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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
------------
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934 (FEE REQUIRED)
For the Fiscal Year Ended
December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 (NO FEE REQUIRED)
For the transition period from ___________ to __________
Commission File No. 33-82624
Moran Transportation Company
(Exact name of registrant as specified in its charter)
Delaware 06-1399280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Greenwich Plaza, Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 625-7800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
--- ---
Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
As of March 28, 1997, all of the registrant's 44,600 issued and outstanding
shares of Common Stock, par value $.01 per share, were held by directors,
officers and affiliates of the registrant.
================================================================================
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PART I
Item 1. Business
General
Moran Transportation Company was incorporated on June 2, 1994. Moran
Transportation Company was formed by Lakes Shipping Company, Inc. ("Lakes
Shipping") and its principals, Paul R. Tregurtha and James R. Barker (who
serve as Chairman and Vice Chairman, respectively), together with members
of Mr. Barker's immediate family, certain officers of Lakes Shipping
(collectively, the "Lakes Group"), and certain members of senior management
of Moran Towing Corporation (the "Predecessor"). Moran Transportation
Company acquired the Predecessor on July 11, 1994 (the "Acquisition").
Except as otherwise indicated, or where the context otherwise requires, the
"Company" shall refer to Moran Transportation Company, the Predecessor and
each of its subsidiaries.
The Company is a leading provider of tug and marine transportation services
on the East and Gulf Coasts and in the U.S. coastwise trade (the "Jones
Act" trade). Operating a fleet of 54 tugs and 15 barges, the Company serves
a diverse customer base out of the ports of Portsmouth, New Hampshire; New
York, New York; Philadelphia, Pennsylvania; Baltimore, Maryland; Norfolk,
Virginia; Jacksonville, Florida; Miami, Florida; and Beaumont/Port Arthur,
Texas. The Company has relationships that span 30 or more years with many
of its major customers in the tug services and marine transportation
businesses.
Tug Services. The Company is a widely recognized leader in the tug
services industry and believes it has the greatest number of tugboats
performing ship docking and barge towing services along the East and
Gulf Coasts of the United States. The Company provides ship docking and
undocking services and harbor and coastwise towing for major domestic
and international bulk and container cargo shipping companies, cruise
lines, car carriers, barge transportation companies, oil companies, the
U.S. Navy, and the Company's own barge fleet. The Company believes that
it has a leading position in the ship docking business in each of its
ports of operations, other than in Miami, Florida, where the Company
began operations in February, 1993.
Marine Transportation. The Company's barge fleet transports fuel oil and
refined petroleum products, coal, grain and other bulk cargoes in the
Jones Act and foreign trades. The Company's barges operate under term
contracts with utilities and on both a contract and spot market basis
with oil companies, refineries, commodity trading companies and other
commercial shippers.
Sales and Marketing
Tug Services. The general manager of each operating port has ongoing
marketing responsibilities for his subsidiary. The general managers are
assisted by sales personnel based in Greenwich, Connecticut and
Baltimore, Maryland. The Company also has long-standing relationships
with a network of independent foreign agents in many of the major
shipping centers of the world.
Marine Transportation. The Company has maintained long-term
relationships with key participants in the utility, energy and
agricultural sectors, and uses those contacts to develop business. New
business opportunities for the marine transportation business are also
generated by the general managers of the Company's operating
subsidiaries or divisions. The Company has the ability to quickly
assemble a multi-disciplinary team to analyze new business opportunities
and prepare and submit proposals tailored to meet customers' needs.
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Competition
Tug Services. The tug services industry is highly competitive. The
Company's primary competitors are McAllister Brothers, Inc. and Turecamo
Harbor and Coastal Towing Company. McAllister competes with the Company
in five of its eight ports and Turecamo competes with the Company in New
York and Philadelphia. In addition, the Company also competes with other
providers of tug services in several of its ports.
Because entry into most ports is unrestricted, additional competitors
may enter the Company's current markets in the future. Management
believes that such competitors are more likely to emerge from existing
tug service companies (as opposed to new entrants into the industry) for
the following reasons. First, the tug services industry is mature and
management believes that business development for a newcomer would be
difficult given the importance of relationships in the tug services
business. Second, the Jones Act limits U.S. port-to-port maritime
shipping to vessels built in the United States, owned by U.S. citizens
and manned by U.S. crews, thereby precluding the entry of foreign
competitors. Third, capital investment requirements are significant.
Fourth, management believes that the Oil Pollution Act of 1990 ("OPA
90") and other environmental and safety regulations will have the effect
of discouraging smaller competitors from entering the market.
Management believes that participants in the tug services market compete
on the basis of price, service (including vessel availability),
relationships, reputation, quality of operations, the ability to meet
stringent safety requirements and operational flexibility.
Marine Transportation. The marine transportation industry is highly
competitive. The industry has become increasingly concentrated in recent
years as smaller and/or economically weaker companies have gone out of
business or have been acquired by larger competitors. The Company has a
number of competitors in each of its marine transportation markets which
operate U.S. flag barges, tankers and bulkers. Certain of these
competitors have substantially greater resources than the Company.
However, the number of vessels eligible to engage in Jones Act trade has
declined over the past several years.
Management believes that participants in the tank and dry bulk barge
business compete on the basis of price, service (including vessel
availability), relationships, reputation, quality of operations, the
ability to pass stringent safety audits and operational flexibility.
Further, in light of the potential liability of oil companies and other
shippers of petroleum products under OPA 90 and analogous state laws,
management believes that some shippers select transporters in larger
measure than in the past, on the basis of a demonstrated record of safe
operations. Therefore, the Company has implemented a number of measures
in order to maintain high quality operations and has continued to stress
its long-standing commitment to safe transportation of petroleum
products in its marketing efforts.
Customers and Contracts
Tug Services. The Company offers tug services to vessel owners and
operators and their agents. The Company prides itself on its long-
standing customer relationships, which in some cases date back to before
World War II. The majority of the Company's ship docking business is
performed under one-year, renewable contracts, with the remainder being
on a spot basis. The Company also has long and established relationships
with many of its harbor and coastwise towing customers. Almost all of
the Company's towing business is performed on a spot market basis.
No single tug services customer accounted for more than 4% of the
Company's total consolidated revenues in 1996. Although many of the
Company's tug services customers have been customers of the Company for
periods in excess of 30 years and although most of the Company's tug
services customers have had at least a five-year relationship with the
Company, there can be no assurance that any individual contract or
relationship will be renewed or continued.
Marine Transportation. The Company's marine transportation business does
business both on a term contract basis and on a spot market basis. The
Company strives to maintain an appropriate mix of contract and spot
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business, based on current market conditions. No single marine
transportation customer accounted for more than 6% of the Company's
total revenues in 1996.
3
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Insurance
The Company's operations are subject to the hazards associated with
operating vessels and carrying large volumes of cargo in a marine
environment. These hazards include the risk of loss of, or damage to, the
Company's vessels, damage to property of third parties (including
customers), loss or contamination of cargo, personal injury to employees or
third parties, and pollution and other environmental damages. The Company
maintains insurance coverage against these hazards. Risk of loss of, or
damage to, the Company's vessels is insured to amounts which the Company
believes represents the fair market values of such vessels, subject to
certain deductibles. Vessel operating liabilities, resulting from such
things as collision, cargo and environmental damage and personal injury,
are insured at levels believed to be adequate primarily through the
Company's participation in a protection and indemnity mutual insurance
association. However, because of the mutual nature of such insurance, the
Company is exposed to funding requirements and coverage shortfalls in the
event claims by the Company or other members exceed available funds and
reinsurance. See "Regulatory Matters-Environmental Matters - Oil Pollution
Legislation."
The Company has entered into a Marine Insurance Additional Retention
Agreement (the "Insurance Agreement") with The Interlake Steamship Company,
Lakes Shipping and Mormac Marine Transport Inc. (collectively, the "Mormac
Group"). Messrs. Tregurtha, Barker and Langlois are officers, directors
and/or direct or indirect shareholders of some or all of the entities in
the Mormac Group. The Company and the Mormac Group entered into the
Insurance Agreement in an effort to reduce insurance expense by obtaining
lower premiums through group purchases of insurance and through higher
deductibles. The Insurance Agreement also provides for allocation among the
parties of any risk arising out of the increases in insurance deductibles.
Pursuant to the Insurance Agreement, the Company and Mormac Group agreed to
share any increased insurance claims expense required to be borne by a
party as a result of insurance claims which exceed historical deductibles
but are less than the new, increased deductibles. Allocations of any
increased insurance claims expense is based upon the historical claims
experience (in excess of historical deductibles) for each party to the
agreement. In the current policy year, 60% of any additional insurance
claims expense attributable to the higher deductibles will be borne by the
Company and 40% of any such additional insurance claims expense will be
borne by the Mormac Group. Amounts payable to the Company from members of
the Mormac Group totaled $482,000 at December 31, 1996. The Company
believes that the terms of the Insurance Agreement, which was prepared in
consultation with an independent insurance broker, are similar to those
that would be obtained in an arms'-length transaction.
Regulatory Matters
General. The Company's rates for transportation of bulk cargoes, which
are not published and are negotiated with its customers, are not subject
to government regulation. The operation of tugboats and barges is
subject to regulation under various federal laws and international
conventions, as interpreted and implemented by the United States Coast
Guard, as well as under certain state and local laws. Tugboats and
barges are required to meet operational and safety standards currently
established by the United States Coast Guard. In addition, most of the
Company's tugboats and all of its barges meet construction and repair
standards established by the American Bureau of Shipping, a private
vessel inspection organization. The Company's seagoing supervisory
personnel are licensed by the United States Coast Guard. Seamen and
tankermen are certificated by the United States Coast Guard. See also
"Regulatory Matters-Occupational Health Regulations".
