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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 JUNE 30, 2000
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 (State or Other Jurisdiction of Incorporation or Organization) |
52-210660 (IRS Employer Identification No.) |
|
1701 East Market Street Jeffersonville, Indiana (Address of Principal Executive Offices) |
|
47130 (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 June 30, 2000, the registrant had 100 membership interests outstanding.
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Page Number |
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PART I. FINANCIAL INFORMATION. |
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Item 1. Financial Statements (unaudited) |
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1. |
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Condensed Consolidated Statement of Earnings for the Quarters and Six Months Ended June 30, 2000 and July 2, 1999 |
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2 |
2. |
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Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2000 and July 2, 1999 |
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3 |
3. |
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Condensed Consolidated Statement of Financial Position At June 30, 2000 and December 31, 1999 |
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4 |
Notes to Condensed Consolidated Financial Statements |
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5 |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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22 |
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PART II. OTHER INFORMATION. |
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Item 6. Exhibits and Reports on Form 8-K. |
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23 |
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Signature |
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24 |
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1
Item 1. Financial Statements
AMERICAN COMMERCIAL LINES LLC
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Thousands)
|
Quarters Ended |
Six Months Ended |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2000 |
July 2, 1999 |
June 30, 2000 |
July 2, 1999 |
|||||||||||
|
(Unaudited) |
(Unaudited) |
|||||||||||||
OPERATING REVENUE | $ | 193,865 | $ | 189,961 | $ | 361,342 | $ | 363,178 | |||||||
OPERATING EXPENSE |
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|
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|
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||
Materials, Supplies and Other | 81,877 | 80,714 | 151,298 | 157,852 | |||||||||||
Rent | 12,619 | 11,644 | 23,391 | 24,725 | |||||||||||
Labor and Fringe Benefits | 40,573 | 44,857 | 81,810 | 90,516 | |||||||||||
Fuel | 22,011 | 13,756 | 40,621 | 26,233 | |||||||||||
Depreciation and Amortization | 13,640 | 12,413 | 26,803 | 25,448 | |||||||||||
Taxes, Other Than Income Taxes | 6,616 | 6,622 | 12,919 | 14,133 | |||||||||||
177,336 | 170,006 | 336,842 | 338,907 | ||||||||||||
OPERATING INCOME | 16,529 | 19,955 | 24,500 | 24,271 | |||||||||||
OTHER EXPENSE (INCOME) |
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Interest Expense | 17,681 | 17,016 | 34,977 | 35,596 | |||||||||||
Other, Net | (104 | ) | (38 | ) | (1,461 | ) | (1,354 | ) | |||||||
17,577 | 16,978 | 33,516 | 34,242 | ||||||||||||
(LOSS) EARNINGS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
|
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(1,048 |
) |
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2,977 |
|
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(9,016 |
) |
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(9,971 |
) |
||
INCOME TAXES |
|
|
661 |
|
|
189 |
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|
790 |
|
|
51 |
|
||
(LOSS) EARNINGS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
|
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(1,709 |
) |
|
2,788 |
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(9,806 |
) |
|
(10,022 |
) |
||
EXTRAORDINARY ITEMLOSS ON EARLY EXTINGUISHMENT OF DEBT |
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(734 |
) |
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(734 |
) |
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CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
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(1,737 |
) |
||
NET (LOSS) EARNINGS | $ | (2,443 | ) | $ | 2,788 | $ | (10,540 | ) | $ | (11,759 | ) | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
2
AMERICAN COMMERCIAL LINES LLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
|
Six Months Ended |
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---|---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2000 |
July 2, 1999 |
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(Unaudited) |
||||||||||
OPERATING ACTIVITIES | |||||||||||
Net Loss | $ | (10,540 | ) | $ | (11,759 | ) | |||||
Adjustments to Reconcile Net Loss to Net Cash | |||||||||||
Provided by (Used in) Operating Activities: | |||||||||||
Depreciation and Amortization | 28,243 | 26,857 | |||||||||
Other Operating Activities | (8,440 | ) | (1,888 | ) | |||||||
Changes in Operating Assets and Liabilities: | |||||||||||
Accounts Receivable | (2,061 | ) | 4,240 | ||||||||
Materials and Supplies | 8,654 | 2,493 | |||||||||
Accrued Interest | (3,079 | ) | (14,445 | ) | |||||||
Other Current Assets | 1,450 | 386 | |||||||||
Other Current Liabilities | 6,944 | 8,003 | |||||||||
Net Cash Provided by Operating Activities | 21,171 | 13,887 | |||||||||
INVESTING ACTIVITIES |
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||||
Property Additions | (12,562 | ) | (23,026 | ) | |||||||
Purchase of Barging Assets | (31,500 | ) | | ||||||||
Proceeds from Property Dispositions | 3,385 | 1,243 | |||||||||
