<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________.
Commission file number 333-62227
AMERICAN COMMERCIAL LINES LLC
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-210660
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1701 EAST MARKET STREET
JEFFERSONVILLE, INDIANA 47130
(Address of Principal Executive Offices) (Zip Code)
(812) 288-0100
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
AS OF OCTOBER 1, 1999, THE REGISTRANT HAD 100 MEMBERSHIP INTERESTS OUTSTANDING.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements (unaudited)
1. Condensed Consolidated Statement of Earnings for the
Quarters and Nine Months Ended October 1, 1999 and September 25, 1998 2
2. Condensed Consolidated Statement of Cash Flows for the
Nine Months Ended October 1, 1999 and September 25, 1998 3
3. Condensed Consolidated Statement of Financial Position
At October 1, 1999 and December 25, 1998 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. 17
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 23
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K. 24
Signature 24
</TABLE>
1
<PAGE>
PART 1
FINANCIAL INFORMATION
Item. 1. Financial Statements
AMERICAN COMMERCIAL LINES LLC
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
-------------------------------------- -----------------------------------
OCTOBER 1, SEPTEMBER 25, OCTOBER 1, SEPTEMBER 25,
1999 1998 1999 1998
----------------- ------------------ --------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 188,617 $ 180,601 $ 551,795 $ 447,459
OPERATING EXPENSE
Materials, Supplies and Other 86,315 84,614 268,892 206,766
Labor and Fringe Benefits 47,867 54,059 138,383 127,318
Fuel 13,068 12,417 39,301 35,076
Depreciation and Amortization 12,738 12,809 38,186 33,378
Taxes, Other Than Income Taxes 6,149 6,433 20,282 17,460
----------------- ------------------ --------------- -----------------
166,137 170,332 505,044 419,998
----------------- ------------------ --------------- -----------------
OPERATING INCOME 22,480 10,269 46,751 27,461
OTHER EXPENSE (INCOME)
Interest Expense 17,424 17,370 53,020 19,467
Interest Expense, Affiliate - Net - 36 - 4,007
Other, Net (641) 520 (1,995) 1,207
----------------- ------------------ --------------- -----------------
16,783 17,926 51,025 24,681
----------------- ------------------ --------------- -----------------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 5,697 (7,657) (4,274) 2,780
INCOME TAXES (BENEFIT) 457 (6,068) 508 (68,293)
----------------- ------------------ --------------- -----------------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 5,240 (1,589) (4,782) 71,073
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - (1,737) -
----------------- ------------------ --------------- -----------------
NET EARNINGS (LOSS) $ 5,240 $ (1,589) $ (6,519) $ 71,073
================= ================== =============== =================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-2-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------
OCTOBER 1, SEPTEMBER 25,
1999 1998
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net (Loss) Earnings $ (6,519) $ 71,073
Adjustments to Reconcile Net (Loss) Earnings to
Net Cash Provided by (Used in):
Depreciation and Amortization 40,361 34,068
Deferred Income Taxes - (70,091)
Other Operating Activities (844) 14,625
Changes in Operating Assets and Liabilities:
Accounts Receivable 400 2,232
Materials and Supplies (3,942) (11,892)
Accrued Interest (6,319) 14,519
Other Current Assets (3,229) (3,869)
Due to Affiliates - (13,805)
Other Current Liabilities (2,639) 374
----------------- -----------------
Net Cash Provided by Operating Activities 17,269 37,234
INVESTING ACTIVITIES
Property Additions (44,065) (39,922)
Proceeds from Property Dispositions 1,716 6,423
Restricted Investments - (26,128)
Other Investing Activities (4,631) (11,114)
----------------- -----------------
Net Cash Used in Investing Activities (46,980) (70,741)
FINANCING ACTIVITIES
Recapitalization Distribution - (695,000)
Issuance of Membership Interests - 60,047
Debt Issued 988 735,000
Financing Costs - (27,000)
Partner Distribution (541) -
Long-Term Debt Repaid (2,115) (98,830)
Affiliate Debt Repaid - (11,200)
Cash Dividends Paid - (9,500)
Other Financing 8,431 (14,291)
Short Term Borrowing from Affiliates - 94,715
----------------- -----------------
Net Cash Provided by Financing Activities 6,763 33,941
Net (Decrease) Increase in Cash and Cash Equivalents (22,948) 434
Cash and Cash Equivalents at Beginning of Period 49,356 6,925
----------------- -----------------
Cash and Cash Equivalents at End of Period $ 26,408 $ 7,359
================= =================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 1, DECEMBER 25,
1999 1998
----------------- -----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 26,408 $ 49,356
Accounts Receivable, Net 88,493 88,556
Materials and Supplies 43,555 39,054
Restricted Investments 25,675 -
Other Current Assets 23,191 19,962
----------------- -----------------
Total Current Assets 207,322 196,928
PROPERTIES-Net 565,119 541,415
RESTRICTED INVESTMENTS - 25,912
NET PENSION ASSET 22,776 21,490
OTHER ASSETS 37,776 52,785
----------------- -----------------
Total Assets $ 832,993 $ 838,530
================= =================
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 38,167 $ 39,823
Accrued Payroll and Fringe Benefits 20,765 23,166
Deferred Revenue 15,109 9,459
Accrued Claims and Insurance Premiums 16,906 14,661
Accrued Interest 16,204 22,523
Current Portion of Long-Term Debt 27,244 2,500
Other Current Liabilities 53,440 47,109
----------------- -----------------
Total Current Liabilities 187,835 159,241
LONG-TERM DEBT 736,494 756,400
PENSION LIABILITY 19,347 19,347
OTHER LONG-TERM LIABILITIES 30,796 33,937
----------------- -----------------
974,472 968,925
----------------- -----------------
MEMBER'S DEFICIT
Member's Interest 220,047 220,047
Other Capital 161,877 161,051
Retained Deficit (523,403) (511,493)
----------------- -----------------
Total Member's Deficit (141,479) (130,395)
----------------- -----------------
Total Liabilities and Member's Deficit $ 832,993 $ 838,530
================= =================
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments necessary to present fairly the company's
financial position at October 1, 1999 and December 25, 1998, the results of its
operations, and its cash flows for the nine months ended October 1, 1999 and
September 25, 1998, such adjustments being of a normal recurring nature.