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Jones Act and Related Regulations. The Jones Act restricts marine
transportation between United States ports to vessels built and
registered in the United States and owned by United States citizens. The
Jones Act also requires that all United States flag vessels be manned by
United States citizens, which significantly increases the labor and
certain other operating costs of United States flag vessel operations
compared to foreign-flag vessel operations. In addition, the United
States Coast Guard and American Bureau of Shipping maintain the most
stringent regime of vessel inspection in the world, which tends to
result in higher regulatory compliance costs for United States flag
operators than for owners of vessels registered under foreign flags.
Because the Company transports cargo between United States ports and
engages in harbor work within United States ports, most of its business
depends upon the Jones Act remaining in effect. Compliance with the
requirements of the Jones Act is therefore very important to the
operations of the Company and the loss of Jones Act status could have a
significant adverse effect on the Company. In this regard, stockholder
agreements prohibit the transfer of shares of the Company's capital
stock to non-U.S. citizens. See "Certain Relationships and Related
Transactions." The Company also monitors the citizenship of its
employees and will take any remedial action necessary to insure
compliance with Jones Act requirements. There have been various
unsuccessful attempts in the past by foreign governments and companies
to gain access to the Jones Act trade. These efforts have been
consistently defeated by large margins in the United States Congress.
Management believes that continued efforts will be made to gain access
to such trade and if such efforts are successful, there could be an
adverse effect on the Company.
Merchant Marine Act, 1936. Because Mormac Marine Transport, Inc.
("Mormac"), which is owned by the principals of the Lakes Group,
received operating-differential subsidies from the United States in 1996
in order to compete in foreign trade, the Lakes Group was required to
obtain the approval of the Secretary of Transportation pursuant to
Section 805(a) of the Merchant Marine Act, 1936, as amended, in order to
consummate the Acquisition and in order for Messrs. Barker and Tregurtha
to serve as officers and directors of the Company. Such approval was
obtained and was issued by the Secretary of Transportation acting by and
through the Maritime Administrator on June 2, 1994. A condition of the
approval was that the Company could not operate tugboats and/or barges
on the West Coast of the United States during the remaining term of
Mormac's subsidy contracts (which expired in January 1997).
Environmental Matters. The Company is subject to various legislation and
regulations enacted to protect the environment. Under applicable law, an
owner or operator of real property may be liable for the costs of
removal or remediation of certain hazardous or toxic substances on or
under such property, regardless whether the owner or operator knew of,
or was responsible for, the presence of such materials. Moreover,
persons who arrange for the disposal or treatment of wastes containing
such substances at an off-site facility may also be liable for the costs
of removal or remediation of such substances at the off-site facility,
regardless whether the facility is owned or operated by such person. In
this regard, the Company and its predecessors have conducted vessel
repair and maintenance activities at certain owned or leased sites, and
have disposed of, and currently dispose of, wastes that may contain such
substances at off-site waste management facilities. As discussed below
under "Legal Proceedings", Jakobson Shipyard, Inc. a subsidiary of the
Company ("Jakobson"), has completed the remediation of its inactive
shipyard facility in Oyster Bay, New York. Also, Jakobson has been named
as a potentially responsible party for the cleanup of an off-site waste
management facility in Syosset, New York. It is possible that the
Company will in the future be subject to additional claims for, and
incur costs in connection with, remediation of other real property.
However, the extent of any such liability and the timing of any payments
to be made by the Company, if any, are not determinable.
The Company may also incur future costs and expenses in order to ensure
compliance with existing or new requirements under applicable
environmental laws. In many instances, the ultimate costs under such
environmental laws and the time period during which such costs are
likely to be incurred are not determinable: See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Other
Matters."
Oil Pollution Legislation. As a transporter of petroleum products, the
Company is subject to oil pollution legislation. OPA 90 substantially
affects the liability exposure of owners and operators of vessels, oil
terminals and pipelines. Under OPA 90, each responsible party for a
vessel or facility from which oil is discharged will be jointly and
severally liable for all oil spill containment and clean-up costs and
certain other damages arising from the discharge. These other damages
are defined broadly to include (i) natural resource damage (recoverable
only
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by government entities), (ii) real and personal property damage, (iii)
net loss of taxes, royalties, rents, fees and other lost revenues
(recoverable only by government entities), (iv) lost profits or
impairment of earning capacity due to property or natural resource
damage, and (v) net cost of public services necessitated by a spill
response, such as protection from fire, safety or health hazards.
The owner or operator of a vessel from which oil is discharged will be
liable under OPA 90 unless it can be demonstrated that the spill was
caused solely by an act of God, an act of war, or the act or omission of
a third party unrelated by contract to the responsible party. Even if
the spill is caused solely by a third party, the owner or operator must
pay all removal cost and damage claims and then seek reimbursement from
the third party or the trust fund established under OPA 90.
OPA 90 establishes a federal limit of liability of the greater of $1,200
per gross ton or $10 million per tank vessel. A vessel owner's liability
is not limited, however, if the spill results from a violation of
federal safety, construction or operating regulations.
OPA 90 requires all vessels to maintain a certificate of financial
responsibility ("COFR") for oil pollution in an amount equal to the
greater of $1,200 per gross ton per vessel, or $10 million per vessel,
in compliance with regulations promulgated by the U.S. Coast Guard.
Additional financial responsibility in the amount of $300 per gross ton
is required under regulations promulgated by the U.S. Coast Guard under
the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA"), the federal Superfund law. Owners of more than one tank
vessel, such as the Company, however, are only required to demonstrate
financial responsibility in an amount sufficient to cover the vessel
having the greatest maximum liability (approximately $17 million in the
Company's case). The Company currently maintains COFRs in compliance
with applicable Coast Guard rules.
OPA 90 requires all newly constructed petroleum tank vessels engaged in
marine transportation of oil and petroleum products in the U.S. to be
double-hulled and all existing single-hulled vessels to be retrofitted
with double hulls or phased out of the industry between January 1, 1995
and 2015. Because of the age and size of the Company's individual
barges, the first three of its barges will be required to be retired or
retrofitted by 2005. However, many of the vessels competing with the
Company's barges are required to be retired or retrofitted during the
period between January 1, 1995 and 2005.
Since the double-hull requirements of OPA 90 do not begin to impact
materially the seven single-hulled barges in the Company's current tank
barge fleet until 2005, the Company has not yet determined how it will
finance the conversion or replacement of these single-hulled barges.
However, the Company expects that, where economically feasible, it will
take steps to construct new, double-hulled barges when its single-hulled
barges are phased out. At current construction costs, the Company
estimates that it would cost approximately (a) $5 million to build a new
40,000 barrel tank barge similar to the Connecticut and (b) $25 million
to build a new barge to replace a 250,000 barrel tank barge such as the
New York. The timing of the construction or conversion of such barges
will depend in large measure on market conditions, particularly demand
for double-hulled barges and the rates which petroleum shippers are
willing to pay to use such barges. The Company expects to finance such
construction or conversion from both internally generated funds and from
outside sources, including the equity market, banks and insurance
companies and U.S. Government-guaranteed ship financing programs, if
available. There is no assurance that such financing will be available
in the amounts and at interest rates that will allow the Company to
replace its current single-hulled barge fleet. See "Properties-Vessels:
Barge Fleet."
OPA 90 directs the Coast Guard to develop interim measures for single
hull-tank vessels of over 5,000 gross tons "that provide as substantial
protection to the environment as is economically and technologically
feasible". The Coast Guard is expected to adopt a series of operational
measures that, while increasing current standards, is not expected to
have an appreciable effect on the Company.
OPA 90 further requires all tank vessel operators to submit for federal
approval detailed vessel oil spill contingency plans setting forth their
capacity to respond to a worst case spill situation. Several states have
similar contingency or response plan requirements. Although the Company
is currently in compliance, there can be no assurance that the Company
will be able to remain in compliance with all the federal requirements
or those of one or more states.
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OPA 90 is expected to have a continuing adverse effect on that segment
of the marine transportation industry that transports petroleum
products, including the Company. The effects on the industry could
include, among others, (i) increased requirements for capital
expenditures to fund the cost of double-hulled vessels, (ii) increased
maintenance, training, insurance and other operating costs, (iii) civil
penalties and liability, (iv) decreased operating revenues as a result
of a further reduction of volume transported by vessels and (v)
increased difficulty in obtaining sufficient insurance, particularly oil
pollution coverage. These effects could adversely affect the
profitability and liquidity of the Company's marine transportation line
of business.
Finally, OPA 90 does not preclude states from adopting their own
liability laws. Many of the states in which the Company does business
have enacted laws providing for strict, unlimited liability for vessel
owners in the event of an oil spill. In addition, numerous states have
enacted or are considering legislation or regulations involving at least
some of the following provisions: tank-vessel-free zones, contingency
planning, inspection of vessels, additional operating, maintenance and
safety requirements, and financial responsibility requirements.
Management believes that the liability provisions of OPA 90 and similar
state laws have greatly expanded the Company's potential liability in
the event of an oil spill, even where the Company is not at fault.
During the three year period from January 1, 1994 through December 31,
1996, the Company was involved in 35 quantifiable oil spills, each
typically involving approximately one barrel or less, with one spill of
12 barrels and one spill of 35 barrels (from a barge being towed by a
Company tug).
Other Regulations. The Company is also subject to regulations under the
Federal Water Pollution Control Act of 1972, as amended by the Clean
Water Act of 1977, and the Clean Air Act, as well as similar state
statutory and regulatory programs. To date, compliance with the
applicable provisions of these acts and regulations has not exposed the
Company to material expense, although the Company has found it
increasingly expensive to manage the wastes generated in its operations.
User Fees and Taxes. Federal legislation imposes user fees on vessel
operators such as the Company to help fund the United States Coast
Guard's regulatory activities. Other federal, state and local agencies
or authorities could also seek to impose additional user fees or taxes
on vessel operators or their vessels. Currently, the Coast Guard
collects fees for vessel inspection and documentation, licensing and
tank vessel examinations. The Company does not expect that these fees
will be material to it. There can be no assurance that additional user
fees will not be imposed in the future.