Proceeds from Sale of Restricted Investment | 25,288 | | |||||||||
Other Investing Activities | (1,905 | ) | (3,519 | ) | |||||||
Net Cash Used in Investing Activities | (17,294 | ) | (25,302 | ) | |||||||
FINANCING ACTIVITIES |
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Partner Distribution | | (541 | ) | ||||||||
Short Term Debt, Net Borrowings | 11,000 | | |||||||||
Long Term Debt Repaid | (35,318 | ) | (1,500 | ) | |||||||
Other Financing | (1,410 | ) | 2,816 | ||||||||
Net Cash (Used in) Provided by Financing Activities | (25,728 | ) | 775 | ||||||||
Net Decrease in Cash and Cash Equivalents | (21,851 | ) | (10,640 | ) | |||||||
Cash and Cash Equivalents at Beginning of Period | 30,841 | 49,356 | |||||||||
Cash and Cash Equivalents at End of Period | $ | 8,990 | $ | 38,716 | |||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
AMERICAN COMMERCIAL LINES LLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in Thousands)
|
June 30, 2000 |
December 31, 1999 |
|||||||
---|---|---|---|---|---|---|---|---|---|
|
(Unaudited) |
|
|||||||
ASSETS | |||||||||
CURRENT ASSETS | |||||||||
Cash and Cash Equivalents | $ | 8,990 | $ | 30,841 | |||||
Accounts Receivable, Net | 36,469 | 34,408 | |||||||
Materials and Supplies | 35,326 | 42,516 | |||||||
Restricted Investments | | 25,436 | |||||||
Other Current Assets | 21,636 | 23,086 | |||||||
Total Current Assets | 102,421 | 156,287 | |||||||
PROPERTIES-Net |
|
|
569,298 |
|
|
559,777 |
|
||
NET PENSION ASSET | 23,568 | 22,651 | |||||||
OTHER ASSETS | 47,386 | 37,381 | |||||||
Total Assets | $ | 742,673 | $ | 776,096 | |||||
LIABILITIES | |||||||||
CURRENT LIABILITIES | |||||||||
Accounts Payable | $ | 42,782 | $ | 39,095 | |||||
Accrued Payroll and Fringe Benefits | 13,629 | 17,282 | |||||||
Deferred Revenue | 16,216 | 10,548 | |||||||
Accrued Claims and Insurance Premiums | 21,862 | 17,362 | |||||||
Accrued Interest | 4,610 | 7,689 | |||||||
Current Portion of Long-Term Debt | 12,658 | 28,730 | |||||||
Other Current Liabilities | 49,382 | 52,106 | |||||||
Total Current Liabilities | 161,139 | 172,812 | |||||||
LONG-TERM DEBT |
|
|
675,831 |
|
|
684,077 |
|
||
PENSION LIABILITY | 23,153 | 22,229 | |||||||
OTHER LONG-TERM LIABILITIES | 25,315 | 29,050 | |||||||
Total Liabilities | 885,438 | 908,168 | |||||||
MEMBER'S DEFICIT | |||||||||
Member's Interest | 220,074 | 220,074 | |||||||
Other Capital | 161,615 | 161,768 | |||||||
Retained Deficit | (524,454 | ) | (513,914 | ) | |||||
Total Member's Deficit | (142,765 | ) | (132,072 | ) | |||||
Total Liabilities and Member's Deficit | $ | 742,673 | $ | 776,096 | |||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
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 June 30, 2000 and December 31, 1999, the results of its operations and its cash flows for the six months ended June 30, 2000 and July 2, 1999, such adjustments being of a normal recurring nature. Operating results for the quarter and six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ended December 29, 2000.
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 1999 audited consolidated financial statements and the notes related thereto included in American Commercial Lines LLC's (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 26 weeks ended June 30, 2000 and the 13 and 27 weeks ended July 2, 1999, and the fiscal year (53 weeks) ended December 31, 1999.
NOTE 2. ACQUISITION
On May 26, 2000, ACL purchased certain barging assets of the Peavey Barge Line (Peavey) from ConAgra, Inc. for $31,500 in cash. The purchase price was financed with existing credit facilities and cash flows from operations. ACL also assumed $3.8 million in capital leases. The acquisition has been accounted for under the purchase method of accounting. The Peavey operations are included in the accompanying consolidated financial statements since the date of acquisition.
NOTE 3. EXTRAORDINARY ITEMLOSS ON EARLY EXTINGUISHMENT OF DEBT
ACL recognized $0.7 million as an extraordinary loss due to the early redemption premium on the Terminal Revenue Refunding Bonds. This amount was paid out of an escrow account previously established as an irrevocable trust.
NOTE 4. MATERIAL AND SUPPLIES
Materials and Supplies are carried at the lower of cost (average) or market and consist of the following:
|
June 30, 2000 |
December 31, 1999 |
|||||
---|---|---|---|---|---|---|---|
Raw Materials | $ | 4,108 | $ | 7,975 | |||
Work in Process | 13,512 | 16,989 | |||||
Parts and Supplies | 17,706 | 17,552 | |||||
$ | 35,326 | $ | 42,516 | ||||
5
NOTE 5. BUSINESS SEGMENTS
|
Reportable Segments |
|
|
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
All Other Segments (1) |
|
||||||||||
|
Barging |
Construction |
Total |
|||||||||
Quarter ended June 30, 2000 | ||||||||||||
Revenues from external customers | $ | 151,287 | $ | 37,195 | $ | 5,383 | $ | 193,865 | ||||
Intersegment revenues | | 388 | 1,494 | 1,882 | ||||||||
Segment earnings | 11,590 | 3,486 | 1,453 | 16,529 | ||||||||
Quarter ended July 2, 1999 |
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|
Revenues from external customers | $ | 148,526 | $ | 36,096 | $ | 5,339 | $ | 189,961 | ||||
Intersegment revenues | | 506 | 1,231 | 1,737 | ||||||||
Segment earnings | 15,150 | 3,460 | 1,345 | 19,955 | ||||||||
Six Months ended June 30, 2000 |
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|
Revenues from external customers | $ | 286,489 | $ | 63,972 | $ | 10,881 | $ | 361,342 | ||||
Intersegment revenues | | 1,982 | 3,151 | 5,133 | ||||||||
Segment earnings | 14,934 | 6,451 | 3,115 | 24,500 | ||||||||
Six Months ended July 2, 1999 |
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|
Revenues from external customers | $ | 283,071 | $ | 68,351 | $ | 11,756 | $ | 363,178 | ||||
Intersegment revenues | | 12,680 | 2,986 | 15,666 | ||||||||
Segment earnings | 13,754 | 6,808 | 3,709 | 24,271 |
6
The following is a reconciliation of ACL's revenues from external customers and segment earnings to ACL's consolidated totals.