Operating results for the quarter and nine months ended October 1, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 1999.
American Commercial Lines LLC ("ACL") was a wholly owned subsidiary of CSX
Corporation ("CSX") until June 30, 1998. On June 30, 1998 ACL's parent, American
Commercial Lines Holdings LLC (the "Parent"), completed a recapitalization in a
series of transactions in which the barge business of Vectura Group, Inc.
("Vectura") and its subsidiaries ("NMI" or the "NMI Contribution") were combined
with that of ACL. ACL issued $735 million in new debt in connection with these
transactions. These transactions were accounted for as a recapitalization of ACL
and the NMI Contribution was recorded by the purchase method of accounting. The
results of the NMI operations and cash flows are included in the accompanying
financial statements since June 30, 1998.
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 ACL Capital Corp. and the foreign subsidiaries) on June
30, 1998 prior to the recapitalization.
While management believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the 1998 audited
consolidated financial statements and the notes related thereto included in
ACL's Form 10-K.
ACL's fiscal year ends on the last Friday in December. The condensed
consolidated financial statements presented are for the 13 and 40 weeks ended
October 1, 1999 and the 13 and 39 weeks ended September 25, 1998, and the fiscal
year (52 weeks) ended December 25, 1998.
NOTE 2. MATERIALS AND SUPPLIES
Materials and Supplies are carried at the lower of cost (average) or market and
consist of the following:
<TABLE>
<CAPTION>
OCTOBER 1, DECEMBER 25,
1999 1998
----------------- ----------------------
<S> <C> <C>
Raw Materials $ 10,433 $ 9,802
Work in Process 13,541 9,829
Parts and Supplies 19,581 19,423
----------------- ----------------------
$ 43,555 $ 39,054
================= ======================
</TABLE>
-5-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 3. BUSINESS SEGMENTS
<TABLE>
<CAPTION>
REPORTABLE SEGMENTS ALL OTHER
----------------------
BARGING CONSTRUCTION SEGMENTS (1) TOTAL
------- ------------ ------------ -----
<S> <C> <C> <C> <C>
QUARTER ENDED OCTOBER 1, 1999
Revenues from external customers $ 155,396 $ 28,806 $ 4,415 $ 188,617
Intersegment revenues - 2,566 1,028 3,594
Segment earnings 19,560 2,534 386 22,480
QUARTER ENDED SEPTEMBER 25, 1998
Revenues from external customers $ 144,844 $ 29,735 $ 6,022 $ 180,601
Intersegment revenues - 377 1,272 1,649
Segment earnings 4,317 3,807 2,145 10,269
NINE MONTHS ENDED OCTOBER 1, 1999
Revenues from external customers $ 438,467 $ 97,157 $ 16,171 $ 551,795
Intersegment revenues - 15,246 4,014 19,260
Segment earnings 33,314 9,342 4,095 46,751
NINE MONTHS ENDED SEPTEMBER 25, 1998
Revenues from external customers $ 361,182 $ 67,053 $ 19,224 $ 447,459
Intersegment revenues - 11,442 3,266 14,708
Segment earnings 21,147 7,957 5,767 34,871
</TABLE>
(1)Financial data for segments below the reporting thresholds are 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.
-6-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
The following is a reconciliation of ACL's revenues from external customers and
segment earnings to ACL's consolidated totals.
<TABLE>
<CAPTION>
QUARTERS ENDED NINE MONTHS ENDED
OCTOBER 1, SEPTEMBER 25, OCTOBER 1, SEPTEMBER 25,
1999 1998 1999 1998
-------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Revenues from external customers $ 188,617 $ 180,601 $ 551,795 $ 447,459
Intersegment revenues 3,594 1,649 19,260 14,708
Elimination of intersegment revenues (3,594) (1,649) (19,260) (14,708)
--------------- ------------------ -------------- ------------------
Operating revenue $ 188,617 $ 180,601 $ 551,795 $ 447,459
=============== ================== ============== ==================
EARNINGS
Total segment earnings $ 22,480 $ 10,269 $ 46,751 $ 34,871
Unallocated amounts:
Management service fee charged by CSX - - - (7,410)
Interest expense (17,424) (17,370) (53,020) (19,467)
Interest expense, affiliate - net - (36) - (4,007)
Other, net 641 (520) 1,995 (1,207)
--------------- ------------------ -------------- ------------------
Earnings (Loss) before income taxes and
cumulative effect of accounting change $ 5,697 $ (7,657) $ (4,274) $ 2,780
=============== ================== ============== ==================
</TABLE>
-7-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
NOTE 4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
ACL had unpaid property additions of $4,140 at October 1, 1999 recorded as Other
Current Liabilities. Payment was made in October 1999.
In July 1999, a merger of certain Venezuelan subsidiaries and certain
investee companies occurred which resulted in non-cash assets and liabilities.
NOTE 5. 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.
NOTE 6. CHANGES IN ACCOUNTING STANDARDS
In December 1997, the AICPA issued Statement of Position No. 97-3, "Accounting
by Insurance and Other Enterprises for Insurance-Related Assessments" (SOP 97-3)
which provides guidance on recognition, measurement, and disclosure of
liabilities for guaranty-fund and certain other insurance-related assessments,
including workers' compensation second-injury funds. SOP 97-3 is effective for
fiscal years beginning after December 15, 1998. ACL adopted SOP 97-3 in the
first quarter of 1999, with a cumulative effect adjustment of $1,737 in non-cash
expense.
NOTE 7. GUARANTOR FINANCIAL STATEMENTS
The $735 million of debt issued by ACL and a revolving credit facility, which
provides for revolving loans and the issuance of letters of credit in an
aggregate amount up to $100 million, are guaranteed by ACL's wholly-owned
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 ACL
without substantial assets or operations (collectively 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,
combining statements of financial position, statements of earnings and
statements of cash flows for the Subsidiary Guarantors, non-guarantor
subsidiaries and for ACL as of October 1, 1999 and December 25, 1998 and the
quarters and nine months ended October 1, 1999 and September 25, 1998.