Occupational Health Regulations. Certain of the Company's vessel
operations are subject to United States Occupational Safety and Health
Administration regulations. Similarly, the Coast Guard has promulgated
regulations that address the exposure to benzene vapors, which require
the Company, as well as other operators, to perform extensive
monitoring, medical testing and record keeping of seamen engaged in the
handling of benzene transported aboard vessels. It is expected that
these regulations may serve as a prototype for similar health
regulations relating to the carriage of other cargoes. Management
believes that the Company is in compliance with the provisions of the
regulations that have been adopted and does not believe that the
adoption of any further regulations will adversely affect the Company.
Employees
The Company and its subsidiaries employed 586 persons as of December 31,
1996, of which 449 are crew embers or other seagoing personnel. As of
December 31, 1996, 344 of such employees are represented by various unions.
Union contracts for certain marine employees of subsidiaries of the Company
expire between April 30, 1997 (27 employees) and April 30, 2001 (38
employees). Management believes that its relationship with employees is
satisfactory.
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Item 2. Properties
Vessels: Tug Fleet
The tugboat fleet operated by subsidiaries of the Company is comprised of
54 tugboats with the following specifications and capacities:
<TABLE>
<CAPTION>
Average
Number Age in
Class in Class Years
- ----- -------- ------
<S> <C> <C>
Over 3,500 horsepower................. 14 23.8
3,000 to 3,500 horsepower............. 20 24.5
Under 3,000 horsepower................ 20 40.5
</TABLE>
Tugboats typically have long useful lives, generally exceeding 50 years.
Through the Company's maintenance practices and periodic overhauls, the
Company is able to maximize the operational life of its tug fleet and
minimize vessel downtime. Management believes that the Company's tug fleet
has a lower average age and is better maintained than the fleets of many of
the Company's competitors.
During the past two years, the Company converted two of its single screw
tugs to MORTRAC class tugs. The conversion consists of installing a forward
mounted, fully retractable 360 degree azimuthing thruster which greatly
enhances both horsepower and maneuverability. The Company has plans to
convert two more of its single screw tugs during the next two years.
MORTRAC is a registered trademark of the Company.
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Vessels: Barge Fleet
The Company operates 15 barges, fourteen of which were in service in
the U.S. coastwise and preference cargo trades. On February 21, 1997,
the Company acquired a new barge, the Massachusetts. Thirteen of the
barges are owned by the Company, and two are chartered to the Company.
The specifications and capacities of each of such barges are set forth
in the following table:
<TABLE>
<CAPTION>
OPA 90
Year Replacement Employment Principal
Name Type Built Date Capacity At 12/31/96 Cargo
---- ---- ----- ---- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Somerset Ocean Dry Bulk 1990 N/A 13,100 dwt Term Contract Coal
Bridgeport Ocean Dry Bulk 1986 N/A 12,780 dwt Term Contract Coal
Portsmouth(1) Ocean Dry Bulk 1996 N/A 14,500 dwt Spot Market Coal
Virginia Ocean Dry Bulk 1982 N/A 24,109 dwt Spot Market Grain
Maryland (2) Inland Dry Bulk 1970 N/A 20,357 dwt Inactive Coal
Connecticut (3) Ocean Tank 1994 N/A 41,454 bbl Term Contract No. 6 Oil
Texas Ocean Tank 1981 2006 130,000 bbl Term Contract No. 6 Oil
Florida Ocean Tank 1980 2005 130,000 bbl Spot Market No. 6 Oil
Pennsylvania Ocean Tank 1971 2005 93,000 bbl Term Contract No. 6 Oil
New York (4) Ocean Tank 1970 2005 250,000 bbl Spot Market Gasoline
Massachusetts(5) Ocean Tank 1982 2007 145,000 bbl (5) No. 6 Oil
Maine Inland Tank 1976 2014 64,000 bbl Spot Market No. 6 Oil
Rhode Island Inland Tank 1972 2014 64,000 bbl Spot Market No. 6 Oil
Seahorse I (6) Inland Tank 1966 2014 41,770 bbl Spot Market No. 6 Oil
New Jersey Inland Tank 1969 2014 36,278 bbl Bareboat Charter Bunker Fuel
</TABLE>
(1) The Company leases this barge under a 10-year bareboat charter.
(2) The Maryland was employed in a number of alternative uses in 1996, but
is primarily a coal barge. The barge has not been utilized since
November 7, 1996 due to damage to the vessel. The Company is currently
evaluating whether to repair the vessel.
(3) This barge is the primary barge used in connection with a long-term
contract with Connecticut Light and Power ("CL&P"). This contract
provides, among other things that CL&P may exercise a purchase option
on the Connecticut in certain circumstances. First, commencing with the
fourth anniversary of the delivery of the Connecticut, CL&P may, on
each anniversary date, purchase the barge for a purchase price equal to
certain scheduled amounts. Second, CL&P may purchase the Connecticut
for a purchase price equal to certain schedule amounts if, within the
period ending in March 1998, there is a significant corporate event or
change in control affecting the Company. In addition, CL&P has the
option to purchase the barge if the Company willfully refuses to
perform and in certain other limited circumstances.
(4) 50% owned by a subsidiary of the Company
(5) Acquired in February 1997.
(6) 100% owned by CL&P, and operated by a subsidiary of the Company
pursuant to an evergreen bareboat charter. The Seahorse I is the
primary back up barge for the Company's contract with CL&P, but is
currently used in the spot market. The Seahorse I is double-hulled, but
does not meet the OPA 90 double hull requirements and therefore has an
OPA 90 replacement date.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
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Other Properties
Set forth below is a list of all of the Company's offices and facilities
as of December 31. 1996.
<TABLE>
<CAPTION>
Approximate
Square Feet/ Lease
Location Description Linear Feet(1) Expiration Date
-------- ---------------- ------------- ---------------
<S> <C> <C> <C>
Greenwich, CT Executive Office 17,526 2004
Portsmouth, NH Office Space 322 Owned Property
Portsmouth, NH Pier Space 126 Owned Property
Staten Island, NY Office and Pier Space 113,756(2) Owned Property
Oyster Bay, NY Discontinued Shipyard 61,500(2) 2004
Philadelphia, PA Pier and Office Space 52,500(2) Month to Month
Baltimore, MD Office Space 4,400 2002
Baltimore, MD Pier Space 415 1998
Norfolk, VA (2) Pier Space 115 Owned Property
Norfolk, VA Office Space 2,610 Month to Month
Jacksonville, FL Office and Pier Space 71,874(2) 1997
Miami, FL Office Space 630 1997
Nederland, TX Office Space 1,175 1998
Port Arthur, TX Pier Space 295 Month to Month
</TABLE>
(1) Square footage is presented for office space; linear footage is
presented for pier space.
(2) Aggregate square footage for entire property.
Management believes that its existing properties are adequate for its
current needs and that additional facilities will be readily available if
needed.
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Item 3. Legal Proceedings
The Company is a party to routine, marine-related lawsuits arising in the
ordinary course of its business. The claims made in connection with the
Company's marine operations are covered by marine insurance, subject to
applicable policy deductibles. Management believes, based on its current
knowledge, that such lawsuits and claims, even if the outcomes were to be
adverse, would not have a material adverse effect on the Company's
financial condition and results of operations.
On January 31, 1990, Jakobson was notified by letter from the EPA that the
EPA had reason to believe that the subsidiary is a Potentially Responsible
Party (a "PRP") under CERCLA with respect to a landfill site at Syosset,
New York. In February 1994, the Town of Oyster Bay, New York, operator of
the Syosset landfill, filed suit in the United States District Court for
the Eastern District of New York against Jakobson and several other
potentially responsible parties to recover costs associated with clean up
of the landfill. In its complaint, the town alleges that Jakobson disposed
of various wastes at the landfill, which the town operated from
approximately 1933 to 1975. Prior to filing the complaint, the Town entered
into an administrative consent order with the EPA to remediate the site.
The Town seeks to recover from the PRPs past and future costs associated
with the cleanup of the municipal landfill. According to the town's
complaint, as of February 1994, the Town had expended approximately $2.75
million and anticipated additional costs of $500,000 to evaluate remedial
alternatives for the site. Clean up costs were estimated at $25 million.
Jakobson believes that it has both a factual and legal defense to
liability. Although in theory liability under CERCLA is joint and several
without regard to fault, as a practical matter, liability is typically
apportioned among PRPs, usually on a volumetric basis. Jakobson believes
that in relation to the other defendants its volumetric contribution, if
any, to the site is relatively small. Jakobson is investigating the
allegations of the EPA and the Town and the existence of insurance coverage
should the subsidiary be found to have liability with respect to the
landfill site. At this stage, management believes that it is premature to
attempt to predict the outcome of the suit.
Subsidiaries of the Company are defendants, along with others, in certain
lawsuits filed in the U.S. District Courts for the Northern District of
Ohio and the Eastern District of Pennsylvania and in Virginia state court
by an aggregate of 213 individuals or their estates or personal
representatives who have alleged damages for workplace exposure to
asbestos. Based on employment records, a number of these individuals appear
to have worked for subsidiaries of the Company, or their predecessors, for
less than one year, if at all, out of their working careers. The Company is
in the process of identifying the scope of its insurance coverage for these
claims. At least 40 of these individuals served on vessels operated by a
subsidiary of the Company on behalf of the United States government for
which a government indemnity is believed by the Company to be applicable.
Management believes that the United States indemnity will extend to
additional cases. Although the Company believes that these claims are
without merit, it is impossible at this juncture to express a definitive
opinion on the final outcome of any such suit. Management believes that any
liability under any such suits would not have a material adverse effect on
the Company's financial condition and results of operation, regardless of
the scope of available insurance coverage.
11
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
There is currently no public trading market for the Company's issued and
outstanding common stock. All of the Company's outstanding common stock is
held by officers, directors and affiliates of the Company.
