICAN COMMERCIAL BARGE LINE LLC
By: *
-------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-8
<PAGE> 193
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
AMERICAN COMMERCIAL LINES
INTERNATIONAL LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- International and
- -------------------------------------------------------- Member
Martin K. Pepper
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-9
<PAGE> 194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
AMERICAN COMMERCIAL MARINE
SERVICE LLC
By: *
------------------------------------
Name: Robert W. Greene
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Robert W. Greene
* Member
- --------------------------------------------------------
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-10
<PAGE> 195
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
AMERICAN COMMERCIAL TERMINALS LLC
By: *
------------------------------------
Name: Robert W. Greene
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Robert W. Greene
* Member
- --------------------------------------------------------
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-11
<PAGE> 196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
AMERICAN COMMERCIAL TERMINALS --
MEMPHIS LLC
By: *
------------------------------------
Name: Robert W. Greene
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Robert W. Greene
* Member
- --------------------------------------------------------
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-12
<PAGE> 197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
BREEN TAS LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President, Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Vice President -- Corporate Services and
- -------------------------------------------------------- Member
Michael A. Khouri
* Vice President -- International and Member
- --------------------------------------------------------
Martin K. Pepper
* Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-13
<PAGE> 198
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
BULLARD TAS LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Vice President -- Corporate Services and
- -------------------------------------------------------- Member
Michael A. Khouri
* Vice President -- International and Member
- --------------------------------------------------------
Martin K. Pepper
* Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-14
<PAGE> 199
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
HOUSTON FLEET LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Transportation
- -------------------------------------------------------- Services and Member
William N. Whitlock
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-15
<PAGE> 200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
JEFFBOAT LLC
By: *
------------------------------------
Name: Robert W. Greene
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Robert W. Greene
* Member
- --------------------------------------------------------
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-16
<PAGE> 201
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
LEMONT HARBOR & FLEETING
SERVICES LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Transportation
- -------------------------------------------------------- Services and Member
William N. Whitlock
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-17
<PAGE> 202
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
LOUISIANA DOCK COMPANY LLC
By:
*
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Transportation
- -------------------------------------------------------- Services and Member
William N. Whitlock
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-18
<PAGE> 203
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
ORINOCO TASA LLC
By:
*
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Vice President -- Corporate Services and
- -------------------------------------------------------- Member
Michael A. Khouri
* Vice President -- International and Member
- --------------------------------------------------------
Martin K. Pepper
* Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-19
<PAGE> 204
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
ORINOCO TASV LLC
By:
*
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Vice President -- Corporate Services and
- -------------------------------------------------------- Member
Michael A. Khouri
* Vice President -- International and Member
- --------------------------------------------------------
Martin K. Pepper
* Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-20
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
SHELTON TAS LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Vice President -- Corporate Services and
- -------------------------------------------------------- Member
Michael A. Khouri
* Vice President -- International and Member
- --------------------------------------------------------
Martin K. Pepper
* Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-21
<PAGE> 206
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
TIGER SHIPYARD LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Transportation
- -------------------------------------------------------- Services and Member
William N. Whitlock
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-22
<PAGE> 207
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
WATERWAY COMMUNICATIONS
SYSTEM LLC
By:
*
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-23
<PAGE> 208
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jeffersonville, State of Indiana, on October 16, 1998.
WILKINSON POINT LLC
By: *
------------------------------------
Name: Michael C. Hagan
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to its Registration Statement has been signed by the following persons in
the capacities and on the dates indicated on October 16, 1998:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* President, Chief Executive Officer
- -------------------------------------------------------- (principal executive officer) and Member
Michael C. Hagan
/s/ MICHAEL A. KHOURI Senior Vice President -- Corporate Services
- -------------------------------------------------------- and Member
Michael A. Khouri
* Senior Vice President -- Transportation
- -------------------------------------------------------- Services and Member
William N. Whitlock
* Senior Vice President -- Finance and
- -------------------------------------------------------- Administration, Chief Financial Officer
James J. Wolff (principal financial officer and
accounting officer) and Member
*By: /s/ MICHAEL A. KHOURI
---------------------------------------------------
As Attorney-in-fact
</TABLE>
II-24
<PAGE> 209
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
+2.1 Recapitalization Agreement dated as of April 17, 1998 by and
among CSX Corporation, Vectura Group, Inc., the Parent, the
Company and National Marine, Inc. ..........................
+3.1 Certificate of Formation of the Parent......................
+3.2 Form of Certificate of Formation of the Company and the
Subsidiary Guarantors.......................................
+3.3 Form of Limited Liability Company Agreement for the
Subsidiary Guarantors.......................................
+3.4 Amended and Restated Limited Liability Company Agreement of
the Parent..................................................