|
Quarters Ended |
Six Months Ended |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2000 |
July 2, 1999 |
June 30, 2000 |
July 2, 1999 |
|||||||||||
Revenues | |||||||||||||||
Revenues from external customers | $ | 193,865 | $ | 189,961 | $ | 361,342 | $ | 363,178 | |||||||
Intersegment revenues | 1,882 | 1,737 | 5,133 | 15,666 | |||||||||||
Elimination of intersegment revenues | (1,882 | ) | (1,737 | ) | (5,133 | ) | (15,666 | ) | |||||||
Operating revenue | $ | 193,865 | $ | 189,961 | $ | 361,342 | $ | 363,178 | |||||||
Earnings |
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Total segment earnings | $ | 16,529 | $ | 19,955 | $ | 24,500 | $ | 24,271 | |||||||
Unallocated amounts: | |||||||||||||||
Interest expense | (17,681 | ) | (17,016 | ) | (34,977 | ) | (35,596 | ) | |||||||
Other, net | 104 | 38 | 1,461 | 1,354 | |||||||||||
(Loss) Earnings before income taxes, extraordinary items and cumulative effect of accounting change | $ | (1,048 | ) | $ | 2,977 | $ | (9,016 | ) | $ | (9,971 | ) | ||||
NOTE 6. 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.
7
NOTE 7. 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.
In June 1998, the Financial Accounting Standards Board (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 ACL's financial statements for fiscal years beginning after January 1, 2001, but earlier application is encouraged. ACL has not determined when it will adopt statement No. 133, but expects adoption will not have a significant effect on its consolidated financial statements.
NOTE 8. 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 "Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint and several. Separate financial statements of the Guarantor Subsidiaries 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 Guarantor Subsidiaries, non-guarantor subsidiaries and for ACL as of June 30, 2000 and December 31, 1999 and the quarters and six months ended June 30, 2000 and July 2, 1999.
8
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Earnings for the Quarter Ended June 30, 2000
(Dollars in thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OPERATING REVENUE | $ | 181,826 | $ | 12,039 | $ | | $ | 193,865 | |||||||
OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Materials, Supplies and Other | 77,074 | 4,803 | | 81,877 | |||||||||||
Rent | 12,230 | 389 | | 12,619 | |||||||||||
Labor and Fringe Benefits | 38,287 | 2,286 | | 40,573 | |||||||||||
Fuel | 21,007 | 1,004 | | 22,011 | |||||||||||
Depreciation and Amortization | 11,807 | 1,833 | | 13,640 | |||||||||||
Taxes, Other Than Income Taxes | 6,436 | 180 | | 6,616 | |||||||||||
166,841 | 10,495 | | 177,336 | ||||||||||||
OPERATING INCOME |
|
|
14,985 |
|
|
1,544 |
|
|
|
|
|
16,529 |
|
||
OTHER EXPENSE (INCOME) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Interest Expense | 17,681 | | | 17,681 | |||||||||||
Interest Expense, AffiliateNet | | 1,515 | (1,515 | ) | | ||||||||||
Other, Net | (1,556 | ) | (63 | ) | 1,515 | (104 | ) | ||||||||
16,125 | 1,452 | | 17,577 | ||||||||||||
(LOSS) EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM | (1,140 | ) | 92 | | (1,048 | ) | |||||||||
INCOME TAXES |
|
|
21 |
|
|
640 |
|
|
|
|
|
661 |
|
||
LOSS BEFORE EXTRAORDINARY ITEM | (1,161 | ) | (548 | ) | | (1,709 | ) | ||||||||
EXTRAORDINARY ITEMLOSS ON EARLY |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
EXTINGUISHMENT OF DEBT | (734 | ) | | | (734 | ) | |||||||||
NET LOSS | $ | (1,895 | ) | $ | (548 | ) | $ | | $ | (2,443 | ) | ||||
9
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Earnings for the Quarter Ended July 2, 1999
(Dollars in thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OPERATING REVENUE | $ | 174,635 | $ | 15,326 | $ | | 189,961 | ||||||||
OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Materials, Supplies and Other | 74,665 | 6,049 | | 80,714 | |||||||||||
Rent | 11,056 | 588 | 11,644 | ||||||||||||
Labor and Fringe Benefits | 42,197 | 2,660 | | 44,857 | |||||||||||
Fuel | 12,910 | 846 | | 13,756 | |||||||||||
Depreciation and Amortization | 11,115 | 1,298 | | 12,413 | |||||||||||
Taxes, Other Than Income Taxes | 6,473 | 149 | | 6,622 | |||||||||||
158,416 | 11,590 | | 170,006 | ||||||||||||
OPERATING INCOME |
|
|
16,219 |
|
|
3,736 |
|
|
|
|
|
19,955 |
|
||
OTHER EXPENSE (INCOME) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Interest Expense | 17,016 | | | 17,016 | |||||||||||
Interest Expense, AffiliateNet | | 1,013 | (1,013 | ) | | ||||||||||
Other, Net | (1,593 | ) | 542 | 1,013 | (38 | ) | |||||||||
15,423 | 1,555 | | 16,978 | ||||||||||||
EARNINGS BEFORE INCOME TAXES | 796 | 2,181 | | 2,977 | |||||||||||
INCOME TAXES |
|
|
52 |
|
|
137 |
|
|
|
|
|
189 |
|
||
NET EARNINGS | $ | 744 | $ | 2,044 | $ | | $ | 2,788 | |||||||
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Earnings for the Six Months Ended June 30, 2000
(Dollars in thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OPERATING REVENUE | $ | 346,375 | $ | 14,967 | $ | | $ | 361,342 | |||||||
OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Materials, Supplies and Other | 142,511 | 8,787 | | 151,298 | |||||||||||
Rent | 22,605 | 786 | | 23,391 | |||||||||||
Labor and Fringe Benefits | 77,911 | 3,899 | | 81,810 | |||||||||||
Fuel | 39,150 | 1,471 | | 40,621 | |||||||||||
Depreciation and Amortization | 23,147 | 3,656 | | 26,803 | |||||||||||
Taxes, Other Than Income Taxes | 12,575 | 344 | | 12,919 | |||||||||||
317,899 | 18,943 | | 336,842 | ||||||||||||
OPERATING INCOME (LOSS) | 28,476 | (3,976 | ) | | 24,500 | ||||||||||
OTHER EXPENSE (INCOME) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Interest Expense | 34,977 | | | 34,977 | |||||||||||
Interest Expense, AffiliateNet | | 3,031 | (3,031 | ) | | ||||||||||
Other, Net | (3,136 | ) | (1,356 | ) | 3,031 | (1,461 | ) | ||||||||
31,841 | 1,675 | | 33,516 | ||||||||||||
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM | (3,365 | ) | (5,651 | ) | | (9,016 | ) | ||||||||
INCOME TAXES |
|
|
40 |
|
|
750 |
|
|
|
|
|
790 |
|
||
LOSS BEFORE EXTRAORDINARY ITEM | (3,405 | ) | (6,401 | ) | | (9,806 | ) | ||||||||
EXTRAORDINARY ITEMLOSS ON EARLY EXTINGUISHMENT OF DEBT |
|
|
(734 |
) |
|
|
|
|
|
|
|
(734 |
) |
||
NET LOSS | $ | (4,139 | ) | $ | (6,401 | ) | $ | | $ | (10,540 | ) | ||||
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Earnings for the Six Months Ended July 2, 1999
(Dollars in thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OPERATING REVENUE | $ | 342,639 | $ | 20,539 | $ | | $ | 363,178 | |||||||
OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Materials, Supplies and Other | 147,482 | 10,370 | | 157,852 | |||||||||||
Rent | 22,805 | 1,920 | | 24,725 | |||||||||||
Labor and Fringe Benefits | 85,581 | 4,935 | | 90,516 | |||||||||||
Fuel | 24,921 | 1,312 | | 26,233 | |||||||||||
Depreciation and Amortization | 22,854 | 2,594 | | 25,448 | |||||||||||
Taxes, Other Than Income Taxes | 13,802 | 331 | | 14,133 | |||||||||||
317,445 | 21,462 | | 338,907 | ||||||||||||
OPERATING INCOME (LOSS) | 25,194 | (923 | ) | | 24,271 | ||||||||||
OTHER EXPENSE (INCOME) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Interest Expense | 35,596 | | | 35,596 | |||||||||||
Interest Expense, AffiliateNet | | 2,008 | (2,008 | ) | | ||||||||||
Other, Net | (3,027 | ) | (335 | ) | 2,008 | (1,354 | ) | ||||||||
32,569 | 1,673 | | 34,242 | ||||||||||||
LOSS BEFORE INCOME TAXES | (7,375 | ) | (2,596 | ) | | (9,971 | ) | ||||||||
INCOME TAXES (BENEFIT) |
|
|
141 |
|
|
(90 |
) |
|
|
|
|
51 |
|
||
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | (7,516 | ) | (2,506 | ) | | (10,022 | ) | ||||||||
CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
|
|
(1,737 |
) |
|
|
|
|
|
|
|
(1,737 |
) |
||
NET LOSS | $ | (9,253 | ) | $ | (2,506 | ) | $ | | $ | (11,759 | ) | ||||
12
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Cash Flows for the Six Months Ended June 30, 2000
(Dollars in Thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OPERATING ACTIVITIES | |||||||||||||||||
Net Loss | $ | (4,139 | ) | $ | (6,401 | ) | $ | | $ | (10,540 | ) | ||||||
Adjustments to Reconcile Net Loss to Net Cash | |||||||||||||||||
(Used in) Provided by Operating Activities: | |||||||||||||||||
Depreciation and Amortization | 24,587 | 3,656 | | 28,243 | |||||||||||||
Other Operating Activities | (6,548 | ) | (1,892 | ) | | (8,440 | ) | ||||||||||
Changes in Operating Assets and Liabilities: | |||||||||||||||||
Accounts Receivable | (5,040 | ) | 2,979 | | (2,061 | ) | |||||||||||
Materials and Supplies | 8,614 | 40 | | 8,654 | |||||||||||||
Accrued Interest | (3,079 | ) | | | (3,079 | ) | |||||||||||
Other Current Assets | (2,494 | ) | 3,944 | | 1,450 | ||||||||||||
Other Current Liabilities | 4,863 | 2,081 | | 6,944 | |||||||||||||
Net Cash Provided by Operating Activities | 16,764 | 4,407 | | 21,171 | |||||||||||||
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Property Additions | (11,823 | ) | (739 | ) | | (12,562 | ) | ||||||||||
Purchase of Barging Assets | (31,500 | ) | | | (31,500 | ) | |||||||||||
Proceeds from Property Dispositions | 3,385 | | | 3,385 | |||||||||||||
Proceeds from Sale of Restricted Investment | 25,288 | | | 25,288 | |||||||||||||
Other Investing Activities | (2,165 | ) | 462 | (202 | ) | (1,905 | ) | ||||||||||
Net Cash Used in Investing Activities | (16,815 | ) | (277 | ) | (202 | ) | (17,294 | ) | |||||||||
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short Term Debt, Net Borrowings | 11,000 | | | 11,000 | |||||||||||||
Long Term Debt Repaid | (35,318 | ) | (155 | ) | 155 | (35,318 | ) | ||||||||||
Other Financing Activities | (1,410 | ) | (47 | ) | 47 | (1,410 | ) | ||||||||||
Net Cash Used in Financing Activities | (25,728 | ) | (202 | ) | 202 | (25,728 | ) | ||||||||||
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
(25,779 |
) |
|
3,928 |
|
|
|
|
|
(21,851 |
) |
||||
Cash and Cash Equivalents at Beginning of Period | 29,238 | 1,603 | | 30,841 | |||||||||||||
Cash and Cash Equivalents at End of Period | $ | 3,459 | $ | 5,531 | $ | | $ | 8,990 | |||||||||
