<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 March 31, 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, 12,092,102 shares outstanding as of March 31, 1999
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MARITRANS INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998 3
Condensed Consolidated Statements of Income - Three months
ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows - Three
months ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
2
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PART I: FINANCIAL INFORMATION
MARITRANS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($000)
March 31, December 31,
1999 1998
------------------------
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash and cash equivalents $ 12,091 $ 1,214
Trade accounts receivable 13,393 18,030
Other accounts receivable 7,303 9,434
Inventories 4,297 4,656
Deferred income tax benefit 4,627 4,627
Prepaid expenses 4,532 3,479
-------- --------
Total current assets 46,243 41,440
Vessels, terminals and equipment 350,372 358,197
Less accumulated depreciation 154,460 151,506
-------- --------
Net vessels, terminals and equipment 195,912 206,691
Other 6,419 6,775
-------- --------
Total assets $248,574 $254,906
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Debt due within one year $ 7,700 $ 11,873
Trade accounts payable 1,561 1,856
Accrued interest 2,704 1,351
Accrued shipyard costs 8,138 7,413
Accrued wages and benefits 4,324 3,559
Other accrued liabilities 7,276 8,559
-------- --------
Total current liabilities 31,703 34,611
Long-term debt 76,700 83,400
Deferred shipyard costs 12,208 11,119
Other liabilities 5,299 5,107
Deferred income taxes 32,143 30,854
Stockholders' equity 90,521 89,815
-------- --------
Total liabilities and stockholders' equity $248,574 $254,906
======== ========
See accompanying notes.
3
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MARITRANS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($000, except per share amounts)
Three Months Ended March 31,
1999 1998
----------------------------
Revenues $38,398 $35,830
Costs and expenses:
Operation expense 21,975 19,652
Maintenance expense 7,479 6,416
General and administrative 2,329 2,389
Depreciation and amortization 5,160 4,633
------- -------
Total operating expenses 36,943 33,090
------- -------
Operating income 1,455 2,740
Interest expense, net (1,933) (1,895)
Other income, net 3,852 307
------- -------
Income before income taxes 3,374 1,152
Income tax provision 1,289 432
------- -------
Net income $ 2,085 $ 720
======= =======
Basic and diluted earnings per share $ 0.17 $ 0.06
See accompanying notes.
4
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MARITRANS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
($000)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,085 $ 720
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 5,160 4,633
Deferred income tax provision 1,289 (503)
Stock compensation 164 182
Changes in receivables, inventories and
prepaid expenses 6,074 4,404
Changes in current liabilities, other than debt 1,265 (630)
Non-current changes, net 1,541 1,373
(Gain) loss on sale of fixed assets (3,962) --
------- -------
11,531 9,459
------- -------
Net cash provided by operating activities 13,616 10,179
Cash flows from investing activities:
Proceeds from litigation settlement -- 1,025
Cash proceeds from sale of equipment 11,449 --
Purchase of vessels, terminals and equipment (1,772) (2,631)
------- -------
Net cash provided by (used in) investing activities 9,677 (1,606)
------- -------
Cash flows from financing activities:
Payment of long-term debt (300) (435)
Borrowings under revolving credit facility 6,018 --
Repayments of borrowings under revolving credit
facilities (16,591) --
Purchase of treasury stock (329) --
Dividends declared and paid (1,214) (1,090)
------- -------
Net cash provided by (used in) financing
activities (12,416) (1,525)
------- -------
Net increase (decrease) in cash and cash equivalents 10,877 7,048
Cash and cash equivalents at beginning of period 1,214 13,312
------- -------
Cash and cash equivalents at end of period $12,091 $20,360
======= =======
</TABLE>
See accompanying notes.
5
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MARITRANS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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, and own and operate petroleum storage
facilities on the Atlantic Coast.
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. It is suggested that these financial statements 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.
6
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2. Earnings per Common Share
The following data show the amounts used in computing basic and diluted
earnings per share ("EPS"):
March 31,
1999 1998
---- ----
(thousands)
Income available to common stockholders
used in basic EPS $ 2,085 $ 720
Weighted average number of common
shares used in basic EPS 11,941 12,062
Effect of dilutive securities:
Stock options and restricted shares 115 252
Weighted number of common shares
and dilutive potential common
stock used in diluted EPS 12,056 12,314
3. Income Taxes
The Company's effective tax rate differs from the federal statutory rate
due primarily to state income taxes.
4. Gain 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 which were working in Puerto Rico and a tug boat working
in the Atlantic Coast. The gain on the sale of these assets, net of noncash
adjustments, was $3.7 million and is included in other income.
5. Share Buyback Program
On February 9, 1999, the Board of Directors authorized a share buy back
program for the acquisition of up to 1 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 March 31, 1999,
55,300 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.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Three Month Comparison
- ----------------------
Revenues
- --------
Revenue in the first quarter of 1999 increased over the first quarter of 1998.