+3.5 Amended and Restated Limited Liability Company Agreement of
the Company.................................................
+3.6 Certificate of Incorporation of ACL Capital.................
+3.7 By-laws of ACL Capital......................................
+4.1 Indenture dated as of June 30, 1998 by and among the
Company, ACL Capital and the Subsidiary Guarantors and the
United States Trust Company of New York, as trustee.........
+4.2 Purchase Agreement dated as of June 23, 1998 among the
Company, ACL Capital and the Subsidiary Guarantors,
Wasserstein Perella Securities, Inc. and Chase Securities
Inc. .......................................................
+4.3 Registration Rights Agreement dated as of June 23, 1998 by
and among the Company, ACL Capital and the Subsidiary
Guarantors, Wasserstein Perella Securities, Inc. and Chase
Securities Inc. ............................................
+4.4 Registration Rights Agreement dated as of June 30, 1998 by
and among the Company, Vectura Group, Inc., National Marine,
Inc., CSX Brown Corp., Stuart Agranoff and Steven Anderson
and each Person whose name is set forth on Schedule I
therein.....................................................
5.1 Opinion and consent of Kirkland & Ellis. ...................
8.1 Opinion Regarding Tax Matters...............................
+10.1 Credit Agreement dated as of June 30, 1998 among the
Company, the Parent, the Lenders (as defined therein) and
the Chase Manhattan Bank, as issuing bank, as administrative
agent, as security trustee and as collateral agent..........
12.1 Statement of Computation of Ratios..........................
+21.1 Subsidiaries of the Company.................................
23.1 Consent of Ernst & Young LLP. ..............................
23.2 Consent of Arthur Andersen LLP. ............................
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1). .....
+24.1 Powers of Attorney (included in signature page). ...........
+25.1 Statement of Eligibility of Trustee on Form T-1. ...........
27.1 Financial Data Schedule. ...................................
+99.1 Form of Letter of Transmittal. .............................
+99.2 Form of Notice of Guaranteed Delivery. .....................
+99.3 Form of Tender Instructions. ...............................
</TABLE>
- ---------------
+ Previously filed.
<PAGE> 1
Exhibit 5.1
[LETTERHEAD OF KIRKLAND & ELLIS]
To Call Writer Direct:
212 446-4800
October 16, 1998
AMERICAN COMMERCIAL LINES LLC
ACL CAPITAL CORP.
AMERICAN COMMERCIAL BARGE LINE LLC
AMERICAN COMMERCIAL MARINE SERVICE LLC
LOUISIANA DOCK COMPANY LLC
WATERWAY COMMUNICATIONS SYSTEM LLC
AMERICAN COMMERCIAL TERMINALS LLC
AMERICAN COMMERCIAL TERMINALS --
MEMPHIS LLC
JEFFBOAT LLC
AMERICAN COMMERCIAL LINES
INTERNATIONAL LLC
ORINOCO TASA LLC
ORINOCO TASV LLC
BREEN TAS LLC
BULLARD TAS LLC
SHELTON TAS LLC
LEMONT HARBOR & FLEETING SERVICES LLC
TIGER SHIPYARD LLC
WILKINSON POINT LLC
HOUSTON FLEET LLC (collectively the "Registrants")
1701 East Market St.
Jeffersonville, IN 47130
Re: Series B 10 1/4% Senior Notes due 2008
Ladies and Gentlemen:
We are acting as special counsel to the Registrants, in connection with
the proposed registration by the Registrants of up to $300,000,000 in aggregate
principal amount of the Registrants' Series B 10 1/4% Senior Notes due 2008 (the
"Exchange Notes"), pursuant to a Registration Statement on Form S-4 filed with
the Securities and Exchange Commission (the "Commission") on the date hereof
under the Securities Act of 1933, as amended (the "Securities Act") (such
Registration Statement, as amended or supplemented, is hereinafter referred to
as the "Registration Statement"), for the purpose of effecting an exchange offer
(the "Exchange Offer") for the Registrants' 10 1/4% Senior Notes due 2008 (the
"Old Notes"). The Exchange Notes are to be issued pursuant to the Indenture (the
"Indenture"), dated as of June 30, 1998, between the Registrants and United
States Trust Company of New York, as Trustee, in exchange for and in replacement
of the Registrants' outstanding Old Notes, of which $300,000,000 in aggregate
principal amount is outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the corporate and organizational documents of the
Registrants, (ii) minutes and records of the corporate proceedings of the
Registrants with respect to the issuance of the Exchange Notes, (iii) the
Registration Statement and exhibits thereto and (iv) the Registration Rights
Agreement, dated as of June 30, 1998, among the Registrants, Wasserstein
Perella Securities Inc. and Chase Securities Inc.