13
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Cash Flows for the Six Months Ended July 2, 1999
(Dollars in Thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
OPERATING ACTIVITIES | |||||||||||||||||
Net Loss | $ | (9,253 | ) | $ | (2,506 | ) | $ | | $ | (11,759 | ) | ||||||
Adjustments to Reconcile Net Loss to Net Cash Provided by: | |||||||||||||||||
Depreciation and Amortization | 24,263 | 2,594 | | 26,857 | |||||||||||||
Other Operating Activities | (225 | ) | (1,663 | ) | | (1,888 | ) | ||||||||||
Changes in Operating Assets and Liabilities: | |||||||||||||||||
Accounts Receivable | 2,368 | 1,872 | | 4,240 | |||||||||||||
Materials and Supplies | 2,554 | (61 | ) | | 2,493 | ||||||||||||
Accrued Interest | (14,445 | ) | | | (14,445 | ) | |||||||||||
Other Current Assets | (12,777 | ) | 13,163 | | 386 | ||||||||||||
Other Current Liabilities | 9,048 | (1,045 | ) | | 8,003 | ||||||||||||
Net Cash Provided by Operating Activities | 1,533 | 12,354 | | 13,887 | |||||||||||||
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Property Additions | (13,786 | ) | (9,240 | ) | | (23,026 | ) | ||||||||||
Proceeds from Property Dispositions | 1,243 | | | 1,243 | |||||||||||||
Other Investing Activities | (1,830 | ) | (644 | ) | (1,045 | ) | (3,519 | ) | |||||||||
Net Cash Used in Investing Activities | (14,373 | ) | (9,884 | ) | (1,045 | ) | (25,302 | ) | |||||||||
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Partner Distribution | (541 | ) | | | (541 | ) | |||||||||||
Long-Term Debt Repaid | (1,500 | ) | | | (1,500 | ) | |||||||||||
Cash Dividends Paid | | (1,975 | ) | 1,975 | | ||||||||||||
Other Financing Activities | 2,816 | | | 2,816 | |||||||||||||
Borrowing from Affiliates | | 930 | (930 | ) | | ||||||||||||
Net Cash Provided by (Used in) Financing Activities | 775 | (1,045 | ) | 1,045 | 775 | ||||||||||||
Net (Decrease) Increase in Cash and Cash Equivalents |
|
|
(12,065 |
) |
|
1,425 |
|
|
|
|
|
(10,640 |
) |
||||
Cash and Cash Equivalents at Beginning of Period | 44,054 | 5,302 | | 49,356 | |||||||||||||
Cash and Cash Equivalents at End of Period | $ | 31,989 | $ | 6,727 | $ | | $ | 38,716 | |||||||||
14
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Condensed Combining Statement of Financial Position at June 30, 2000
(Dollars in Thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||||
CURRENT ASSETS | |||||||||||||||
Cash and Cash Equivalents | $ | 3,459 | $ | 5,531 | $ | | $ | 8,990 | |||||||
Accounts ReceivableNet | 36,700 | (231 | ) | | 36,469 | ||||||||||
Materials and Supplies | 33,090 | 2,236 | | 35,326 | |||||||||||
Other Current Assets | 20,445 | 1,191 | | 21,636 | |||||||||||
Total Current Assets | 93,694 | 8,727 | | 102,421 | |||||||||||
PROPERTIESNET |
|
|
488,243 |
|
|
81,055 |
|
|
|
|
|
569,298 |
|
||
NET PENSION ASSET | 23,568 | | | 23,568 | |||||||||||
OTHER ASSETS | 126,378 | 1,209 | (80,201 | ) | 47,386 | ||||||||||
Total Assets | $ | 731,883 | $ | 90,991 | $ | (80,201 | ) | $ | 742,673 | ||||||
LIABILITIES | |||||||||||||||
CURRENT LIABILITIES | |||||||||||||||
Accounts Payable | $ | 42,368 | $ | 414 | $ | | $ | 42,782 | |||||||
Accrued Payroll and Fringe Benefits | 13,631 | (2 | ) | | 13,629 | ||||||||||
Deferred Revenue | 16,216 | | | 16,216 | |||||||||||
Accrued Claims and Insurance Premiums | 21,862 | | | 21,862 | |||||||||||
Accrued Interest | 4,610 | | | 4,610 | |||||||||||
Current Portion of Long-Term Debt | 12,658 | | | 12,658 | |||||||||||
Other Current Liabilities | 41,833 | 7,549 | | 49,382 | |||||||||||
Total Current Liabilities | 153,178 | 7,961 | | 161,139 | |||||||||||
LONG-TERM DEBT |
|
|
675,831 |
|
|
67,880 |
|
|
(67,880 |
) |
|
675,831 |
|
||
PENSION LIABILITY | 23,153 | | | 23,153 | |||||||||||
OTHER LONG-TERM LIABILITIES | 22,486 | 2,829 | | 25,315 | |||||||||||
Total Liabilities | 874,648 | 78,670 | (67,880 | ) | 885,438 | ||||||||||
MEMBER'S DEFICIT | |||||||||||||||
Member's Interest |
|
|
220,074 |
|
|
|
|
|
|
|
|
220,074 |
|
||
Other Capital | 161,615 | 44,943 | (44,943 | ) | 161,615 | ||||||||||
Retained Deficit | (524,454 | ) | (32,622 | ) | 32,622 | (524,454 | ) | ||||||||
Total Member's Deficit | (142,765 | ) | 12,321 | (12,321 | ) | (142,765 | ) | ||||||||
Total Liabilities and Member's Deficit | $ | 731,883 | $ | 90,991 | $ | (80,201 | ) | $ | 742,673 | ||||||
15
AMERICAN COMMERCIAL LINES LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Combining Statement of Financial Position at December 31, 1999
(Dollars in Thousands)
|
Guarantor Subsidiaries |
Other Subsidiaries |
Eliminations |
Combined Totals |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||||
CURRENT ASSETS | |||||||||||||||
Cash and Cash Equivalents | $ | 29,238 | $ | 1,603 | $ | | $ | 30,841 | |||||||
Accounts ReceivableNet | 31,660 | 2,748 | | 34,408 | |||||||||||
Materials and Supplies | 40,240 | 2,276 | | 42,516 | |||||||||||
Restricted Investments | 25,436 | | | 25,436 | |||||||||||
Other Current Assets | 17,951 | 5,135 | | 23,086 | |||||||||||