12
<PAGE>
Item 6. Selected Consolidated Financial Data
The following table presents historical financial information concerning
the Predecessor and the Company. The historical financial information in
the five-year period ending December 31, 1996, is derived from the
consolidated financial statements of the Company. Such financial statements
are included elsewhere herein for the three-year period ended December 31,
1996. The following financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
<TABLE>
<CAPTION>
Predecessor Company
----------------------------------- -----------------------------------
Period Period
(Dollars in thousands) Year ended Jan. 1, 1994 July 12, 1994 Year ended
December 31, thru thru December 31,
------------ July. 11, Dec. 31, ------------
Income Statement Data: 1992 1993 1994 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating revenue.............................. $75,619 $78,740 $41,694 $ 37,482 $ 77,343 $ 91,458
Operating expenses........................... 44,442 48,134 27,341 22,355 45,672 57,451
Depreciation................................. 5,285 6,784 3,119 3,217 7,412 7,719
General and administrative expenses.......... 13,427 13,197 7,559 5,962 14,221 14,283
Provision for shipyard sale.................. 2,673 705 589 - - -
------- ------- ------- -------- -------- --------
Operating income........................ 9,792 9,920 3,086 5,948 10,038 12,005
Interest expense............................... (3,031) (2,083) (975) (4,810) (10,192) (10,132)
Interest income................................ 24 - 28 74 51 146
Equity in (loss)/income from affiliates........ (1,428) 1,149 (622) - - -
Equity in income/(loss) from joint venture..... 101 614 220 106 (188) (66)
Other income................................... 3 164 317 218 155 160
------- ------- ------- -------- -------- --------
Income/(loss) before provision for income
taxes......................................... 5,461 9,764 2,054 1,536 (136) 2,113
Provision for income taxes..................... 3,069 3,342 785 630 200 808
------- ------- ------- -------- -------- --------
Income/(loss) before cumulative effect of
accounting changes........................ 2,392 6,422 1,269 906 (336) 1,305
Cumulative effect of accounting change (1)..... - 525 - - - -
------- ------- ------- -------- -------- --------
Net income/(loss)............................. $ 2,392 $ 6,947 $ 1,269 $ 906 $ (336) $ 1,305
======= ======= ======= ======== ======== ========
Other Data:
EBITDA(2)...................................... $16,890 $19,775 $ 6,977 $ 9,987 $ 18,855 $ 23,337
Net cash provided by operating activities...... 9,219 8,334 3,939 6,527 5,491 11,427
Net cash (used for)/provided by investing
activities.................................... (360) (3,594) 817 (73,555) (5,832) (5,110)
Net cash (used for)/provided by financing
activities.................................... (8,792) (6,323) (4,637) 68,842 (652) (3,496)
Ratio of earnings to fixed charges (3)......... 2.5x 4.5x 2.7x 1.3x 1.0x 1.2x
Balance Sheet Data (at end of period)
Total assets................................... $63,723 $69,139 $64,432 $170,108 $174,094 $172,717
Total long-term debt........................... 22,120 19,235 16,450 83,414 82,848 80,000
Mandatorily Redeemable Capital Stock........... - - - 1,150 1,150 1,000
Total stockholders equity...................... 16,246 20,132 19,701 10,906 10,570 12,025
</TABLE>
-------------------
(1) The Company adopted FAS No. 109, effective January 1, 1993.
(2) EBITDA means income before provision for income taxes, interest expense
(including amortization of debt discount of $694, $349 and $106 for the
years ended December 31, 1992 and 1993 and the period ended July 11,
1994, respectively), depreciation and amortization and provision for
shipyard sale, and is presented because the Company believes that it
provides useful information regarding its ability to service and/or incur
debt.) EBITDA should not be considered in isolation or as a substitute
for net income (loss), cash flows from operating activities and other
combined income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(3) For purposes of the computations, earnings before fixed charges consist
of income/(loss) before income taxes adjusted for equity earnings/(loss),
as appropriate, plus fixed charges. Fixed charges are defined as interest
expense plus interest capitalized and that portion of rental expense
which is deemed to be representative of the interest factor.
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion and analysis of the Company's financial condition and
historical results of operations should be read in conjunction with the
Company's and the Predecessor's consolidated historical financial
statements and the related notes thereto included elsewhere in this report.
Overview
Revenues
Tug Services. Tug services revenues depend primarily upon tug
utilization and the rates charged for tug services. Tug utilization is
primarily a function of the volume of vessel traffic requiring docking
or undocking or other ship assistance services, barge movements,
coastwise contract towing and offshore rescue work. Rates charged for
tug services are primarily set by reference to the Company's scheduled
rates, subject to discounts as competitive conditions warrant. When
tug services are not performed on a contract basis, rates are quoted
at the time that such services are requested.
Tug services revenues, in the aggregate, have remained relatively
stable over recent years. Although the number of ships entering and
exiting ports has gradually declined, the Company has offset this
decline by imposing higher unit charges for larger ships, maintaining
market share through relationship management and increasing coastwise
towing.
Marine Transportation. Marine transportation services are provided by
the Company's barge fleet on a term contract basis and on a spot
market basis. Rates for such services are pre-established by contract
or are quoted at the time that such services are requested, and are
generally set based on the quantity of product to be transported and
the distance to be traveled.
The Company's marine transportation revenues are primarily
attributable to the transport of petroleum products (particularly No.
6 oil), coal and grain. Demand for the Company's marine transportation
services is substantially dependent upon general demand for petroleum,
petroleum products and coal in the geographic areas served by its
vessels. In addition, weather, prevailing markets for fossil fuels and
other sources of energy and economic factors affect utility
consumption of petroleum, petroleum products and coal and, as a
result, the demand for a substantial portion of the Company's marine
transportation services. For example, the unusually harsh winter of
1994 positively affected 1994 marine transportation and tug services
revenues, in comparison to the relatively mild winter of 1995. Global
grain supply and demand factors and United States cargo preference
policies and programs are the principal factors affecting demand for
the transportation of grain by the Company. U.S. government funding of
cargo preference programs has been reduced in recent years. This
reduced cargo preference funding is expected to continue and, if it
does, the Company will continue to employ its bulk barges in other
areas. However, there can be no assurance that the revenues or
operating income attributable to such employment will be consistent
with the revenues and operating income attributable to grain
movements.
Operating Expenses. The Company's operating expenses are primarily a
function of fleet size and utilization levels and are comprised of wages
and benefits, fuel, repairs, insurance, insurance claims and charter hire
of third party tugs to satisfy vessel requirements. In addition, the
Company incurs depreciation and amortization expense. The crews of the
Company's tugs and barges are primarily paid on a daily wage basis. Wage
and benefit levels vary among ports due to labor market conditions. The
Company capitalizes expenditures when a vessel is improved or its useful
life is extended. Drydocking and related costs are capitalized when
incurred and amortized over the period until the next drydocking, usually
30 months. The timing of drydockings is generally governed by American
Bureau of Shipping requirements, which require two drydockings every five
years. All other repair expenditures are expensed as incurred. The
Predecessor expensed drydocking costs as incurred. Insurance costs consist
primarily of premiums paid for (i) protection & indemnity insurance ("P&I
insurance") for the Company's marine liability risks, which are insured by
a mutual insurance association of which the Company is a member; (ii) hull
and machinery insurance and other marine-related insurance, which are
insured by commercial marine insurance markets; and (iii) general liability
and other traditional insurance, which are insured by commercial insurance
carriers. Insurance costs, particularly
14
<PAGE>
costs of marine insurance, are directly related to amount of coverage,
industry and individual loss records and overall insurance market
conditions, which vary from year-to-year. As discussed above under
"Business-Insurance," the Company and the Mormac Group have entered into
the Insurance Agreement, under which the Company's insurance expense will
be affected by both the Company's increased deductibles and the respective
insurance claims experience of the Company and the Mormac Group.
Results of Operations
Year Ended December 31, 1996 compared to year ended December 31, 1995
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1995 1996
---- ----
<S> <C> <C>
Operating revenue.................................... $ 77,343 $ 91,458
Cost of operations
Operating expenses................................ 45,672 57,451
Depreciation...................................... 7,412 7,719
-------- --------
Total cost of operations............................. 53,084 65,170
-------- --------
Gross profit......................................... 24,259 26,288
General and administrative expenses.................. 14,221 14,283
-------- --------
Operating income..................................... 10,038 12,005
Interest expense..................................... (10,192) (10,132)
Interest income...................................... 51 146
Equity in loss from joint venture.................... (188) (66)
Other income......................................... 155 160
-------- --------
(Loss)/income before provision for income taxes...... (136) 2,113
Provision for income taxes........................... 200 808
-------- --------
Net (loss)/income.................................... $ (336) $ 1,305
======== ========
</TABLE>
Operating Revenues. Operating revenues increased by $14.1 million, or
18.2%, to $91.5 million in 1996. Tug Services increased by $9.4 million or
19.7%, to $57.5 million. All areas of the tug services business ---
shipdocking, harbor towing and coastwise towing -- showed increases in 1996
and included revenue related to The New York City Department of Sanitation
contract which began on July 1, 1996. The two year contract expires on June
30, 1998.
Marine Transportation revenues increased by $4.7 million, or 15.9%, to
$34.0 million primarily due to increased movements of coal and petroleum
products. The Company also increased its transportation of other products,
such as scrap and fertilizer.
Operating Expenses. Operating expenses increased by $11.8 million, or
25.8%, to $57.5 million. The $11.8 million increase in operating expenses
is primarily due to increases in labor, fuel, outside towing expense,
claims and drydocking amortization. The $2.6 million increase in labor
expense and the $2.5 million increase in outside towing expenses were
primarily due to the increased level of activity discussed above. The $2.6
million fuel expense increase was also due to the increased activity but
was also impacted by higher fuel prices, especially in the second half of
the year. Claims expense (claims under insurance deductibles) also
increased in 1996 as did drydocking amortization.
