<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 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 1-9063
------
MARITRANS INC.
--------------
(Exact name of registrant as specified in its charter)
DELAWARE 51-0343903
- ------------------------------- ----------
(State or other jurisdiction of (Identification No.
incorporation or organization) I.R.S. Employer)
1818 MARKET STREET, SUITE 3540
PHILADELPHIA, PENNSYLVANIA 19103
--------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 864-1200
--------------
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 requirements
for the past 90 days.
Yes X No
--- ---
Common Stock $.01 par value, 11,827,890 shares
outstanding as of November 3, 1999
<PAGE>
MARITRANS INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations - Three months
ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Operations - Nine months ended September 30,
1999 and 1998 5
Condensed Consolidated Statements of Cash Flows - Nine months ended September 30,
1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
MARITRANS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($000)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
(Unaudited) (Note 1)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 18,452 $ 1,214
Trade accounts receivables 11,745 18,030
Other accounts receivable 5,515 9,434
Inventories 4,745 4,656
Deferred income tax benefit 5,000 4,627
Prepaid expenses 7,574 3,479
-------- --------
Total current assets 53,031 41,440
Vessels, terminals and equipment 335,574 358,197
Less accumulated depreciation 157,192 151,506
-------- --------
Net vessels, terminals and equipment 178,382 206,691
Other 6,086 6,775
-------- --------
Total assets $237,499 $254,906
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year $ 7,413 $ 11,873
Trade accounts payable 1,040 1,856
Accrued interest 2,405 1,351
Accrued shipyard cost 8,124 7,413
Accrued wages and benefits 5,226 3,559
Other accrued liabilities 9,411 8,559
-------- --------
Total current liabilities 33,619 34,611
Long-term debt 71,457 83,400
Deferred shipyard costs 12,185 11,119
Other liabilities 5,132 5,107
Deferred income taxes 30,612 30,854
Stockholders' equity 84,494 89,815
-------- --------
Total liabilities and stockholders' equity $237,499 $254,906
======== ========
</TABLE>
See notes to financial statements.
3
<PAGE>
MARITRANS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($000, except per share amounts)
<TABLE>
<CAPTION>
July 1 to July 1 to
September 30, 1999 September 30, 1998
---------------- -----------------
<S> <C> <C>
Revenues $ 39,185 $ 38,389
Costs and expenses:
Operation expense 22,637 23,044
Maintenance expense 6,957 6,316
General and administrative 2,613 2,113
Depreciation and amortization 5,223 4,845
-------- --------
Total operating expense 37,430 36,318
-------- --------
Operating income 1,755 2,071
Interest expense (1,623) (1,604)
Other income (loss), net (4,829) 464
-------- --------
Income (loss) before income taxes (4,697) 931
Income tax provision (benefit) (1,788) 349
-------- --------
Net income (loss) $ (2,909) $ 582
======== ========
Basic earnings (loss) per share $ (0.25) $ 0.05
Diluted earnings (loss) per share $ (0.25) $ 0.05
Dividends declared per share $ 0.10 $ 0.10
</TABLE>
See notes to financial statements.
4
<PAGE>
MARITRANS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($000, except per share amounts)
<TABLE>
<CAPTION>
January 1 to January 1 to
September 30, 1999 September 30, 1998
----------------- -----------------
<S> <C> <C>
Revenues $ 117,417 $ 112,356
Costs and expenses:
Operation expense 66,611 64,122
Maintenance expense 21,869 18,768
General and administrative 7,435 6,797
Depreciation and amortization 15,512 14,346
--------- ---------
Total operating expense 111,427 104,033
--------- ---------
Operating income 5,990 8,323
Interest expense (5,170) (5,122)
Other income (loss), net (687) 1,002
--------- ---------
Income before income taxes 133 4,203
Income tax provision 57 1,576
--------- ---------
Net income $ 76 $ 2,627
========= =========
Basic earnings per share $ 0.01 $ 0.22
Diluted earnings per share $ 0.01 $ 0.21
Dividends declared per share $ 0.30 $ 0.28
</TABLE>
See notes to financial statements.