Total Current Assets | 144,525 | 11,762 | | 156,287 | |||||||||||
PROPERTIESNET |
|
|
476,420 |
|
|
83,357 |
|
|
|
|
|
559,777 |
|
||
NET PENSION ASSET | 22,651 | | | 22,651 | |||||||||||
OTHER ASSETS | 121,899 | 1,646 | (86,164 | ) | 37,381 | ||||||||||
Total Assets | $ | 765,495 | $ | 96,765 | $ | (86,164 | ) | $ | 776,096 | ||||||
LIABILITIES | |||||||||||||||
CURRENT LIABILITIES | |||||||||||||||
Accounts Payable | $ | 38,496 | $ | 599 | $ | | $ | 39,095 | |||||||
Accrued Payroll and Fringe Benefits | 17,284 | (2 | ) | | 17,282 | ||||||||||
Deferred Revenue | 10,548 | | | 10,548 | |||||||||||
Accrued Claims and Insurance Premiums | 17,362 | | | 17,362 | |||||||||||
Accrued Interest | 7,689 | | | 7,689 | |||||||||||
Current Portion of Long-Term Debt | 28,730 | | | 28,730 | |||||||||||
Other Current Liabilities | 47,245 | 4,861 | | 52,106 | |||||||||||
Total Current Liabilities | 167,354 | 5,458 | | 172,812 | |||||||||||
LONG-TERM DEBT |
|
|
684,077 |
|
|
67,395 |
|
|
(67,395 |
) |
|
684,077 |
|
||
PENSION LIABILITY | 22,229 | | | 22,229 | |||||||||||
OTHER LONG-TERM LIABILITIES | 23,907 | 5,143 | | 29,050 | |||||||||||
Total Liabilities | 897,567 | 77,996 | (67,395 | ) | 908,168 | ||||||||||
MEMBER'S DEFICIT |
|
|
|
|
|
|
|
||||||||
Member's Interest |
|
|
220,074 |
|
|
|
|
|
|
|
|
220,074 |
|
||
Other Capital | 161,768 | 44,989 | (44,989 | ) | 161,768 | ||||||||||
Retained Deficit | (513,914 | ) | (26,220 | ) | 26,220 | (513,914 | ) | ||||||||
Total Member's Deficit | (132,072 | ) | 18,769 | (18,769 | ) | (132,072 | ) | ||||||||
Total Liabilities and Member's Deficit | $ | 765,495 | $ | 96,765 | $ | (86,164 | ) | $ | 776,096 | ||||||
16
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 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 American Commercial Barge Line LLC ("ACBL") and third parties. ACBL is the leading provider of river barge transportation throughout the Inland Waterways.
On May 26, 2000 ACL entered into an agreement to purchase or lease substantially all of the long-term assets of Peavey Barge Line and other inland marine transport divisions of Conagra, Inc. This added more than 900 covered hopper barges to ACL's existing fleet bringing the total fleet to over 5,300 barges.
RESULTS OF OPERATIONS
Quarter Ended June 30, 2000 Compared with Quarter Ended July 2, 1999
Operating Revenue. Operating revenue for the quarter ended June 30, 2000, increased 2% to $193.9 million from $190.0 million for the quarter ended July 2, 1999. The revenue increase was primarily due to the acquisition of Peavey and favorable fuel price adjustments on certain long term, domestic barging contracts, partially offset by reduced loads per barge reflecting reduced demand for export grain.
Domestic barging revenue increased $6.0 million to $139.2 million due to the addition of Peavey revenue in the last month of the quarter, increased freight rates from contract fuel adjustments and improved market rates for bulk, steel and grain commodities. This was partially offset by reduced loads per barge as shippers held barges longer at loading and unloading facilities compared to the second quarter of 1999. International revenues fell $3.3 million to $12.0 million. Short haul movements replacing long haul contracts in Argentina accounted for $1.0 million of the shortfall. The remaining $2.3 million shortfall is attributable to timing of bauxite shipments in Venezuela that should be recovered in the last half of 2000. Revenue at Jeffboat LLC ("Jeffboat"), ACL's marine construction subsidiary, increased $1.1 million to $37.2 million due to the completion of one towboat for public sale in the second quarter of 2000 compared to no towboats in the second quarter of 1999. The increased revenue from the towboat was partially offset by reduced hopper barge construction volume.
Operating Expense. Operating expense for the quarter ended June 30, 2000 increased 4% to $177.3 million from $170.0 million in the second quarter of 1999. Domestic barging expense increased $7.3 million due to increased fuel prices and additional expenses from operating the Peavey barges, offset by reduced loads per barge. Fuel price before the effect of user tax and hedging was 79 cents per gallon in the second quarter of 2000 on a volume of 26.4 million gallons compared to 45 cents per gallon in the second quarter of 1999. ACL hedges fuel to be consumed for barge freight commitments that are pre-priced and not protected by contract rate adjustments. The hedging program covers roughly one fifth of ACL's fuel consumption. The net impact of rising fuel prices offset by contract adjustments and hedging is estimated to be a $1.8 million reduction in operating income vs. the year ago quarter. International barging expenses fell $0.9 million to $10.5 million due to the reduced volumes discussed above. Jeffboat's expenses increased $1.1 million to $33.7 million due to the completed contract recognition of the towboat cost of sales, partially offset by reduced hopper barge construction.