In 1999, there were fewer weather delays in the Company's Gulf of Mexico market,
where the Company has also deployed the tanker added to the fleet in the second
half of 1998. Vessel utilization, as measured by revenue days divided by
calendar days available, for the entire fleet remained relatively consistent and
totaled 81.3 percent for the period ended March 31, 1999 compared to 81.2
percent for the same period in 1998. Vessel utilization, excluding new vessels,
decreased to 80.9 percent. In the first quarter of 1998, vessel utilization was
impacted by heavier than normal weather delays, whereas in the current quarter,
utilization was negatively impacted by the Company's shortage of qualified
seagoing personnel. In the quarter, the Company sold several vessels and
retained many of the seagoing personnel thus easing the shortage. The Company
continues to seek qualified mariners to fill open positions. Management expects
conditions in the Company's main markets to continue to be very competitive as
additional vessels are being introduced into the market by Maritrans'
competitors. Additionally, the recent trend of mergers, acquisitions and
consolidations among major oil companies that purchase both the Company's and
its competitors services is likely to continue to exert downward pressure on
market rates in general.
Operating expenses increased in the first quarter of 1999 compared to the first
quarter of 1998 due to the addition of a 260,000 barrel oil tanker to the Gulf
of Mexico fleet discussed in the revenue analysis above. Additionally, the
Company chartered third party tugboats, due to the current shortage of qualified
seagoing personnel, also discussed above. This was necessary to cover existing
contract commitments to customers. Part of the increase in operating costs was
offset by a drop in the price of diesel fuel used in the vessels. It is not
expected that the price reduction will be a benefit in the long term.
Operating income declined as a result of the aforementioned changes in revenue
and expenses.
Other income for the first quarter of 1999 includes a gain of $3.7 million, net
of noncash adjustments, on the disposition of five vessels that were no longer
deemed core to the Company's operations. The vessels consisted of two tug and
barge units which were working in Puerto Rico and a tug boat working in the
Atlantic Coast. The total vessels sold represent less than 3% of the Company's
cargo carrying capacity.
Net income for the first quarter of 1999 increased compared to the first quarter
of 1998 due to the gain on sale of assets discussed above offset by the
aforementioned changes in revenue and expenses.
Liquidity and Capital Resources
- -------------------------------
For the three months ended March 31, 1999, funds provided by operating
activities and the sale of vessels discussed above, were sufficient to meet
8
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debt service obligations and loan agreement restrictions, to make capital
acquisitions and improvements and to allow Maritrans 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 of debt to the sum of total debt and
stockholders equity is .48 at March 31, 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 1 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 March 31, 1999, 55,300 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.
Debt Obligations and Borrowing Facility
- ---------------------------------------
At March 31, 1999, the Company had $84.4 million in total outstanding debt,
secured by mortgages on most of the fixed assets of the Company. The current
portion of this debt at March 31, 1999 was $7.7 million. The Company has a $10
million working capital facility, secured by its receivables and inventories. At
March 31, 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 March 31, 1999, $22
million was outstanding under this facility.
Impact of Year 2000
- -------------------
Some of the Company's older computer programs and embedded computer components
suffer from Year 2000 incompatibilities. If left unchanged, this may cause 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:
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.
9
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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.
The Company completed an assessment of its business computing systems,
commercial off-the-shelf systems, and embedded systems and has been developing
new software programs and replacing commercial systems to take advantage of
newer technologies. As a result of this initiative, the Company's business
operating systems, critical embedded systems, and commercial off-the-shelf
systems will be Year 2000 compliant upon completion of these upgrades, which
were scheduled to be complete no later than the first quarter of 1999. The
Company almost met its objectives by having all of the major information systems
in production use by that date, except for one system, which is scheduled to be
in production by the end of the second quarter. This final system, which is a
commercial off-the-shelf replacement of the Company's purchasing system has been
installed and configured and the personnel have been trained on its use. This
completion date is prior to any anticipated impact on the operating systems.
For the Company's less critical commercial off-the-shelf systems and the vessel
systems' embedded components, the Company is working closely with the
manufacturers to verify compliance and is proceeding with remediation efforts.
The Company is collaborating with its key service providers and customers to
10
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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. All of these activities are scheduled to be completed no later than
the second quarter of 1999. 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 is currently prioritizing these processes and developing 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 and are scheduled to be in place
by the second quarter 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. However, if such conversions are not completed in a timely manner, the
Year 2000 issue could have a material adverse impact on the operations of the
Company. 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 or if replacements are not
completed on time, 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 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
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 guarantee that these estimates will be
11
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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.
12
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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 some portion of the vessels within the Maritrans
fleet. The Company is in the process of evaluating the Court's
order.
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
March 31, 1999.
13
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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: May 13, 1999
---------------------------------
H. William Brown
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Walter T. Bromfield Dated: May 13, 1999
---------------------------------
Walter T. Bromfield
Treasurer and Controller
(Principal Accounting Officer)
14
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EXHIBIT INDEX
- -------------
Exhibit Page Number
- ------- -----------
27 Financial Data Schedule --
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 12,091
<SECURITIES> 0
<RECEIVABLES> 13,393
<ALLOWANCES> 1,408
<INVENTORY> 4,297
<CURRENT-ASSETS> 46,243
<PP&E> 350,372
<DEPRECIATION> 154,460
<TOTAL-ASSETS> 248,574
<CURRENT-LIABILITIES> 31,703
<BONDS> 76,700
0
0
<COMMON> 131
<OTHER-SE> 90,390
<TOTAL-LIABILITY-AND-EQUITY> 248,574
<SALES> 0
<TOTAL-REVENUES> 38,398
<CGS> 0
<TOTAL-COSTS> 36,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,933
<INCOME-PRETAX> 3,374
<INCOME-TAX> 1,289
<INCOME-CONTINUING> 2,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,085
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