5
<PAGE>
MARITRANS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($000)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 1998
---------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 76 $ 2,627
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 15,512 14,346
Deferred income tax provision (615) (1,334)
Stock compensation 682 282
Changes in receivables, inventories and prepaid expenses 6,019 (3,351)
Changes in current liabilities, other than debt 3,468 (1,133)
Non-current changes, net 1,489 (3,105)
(Gain) loss on sale of fixed assets 1,493 --
-------- --------
28,048 5,705
-------- --------
Net cash provided by operating activities 28,124 8,332
Cash flows from investing activities:
Proceeds from litigation settlement -- 1,025
Cash proceeds from sale of equipment 21,136 --
Purchase of vessels, terminals and equipment (4,594) (25,553)
-------- --------
Net cash provided by (used in) investing activities 16,542 (24,528)
-------- --------
Cash flows from financing activities:
Payment of long-term debt (10,776) (16,123)
Borrowings under revolving credit facilities 14,908 25,950
Repayments of borrowing under revolving credit facilities (25,481) (1,865)
Purchase of treasury stock (2,458) --
Dividends declared and paid (3,621) (3,266)
-------- --------
Net cash provided by (used in) financing activities (27,428) 4,696
-------- --------
Net increase (decrease) in cash and cash equivalents 17,238 (11,500)
Cash and cash equivalents at beginning of period 1,214 13,312
-------- --------
Cash and cash equivalents at end of period $ 18,452 $ 1,812
======== ========
Noncash investing and financing activities
Borrowings under long-term debt for purchase of vessel $ 4,947 --
</TABLE>
See notes to financial statements
6
<PAGE>
MARITRANS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. Basis of Presentation/Organization
Maritrans Inc. owns Maritrans Operating Partners L.P. ("the Operating
Partnership"), Maritrans General Partner Inc., Maritrans Tankers Inc.,
Maritrans Barge Co., Maritrans Holdings Inc. and other Maritrans
entities (collectively, the "Company"). These subsidiaries, directly and
indirectly, own and operate oil tankers, tugboats, and oceangoing
petroleum tank barges principally used in the transportation of oil and
related products, along the Gulf and Atlantic coasts.
In the opinion of management, the accompanying condensed consolidated
financial statements of Maritrans Inc., which are unaudited (except for
the Condensed Consolidated Balance Sheet as of December 31, 1998, which
is derived from audited financial statements), include all adjustments
(consisting of normal recurring accruals) necessary to present fairly
the financial statements of the consolidated entities.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the unaudited condensed consolidated financial statements do
not include all of the information and notes normally included with
annual financial statements prepared in accordance with generally
accepted accounting principles. These financial statements should be
read in conjunction with the consolidated historical financial
statements and notes thereto included in the Company's Form 10-K for the
period ended December 31, 1998.
7
<PAGE>
2. Earnings per Common Share
The following data show the amounts used in computing basic and diluted
earnings per share ("EPS"):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(000's) (000's)
<S> <C> <C> <C> <C>
Income available to common stockholders
used in basic EPS $ (2,909) $ 582 $ 76 $ 2,627
Weighted average number of common
shares used in basic EPS 11,577 12,098 11,810 12,085
Effect of dilutive securities:
Stock options and restricted shares 0 212 113 240
Weighted number of common shares
and dilutive potential common
stock used in diluted EPS 11,577 12,310 11,923 12,325
</TABLE>
3. Income Taxes
The Company's effective tax rate differs from the federal statutory rate
due primarily to state and local income taxes.
4. Gain/Loss on Sale of Assets
In the first quarter of 1999, the Company sold five vessels that were no
longer deemed core to the Company's operations. The vessels consisted of
two tug and barge units that were working in Puerto Rico and a tugboat
working on the Atlantic Coast. The gain on the sale of these assets, net
of non-cash adjustments, was $3.7 million and is included in other income
on the Statement of Operations.