-8-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE
QUARTER ENDED OCTOBER 1, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 175,647 $ 12,970 $ - 188,617
OPERATING EXPENSE
Materials, Supplies and Other 81,442 4,873 - 86,315
Labor and Fringe Benefits 45,307 2,560 - 47,867
Fuel 12,354 714 - 13,068
Depreciation and Amortization 11,074 1,664 - 12,738
Taxes, Other Than Income Taxes 5,921 228 - 6,149
--------------- -------------- -------------- --------------
156,098 10,039 - 166,137
--------------- -------------- -------------- --------------
OPERATING INCOME 19,549 2,931 - 22,480
OTHER EXPENSE (INCOME)
Interest Expense 17,424 - - 17,424
Interest Expense, Affiliate - Net - 1,320 (1,320) -
Other, Net (2,151) 190 1,320 (641)
--------------- -------------- -------------- --------------
15,273 1,510 - 16,783
--------------- -------------- -------------- --------------
EARNINGS BEFORE INCOME TAXES 4,276 1,421 - 5,697
INCOME TAXES 81 376 - 457
--------------- -------------- -------------- --------------
NET EARNINGS $ 4,195 $ 1,045 $ - $ 5,240
=============== ============== ============== ==============
</TABLE>
-9-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE
QUARTER ENDED SEPTEMBER 25, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 164,224 $ 16,377 $ - $ 180,601
OPERATING EXPENSE
Materials, Supplies and Other 77,733 6,881 - 84,614
Labor and Fringe Benefits 51,160 2,899 - 54,059
Fuel 11,387 1,030 - 12,417
Depreciation and Amortization 11,532 1,277 - 12,809
Taxes, Other Than Income Taxes 6,403 30 - 6,433
--------------- --------------- -------------- --------------
158,215 12,117 - 170,332
--------------- --------------- -------------- --------------
OPERATING INCOME 6,009 4,260 - 10,269
OTHER EXPENSE (INCOME)
Interest Expense 17,370 - - 17,370
Interest Expense, Affiliate - Net 36 1,120 (1,120) 36
Other, Net (1,312) 712 1,120 520
--------------- --------------- -------------- --------------
16,094 1,832 - 17,926
--------------- --------------- -------------- --------------
(LOSS) EARNINGS BEFORE INCOME TAXES (10,085) 2,428 - (7,657)
INCOME TAXES (BENEFIT) (6,728) 660 - (6,068)
--------------- --------------- -------------- --------------
NET (LOSS) EARNINGS $ (3,357) $ 1,768 $ - $ (1,589)
=============== =============== ============== ==============
</TABLE>
-10-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE
NINE MONTHS ENDED OCTOBER 1, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 518,286 $ 33,509 $ - $ 551,795
OPERATING EXPENSE
Materials, Supplies and Other 251,729 17,163 - 268,892
Labor and Fringe Benefits 130,888 7,495 - 138,383
Fuel 37,275 2,026 - 39,301
Depreciation and Amortization 33,928 4,258 - 38,186
Taxes, Other Than Income Taxes 19,723 559 - 20,282
-------------- -------------- -------------- --------------
473,543 31,501 - 505,044
-------------- -------------- -------------- --------------
OPERATING INCOME 44,743 2,008 - 46,751
OTHER EXPENSE (INCOME)
Interest Expense 53,020 - - 53,020
Interest Expense, Affiliate - Net - 3,328 (3,328) -
Other, Net (5,178) (145) 3,328 (1,995)
-------------- -------------- -------------- --------------
47,842 3,183 - 51,025
-------------- -------------- -------------- --------------
LOSS BEFORE INCOME TAXES (3,099) (1,175) - (4,274)
INCOME TAXES 222 286 - 508
-------------- -------------- -------------- --------------
LOSS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (3,321) (1,461) - (4,782)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (1,737) - - (1,737)
-------------- -------------- -------------- --------------
NET LOSS $ (5,058) $ (1,461) $ - $ (6,519)
============== ============== ============== ==============
</TABLE>
-11-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF EARNINGS FOR THE
NINE MONTHS ENDED SEPTEMBER 25, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
--------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 413,688 $ 33,771 $ - $ 447,459
OPERATING EXPENSE
Materials, Supplies and Other 187,927 18,839 - 206,766
Labor and Fringe Benefits 119,950 7,368 - 127,318
Fuel 32,742 2,334 - 35,076
Depreciation and Amortization 29,772 3,606 - 33,378
Taxes, Other Than Income Taxes 17,376 84 - 17,460
--------------- --------------- -------------- --------------
387,767 32,231 - 419,998
--------------- --------------- -------------- --------------
OPERATING INCOME 25,921 1,540 - 27,461
OTHER EXPENSE (INCOME)
Interest Expense 19,467 - - 19,467
Interest Expense, Affiliate - Net 4,007 2,651 (2,651) 4,007
Other, Net (2,577) 1,133 2,651 1,207
--------------- --------------- -------------- --------------
20,897 3,784 - 24,681
--------------- --------------- -------------- --------------
EARNINGS (LOSS) BEFORE INCOME TAXES 5,024 (2,244) - 2,780
INCOME TAXES (BENEFIT) (69,048) 755 - (68,293)
--------------- --------------- -------------- --------------
NET EARNINGS (LOSS) $ 74,072 $ (2,999) $ - $ 71,073
=============== =============== ============== ==============
</TABLE>
-12-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE
NINE MONTHS ENDED OCTOBER 1, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
-------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $ (5,058) $ (1,461) $ - $ (6,519)
Adjustments to Reconcile Net Loss
to Net Cash Provided by:
Depreciation and Amortization 36,103 4,258 - 40,361
Other Operating Activities 530 (1,374) - (844)
Changes in Operating Assets and Liabilities:
Accounts Receivable (2,616) 3,016 - 400
Materials and Supplies (3,817) (125) - (3,942)
Accrued Interest (6,319) - - (6,319)
Other Current Assets 9,509 (12,738) - (3,229)
Other Current Liabilities (1,305) (1,334) - (2,639)