Operating Income. Operating income for the quarter ended June 30, 2000 decreased 17% to $16.5 million from $20.0 million for the second quarter 1999, due to the reasons discussed above.
17
Interest Expense. Interest expense for the second quarter of 2000 increased to $17.7 million from $17.0 million for the same period in 1999. The increase is due to higher base LIBOR rates on the Senior Credit Facilities partially offset by reduced amounts outstanding under those facilities.
(Loss) Earnings Before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change. The (loss) earnings before income taxes, extraordinary item and the cumulative effect of accounting change was a loss of $1.0 million for the second quarter 2000 compared to earnings of $3.0 million for the same period in 1999 due to the reasons discussed above.
Income Taxes. Income taxes for the quarter were $0.7 million compared to $0.2 million in the second period of last year due to increases in accrued foreign taxes recognized for the international subsidiaries. ACL passes its U.S. federal and state taxable income to its Parent, whose equity holders are responsible for those income taxes.
(Loss) Earnings Before Extraordinary Item and Cumulative Effect of Accounting Change. The (loss) earnings before extraordinary item and the cumulative effect of accounting change was a loss of $1.7 million for the second quarter 2000 compared to earnings of $2.8 million for the same period in 1999 due to the reasons discussed above.
Extraordinary ItemLoss on Early Extinguishment of Debt. ACL recognized $0.7 million as an extraordinary loss due to the early redemption premium on certain terminal revenue refunding bonds (the "Terminal Revenue Refunding Bonds"). This amount was paid out of an escrow account previously established as an irrevocable trust.
Net (Loss) Earnings. Net loss for the quarter was $2.4 million compared to earnings of $2.8 million in the same period last year due to the reasons discussed above.
Six Months Ended June 30, 2000 Compared with Six Months Ended July 2, 1999
ACL follows a 52/53-week fiscal year ending on the last Friday in December of each year. 2000 is a 52-week year compared to 1999, which was a 53-week year. The six months ended June 30, 2000 was a 26-week time period compared to the six months ended July 2, 1999 which was a 27 week time period.
Operating Revenue. Operating revenue for the six months ended June 30, 2000, decreased 1% to $361.3 million from $363.2 million for the first six months of 1999. The revenue decrease was due to the reporting period being 26 weeks in 2000 compared to 27 weeks in 1999. This has the effect of reporting 4% less revenue in the first six months of 2000 versus 1999 or approximately $14 million. The increase that would have occurred without this effect was due to higher freight rates from domestic barging, partially offset by reduced volume from Jeffboat and reduced volume and rates from ACL's international operations.
Domestic barging revenue increased $9.0 million to $271.5 million despite the effect of the shorter reporting period. The increase was due to higher contract freight rates from fuel adjustment clauses, the addition of Peavey assets in the last month of the period and higher market rates for grain, bulk and steel. Difficult operating conditions in the first two quarters of 1999 also contributed to the favorable comparison. Revenue at Jeffboat decreased $4.4 million to $64.0 million, reflecting lower sales of hopper barges to third party customers. International revenues decreased $5.5 million to $15.0 million. Lower revenue rates from ACL's Argentine based operation due to shorter hauls and lower volumes in Venezuela, where navigation on the river system began later in 2000 than in 1999, combined to produce the shortfall.
Operating Expense. Operating expense for the six months fell 1% to $336.8 million from $338.9 million in 1999 due to the shorter reporting period and reduced Jeffboat volume, offset by rising fuel prices. Domestic barging expense rose $4.5 million to $252.7 million, primarily due to an average price of fuel, before user tax and hedging of 77 cents for the first six months of 2000 compared to 42 cents for the same period last year. The net impact of rising fuel prices offset by contract adjustments and hedging is
18
estimated to be a $3.5 million reduction in operating income vs. the year ago period. Jeffboat's expenses fell $4.0 million to $57.5 million due to lower hopper barge construction volumes and improved labor productivity. International barging expenses decreased $2.2 million to $18.9 million primarily due to reduced volume and the shorter reporting period.
ACL implemented a number of internal changes in the first six months of 2000, including staff reductions which will result in cost savings of approximately $2 million per year, and reassignment of senior level responsibilities. Changes in health and benefit plans, including the American Commercial Lines LLC Pension Plan, that affect salaried employees covered by the plans, were also implemented and will result in annual cost savings of $5 to $6 million. Management of ACL's tank barge cleaning facility at Baton Rouge has been assigned to a non-affiliated third party whose core business is barge cleaning. ACL is receiving a variable monthly fee that is linked to the facility's operating profit. Management of ACL's boat and barge repair yard in New Orleans and its fleeting facility in Mobile have also been assigned to non-affiliated third parties with ACL receiving monthly fees containing both fixed and variable components.
Operating Income. Operating income for the six months rose 1% to $24.5 million from $24.3 million for the same period in 1999, due to the foregoing factors.
Interest Expense. Interest expense for the six months decreased to $35.0 million from $35.6 million for the same period in 1999. The decrease is due to 26 weeks being recognized in the first six months of 2000 compared to 27 weeks for the same period in 1999. The increase that would have occurred without this effect was due to a rising interest rate base on the variable rate Senior Credit Facilities offset by a reduced debt balance.
(Loss) Earnings Before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change. The loss before income taxes, extraordinary item and the cumulative effect of an accounting change was $9.0 million for the 2000 six month period compared with a loss of $10.0 million for the same period in 1999, due to the reasons discussed above.
Income Taxes. Income taxes for the six months increased to $0.8 million from $0.1 million for last year's six month period due to increases in accrued foreign taxes recognized for the international subsidiaries. ACL passes its U.S. federal and state taxable income to its Parent, whose equity holders are responsible for those income taxes.
(Loss) Earnings Before Extraordinary Item and Cumulative Effect of Accounting Change. The loss before extraordinary item and the cumulative effect of an accounting change was $9.8 million for the 2000 six month period compared with a loss of $10.0 million for the same period in 1999, due to the reasons discussed above.