In September 1999, the Company sold its petroleum storage terminal
operations, located in Philadelphia, PA and Salisbury, MD. The proceeds
of the sale totaled $10 million, of which $3.6 million was used to payoff
the outstanding debt on the Philadelphia terminal. The loss on the sale
of these assets was $5.9 million and is included in other income on the
Statement of Operations.
8
<PAGE>
5. Share Buyback Program
On February 9, 1999, the Board of Directors authorized a share buyback
program for the acquisition of up to one million shares of the Company's
common stock. This amount represents approximately 8 percent of the 12.1
million shares outstanding at the beginning of the program. As of
September 30, 1999, 439,400 shares have been repurchased under the plan
and have been financed from internally generated funds. Maritrans intends
to hold the majority of the shares as treasury stock, some of which may
be used for employee compensation plans, acquisition currency, and/or
other corporate purposes.
6. Purchase of Vessel
In August 1999, the Company entered into an agreement to purchase the MV
Port Everglades, a tugboat. The purchase price of the vessel was $7.4
million, $2.5 million of which was paid at the closing and $4.9 million
payable to the previous owner in the form of a note payable. The note is
secured by a Mellon Bank NA Letter of Credit.
7. Corporate Relocation and Downsizing
In September 1999, the Company announced its intent to relocate the
corporate headquarters from Philadelphia, PA to Tampa, FL. At the same
time, the Company announced a reduction of approximately twenty-five
percent of the shoreside staff. The Company accrued $0.9 million of
severance costs in the current quarter for the cash benefits to be paid to
the employees who have been terminated. None of this amount has been paid
at September 30, 1999.
8. Subsequent Events
In October 1999, the Company announced an agreement to sell 26 vessels,
most of which work in the Northeastern U.S. coastal waters, to Vane Line
Bunkering Inc. and K-SEA Transportation LLC. The transactions, which
include 15 barges and 11 tugs, represent a divestiture of approximately
twenty-five percent of the Company's cargo-carrying capacity. The proceeds
from the transactions are expected to generate $48 million comprised of
$39 million in cash and $9 million in notes. It is expected that the
transactions will be completed before the end of the year.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Month Comparison
- ----------------------
Revenue in the third quarter of 1999 increased over the third quarter of 1998.
Although barrels of cargo transported decreased from 67.4 million to 64.5
million, vessel utilization increased. Overall vessel utilization, including
changes in the fleet, as measured by revenue days divided by calendar days
available, increased from 78.3 percent in the third quarter of 1998 to 80.4
percent in the third quarter of 1999. The majority of this increased utilization
was a result of the Company's high level of contract business. Additionally,
there were refinery disruptions, which started in the second quarter of 1999 and
extended into the third quarter, which created temporary opportunities to move
refined oil from the Gulf of Mexico to the West Coast. Revenues also increased
due to the addition of a 260,000 barrel oil tanker to the Gulf of Mexico fleet
late in 1998. In the current quarter and the comparative quarter of 1998,
revenue was negatively affected by heavy weather delays in the Gulf of Mexico
and the Northeast.
Operating expenses increased in the third quarter of 1999 compared to the third
quarter of 1998 due to the addition of the 260,000 barrel oil tanker discussed
above. The increase due to the additional vessel was offset by lower operating
expenses resulting from the sale, in the first quarter of 1999, of two units
that were operating in Puerto Rico in the comparative quarter of 1998 and by
lower levels of chartered in oil transportation capacity to cover contract
commitments. Fuel expenses for vessels increased, as the average price per
gallon was higher than in the same quarter of last year. Additionally, in
September 1999, the Company announced a reduction of approximately twenty-five
percent of the shoreside staff. The Company recorded severance expense for those
employees in the quarter.
Operating income decreased as a result of the aforementioned changes in revenue
and expenses.
Other income includes a loss of $5.9 million on the sale of the Company's two
petroleum storage terminals during the quarter.
Net income for the third quarter of 1999 decreased compared to the third quarter
of 1998 due to the aforementioned changes in revenue and expenses along with the
loss on the sale of assets.