-------------- --------------- --------------- --------------
Net Cash Provided by (Used in)
Operating Activities 27,027 (9,758) - 17,269
INVESTING ACTIVITIES
Property Additions (34,511) (9,554) - (44,065)
Proceeds from Property Dispositions 1,694 22 - 1,716
Other Investing Activities (25,127) 74 20,422 (4,631)
-------------- --------------- --------------- --------------
Net Cash Used in Investing Activities (57,944) (9,458) 20,422 (46,980)
FINANCING ACTIVITIES
Debt Issued 988 - - 988
Partner Distribution (541) - - (541)
Long-Term Debt Repaid (2,115) - - (2,115)
Cash Dividends Paid - (1,975) 1,975 -
Other Financing Activities 8,431 (23) 23 8,431
Borrowing from Affiliates - 22,420 (22,420) -
-------------- --------------- --------------- --------------
Net Cash Provided by (Used in) Financing Activities 6,763 20,422 (20,422) 6,763
Net (Decrease) Increase in Cash and Cash Equivalents (24,154) 1,206 - (22,948)
Cash and Cash Equivalents at Beginning of Period 44,054 5,302 - 49,356
-------------- --------------- --------------- --------------
Cash and Cash Equivalents at End of Period $ 19,900 $ 6,508 $ - $ 26,408
============== =============== =============== ==============
</TABLE>
-13-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 25, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings (Loss) $ 74,072 $ (2,999) $ - $ 71,073
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Provided by:
Depreciation and Amortization 30,462 3,606 - 34,068
Deferred Income Taxes (70,098) 7 - (70,091)
Other Operating Activities 10,117 4,508 - 14,625
Changes in Operating Assets and Liabilities:
Accounts Receivable 7,480 (5,248) - 2,232
Materials and Supplies (12,246) 354 - (11,892)
Accrued Interest 14,519 - - 14,519
Other Current Assets (11,205) 7,336 - (3,869)
Due to Affiliates (13,805) - - (13,805)
Other Current Liabilities 268 106 - 374
-------------- -------------- --------------- --------------
Net Cash Provided by
Operating Activities 29,564 7,670 - 37,234
INVESTING ACTIVITIES
Property Additions (19,326) (20,596) - (39,922)
Proceeds from Property Dispositions 6,198 225 - 6,423
Restricted Investments (26,128) - - (26,128)
Other Investing Activities (23,684) 72 12,498 (11,114)
-------------- -------------- --------------- --------------
Net Cash Used in Investing Activities (62,940) (20,299) 12,498 (70,741)
FINANCING ACTIVITIES
Recapitalization Distribution (695,000) - - (695,000)
Issuance of Membership Interests 60,047 - - 60,047
Debt Issued 735,000 - - 735,000
Financing Costs (27,000) - - (27,000)
Long-Term Debt Repaid (98,830) - - (98,830)
Affiliate Debt Repaid (11,200) (2,500) 2,500 (11,200)
Cash Dividends Paid (9,500) (4,345) 4,345 (9,500)
Other Financing Activities (14,291) 15,343 (15,343) (14,291)
Borrowings from Affiliates 94,715 4,000 (4,000) 94,715
-------------- -------------- --------------- --------------
Net Cash Provided by Financing Activities 33,941 12,498 (12,498) 33,941
Net Increase (Decrease) in Cash and Cash Equivalents 565 (131) - 434
Cash and Cash Equivalents at Beginning of Year 2,868 4,057 - 6,925
-------------- -------------- --------------- --------------
Cash and Cash Equivalents at End of Period $ 3,433 $ 3,926 $ - $ 7,359
============== ============== =============== ==============
</TABLE>
-14-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED COMBINING STATEMENT OF FINANCIAL POSITION AT OCTOBER 1, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 19,900 $ 6,508 $ - $ 26,408
Accounts Receivable - Net 81,632 6,861 - 88,493
Materials and Supplies 40,965 2,590 - 43,555
Restricted Investments 25,675 - - 25,675
Other Current Assets 18,344 4,847 - 23,191
----------------- --------------- -------------- ---------------
Total Current Assets 186,516 20,806 - 207,322
PROPERTIES - NET 479,678 85,441 - 565,119
NET PENSION ASSET 22,776 - - 22,776
OTHER ASSETS 129,156 1,903 (93,283) 37,776
----------------- --------------- -------------- ---------------
TOTAL ASSETS $ 818,126 $ 108,150 $ (93,283) $ 832,993
================= =============== ============== ===============
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 36,798 $ 1,369 $ - $ 38,167
Accrued Payroll and Fringe Benefits 20,767 (2) - 20,765
Deferred Revenue 15,109 - - 15,109
Accrued Claims and Insurance Premiums 16,906 - - 16,906
Accrued Interest 16,204 - - 16,204
Current Portion of Long-Term Debt 27,244 - - 27,244
Other Current Liabilities 47,155 6,285 - 53,440
----------------- --------------- -------------- ---------------
Total Current Liabilities 180,183 7,652 - 187,835
LONG-TERM DEBT 736,494 67,550 (67,550) 736,494
PENSION LIABILITY 19,347 - - 19,347
OTHER LONG-TERM LIABILITIES 23,581 7,215 - 30,796
----------------- --------------- -------------- ---------------
959,605 82,417 (67,550) 974,472
----------------- --------------- -------------- ---------------
MEMBER'S DEFICIT
Member's Interest 220,047 - - 220,047
Other Capital 161,877 44,777 (44,777) 161,877
Retained Deficit (523,403) (19,044) 19,044 (523,403)
----------------- --------------- -------------- ---------------
Total Member's Deficit (141,479) 25,733 (25,733) (141,479)
----------------- --------------- -------------- ---------------
Total Liabilities and Member's Deficit $ 818,126 $ 108,150 $ (93,283) $ 832,993
================= =============== ============== ===============
</TABLE>
-15-
<PAGE>
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 25, 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 $ 44,054 $ 5,302 $ - $ 49,356
Accounts Receivable, Net 78,390 10,166 - 88,556
Materials and Supplies 36,589 2,465 - 39,054