Extraordinary ItemLoss on Early Extinguishment of Debt. ACL recognized $0.7 million as an extraordinary loss in the second quarter of 2000 reflecting the redemption premium on the Terminal Revenue Refunding Bonds. This amount was paid out of an escrow account previously established as an irrevocable trust.
Cumulative Effect of Accounting Change. ACL recognized $1.7 million in non-cash expense related to a workers compensation secondary injury fund in accordance with adoption of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" in the first quarter of 1999.
Net (Loss) Earnings. Net loss for the six months was $10.5 million compared with a loss of $11.8 million for the same period in 1999, due to the foregoing factors.
19
Outlook
Domestic barging demand and spot rates for grain, bulk, steel and liquids are expected to improve in the last half of 2000 as compared to 1999 levels. The U.S. Department of Agriculture currently forecasts corn exports of 2.2 billion bushels for the crop year beginning September 1, 2000 an increase of 0.2 billion bushels over the previous crop year. ACL's domestic barging volumes should also improve as Peavey assets are integrated into the fleet to meet the rising demand for grain and other river borne shipments.
The average price of fuel consumed by ACBL vessels in the third quarter is expected to remain consistent with current market prices. With the addition of boats required to move the Peavey barges, ACBL vessels will consume approximately 120 million gallons annually and generally ratably throughout the year. ACBL has contract price adjustment clauses and a fuel-hedging program which provide protection for approximately 80% of gallons consumed. Contract adjustments are deferred one quarter.
As a part of the strategy to focus on core assets, ACL has entered into an agreement to sell its 100% membership interest in Waterway Communications System LLC ("Watercom") to Mobex Network Services Company. A definitive sales agreement subject to regulatory approval has been signed in the second quarter of 2000. Final closing is expected in the third quarter of 2000. Proceeds from the sale of Watercom will be used to reduce the amounts outstanding under the Senior Credit Facilities. The sale of Watercom does not significantly affect ACL's expected future operating income or cash flow from operating activities.
Liquidity and Capital Resources
As of June 30, 2000, ACL had outstanding indebtedness of $688.5 million, including $371.9 million drawn under two Term Loans, $11.0 million drawn under the revolving credit facility and $300.0 million aggregate principal amount of Senior Notes. ACL had other notes outstanding, including a note in connection with the purchase of two formerly leased towboats, of which $5.6 million were outstanding at quarter end. ACL had $3.3 million in capital lease obligations outstanding at the end of the quarter. ACL also had securitized $52.9 million of the trade receivables of two subsidiaries as of the end of the quarter.
In June 1998, ACL deposited $26.1 million into an escrow fund that was used in the second quarter 2000 to repay $24.4 million principal of the Terminal Revenue Refunding Bonds along with the redemption premium and accrued interest on the bonds. The early redemption premium of $0.7 million was reported as an extraordinary item on the Consolidated Statement of Earnings in the second quarter of 2000.
The Senior Credit Facilities and the Indenture contain a number of covenants with specified financial ratios and tests including, with respect to the Senior Credit Facilities, maximum leverage ratios which 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 the financial ratios is affected by adverse weather conditions, seasonality and other risk factors inherent in its business.
ACL's cash balance was $9.0 million as of June 30, 2000. Cash provided by operating activities totaled $21.2 million for the first six months of 2000 compared to cash provided by operating activities of $13.9 million for the first six months of 1999. The increase was primarily due to one additional interest payment being made on the Senior Notes during the first six months of 1999 as a result of ACL's fiscal calendar.
Capital expenditures are expected to be $47 million for 2000, including $20.3 million for Peavey property, approximately $22 million for marine and other equipment maintenance, and $4.6 million for the purchase of barges. As of June 30, 2000, a total of $32.9 million had been spent, including $20.3 million for Peavey property, $9.8 million for equipment maintenance, $1.8 million for the buyout of a barge lease obligation and $1.0 million for the purchase of two new tank barges. An additional $1.8 million investment to purchase the lease obligation of 48 barges was made in July, 2000, subsequent to the end of the reporting period. The purchase of both barge lease obligations will reduce barge charter expense by
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approximately $1 million in the year 2000 as compared to the year 1999. ACL is continuing to lease new construction equipment from third party investors. The effect of this program will be to increase operating lease expense approximately $3 million in the year 2000 as compared to the year 1999.
The $31.5 cash outflow for the purchase of Peavey assets consisted of $20.3 million for Peavey property and $11.2 million for the purchase of favorable lease commitments and inventory. In addition ACL assumed a short-term capital lease with a present value obligation of $3.8 million as of acquisition date in connection with the Peavey purchase. ACL also assumed certain operating lease obligations from Peavey, which will increase lease expense $10.3 million in 2000 as compared to the year 1999.
Management believes that cash generated from operations is sufficient to fund its cash requirements, including capital expenditures for fleet maintenance, working capital, interest payments and scheduled principal payments. ACL may from time to time, borrow under the Revolving Credit Facility.
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.
In June 1998, the Financial Accounting Standards Board (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 recognizes 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 ACL's financial statements for fiscal years beginning January 1, 2001, but earlier application is encouraged. ACL has not determined when it will adopt Statement No. 133, but expects adoption will not have a significant effect on its consolidated financial statements.
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 discussions 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:
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As a result of these and other factors discussed in and incorporated by reference from "Risk Factors," Exhibit 99.1 to ACL's 1999 Annual Report on Form 10-K for the year ended December 31, 1999, 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 of ACL's 1999 Annual report on Form 10-K for the year ended December 31, 1999.
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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 second quarter of 2000.
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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) |
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Date: August , 2000 |
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By: |
/s/ JAMES J. WOLFF Name: James J. Wolff Title: Senior Vice President and Chief Financial Officer (Principal Accounting Officer) |
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