10
<PAGE>
Nine Month Comparison
- ---------------------
Revenue in the first nine months of 1999 increased over the same period of 1998.
Although barrels of cargo transported decreased from 196.1 million to 192.8
million, vessel utilization increased. Overall vessel utilization, including
changes in the fleet, as measured by revenue days divided by calendar days
available, increased from 79.8 percent in the first nine months of 1998 to 81.7
percent for the first nine months of 1999. The main factors of the revenue
increase were the addition of a 260,000 barrel oil tanker to the fleet late in
1998, a high level of contract business and a temporary increase in vessel
demand due to refinery disruptions on the West Coast. These increases were
offset by the reduction in revenue and in barrels transported because two units
operating in Puerto Rico were sold in the first quarter of 1999. Utilization in
the current year has been negatively affected by a shortage of qualified marine
personnel, particularly in the first six months. The Company has hired qualified
personnel to fill the open positions, thereby lessening the impact of the
shortage discussed in the first quarter of 1999.
Total operating expenses increased in the first nine months of 1999 compared to
the first nine months of 1998 due to the addition of a 260,000 barrel oil tanker
to the Gulf of Mexico fleet, costs associated with turnover of qualified
seagoing personnel and crew costs related to vessels working in 1999 which had
been in the shipyard during the related period in 1998. These increases were
offset by the sale of the two tug and barge units used in the Puerto Rico
operations. Additionally, the Company recorded a severance charge in the current
quarter, for the impact of the Company's twenty-five percent reduction of
shoreside staff, which was announced in September 1999.
Operating income decreased as a result of the aforementioned changes in revenue
and expenses.
Other income for the first nine months of 1999 includes a loss, net of non-cash
adjustments, of $1.5 million, on the disposition of a number of assets that were
no longer deemed core to the Company's operations. The assets consisted of two
tug and barge units, which were working in Puerto Rico, a tugboat working on the
Atlantic Coast and two petroleum storage terminals on the East Coast.
Net income for the first nine months of 1999 decreased compared to the first
nine months of 1998 due to the aforementioned changes in revenue and expenses
along with the loss on the sale of assets.
Liquidity and Capital Resources
- -------------------------------
For the nine months ended September 30, 1999, funds provided by operating
activities were sufficient to meet debt service obligations and loan agreement
restrictions, to make capital acquisitions and improvements and to allow
Maritrans Inc. to pay a dividend of $0.10 per common share in the current
quarter. Dividend payments are expected to continue quarterly in 1999. The ratio
11
<PAGE>
of total debt to the sum of total debt and stockholders equity is .48 at
September 30, 1999.
Management believes that in 1999 funds provided by operating activities,
augmented by financing and investing transactions, will be sufficient to provide
funds necessary for operations, anticipated capital expenditures, lease
payments, dividend payments and required debt repayments.
On February 9, 1999, the Board of Directors authorized a share buyback program
for the acquisition of up to one million shares of the Company's common stock.
This amount represents approximately 8 percent of the 12.1 million shares
outstanding at the beginning of the program. As of September 30, 1999, 439,400
shares have been repurchased under the plan and have been financed from
internally generated funds. The Company intends to hold the majority of the
shares as treasury stock, some of which may be used for employee compensation
plans, acquisition currency, and/or other corporate purposes.
On July 30, 1999, the Company awarded a contract to rebuild a second large
single hull barge, the OCEAN 244, to a double hull configuration. The project
will begin early in the second quarter of 2000 and have a total cost of
approximately $12 million. As of September 30, 1999 the Company has advanced
$2.3 million on this project to the shipyard contractor for prefabrication and
other advance design work. The Company expects to finance this project from
internally generated funds.
In August 1999, the Company entered into an agreement to purchase the MV Port
Everglades, a tugboat. The purchase price of the vessel was $7.4 million, $2.5
million of which was paid at the closing and $4.9 million payable to the
previous owner in the form of a note payable. The note is secured by a Mellon
Bank NA Letter of Credit.