Other Current Assets 30,767 (7,891) (2,914) 19,962
----------------- --------------- -------------- ---------------
Total Current Assets 189,800 10,042 (2,914) 196,928
PROPERTIES - NET 471,911 69,504 - 541,415
RESTRICTED INVESTMENTS 25,912 - - 25,912
NET PENSION ASSET 21,490 - - 21,490
OTHER ASSETS 109,157 18,933 (75,305) 52,785
----------------- --------------- -------------- ---------------
TOTAL ASSETS $ 818,270 $ 98,479 $ (78,219) $ 838,530
================= =============== ============== ===============
LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 37,602 $ 2,221 $ - $ 39,823
Accrued Payroll and Fringe Benefits 23,149 17 - 23,166
Due to Affiliates - 2,914 (2,914) -
Deferred Revenue 9,459 - - 9,459
Accrued Claims and Insurance Premiums 14,661 - - 14,661
Accrued Interest 22,523 - - 22,523
Current Portion of Long-Term Debt 2,500 - - 2,500
Other Current Liabilities 39,364 7,745 - 47,109
----------------- --------------- -------------- ---------------
Total Current Liabilities 149,258 12,897 (2,914) 159,241
LONG-TERM NOTE PAYABLE TO AFFILIATE - 41,286 (41,286) -
DEFERRED INCOME TAXES 16 (16) - -
LONG-TERM DEBT 756,400 - - 756,400
PENSION LIABILITY 19,347 - - 19,347
OTHER LONG-TERM LIABILITIES 23,644 10,293 - 33,937
----------------- --------------- -------------- ---------------
948,665 64,460 (44,200) 968,925
----------------- --------------- -------------- ---------------
MEMBER'S DEFICIT
Member's Interest 220,047 - - 220,047
Other Capital 161,051 44,777 (44,777) 161,051
Retained Deficit (511,493) (10,758) 10,758 (511,493)
----------------- --------------- -------------- ---------------
Total Member's Deficit (130,395) 34,019 (34,019) (130,395)
----------------- --------------- -------------- ---------------
Total Liabilities and Member's Deficit $ 818,270 $ 98,479 $ (78,219) $ 838,530
================= =============== ============== ===============
</TABLE>
-16-
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
American Commercial Lines LLC ("ACL") is an integrated marine transportation and
service company, providing barge transportation services on the inland waterways
of North and South America. ACL supports its barging operations by providing
towboat and barge design and construction, terminal services and ship-to-shore
voice and data telecommunications services to its subsidiary companies and third
parties.
ACL was a wholly owned subsidiary of CSX Corporation ("CSX") until June 30,
1998. On June 30, 1998, ACL's parent, American Commercial Lines Holdings LLC,
completed a recapitalization in a series of transactions in which the barge
business of Vectura Group, Inc. ("Vectura"), consisting of National Marine, Inc.
("National Marine") and its subsidiaries, was combined with that of ACL (the
"Recapitalization"). ACL issued $735 million in new debt in connection with
these transactions.
ACL integrated National Marine's operations into its operations in the third
quarter of 1998, increasing its total barge fleet by approximately 16% with the
liquid and dry cargo barge fleets increasing by 82% and 11%, respectively.
ACL follows a 52/53-week fiscal year ending on the last Friday in December of
each year. 1999 is a 53-week year. The nine months ended October 1, 1999
consisted of 40 weeks, compared with 39 weeks in the nine months ended September
25, 1998. The additional week in 1999 was in the first quarter.
RESULTS OF OPERATIONS
QUARTER ENDED OCTOBER 1, 1999 COMPARED WITH QUARTER ENDED SEPTEMBER 25, 1998
OPERATING REVENUE. Operating revenue for the quarter ended October 1, 1999,
increased 4.4% to $188.6 million from $180.6 million for the third quarter of
1998 primarily due to higher domestic barging rates partially offset by
decreases in international barging volumes.
Domestic barging revenue increased $14.0 million to $142.4 million primarily due
to higher rates reflecting an improved demand for covered barges. Domestic spot
grain rates increased more than 20% in the third quarter of 1999 compared to
1998 due to increased demand for U.S. grain exports. Domestic barging volumes
decreased slightly in the 1999 quarter compared to 1998 with adverse operating
conditions a factor in both quarters. Domestic barging volumes in the 1999
quarter were negatively impacted by system delays resulting from low-water
operating conditions and lock repairs. Drought caused low water levels,
resulting in lower volumes due to reduced boat speed and tonnage levels. Lock
repairs on the Upper Mississippi River, Illinois River, and Ohio River caused
delays in each month of the quarter. Volumes in the 1998 quarter were adversely
impacted due to a series of three hurricanes in the Gulf region and low water on
the Ohio River. The revenue in the 1999 quarter was also adversely affected as
the overall fleet velocity declined as customers held barge equipment longer
than usual at both loading and unloading ports. The revenue generated when a
customer holds equipment is less than what is earned when tonnage is moved.
International barging revenues decreased $3.4 million to $13.0 million. Volumes
decreased at ACBL de Venezuela, C.A. ("ACBLV") primarily due to the navigation
season beginning earlier in the second quarter of 1999 compared to 1998 which
shifted volume and revenue from the third quarter to the second. Severe drought
conditions along the Parana/Paraguay River system negatively impacted volumes at
ACBL Hidrovias Ltd. ("ACBLH"). Revenue at Jeffboat LLC ("Jeffboat"), ACL's
marine construction subsidiary, decreased $0.9 million to $28.8 million
primarily due to the construction of fewer tank barges.