Depreciation. Depreciation expense increased by $0.3 million, or 4.1%. This
increase was due to additional improvements to floating equipment,
including the MORTRAC conversions discussed previously.
General & Administrative Expenses. General and administrative expenses
remained essentially the same at $14.3 million, compared to $14.2 million
in 1995.
15
<PAGE>
Operating Income. Operating income increased by $2.0 million, or 19.6%, to
$12.0 million. The increase was primarily due to the increased revenues
discussed above, partially offset by higher operating expenses and
depreciation.
Equity in Loss from Joint Venture. Equity in loss from the Company's 50%
joint venture decreased by $0.1 million or 64.9% from a loss of $188,000 in
1995 to a loss of $66,000 in 1996. The decrease is primarily due to
increased revenues , driven by higher rates and more operating days in
1996.
Net (Loss)/Income. Net income increased by $1.6 million, or 488.4%, from a
loss of $0.3 million in 1995 to a profit of $1.3 million in 1996. The
increase was primarily due to the higher operating profit discussed above.
16
<PAGE>
Year Ended December 31, 1995 compared to year ended December 31, 1994
For purposes of comparison only, the following table combines the Company's
results of operations from July 12, 1994 through December 31, 1994 with
those of the Predecessor for the period January 1, 1994 through July 11,
1994.
<TABLE>
<CAPTION>
Predecessor Company Combined Company
----------- ------- -------- -------
Jan. 1, July 12,
thru thru Year Ended Year Ended
July 11, Dec. 31, Dec. 31, Dec. 31,
1994 1994 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues............................... $41,694 $37,482 $79,176 $ 77,343
Cost of operations
Operating expenses........................... 27,341 22,355 49,696 45,672
Depreciation................................. 3,119 3,217 6,336 7,412
------- ------- ------- --------
Total cost of operations......................... 30,460 25,572 56,032 53,084
------- ------- ------- --------
Gross profit..................................... 11,234 11,910 23,144 24,259
General and administrative expenses.............. 7,559 5,962 13,521 14,221
Provision for shipyard sale...................... 589 - 589 -
------- ------- ------- --------
Operating income................................. 3,086 5,948 9,034 10,038
Interest expense................................. (975) (4,810) (5,785) (10,192)
Interest income.................................. 28 74 102 51
Equity in loss from affiliated partnerships...... (622) - (622) -
Equity in income/(loss) from joint venture....... 220 106 326 (188)
Other income..................................... 317 218 535 155
------- ------- ------- --------
Income/(loss) before provision for income taxes.. 2,054 1,536 3,590 (136)
Provision for income taxes....................... 785 630 1,415 200
------- ------- ------- --------
Net income/(loss)................................ $ 1,269 $ 906 $ 2,175 $ (336)
======= ======= ======= ========
</TABLE>
Operating Revenues. Operating revenues decreased by $1.8 million, or 2.3%,
to $77.3 million in 1995. Tug Services decreased by $4.4 million or 8.5%,
to $48.0 million. This was due to a decrease in shipdocking, harbor towing
and coastwise towing, especially in the first quarter of 1995. A harsh
winter increased tanker and oil barge activity in the northeast during the
early part of 1994, but this was not duplicated during the mild winter of
1995. In addition, operating revenues for 1994 included revenues from a
contract to tow barges carrying partially spent nuclear fuel rods on behalf
of a Long Island power authority. This contract was completed in 1994.
Marine Transportation revenues increased by $2.6 million, or 9.7% to $29.3
million due to increased movements of coal and petroleum products. In
addition, 1995 was the first full year with the barge Pennsylvania, which
was purchased in December 1994. This barge was on charter throughout the
year. The company also increased its transportation of other products, such
as sludge, cement and other dry cargoes. These increased revenues more than
offset lower grain movements in 1995.
Operating Expenses. Operating expenses decreased by $4.0 million, or 8.1%,
to $45.7 million. The $4.0 million decrease in operating expenses is
primarily due to decreases in insurance premiums of $1.5 million, insurance
claims of $1.1 million, repair expense of $1.5 million and fuel and wages
expense of $0.6 million, partially offset by increased drydocking
amortization cost. The lower insurance premiums were the result of a
favorable retroactive insurance adjustment in 1995 as well as the renewal
of various insurance policies at favorable rates (which decreases were
attributable to the Insurance Agreement entered into in 1995). Insurance
claims expense was also lower in 1995 due to favorable claims experience.
Repair expenses were lower in 1995 due to a full year of capitalizing
drydocking expenses and amortizing these costs over their useful lives.
Drydocking amortization increased by $1.3 million, mostly offsetting the
repair expense savings. Fuel and wages were lower as the result of lower
activity versus 1994.
17
<PAGE>
Depreciation. Depreciation expense increased by $1.1 million, or 17.0%.
This increase was due to additional depreciation on a tug and barge
acquired in late 1994 as well as the increased value of floating equipment
resulting from recording the equipment at fair market value as part of the
acquisition accounting in 1994.
General & Administrative Expenses. General and administrative expenses
increased by $0.7 million, or 5.2%, to $14.2 million in 1995. The increase
is primarily due to increased salary and benefits ($0.7 million).
Provision for Shipyard Sale. In 1992, the operations of Jakobson were
discontinued. Discussions have been held with a potential purchaser of the
shipyard property. The provision for shipyard sale includes the pretax
operating losses, anticipated carrying costs until the sale and provision
for clean-up costs to ready the property for sale that are in excess of the
costs expected to be recovered through the sale proceeds. The Predecessor
recorded these costs as estimated or incurred. In connection with the
Acquisition the sellers of the Predecessor agreed to bear certain carrying
costs related to the shipyard arising from and after January 1, 1995. In
1995, the Company's aggregate expenditures with respect to Jakobson, which
totaled $0.6 million, reduced the Company's cash flow. Jakobson received
notification in late 1995 that the shipyard site has been deleted from the
New York State Registry of Inactive Hazardous Waste Disposal Sites.
See "- Other Matters."
Operating Income. Operating income increased by $1.0 million, or 11.1%,
to $10.0 million. The increase was primarily due to the lower cost of
operations discussed above, partially offset by higher depreciation
expense, general and administrative expenses and lower revenues.
Interest Expense. Interest increased by $4.4 million, or 76.2%, to $10.2
million in 1995 due to the effect of a full year of interest related to the
borrowings associated with the Acquisition as compared to 1994, which
included the increased borrowings from July 12, 1994.
Equity in Loss from Affiliated Partnerships. This item represented the
equity earnings from the Predecessor's 20% investment in four partnerships
with Overseas Shipholding Group, Inc. The Predecessor's interest in these
partnerships was transferred to the shareholders of the Predecessor as part
of the Acquisition and the Company has no continuing ownership interest in
these partnerships.
Equity in Income/(Loss) from Joint Venture. Equity in income from the
Company's 50% joint venture decreased by $0.5 million or 157.7% to a loss
of $0.2 million in 1995. The decrease is primarily due to amortization of
the Company's step up in the investment in the joint venture to fair value
as the result of acquisition accounting and lower revenues as the result of
a drydocking in the third quarter of 1995.
Net Income/(Loss). Net income decreased by $2.5 million, or 115.4%, to a
loss of $0.3 million in 1995. The decrease was primarily due to the higher
interest expense discussed above.
Liquidity and Capital Resources
The Company is highly leveraged as a result of the debt incurred as part of
the Acquisition. As part of the Acquisition, the Company has outstanding
$80.0 million of 11.75% Series B First Preferred Ship Mortgage Notes due
July 15, 2004 (the "Notes"), the issuance of which was registered under the
federal securities laws. Interest on the Notes is payable semi-annually on
January 15 and July 15. The Notes are redeemable, in cash, at the option
of the Company, on or after July 15, 1999 at specified redemption prices
plus accrued and unpaid interest. All of the Company's subsidiaries have
guaranteed the Notes. The Notes rank pari passu with all existing and
future senior indebtedness of the Company and senior to all subordinated
indebtedness of the Company and are secured by substantially all of the
Company's floating equipment. The indenture covering the Notes contains
certain restrictions on incurrence of debt, liens, sales of assets,
investments, and capital expenditures, dividends and upstream payments.
The Company must also comply with certain other financial covenants.
The Company has a revolving line of credit of up to $10.0 million,
including a letter of credit facility of up to $5.0 million which reduces
the available credit under the revolving line of credit by the amount of
any outstanding letters of credit. Both facilities are subject to borrowing
base limitations. This Senior Credit Facility is secured by a first
priority lien on trade accounts receivable and inventory of the Company,
has a term of three years and bears interest at rates linked to the prime
rate and/or a Eurodollar rate, at the Company's option. The Senior Credit
Facility
18
<PAGE>
contains certain financial covenants and other covenants. At December 31,
1996, outstanding letters of credit approximated $472,000; no other
borrowings were outstanding under the Senior Credit Facility. The Company
is currently reviewing a proposal to renew this Senior Credit Facility
which expires in July 1997.
On November 8, 1996, a subsidiary of the Company entered into a bareboat
charter for the barge Portsmouth. The 10 year charter contains an option
to buy at enumerated times during the lease period. The Company and Moran
Towing Corporation, a subsidiary, have guaranteed the lease.
On December 29, 1994, a subsidiary of the Company purchased the tug
Valentine Moran and the barge Pennsylvania. As part of that transaction,
the Company's subsidiary entered into a $4.0 million term loan which was
repaid on December 29, 1996. The guaranty by the Company's subsidiary of
the Company's obligation under the Notes is not secured by the two
purchased vessels.
The Company believes that cash flow from current levels of operations and,
to a lesser extent, the availability under the Senior Credit Facility, will
be adequate to make required payments of interest on the Company's
indebtedness, as well as to fund capital expenditures. To the extent that
the Company was to draw upon the commitments under the Senior Credit
Facility due to adverse business conditions or to finance acquisitions or
for other corporate purposes, the Company's aggregate interest expense
would be increased.