In September 1999, the Company announced its intent to relocate the corporate
headquarters from Philadelphia, PA to Tampa, FL. The move will be completed by
the summer of 2000. A fleet center will be maintained in the Philadelphia area.
Also in September 1999, the Company announced a reduction of approximately
twenty-five percent of the shoreside staff. The Company accrued $0.9 million of
severance costs in the current quarter for the cash benefits to be paid to the
employees who have been terminated. None of this amount has been paid at
September 30, 1999.
12
<PAGE>
In September 1999, the Company sold its petroleum storage terminal operations
to ST Services. The terminals were located in Philadelphia, PA and Salisbury,
MD. The proceeds of the sale totaled $10 million, of which $3.6 million was used
to payoff the outstanding debt on the Philadelphia terminal.
In October 1999, the Company announced an agreement to sell 26 vessels, most of
which work in the Northeastern U.S. coastal waters, to Vane Line Bunkering Inc.
and K-SEA Transportation LLC. The transactions, which include 15 barges and 11
tugs, represent a divestiture of approximately twenty-five percent of the
Company's cargo-carrying capacity. The proceeds from the transactions are
expected to generate $48 million comprised of $39 million in cash and $9 million
in notes. The transactions will require the clearance of Hart-Scott-Rodino
anti-trust filings. It is expected that the transactions will be completed
before the end of the year.
Debt Obligations and Borrowing Facility
- ---------------------------------------
At September 30, 1999, the Company had $78.9 million in total outstanding debt,
secured by mortgages on most of the fixed assets of the Company. The current
portion of this debt at September 30, 1999 was $7.4 million. The Company has a
$10 million working capital facility, secured by its receivables and
inventories. At September 30, 1999, there is no balance outstanding under this
facility, although the Company utilizes this facility from time to time.
In 1997, Maritrans entered into a multi-year revolving credit facility for
amounts up to $33 million with Mellon Bank, N.A. This facility is collateralized
by mortgages on tankers acquired in 1998 and 1997. At September 30, 1999, $22
million was outstanding under this facility.
The Company entered into an agreement with Coastal Tug and Barge Inc. on August
5, 1999 to purchase the MV Port Everglades. The outstanding debt on this
transaction is $4.9 million payable to Coastal Tug and Barge Inc. and is secured
by a Mellon Bank NA Letter of Credit. The current portion of this debt at
September 30, 1999 is $0.9 million.
The mortgage on the Philadelphia terminal, which was held by Mellon Bank NA had
an outstanding balance of $3.6 million at the time of the terminal sale. This
debt was paid off with the proceeds of the sale.
13
<PAGE>
Impact of Year 2000
- -------------------
Some of the Company's older computer programs and embedded computer components
had suffered from Year 2000 incompatibilities. If left unchanged, this may have
caused a system failure or miscalculations causing disruptions in operations,
including, among other things, the inability to operate vessel systems, a
temporary inability to process transactions, to send invoices, or to engage in
normal similar business activities. Following is a brief description of the
tasks incorporated in the Company's Year 2000 effort:
<TABLE>
<CAPTION>
<S> <C>
Software Inventory: List all custom software components that may have a dependency on Year 2000.
Software Assessment: Analyze each software component to determine if a Year 2000 dependency exists;
if so then determine magnitude of impact and effort for remediation. Prioritize remediation
efforts.
Software Remediation: Implement corrections or develop alternative plans to work around the problem.
Imbedded Systems Inventory: Develop a list of all devices which contain embedded computer chips, such as
radars, the Global Positioning System, rudder controls, engine controls and truck rack monitors.
Imbedded Systems Assessment: Work with the individual manufacturing companies to identify any problems with
specific devices. Conduct independent tests to identify any possible problems.
Imbedded Systems Remediation: Work with the manufacturing companies to implement replacement or work around plans. Collaborate
with other companies that have the same dependencies to reduce cost and increase effectiveness.
Service Provider Assessment: Verify that service providers are investigating their own Year 2000 problems and that the
Company's interactions with them are Year 2000 compliant. Identify key service providers and
conduct in-depth analyses to verify that service to Maritrans will not be impacted.