17
<PAGE>
OPERATING EXPENSE. Operating expense for the quarter decreased 3% to $166.1
million from $170.3 million in the same quarter last year. Domestic barging
expenses decreased $2.6 million to $125.8 million. Labor and fringe benefits
expense decreased $5.9 million largely due to $8.0 million of non-recurring,
non-cash compensation expense recognized in the third quarter of 1998 related to
the Recapitalization and payable by CSX to certain executive officers of ACL.
Reduced labor costs in the 1999 quarter also reflected lower administrative
headcount compared to the 1998 quarter due to the integration of National
Marine's operations in 1998. These improvements were partially offset by a $1.6
million charge in the 1999 quarter for an employment contract payout to a former
executive of ACL. Domestic barging expenses were negatively impacted in both the
1999 and 1998 quarters due to adverse operating conditions with the cost of the
system delays in the 1999 quarter slightly higher than the impact of the three
hurricanes in the 1998 quarter. Fuel prices rose in the 1999 quarter compared to
1998, increasing from 44 cents per gallon to 54 cents per gallon but a
significant portion of the increase was offset by ACL's fuel hedging program
resulting in an average price per gallon of 47 cents in the 1999 quarter.
International barging expenses decreased $2.1 million to $10.0 million due to
lower volumes at both ACBLH and ACBLV and also because of expansion costs
incurred in 1998 at ACBLH. Expenses at Jeffboat increased $0.3 million to $26.3
million primarily due to the mix of hopper and tank barges.
OPERATING INCOME. Operating income for the quarter rose 119% to $22.5 million
from $10.3 million for the same period in 1998 due to the foregoing factors.
INTEREST EXPENSE. Interest expense for both the 1999 and 1998 quarters was $17.4
million.
OTHER, NET. Other income for the quarter was $0.6 million compared to an expense
of $0.5 million for the same period in 1998. The increase was largely due to
increased earnings from a joint venture with an unconsolidated third-party which
owns and operates terminals, and a decrease in minority interest earnings for
ACBLV.
EARNINGS BEFORE INCOME TAXES. Earnings before income taxes were $5.7 million in
the 1999 quarter compared with a loss of $7.7 million for the same period in
1998 due to the reasons discussed above.
INCOME TAXES (BENEFIT). Income taxes for the quarter increased to an expense of
$0.5 million compared to a benefit of $6.1 million for last year's quarter.
ACL's domestic corporate subsidiaries were converted to limited liability
companies early in the third quarter of 1998. Due to the change in tax status,
previously recognized deferred income taxes were reversed, resulting in a
benefit of $6.5 million. ACL passes its U.S. federal and state taxable income to
its Parent, whose equity holders are responsible for income taxes.
NET EARNINGS. Net earnings for the quarter were $5.2 million compared to a loss
of $1.6 million for the same period in 1998, due to the foregoing factors.
NINE MONTHS ENDED OCTOBER 1, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 25,
1998
OPERATING REVENUE. Operating revenue for the nine months ended October 1, 1999,
increased 23% to $551.8 million from $447.5 million for the nine months of 1998.
The revenue increase was primarily due to increased volumes resulting from the
combination of National Marine's barging operations with those of ACL, higher
sales at Jeffboat, higher domestic barging rates and the additional week during
the first quarter of 1999.
Domestic barging revenue increased $77.5 million to $405.0 million primarily due
to increased volumes resulting from the larger fleet, higher domestic barging
rates, and the additional week in the first quarter. These increases were
partially offset by difficult operating conditions in the first two quarters of
1999, and to a lesser extent, systems delays in the 1999 third quarter. Severe
ice forced the closure of the Illinois River for two weeks early in the first
quarter and high water on the Upper Mississippi River early in the second
quarter resulted in delays and reduced tow sizes. Domestic rates for the
nine-month period in 1999 increased compared with the same period in 1998
primarily due to higher spot grain rates in the second and
18
<PAGE>
third quarters of 1999 from increased demand for U.S. grain exports. Revenue at
Jeffboat, ACL's marine construction subsidiary, rose $30.1 million to $97.2
million, reflecting significantly higher sales of hopper barges to third-party
customers and more favorable weather conditions in the first quarter of 1999
compared to 1998. International revenues decreased $0.3 million to $33.5
million. Increased volumes at ACBLV where the navigation in the river system
began earlier in 1999 than it did in 1998, were offset by decreased volumes at
ACBLH due to the severe drought in the 1999 third quarter.
OPERATING EXPENSE. Operating expense for the nine months increased 20% to $505.0
million from $420.0 million in 1998. Domestic barging expense rose $65.8 million
to $373.7 million, primarily due to increased volumes from the larger fleet size
and the additional week but also because of the adverse operating conditions in
all three quarters of 1999, partially offset by lower executive compensation
expense. Executive compensation expense in the first nine months of 1999 was
lower than the same period in 1998 primarily due to $8.0 million of
non-recurring, non-cash compensation expense recognized in 1998 related to the
Recapitalization and payable by CSX to certain executive officers of ACL,
partially offset by a $1.6 million charge in 1999 for an employment contract
payout to a former executive of ACL. Fuel prices have steadily increased in 1999
but are still lower in the first nine months of 1999 compared to the same period
last year, decreasing from 47 cents per gallon in 1998 to 45 cents per gallon in
1999. ACL's fuel hedging program offset a significant portion of the increase in
fuel prices in the 1999 third quarter compared to 1998 resulting in an average
fuel price of 44 cents per gallon in the first nine months of 1999. Jeffboat's
expenses rose $28.7 million to $87.8 million due to significantly higher
volumes. International barging expenses decreased $0.7 million to $31.5 million
primarily due to lower costs at ACBLH due to expansion costs in 1998.
Elimination of the CSX corporate management fee pursuant to the Recapitalization
reduced 1999 expenses by $7.4 million.
OPERATING INCOME. Operating income for the nine months rose 70% to $46.8 million
from $27.5 million for the same period in 1998, due to the foregoing factors.
OTHER, NET. Other income for the nine months ended October 1, 1999 was $2.0
million compared to an expense of $1.2 million for the same period in 1998. The
increase was largely due to increased earnings from a joint venture with an
unconsolidated third-party which owns and operates terminals, an increase in
interest income, and a decrease in minority interest earnings in ACL's
international operations.