The Company believes that it will generate sufficient cash to make required
payments of interest on its indebtedness and lease obligations, based,
among other things, on the assumptions that (i) the Company's revenues and
operating expenses, as adjusted for inflation, will remain relatively
constant; (ii) the Company will retain working capital in accordance with
prior practices; (iii) the Company will not incur any material capital
expenditures (excluding routine drydocking costs) other than the possible
purchase or construction of new vessels or the acquisition of businesses
which in turn are expected to produce additional cash flow; and (iv)
neither OPA 90 nor any other federal or state environmental statutes or
regulations will impose significant additional capital expenditure
requirements on the Company other than the mandated phase-out or
retrofitting of vessels described in "Business Regulatory Matters."
Currently, the Company has no specific plans for funding the repayment of
principal on the Notes. If cash generated from operations is insufficient
to pay any portion of the principal on the Notes, it would be necessary to
refinance the Notes.
Cash and cash equivalents for the year ended December 31, 1996 increased by
$2.8 million compared to a $1.0 million decrease in the year ended December
31. 1995, a $1.8 million increase for the period ended December 31, 1994
and a $0.1 million increase for the period ended July 11, 1994. The
changes for these periods were attributable to the factors discussed below:
For the year ended December 31, 1996, net cash provided by operations was
$11.4 million. This cash, together with temporary borrowings of $2.3
million were used to fund capital expenditures of $5.1 million (primarily
the capitalization of drydocking costs and the upgrading of a tug, the
Harriet Moran, to a MORTRAC tug) and to pay down debt of $5.7 million
(including the indebtedness relating to the acquisition of the Valentine
Moran and the barge Pennsylvania.)
For the year ended December 31, 1995, net cash provided by operations was
$5.5 million. This amount, together with $1.0 million is short-term
borrowings, was used to fund capital expenditures of $5.8 million
(primarily the capitalization of drydocking costs and including the
upgrading of a tug, the Sewells Point, to a MORTRAC tug), to pay debt of
$1.5 million and to pay financing fees of $0.1 million.
In the period ended December 31, 1994, net cash provided by operating
activities was $6.5 million. This amount, together with $86.0 million of
additional borrowings, $11.2 million from equity contributions and $1.2
million in proceeds from the sale of assets was used to fund the
Acquisition of $68.6 million, to repay debt of $24.4 million, to fund
capital expenditures of $6.2 million (primarily attributable to the
purchase of the tug Valentine Moran, the barge Pennsylvania and the
capitalization of drydocking costs) and to pay debt issuance costs of $3.9
million.
In the period ended July 11, 1994, net cash provided by operations totaled
$3.9 million. This amount, together with $0.5 million in proceeds from
borrowings, and $1.8 million of dividends received from affiliated
partnerships were used to fund capital expenditures of $1.0 million, to
repay debt of $3.5 million and to pay dividends of $1.7 million.
19
<PAGE>
Working capital was $9.1 million at December 31, 1996, $7.6 million at
December 31, 1995, $5.9 million at December 31, 1994 and $4.1 million at
July 11, 1994.
On February 21, 1997, the Company purchased a 145,000 barrel ocean going
barge, the Massachusetts. This barge was purchased using internally
generated cash flow.
Other Matters
In 1991, the Company discovered that the historical operations of its ship
repair subsidiary, Jakobson, had resulted in environmental contamination of
its leased shipyard property. During 1991, the Company decided to
discontinue Jakobson's ship repair business during 1992, and therefore
reduced Jakobson's assets to net realizable value. In 1992, Jakobson
ceased operations and commenced the clean up of the shipyard property.
Environmental costs incurred to ready the shipyard for sale were
capitalized to the extent such costs are reasonably expected to be
recovered from the sale of the shipyard. At December 31, 1992, management
established reserves for the expected future clean up of the shipyard
property. The clean up encompassed remediation of both the shipyard
property and sediments in the bay immediately adjacent to the shipyard.
Remediation of the shipyard property was substantially completed in 1993
and remediation of bay sediments commenced and were substantially completed
in 1994. The remedial activities at the facility were concluded in 1995.
The cost of this project has been approximately $6.1 million. In late
1995, Jakobson received written notification from the New York Department
of Environmental Conservation that the shipyard site had been deleted from
the State Registry of Inactive Hazardous Waste Disposal Sites. In 1995,
the Company expended approximately $0.6 million in connection with the
Jakobson property. Although such expenditures did not affect the Company's
results of operations because they were charged against the provision for
shipyard sale, such expenditures did reduce the Company's cash flow.
Recent Financial Accounting Pronouncements
None
Inflation
In general, the Company's business is affected by inflation and the effects
of inflation may be experienced by the Company in future periods.
Management believes, however, that such effect has not been significant to
the Company during the past three years. In the event that significant
inflationary trends were to arise, management believes that the Company
would generally be able to offset the effects thereof by increasing rates,
to the extent permitted by competitive factors, and through operation of
certain escalation clauses contained in certain of the Company's marine
transportation contracts. There can be no assurance, however, that all
such cost increases could be passed through to customers.
Item 8. Financial Statements
See the financial statements which are listed in items 14(a)(1)-(2).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in, or disagreements with, accountants.
20
<PAGE>
PART III
--------
Item 10. Executive Officers and Directors of the Registrant
Set forth below is information concerning the directors and executive
officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Paul R. Tregurtha 61 Chairman of the Board and Director
James R. Barker 61 Vice Chairman of the Board and Director
Malcolm W. MacLeod 63 President, Chief Executive Office and Director
Jeffrey J. McAulay 43 Vice President of Finance and Administration and Director
William P. Muller 45 President of Moran Services Corporation
Edmond J. Moran, Jr. 52 President of Moran Mid-Atlantic Group and Director
Alan L. Marchisotto 47 General Counsel and Secretary
Andrew P. Langlois 55 Director
Mort Lowenthal 66 Director
</TABLE>
Paul R. Tregurtha. Mr. Tregurtha has been a director and Chairman of the
Board of the Company since June 1994. In addition, he has been Chairman of
each of Mormac Marine Group, Inc.(the parent of Mormac) and Meridian
Aggregates Company, which owns and operates in the United States, since
1988 and 1991, respectively, and Vice Chairman of each of The Interlake
Steamship Company and Lakes Shipping Company, Inc. since 1988 and 1989,
respectively. He served as Chairman and Chief Executive Officer of Moore
McCormack Resources during 1987 and 1988 and was President and Chief
Operating Officer of Moore McCormack Resources prior to that time. Mr.
Tregurtha serves on the Board of Directors of Brown & Sharpe Manufacturing
Company, FPL Group, Inc. and Fleet Financial Group, and is a trustee of
TIAA/CREF.
James R. Barker. Mr. Barker has been a director and is Vice Chairman of
the Board of the Company since June 1994. In addition, he has been
Chairman of each of The Interlake Steamship Company and Lakes Shipping
Company, Inc. since 1987 and 1989, respectively, and Vice Chairman of
Mormac Marine Group, Inc. since 1988. From 1987 to 1988, he served as
Chairman of Mormac Marine Group, Inc. He served as Chairman and Chief
Executive Officer of Moore McCormack Resources from 1971 to 1987. Prior to
joining Moore McCormack Resources, Mr. Barker co-founded and was a
principal of the management consulting firm of Temple, Barker & Sloane,
where he specialized in consulting to the transportation industry. Mr.
Barker is a member of the Board of Directors of each of GTE Corporation and
Pittston Corporation, is a trustee for Eastern Enterprises and is the
Chairman of the Committee of Managers of the Skuld Protection and
Indemnity Association.
Malcolm W. MacLeod. Mr. MacLeod has served as President, Chief Executive
Officer and director since the Acquisition. Mr. MacLeod served as
President of the Predecessor from June 1987 until the Acquisition and as
Chief Executive Officer from April 1991 until the Acquisition. In
addition, Mr. MacLeod served as a director of the Predecessor from 1984
until the Acquisition. Mr. MacLeod served as President and Chief Executive
Officer of Curtis Bay Towing Company, a Company subsidiary, from 1979 until
1987 and as Vice President of Curtis Bay from 1978 to 1979. Prior to that,
Mr. MacLeod started on Company tugs after his graduation from the
Massachusetts Maritime Academy in 1954 and has been with the Company and
its subsidiary companies in a variety of assignments since that time, with
the exception of two years' service in the United States Navy as a deck
officer on fleet tugs.
Jeffrey J. McAulay. Mr. McAulay has served as the Vice President of
Finance and Administration and a director of the Company since April 1996.
Mr. McAulay served as the Company's Controller from the Acquisition until
April 1996 and served as Controller of the Predecessor from February 1992
until the Acquisition. From 1979 through 1992, Mr. McAulay was employed by
W.R. Grace & Co. He held various positions at Grace's Specialty Chemicals
Group including Manager of New Business Analysis (from 1988 to 1992),
Assistant Controller and briefly as Chief Financial Officer of Grace's
Japan Chemicals Business. Mr. McAulay began his career at the auditing
firm of Arthur Andersen & Co.
William P. Muller. Mr. Muller was appointed President of Moran Services
Corporation and director of Moran Towing Corporation in July 1995. From
1989 until July 1995, was the Vice President, Operations of Moran Towing
21
<PAGE>
& Transportation Co., Inc., the Company's New York operating subsidiary and
Vice President of Moran Services Corporation. From 1981 through 1989, he
was Vice President and General Manager of Moran Towing of Florida Inc., the
Company's Jacksonville operating subsidiary. Mr. Muller joined Moran in
1977 as part of the sales department and held a variety of positions before
accepting the Florida position. Prior to joining Moran, Mr. Muller served
as a manager for Prudential Grace Line's South American operations. He
began his career with Continental Insurance (MOAC) in the hull &
underwriting department.