Customer Assessment: Verify that customers are proceeding with their own Year 2000 efforts. Collaborate with the
customers to ensure that both parties have a smooth transition into the new millennium.
Contingency Planning: Identify and document contingency plans for core business processes.
</TABLE>
The Company completed an assessment of its business computing systems,
commercial off-the-shelf systems, and embedded systems and has developed new
software programs and replaced commercial systems to take advantage of newer
technologies. As a result of this initiative, the Company believes its business
operating systems, critical embedded systems, and commercial off-the-shelf
systems are Year 2000 compliant.
14
<PAGE>
For the Company's less critical commercial vessel systems' embedded components,
the Company has worked closely with the manufacturers to verify compliance and
has completed remediation efforts. The Company is collaborating with its key
service providers and customers to ensure their Year 2000 efforts will identify
and address common risks as well as developing contingency plans where
necessary. The Company's major customers do not expect to incur major
disruptions in the need for services due to any Year 2000 issues. While the
Company has completed its major efforts in assessing its business partners, it
will continue collaboration efforts to ensure a smooth transition into Year
2000. However, there can be no assurances that the companies with which the
Company does business will achieve a Year 2000 conversion in a timely fashion,
or that such failure to convert by another company will not have a material
adverse effect on Maritrans.
The Company's contingency planning effort has identified critical business
processes and the Year 2000 dependencies that these processes may have. The
Company has prioritized these processes and developed contingency plans to
eliminate or manage any Year 2000 failures that may occur. These contingency
plans consider the internal systems and facilities, customer and supplier
readiness, and infrastructure concerns. The Company has completed a majority of
its contingency planning efforts but plans on continuing its implementation and
fine-tuning of these plans up through the end of 1999.
The Company believes that with the conversions to new software, the Year 2000
issue will not pose significant operational problems for its business computing
systems. The Company believes that with its program of verifying vessel systems
with manufacturers and replacing any non-compliant systems, the Year 2000 issue
will not pose significant operational problems. Due to the fact that there is
little standardization of equipment types aboard the vessels, the Company also
believes that if such verifications are faulty, these isolated problems will not
have a material adverse affect on operations. Completion of the Company's Year
2000 efforts does not guarantee that Year 2000 will not have a material adverse
effect on the Company.
The Company believes that the most reasonably likely worst case Year 2000
scenario would be that some of the customers' supply chains would be disrupted.
This would cause fewer barrels to be moved, interruption of normal distribution
patterns, and/or inability to transfer product, possibly leaving the vessels
empty and crippling the delivery system. In this event, the Company expects less
than half of the fleet would be impacted with a maximum of 5-day delays for
product loading. Vessels attempting to discharge would be rerouted to other
ports or customers and thus it is believed, not incur significant delays. As
part of the contingency planning efforts, the Company is addressing this
specific issue internally and with customers to reduce the likelihood and impact
of this scenario.
The total cost of the Company's Year 2000 remediation efforts is expected to be
$0.6 million, with approximately $0.1 million to be incurred during the
15
<PAGE>
remainder of the project. This amount is being financed from internally
generated funds. The costs of the project and the date on which the Company
believes it will complete the Year 2000 conversions are based on management's
best estimates. However, there can be no guarantees that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to upgrade all relevant operating systems, and similar uncertainties.
Forward Looking Information
- ---------------------------
In this report, the statements contained or incorporated by reference that are
not historical facts or statements of current condition are forward-looking
statements. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes", "expects",
"forecasts", "will" or "anticipates", or the negative thereof or other
variations thereon or comparable terminology, or by discussion of strategies or
intentions. These forward-looking statements, such as statements regarding
present or anticipated utilization, future revenues and customer relationships,
capital expenditures, future financings and other statements regarding matters
that are not historical facts, involve predictions. The Company's actual
results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Potential risks
and uncertainties that could affect the Company's actual results, performance or
achievements include, but are not limited to, the factors outlined in the
Company's Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 1998 and general financial, economic, environmental and
regulatory conditions affecting the oil and marine transportation industry in
general. Given these uncertainties, current or prospective investors are
cautioned not to place undue reliance on any such forward-looking statements.