For purposes of this opinion, we have assumed the authenticity of all
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the
<PAGE> 2
October 16, 1998
Page 2
genuineness of the signatures of persons signing all documents in connection
with which this opinion is rendered, the authority of such persons signing on
behalf of the parties thereto other than the Registrants, and the due
authorization, execution and delivery of all documents by the parties thereto
other than the Registrants. As to any facts material to the opinions expressed
herein which we have not independently established or verified, we have relied
upon statements and representations of officers and other representatives of the
Registrants and others.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that:
(1) Each of American Commercial Lines LLC, American Commercial Barge
Line LLC, American Commercial Marine Service LLC, Louisiana Dock Company LLC,
Waterway Communications System LLC, American Commercial Terminals LLC, American
Commercial Terminals -- Memphis LLC, Jeffboat LLC, American Commercial Lines
International LLC, Orinoco TASA LLC, Orinoco TASV LLC, Breen TAS LLC, Bullard
TAS LLC, Shelton TAS LLC, Lemont Harbor & Fleeting Services LLC, Tiger Shipyard
LLC, Wilkinson Point LLC, Houston Fleet LLC is a limited liability company
existing and in good standing under the General Corporation Law of the State of
Delaware.
(2) ACL Capital Corp. is a corporation existing and in good standing
under the General Corporation Law of the State of Delaware.
(3) The sale and issuance of the Exchange Notes has been validly
authorized by the Registrants.
(4) When, as and if (i) the Registration Statement shall have become
effective pursuant to the provisions of the Securities Act, (ii) the Indenture
shall have been qualified pursuant to the provisions of the Trust Indenture Act
of 1939, as amended, (iii) the Old Notes shall have been validly tendered to the
Company and (iv) the Exchange Notes shall have been issued in the form and
containing the terms described in the Registration Statement, the Indenture, the
resolutions of the Registrants' Board of Directors or Board of Managers, as the
case may be, (or authorized committee thereof) authorizing the foregoing and any
legally required consents, approvals, authorizations and other order of the
Commission and any other regulatory authorities to be obtained, the Exchange
Notes when issued pursuant to the Exchange Offer will be legally issued, fully
paid and nonassessable and will constitute valid and binding obligations of the
Registrants.
Our opinions expressed above are subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of (i)
any bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or other similar law affecting the enforcement of
creditors' rights generally, (ii) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law), (iii)
public policy considerations which may limit the rights of parties to obtain
certain remedies and (iv) any laws except the laws of
<PAGE> 3
October 16, 1998
Page 3
the State of New York and the General Corporation Law of the State of Delaware.
We have assumed without investigation that there has been no relevant change or
development between the respective dates of such certificates and the date of
this letter.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. We also consent to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving this consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Commission.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the securities
or "Blue Sky" laws of the various states to the issuance of the Exchange Notes.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the present
laws of the States of Delaware or New York be changed by legislative action,
judicial decision or otherwise.
Yours very truly,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE> 1
Exhibit 8.1
To Call Writer Direct:
212 446-4800
October 16, 1998
American Commercial Lines LLC
1701 East Market Street
Jeffersonville, IN 47130
Re: Offer by American Commercial Lines LLC, et al. to
Exchange any and all of its outstanding Series A
10 1/4% Senior Notes Due 2008 for its Series B 10 1/4%
Senior Notes Due 2008
Gentlemen:
We have acted as counsel to American Commercial Lines LLC, et
al. (the "Company") in connection with its offer (the "Exchange Offer") to
exchange any and all of its Series A 10 1/4% Senior Notes Due 2008 (the "Old
Securities") for its Series B 10 1/4% Senior Notes Due 2008 (the "New
Securities").
You have requested our opinion as to certain United States
federal income tax consequences of the Exchange Offer. In preparing our opinion,
we have reviewed and relied upon the Company's Registration Statement on Form
S-4, filed with the Securities and Exchange Commission on August 26, 1998 (the
"Registration Statement"), and such other documents as we deemed necessary.
On the basis of the foregoing, it is our opinion that the
exchange of the Old Securities for the New Securities pursuant to the Exchange
Offer will not be treated as an "exchange" for United States federal income tax
purposes.
The opinion set forth above is based upon the applicable
provisions of the Internal Revenue Code of 1986, as amended, the Treasury
Regulations promulgated or proposed thereunder, current positions of the
Internal Revenue Service (the "IRS") contained in published revenue rulings,
revenue procedures, and announcements, existing judicial decisions and other
applicable authorities. No tax ruling has been sought from the IRS with respect
to any of the matters discussed herein. Unlike a ruling from the IRS, an opinion
of counsel is not binding on the IRS. Hence, no assurance can be given that the
opinion stated in this letter will not be successfully challenged by the IRS or
by a court. We express no opinion concerning any tax consequences of the
Exchange Offer except as expressly set forth above.