Edmond J. Moran, Jr. From 1987 until the present, Mr. Moran has served as
President of Moran Mid-Atlantic Corporation (which was reorganized as the
Moran Mid-Atlantic Group as of January1, 1997). Since January 1, 1997,
Mr. Moran has also served as Vice President, Business Development of Moran
Towing Corporation. Mr. Moran is currently a director of the Company and
served as a director of the Predecessor from 1984 until the Acquisition.
From 1984 until 1987, Mr. Moran served as Vice President of Moran Towing &
Transportation Co., Inc. and directed all the activities of the Company's
barge division. From 1981 until 1983, Mr. Moran served as President of the
subsidiary in charge of Moran's Texas subsidiary. From 1976 until 1981, he
served as Vice President and General Manager of Jacksonville operations.
From 1971, when he joined the Company, until 1976, Mr. Moran served as a
Sales Representative in the Harbor Operations Department. Prior to that,
following active duty in the United States Navy, Mr. Moran joined the
planning department of States Marine Lines, Inc.
Alan L. Marchisotto. Mr. Marchisotto joined the Company in 1982 as
Secretary and General Counsel. From 1978 until 1982, he served as
corporate and international counsel to Norlin Corporation, a NYSE-listed
company, where he directed the legal affairs of manufacturing and sales
subsidiaries in eleven countries and worked closely with senior management
in the negotiation and structuring of complex financing and business
agreements. Prior to that, he was engaged in private practice in New York
City.
Andrew P. Langlois. Mr. Langlois has served as a director since the
Acquisition. Mr. Langlois has served as Vice President of Mormac Marine
Group and Lakes Shipping Company, Inc., since 1988 and 1989, respectively,
and as Vice President and Director of Meridian Aggregates Company since
1991. From 1980 to 1988, Mr. Langlois was employed by Moore McCormack
Resources and was an officer from 1983 to 1988. Prior to joining Moore
McCormack in 1980, he was employed by the Electric Boat Division of General
Dynamics.
Mort Lowenthal. Mr. Lowenthal joined the Board of Directors in November
1994. Mr. Lowenthal is a Senior Advisor - Schroder Wertheim & Co.,
Incorporated, an international investment bank. From 1980 to February
1995, Mr. Lowenthal was a Managing Director at Schroder Wertheim & Co.,
Incorporated.
Each director holds office until the next annual meeting of stockholders
and until his successor has been elected and has qualified. Officers are
elected by the Board of Directors and serve at its discretion.
All directors of the Company who are not employees of the Company or the
Lakes Group are reimbursed for their travel and other expenses incurred in
connection with their responsibilities, and are also paid $800 for every
meeting attended.
22
<PAGE>
Item 11. Executive Compensation
The following table sets forth the annual and long-term compensation for
the five highest paid officers (named executive officers), as well as the
total compensation paid to, or earned by, each individual for the Company's
fiscal years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Annual
Compensation
Fiscal All Other
Name & Position Year(1) Salary Bonus Compensation(2)
--------------- ------ ------ ----- ---------------
<S> <C> <C> <C> <C>
Paul R. Tregurtha 1996 $300,000 $ --- $ ---
Chairman of the Board 1995 300,000 --- ---
1994(3) 138,462 --- ---
James R. Barker 1996 300,000 --- ---
Vice Chairman of the Board 1995 300,000 --- ---
1994(3) 138,462 --- ---
Malcolm W. MacLeod 1996 319,374 32,000 16,320
President and Chief Executive Officer 1995 298,340 29,500 16,443
1994 291,000 --- 16,452
Edmond J. Moran, Jr. 1996 168,635 10,000 16,320
President of Moran Mid-Atlantic Group 1995 163,723 7,500 16,443
1994 158,954 --- 16,452
Alan Marchisotto 1996 142,527 8,500 15,573
General Counsel and Secretary 1995 137,527 5,000 15,151
1994 131,776 --- 14,630
</TABLE>
(1) In the case of Messrs. MacLeod, Moran and Marchisotto, reflects
compensation paid by the Predecessor for the period from January 1,
1994 through January 11, 1994, and compensation paid by the Company for
the period from July 12, 1994 through December 31, 1994, and
compensation paid for fiscal 1995 and 1996.
(2) Amounts for 1996 includes contribution of $15,000, $15,000 and $14,253
made by the Company to the Company's Profit Sharing Plan on behalf of
Messrs. MacLeod, Moran and Marchisotto, respectively, in 1996. See
"Company Plans-Profit Sharing Plan." Also includes premiums of $1,320
paid by the Company in respect of term life insurance policies insuring
the lives of Messrs. MacLeod, Moran and Marchisotto, respectively, in
1996.
(3) Messrs. Tregurtha and Barker began receiving compensation after the
Acquisition.
Company Plans
In connection with the Acquisition, the Company will provide benefits to
the Company's non-union employees for at least three years on terms which
are substantially similar to the benefit plans of the Predecessor existing
prior to the Acquisition. In addition, as described below under "-1994
Stock Option Plan," the Company adopted a stock option plan which became
effective upon the consummation of the Acquisition.
23
<PAGE>
Defined Benefit Plans
The following table shows the estimated annual benefits on a combined basis
for employees who retire at age 65, without regard to statutory maximums,
for various combinations of final average compensation and lengths of
service under the Moran Towing Corporation Restated Pension Plan and the
Moran Towing Corporation Supplemental Employee Retirement Plan
(collectively, the "Plans"). The Restated Pension Plan is intended to be a
qualified plan under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the Supplemental Employee Retirement Plan is
not intended to be so qualified.
<TABLE>
<CAPTION>
Projected Annual Benefits at Age 65
------------------------------------
Average Five Year of Service
Year Base ---------------
Salary 15 20 25 30 35
------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $27,450 $36,600 $ 45,750 $ 54,900 $ 64,050
150,000 33,075 44,100 55,125 66,150 77,175
175,000 38,700 51,600 64,500 77,400 90,300
200,000 44,325 59,100 73,875 88,650 103,425
225,000 49,950 66,600 83,250 99,900 116,550
250,000 55,575 74,100 96,625 111,150 129,675
275,000 61,200 81,600 102,000 122,400 142,800
300,000 66,825 89,100 111,375 133,650 155,925
</TABLE>
Generally, the monthly pension benefit under the Plans for named executive
officers is equal to 1% of the first $750 of average monthly compensation
plus 1.5% of the remainder of the executive officer's average monthly
compensation, multiplied by the executive's number of years of credited
service. In the case of service years prior to 1975, the executive's
benefit for such years is equal to 25% of the executive's average monthly
compensation multiplied by a fraction equal to the executive's number of
years of credited service divided by 35 and adjusted for the normal form of
payment under the Plans as in effect at that time. The benefit in respect
of years prior to 1975 is not reflected in the table. For purposes of the
preceding computations, an executive's average monthly compensation is
equal to the highest average of the executive's base compensation (on a
monthly basis) for any five consecutive calendar years during the final 10
calendar years before retirement. For 1995, the base compensation for each
of the named executive officers is the same as the salary shown in the
summary compensation table under "Management-Executive Compensation."
After three years of service, a participant becomes 20% vested and vesting
continues in 20% increments for each year of service. At seven years the
participant is 100% vested. The estimated number of credited years of
service for named executive officers is as follows: Malcolm MacLeod, 42
years; Edmond Moran, Jr., 26 years and Alan Marchisotto, 14 years.
Profit Sharing Plan. As a retirement plan for substantially all shoreside
non-union employees, the Company established a tax-qualified defined
contribution plan (the "Profit Sharing Plan"). Contributions are made on
an annual basis in an amount determined at the sole discretion of the Board
of Directors of the Company, subject to certain maximum limitations set
forth under the Code. Contributions are based upon a percentage, generally
10% to 15%, of each participant's compensation as defined in the Profit
Sharing Plan. Contributions are invested in various investment
alternatives pursuant to instructions received from each plan participant.
After three years of service, a participant becomes 20% vested and vesting
continues in 20% increments for each year of service. At seven years, the
participant is 100% vested. Profit Sharing Plan contributions are made on
a fiscal year basis.
1994 Stock Option Plan. The Company's 1994 Stock Option Plan (the "1994
Plan") was adopted by the Company's Board of Directors and stockholders on
June 11, 1994, effective as of the consummation of the Acquisition, to
provide an incentive to select employees of the Company to remain in the
employ of the Company and to increase their personal interest in the
success of the Company. The 1994 Plan provides for the grant of options
("1994 Stock Options") to purchase shares of the Company's Common Stock.
The maximum number of shares of the Company's Common Stock issueable under
the 1994 Plan is 2,000. Participation in the 1994 Plan is limited to
employees of the Company designated by the Plan Committee comprised of
Messrs. Tregurtha and Barker, each of whom is ineligible to receive awards
under the 1994 plan. Non-employee directors of the Company are not
eligible to participate.
24
<PAGE>
The table sets forth certain information concerning the number of shares
covered by stock options as of December 31, 1996. At December 31, 1996 the
fair market value is assumed to be equal to the exercise price. None of
the named executive officers exercised an option to purchase the Company's
Common Stock in 1996.
<TABLE>
<CAPTION>
Fiscal Year-End Option Values
Number of
Securities Underlying Value of Unexercised
Shares Unexercised in-the-Money Options
Acquired Options at Fiscal at Fiscal year End($)
on Value Year-end (Exercisable/
Name Exercise Realized (Exercisable/Unexercisable) Unexercisable)
---- -------- -------- --------------------------- ---------------------
<S> <C> <C> <C> <C>
Paul R. Tregurtha 0 0 0 0
James R. Barker 0 0 0 0
Malcolm W. MacLeod 0 0 800/0 $0/$0
Edmond J. Moran, Jr. 0 0 0 0
Alan L. Marchisotto 0 0 0 0
</TABLE>
25
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board of Directors is comprised
of Messrs. Tregurtha, Barker and MacLeod. Messrs. Tregurtha, Barker and
MacLeod have served in the positions described under "Executive Officers
and Directors of the Registrant". Generally such relationships can create
an opportunity for conflicts of interest in compensation decisions. Other
than as set forth below, none of the members of the Committee has any other
relationship with other entities that would require additional disclosure.