INTEREST EXPENSE. Interest expense for the nine months increased to $53.0
million from $23.5 million for the same period in 1998. The increase is due to
$735 million of long-term debt secured for ACL's recapitalization.
EARNINGS (LOSS) BEFORE INCOME TAXES. Earnings (loss) before income taxes and
before the cumulative effect of an accounting change were a loss of $4.3 million
in the 1999 nine-month period compared with earnings of $2.8 million for the
same period in 1998, due to the reasons discussed above.
INCOME TAXES (BENEFIT). Income taxes for the nine months increased to an expense
of $0.5 million from a benefit of $68.3 million for last year's nine-month
period. ACL and its domestic subsidiaries were converted to limited liability
companies in the second and third quarters of 1998, respectively. Due to the
change in tax status, previously recognized deferred tax liabilities were
reversed, resulting in a benefit of $72 million. ACL passes its U.S. federal and
state taxable income to its Parent, whose equity holders are responsible for
income taxes.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. In the first quarter of 1999, ACL
adopted AICPA Statement of Position 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments." Implementing the new accounting
rule, which applies to workers compensation second-injury fund assessments,
resulted in a non-cash, cumulative-effect adjustment of $1.7 million in the
first quarter of 1999.
NET (LOSS) EARNINGS. Net (loss) earnings for the nine months was a loss of $6.5
million compared with earnings of $71.1 million for the same period in 1998, due
to the foregoing factors.
19
<PAGE>
OUTLOOK
Management expects the domestic barging demand and spot rates for grain, bulk
and steel to continue to improve in the fourth quarter of 1999 compared with
1998 levels. The U.S. Department of Agriculture currently forecasts 1999 corn
exports of 1.98 billion bushels, an increase of 480 million bushels over 1998
levels. However, continuing low water conditions in both North and South America
are expected to negatively impact barging results in the fourth quarter.
Additionally, higher fuel prices in the fourth quarter of 1999 compared to 1998
are also expected to negatively impact barging results in the fourth quarter.
One of ACL's electric utility customers has been in proceedings under Chapter 11
of the U.S. Bankruptcy Code. The U.S. Bankruptcy Court for the Middle District
of Louisiana recently confirmed a reorganization plan resulting in a
restructuring of this contract at reduced rates. This restructuring will
negatively affect ACL's revenue and earnings in the range of $12 to $16 million
annually beginning in the first or second quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the Recapitalization, ACL incurred $735 million in long-term
debt consisting of two term loans in the principal amount of $435 million, a
revolving credit facility and the issuance of letters of credit in an aggregate
amount up to $100 million (the "Senior Credit Facilities"), and $300 million in
Senior Notes (the "Senior Notes"). Prior to the Recapitalization, ACL
participated in CSX's cash management plan, through which most of its cash needs
were funded by CSX and any excess cash was advanced to CSX for investment.
The Senior Credit Facilities and the Senior Notes contain a number of covenants
with specified financial ratios and tests including, with respect to the Senior
Credit Facilities, maximum leverage ratios and minimum interest coverage ratios.
A failure to maintain specified financial ratios could lead to an event of
default which could result in acceleration of the debt, higher interest rates or
other adverse consequences. Compliance with financial ratios is measured at the
end of each quarter. ACL's ability to meet financial ratios is affected by
adverse weather conditions, seasonality and other risk factors inherent in its
business.
Cash totaled $26.4 million at October 1, 1999, and there were no loans
outstanding under the revolving credit facility. Cash generated from operations
totaled $17.3 million in the first nine months of 1999 compared with $37.2
million in the first nine months of 1998. The decrease is primarily due to the
timing of interest payments on ACL's long-term debt and lower earnings.
Management believes that cash generated from operations together with the
borrowings available under the revolving credit facility are more than
sufficient to fund its cash requirements, including capital expenditures for
fleet replacement, maintenance and expansion, working capital, interest payments
and scheduled principal payments.
Capital expenditures for 1999 are projected to be $65 to $70 million. As of
October 1, 1999, $48.2 million had been spent.
20
<PAGE>
YEAR 2000
OVERVIEW
ACL formed a Year 2000 project team in mid-1997. Over the past two years, ACL
has developed, upgraded and replaced certain systems to meet its core business
requirements, with the additional benefit of achieving Year 2000 compliance for
those systems. ACL's current Year 2000 effort encompasses all functions and
operations of ACL, including those of American Commercial Barge Line LLC
(domestic barging); Jeffboat LLC (shipyards), American Commercial Terminals LLC
(marine terminals); Louisiana Dock Company LLC (marine services); American
Commercial Lines International LLC (international barging and marine services);
and Waterway Communications System LLC (marine telecommunications).
SCOPE OF YEAR 2000 EFFORT
The scope of this effort includes all hardware, software and mission critical
business processes. This includes, but is not limited to, mainframe and client
server systems, desktop applications and spreadsheets, mainframe and personal
computer hardware, voice and data communications networks, embedded systems,
electronic interfaces, suppliers, customers, utilities, government agencies,
financial institutions and others. ACL's focus throughout this process has
remained on mission critical systems, trading partners and other third parties
which have been identified as strategically important or necessary to continue
its business into the millenium.
The Year 2000 project team has representatives from senior management and key
areas of the company's operations. The team provides overall guidance and
coordination of the project ACL's senior management and the Board of Managers
monitor this effort through periodic status reports.
STATUS OF YEAR 2000 EFFORT
Management believes that ACL has materially completed it preparations for the
Year 2000, with the exception of ongoing testing and assessment of third-party
Year 2000 readiness status.
The remediation of ACL's mainframe and client server systems is materially
complete. Further documentation of test plans was completed in April 1999 and
testing of mission critical mainframe and client server computer systems was
materially completed in July 1999, with such testing expected to continue
through 1999. Testing and replacement, as needed, of personal computer ("PC")
hardware and software was materially completed in July 1999. ACL also completed
review and remediation of material PC-resident spreadsheets in July 1999.