Furthermore, the Company disclaims any obligation or intent to update any such
factors or forward-looking statements to reflect future events or developments.
Additionally, important factors that could cause actual results of the expected
transactions to differ from anticipated results include contractual obligations
of the parties to the agreements and the availability of commercially reasonable
financing to the buyers.
16
<PAGE>
Part II: OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
In Maritrans Inc., et al v. United States, Maritrans sued the
United States in 1996 alleging that the double hull requirement
of the Oil Pollution Act of 1990 ("OPA") which requires
retirement of Maritrans' fleet of single-hulled barges, is a
"taking" under the fifth amendment to the U.S. Constitution.
Maritrans is seeking in excess of $250 million in compensation
for this taking. A trial was held in July 1997 on the
preliminary issue of whether Maritrans had a cognizable property
interest that could be subject to taking.
In an Order dated October 29, 1997, the United States Court of
Federal Claims held that, at the time Maritrans built or
acquired its single-hulled tank barges, it could not have
reasonably anticipated that double hulls would be required
within the working lifetime of the vessels. This Order cleared
the way for further proceedings which will determine whether
OPA's double-hull requirements constitute a taking, and, if so,
the amount of compensation to be paid to Maritrans. The written
opinion of this Order was handed down on April 24, 1998.
In May 1998, the United States filed a Motion for
Reconsideration, which was denied by the Court some weeks later.
Subsequently, also in May, the United States filed a further
Motion for Summary Judgment. On March 11, 1999, the United
States Court of Federal Claims ("the Court") dismissed
Maritrans' suit in response to the Motion for Summary Judgment,
deciding essentially that the Company's cause of action is not
yet ripe for judicial determination because Maritrans' vessels
have not yet been forced out of service by OPA's phase-out
provisions. The Court determined that since the vessels are
continuing to generate income, the Company has not suffered the
degree of economic harm sufficient to constitute a Fifth
Amendment taking.
Maritrans, by Motion of March 22, 1999, asked the Court to
reconsider its dismissal. On April 30, 1999, following a
hearing, the Court did order the case reinstated on its trial
docket as to a portion of the vessels within the Maritrans
fleet. On July 20, 1999, the United States filed a motion asking
that the Court certify various issues to the Court of Appeals
for the Federal Circuit, which the court denied.
Maritrans and the United States have agreed on a joint proposed
schedule which calls for discovery on the remaining issues to
commence in December 1999 and for the trial to occur in October
2000. The parties are awaiting a court response to the proposed
scheduling order.
17
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
No. 27 - Financial Data Schedule.
(b) Reports on Form 8-K
(1) No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MARITRANS INC.
(Registrant)
By: /s/ H. William Brown Dated: November 5, 1999
-----------------------------------
H. William Brown
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Walter T. Bromfield Dated: November 5, 1999
-----------------------------------
Walter T. Bromfield
Treasurer and Controller
(Principal Accounting Officer)
19
<PAGE>
EXHIBIT INDEX
Exhibit Page Number
- ------- -----------
27 Financial Data Schedule --
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 18,452
<SECURITIES> 0
<RECEIVABLES> 13,011
<ALLOWANCES> 1,266
<INVENTORY> 4,745
<CURRENT-ASSETS> 53,031
<PP&E> 335,574
<DEPRECIATION> 157,192
<TOTAL-ASSETS> 237,499
<CURRENT-LIABILITIES> 33,619
<BONDS> 71,457
0
0
<COMMON> 132
<OTHER-SE> 84,362
<TOTAL-LIABILITY-AND-EQUITY> 237,499
<SALES> 0
<TOTAL-REVENUES> 117,417
<CGS> 0
<TOTAL-COSTS> 111,427
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,170
<INCOME-PRETAX> 133
<INCOME-TAX> 57
<INCOME-CONTINUING> 76
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76
<EPS-BASIC> $.01
<EPS-DILUTED> $.01
</TABLE>