<PAGE> 2
American Commercial Lines LLC
October 16, 1998
Page 2
We hereby consent to the filing of this opinion as Exhibit 8.1
to the Registration Statement. We also consent to the reference to our firm
under the heading "Certain Federal Income Tax Consequences." In giving this
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE> 1
EXHIBIT 12.1
AMERICAN COMMERCIAL LINES LLC
RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Pro Forma
----------------
Fiscal Twelve
Fiscal Years Ended Six Months Ended Year Months
--------------------------------------------- ---------------- Ended Ended
Dec. 31, Dec. 31, Dec. 29, Dec. 27, Dec. 26, June 27, June 28, Dec. 26, June 26,
1993 1994 1995 1996 1997 1997 1998 1997 1998
-------- -------- -------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings before income taxes 18,421 40,222 82,263 86,158 44,231 7,796 10,437 14,528 15,587
Interest on indebtedness 15,654 13,712 11,385 11,780 12,472 6,166 6,068 68,208 68,208
Amortization of debt discount 541 497 429 377 326 167 140 2,800 2,800
Interest portion of fixed rent expense 2,620 2,251 2,197 5,681 6,370 2,975 3,117 9,320 9,443
Minority interest share of loss in
consolidated subsidiaries 0 0 0 0 0 (21) (447) 0 0
------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings, as Adjusted 37,236 56,682 96,274 103,996 63,399 17,083 19,315 94,856 96,038
FIXED CHARGES:
Interest on indebtedness 15,654 13,712 11,385 11,780 12,472 6,166 6,068 68,208 68,208
Amortization of debt discount 541 497 429 377 326 167 140 2,800 2,800
Interest portion of fixed rent expense 2,620 2,251 2,197 5,681 6,370 2,975 3,117 9,320 9,443
------ ------ ------ ------ ------ ------ ------ ------ ------
Fixed Charges 18,815 16,460 14,011 17,838 19,168 9,308 9,325 80,328 80,451
Ratio of Earnings to Fixed Charges 2.0x 3.4x 6.9x 5.8x 3.3x 1.8x 2.1x 1.2x 1.2x
====== ====== ====== ====== ====== ====== ====== ====== ======
Pro Forma
---------
Six
Months
Ended
June 26,
1998
--------
<S> <C>
EARNINGS:
Earnings before income taxes (10,351)
Interest on indebtedness 34,104
Amortization of debt discount 1,400
Interest portion of fixed rent expense 4,586
Minority interest share of loss in
consolidated subsidiaries (447)
-------
Earnings, as Adjusted 29,292
FIXED CHARGES:
Interest on indebtedness 34,104
Amortization of debt discount 1,400
Interest portion of fixed rent expense 4,586
------
Fixed Charges 40,090
Ratio of Earnings to Fixed Charges 0.7x
======
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 30, 1998 except for Note 11, as to which the
date is June 5, 1998, with respect to the consolidated financial statements of
American Commercial Lines, Inc. included in Amendment No. 1 to the Registration
Statement (Form S-4), and related Prospectus of American Commercial Lines LLC
for the registration of $300 million Series B 10-1/4% Senior Notes due 2008.
/s/ Ernst & Young LLP
Louisville, Kentucky
October 15, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants we hereby consent to the use of our report and
to all references to our Firm included in or made a part of this Registration
Statement.
/S/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
October 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001068078
<NAME> AMERICAN COMMERCIAL LINES LLC
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-26-1997 JUN-26-1998
<PERIOD-START> DEC-28-1996 MAR-28-1998
<PERIOD-END> DEC-26-1997 JUN-26-1998
<EXCHANGE-RATE> 1 1
<CASH> (1,081) 4,396
<SECURITIES> 0 0
<RECEIVABLES> 78,703 69,653
<ALLOWANCES> (1,254) (1,387)
<INVENTORY> 33,526 50,466
<CURRENT-ASSETS> 121,439 135,263
<PP&E> 696,518 710,271
<DEPRECIATION> (236,223) (252,930)
<TOTAL-ASSETS> 632,132 671,583
<CURRENT-LIABILITIES> 113,994 171,473
<BONDS> 0 0
0 0
0 0
<COMMON> 6,006 6,006
<OTHER-SE> 293,495 323,810
<TOTAL-LIABILITY-AND-EQUITY> 632,132 671,583
<SALES> 0 0
<TOTAL-REVENUES> 618,233 150,047
<CGS> 0 0
<TOTAL-COSTS> 559,600 138,863
<OTHER-EXPENSES> 1,930 712
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,472 3,341
<INCOME-PRETAX> 44,231 7,131
<INCOME-TAX> 18,287 (64,849)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 25,944 71,980
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