ACL also has completed its assessment of key operating assets, facilities and
telecommunications networks for embedded technology. This assessment includes
marine terminal operations and vessel systems such as electronic navigation
equipment, diesel engine monitoring systems and other emergency monitors and
alarms. ACL currently anticipates no material impairment of its operations due
to embedded technology that cannot be addressed by remediation or contingency
planning.
As part of its Year 2000 project, ACL is in communication with its mission
critical suppliers, larger customers and financial institutions and other
significant third parties to assess their Year 2000 readiness. ACL has conducted
an initial survey of these key trading partners and has assessed, to the best of
its ability, whether key trading partners are addressing their Year 2000 issues
appropriately. Although initial assessments and more thorough audits, as
called for, have been conducted, ACL will continue its assessment of third-party
readiness throughout 1999. Further, 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. businesses may not be addressing their Year 2000 issues
on as timely a basis as are U.S. businesses.
21
<PAGE>
CONTINGENCY PLANS
ACL has assessed the consequences of Year 2000-related failures in third-party
services and in any remediation effort not being successful, among other things,
and has planned for contingencies, including efforts to address disruptions in
third-party services, such as telecommunications and electricity, on which its
systems and operations rely. ACL completed its preparation in July 1999. The
contingency plans include plans for securing alternate or replacement suppliers
for goods and/or services and developing other strategic solutions for mission
critical areas should the need arise. In addition, ACL has contingency plans in
place on its vessels and at its facilities in the event a Year 2000-related
computer system failure causes system or equipment shut down. ACL's contingency
plans will be reviewed throughout the year and revised, as necessary, as
business conditions and outlooks change.
ACL presently anticipates that its greatest exposure for Year 2000 problems may
result from telecommunication, utility or financial institution failures; rail
service or other equipment failures that hinder loading or unloading at marine
terminals; failures of fuel or other key suppliers, and failures of locks or
dams that impact river navigation by ACL vessels. Contingency plans have been
prepared to address these and other areas of significant risk. However, there
can be no assurances that ACL's contingency plans or its efforts with respect to
third parties will prevent a material adverse effect on its business, results of
operations or financial condition.
COST OF YEAR 2000 PROJECT
ACL has spent $2.4 million to date, related to this project. The remaining cost
of the Year 2000 project is presently estimated at $0.9 million, which will be
expensed as incurred through 2000. The total estimated cost of $3.3 million will
comprise approximately 16% of ACL's total technology budget for the project
period and includes $2.3 million to upgrade and replace software and $1.0
million for hardware. A portion of the total Year 2000 project expense is
represented by existing staff that has been or will be deployed to this project.
ACL has also engaged consultants and contractors to assist in its Year 2000
efforts.
ACL does not believe that the redeployment of existing staff has had or will
have a material adverse effect on its business, results of operations or
financial position. However, the remaining cost and the date on which ACL
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.
CHANGES IN ACCOUNTING STANDARDS
In December 1997, the AICPA issued Statement of Position No. 97-3, "Accounting
by Insurance and Other Enterprises for Insurance-Related Assessments" (SOP 97-3)
which provides guidance on recognition, measurement, and disclosure of
liabilities for guaranty-fund and certain other insurance-related assessments,
including workers' compensation second-injury funds. SOP 97-3 is effective for
fiscal years beginning after December 15, 1998. ACL adopted SOP 97-3 in the
first quarter of 1999, with a cumulative effect adjustment of $1.7 million in
non-cash expense.
FORWARD LOOKING STATEMENTS
This Quarterly Report contains certain forward-looking statements about ACL's
financial position and results of operations. These statements include words
such as "believe," "expect," "anticipate," "intend," "estimate" or other similar
words. Any statements that express or involve discussion as to expectations,
beliefs or plans are not historical facts and involve known and unknown risks,
uncertainties and other factors that may cause the actual results to materially
differ from those considered by the forward-looking statements. Such factors
include:
- - substantial leverage and ability to service debt;
22
<PAGE>
- - changing market, labor, legal and regulatory conditions and trends in the
barge and inland shipping industries;
- - general economic and business conditions, including a prolonged or
substantial recession in the United States or certain international
commodity markets such as the market for grain exports;
- - annual worldwide weather conditions, particularly those affecting North and
South America; and
- - the ability of ACL to resolve Year 2000 issues.
As a result of these and other factors discussed in "Risk Factors," Exhibit 99.1
to ACL's 1998 Annual Report on Form 10-K for the year ended December 25, 1998,
no assurances can be given as to future results, levels of activity and
achievements. Any forward-looking statements speak only as of the date the
statement was made. ACL undertakes no obligation to update or revise any
forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes to ACL's exposure to market risks discussed
in Item 7A in ACL's 1998 Annual Report on Form 10-K for the year ended December
25, 1998.
23
<PAGE>
PART II
OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
Exhibit 27.1 - Financial Data Schedule
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed in the third quarter of 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
American Commercial Lines LLC has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN COMMERCIAL LINES LLC
(Registrant)
Date: November 12, 1999 By: /s/ James J. Wolff
--------------------------------
Name: James J. Wolff
Title: Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-03-1999
<PERIOD-END> OCT-01-1999
<CASH> 26,408
<SECURITIES> 0
<RECEIVABLES> 90,849
<ALLOWANCES> (2,356)
<INVENTORY> 43,555
<CURRENT-ASSETS> 207,322
<PP&E> 886,702
<DEPRECIATION> (321,583)
<TOTAL-ASSETS> 832,993
<CURRENT-LIABILITIES> 187,835
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (141,479)
<TOTAL-LIABILITY-AND-EQUITY> 832,993
<SALES> 0
<TOTAL-REVENUES> 188,617
<CGS> 0
<TOTAL-COSTS> 166,137
<OTHER-EXPENSES> (641)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,424
<INCOME-PRETAX> 5,697
<INCOME-TAX> 457
<INCOME-CONTINUING> 5,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,240
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