Messrs. Tregurtha and Barker serve in various capacities, including serving
as directors, of Mormac Marine Group, Inc., Meridian Aggregates Company and
Lakes Shipping. Mr. Langlois, a director of the Company, is an executive
officer of Mormac Marine Group, Inc., Meridian Aggregates Company and Lakes
Shipping. The boards of directors of such entities perform the functions
of compensation committees. In addition, the Company provides ship docking
and undocking services to Mormac, a company which is owned by Messrs.
Barker and Tregurtha and certain members of their families and as to which
Messrs. Barker and Tregurtha are principal executive officers. Mormac
operates three Coronado class oil tankers in the foreign trade and manages
tankers for others in the Jones Act. During 1996, Mormac paid $188,000 for
ship docking services performed by the Company. All such services were
provided on arms'-length terms at customary rates. Management has been
informed that Mormac expects to continue to use the Company's tug services
in each instance where Mormac's tankers call on a harbor which the Company
services. All such services will be performed on arms'-length terms and
conditions. All of the members of the Compensation Committee are also
parties to stockholder agreements with the Company. The Company has
entered into the Insurance Agreement with the Mormac Group. Messrs.
Tregurtha, Barker and Langlois are officers, directors and/or direct or
indirect shareholders of some or all of the entities in the Mormac Group.
The Company and the Mormac Group entered into the Insurance Agreement in an
effort to reduce insurance expenses by obtaining lower premiums through
group purchases of insurance and through higher deductibles. The Insurance
Agreement also provides for allocation among the parties of any risk
arising out of the increases in insurance deductibles. Pursuant to the
Insurance Agreement, the Company and the Mormac Group agreed to share any
increased insurance claims expense required to be borne by a party as a
result of insurance claims which exceed historical deductibles but are less
than the new, increased deductibles. Allocations of any increased
insurance claims expense is based upon the historical claims experience (in
excess of historical deductibles) for each party to the agreement. In the
current policy year, 60% of any additional insurance claims expense
attributable to the higher deductibles will be borne by the Company and 40%
of any such additional insurance claims expense will be borne by the Mormac
Group. Amounts payable to the Company from members of the Mormac Group
totaled $482,000 at December 31, 1996. The Company believes that the terms
of the Insurance Agreement which was prepared in consultation with an
independent insurance broker, are similar to those that would be obtained
in an arms'-length transaction.
In February 1997, the Company entered into a bareboat charter with
Interlake Transportation, Inc., a corporation which is indirectly owned by
Messrs. Tregurtha and Barker, and as to which Messrs. Tregurtha, Barker and
Langlois serve as executive officers and/or directors. Pursuant to the
bareboat charter, the Company will bareboat charter a tug until at least
October, 1997, at an aggregate cost of approximately $650,000. As part of
a related transaction on February 21, 1997, in which the Company purchased
the barge Massachusetts from a third party, the Company assigned its right
to purchase such tug from the same third party to Interlake Transportation,
Inc., which purchased the tug. The Company received no consideration for
such assignment to Interlake Transportation, Inc.
26
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain beneficial ownership information as
of March 24, 1997, concerning the Company's Common Stock with respect to
(1) each person known by the Company to be a beneficial owner of more than
5% of the outstanding shares of the Company's Common Stock, (2) each
director of the Company, (3) each named executive officer of the Company,
and (4) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number
Directors, Named Officers and of
5% Beneficial Owners(1) Shares(2) Percentage
----------------------- --------- -----------
<S> <C> <C>
Lakes Shipping Company, Inc. ................................... 28,000 61.5%
Paul R. Tregurtha(3) ........................................... 34,375 75.5
James R. Barker(4) ............................................. 30,310 66.6
Malcolm W. MacLeod(5) .......................................... 2,800 6.2
Edmond J. Moran, Jr. ........................................... 1,200 2.6
Andrew P. Langlois(6) .......................................... 450 1.0
Alan Marchisotto ............................................... 800 1.8
Jeffrey J. McAulay(7) .......................................... 50 0.1
Mort Lowenthal ................................................. - -
Directors and executive officers as a group (9 persons)(8) ..... 42,097 92.4
</TABLE>
(1) Unless otherwise indicated, the business address of each beneficial
owner of more than 5% of the Company's Common Stock is Three Landmark
Square, Stamford, Connecticut 06901.
(2) For purposes of computing the percentage of outstanding shares of the
Company's common Stock held by each person or entity, a person or
entity is deemed to have "beneficial ownership" of any shares of the
Company's Common Stock which such person or entity has the right to
acquire within 60 days after the date of the report. Any such shares
are deemed to be outstanding for purposes of computing percentages of
beneficial ownership. Unless otherwise indicated, shares of the
Company's Common Stock are considered beneficially owned by a person
or entity if such person or entity has or shares voting or investment
power with respect to such shares. As a result, the same security may
be beneficially owned by more than one child and entity and,
accordingly, in some cases, the same shares are listed opposite more
than one name in this table.
(3) Mr. Tregurtha owns directly 6,375 shares of the Company's Common
Stock. In addition, Mr. Tregurtha beneficially owns 44.6% of the
capital stock of, and serves as Vice Chairman of, Lakes Shipping.
Therefore, Mr. Tregurtha may be deemed to beneficially own the 28,000
shares beneficially owned by Lakes Shipping.
(4) Mr. Barker owns directly 2,310 shares of the Company's Common Stock.
In addition, Mr. Barker and certain members of his family beneficially
own in the aggregate 44.6% of the capital stock of Lakes Shipping. Mr.
Barker also serves as Chairman of Lakes Shipping. Therefore, Mr.
Barker may be deemed to beneficially own the 28,000 shares
beneficially owned by Lakes Shipping. Three of Mr. Barker's adult
children own in the aggregate 3,465 shares of Company's Common Stock,
which shares are excluded from the number of shares of the Company's
Common Stock shown as being owned by Mr. Barker. Mr. Barker disclaims
beneficial ownership of all 3,465 shares which are owned by his
children.
(5) Mr. MacLeod's business address is Two Greenwich Plaza Greenwich,
Connecticut 06830. Includes options to purchase 800 shares of the
Company's Common Stock which were granted to Mr. MacLeod upon the
consummation of the Acquisition.
(6) Shares shown are held by an individual retirement account for the
benefit of Mr. Langlois.
(7) Includes presently exercisable options to purchase shares of the
Company's Common Stock.
(8) Includes presently exercisable options to purchase shares of the
Company's Common Stock which were granted to William P. Muller, the
President of Moran Services Corporation, upon consummation of the
Acquisition.
27
<PAGE>
Item 13. Certain Relationships and Related Transactions
As discussed under "Business," the Company was formed in June 1994 in order
to acquire all of the outstanding capital stock of the Predecessor from,
among others, Messrs. MacLeod and Moran. Messrs. MacLeod, Moran and
Marchisotto acquired shares of the common stock of the Company concurrently
with the closing of the Acquisition. In addition, as discussed in note 1
to the consolidated financial statements attached to this report, the
Predecessor transferred its 20% equity interest in four partnerships to
entities formed by the stockholders of the Predecessor. Finally, the
agreement governing the Acquisition provides for the payment of a
contingent purchase price to the former stockholders of the Predecessor
upon the occurrence of certain events. Contingent purchase price of $12.0
million was paid to the former stockholders on February 10, 1997. In
connection with the Acquisition, the sellers of the Predecessor agreed to
bear certain carrying costs related to the Jakobson shipyard arising from
and after January 1, 1995.
Certain members of management (the "Management Group") entered into
stockholder agreements (the "Stockholder Agreements") concurrently with the
consummation of the Acquisition. With the exception of Alan L.
Marchisotto, who purchased shares of the Company's Common Stock for cash,
all members of the Management Group were issued shares of the Company's
Common Stock in exchange for a portion of their shares of the capital stock
of the Predecessor. The Stockholder Agreements place the following
restrictions upon the transfer of the Company's Common Stock by each member
of the Management Group: (i) the members of the Management Group may not
transfer the Company's Common Stock to any non-U.S. citizen, for purposes
of the Jones Act (a "Foreigner"), and (ii) the members of the Management
Group may not transfer shares of the Company's Common Stock to any other
individuals or entities except in certain limited situations, such as
through obtaining the consent of the Company to the transfer, the exercise
of a "Put" (as defined below) with respect to these shares or the transfer
of these shares to ancestors, descendants or a spouse. The Stockholder
Agreements also provide that each member of the Management Group has the
right to require the Company to purchase (a "Put") all of such member's
shares of the Company's Common Stock following such time as the member
ceases to be an employee of any of the Company, its Subsidiaries or its
affiliates, with certain limitations. The Company has the right to
purchase (a "Call") the shares of the Company's Common Stock of each member
of the Management Group upon the occurrence of certain events, including
the death of such member, the making by such member of a general assignment
for the benefit of creditors, the filing of a voluntary or involuntary
petition for bankruptcy or the cessation of such member's employment with
the Company, its subsidiaries or affiliates. The Stockholder Agreements
for all members of the Management Group, provide that the purchase price of
the shares being either purchased or sold through such a Put or Call will
be the fair market value of such shares as determined by an investment
banking firm of national standing. The Stockholder Agreements also provide
that if the Company grants registration rights to any executive officer, it
will at such time grant proportionate registration rights to the members of
the Management Group.
The members of the Lakes Group entered into stockholder agreements with the
Company prohibiting the transfer of the Company's Common Stock to any
foreigner.
28
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of the Report
(1) Financial Statements - The Company
The following Consolidated Financial Statements of the Company and its
subsidiaries are included in this Report:
Reports of Independent Accountants....................... F-1, F-2
Consolidated Balance Sheets at December 31, 1995
and December 31, 1996.................................... F-3to F-4
Consolidated Statements of Income for the periods ended
July 11, 1994 and December 31, 1994, and the Years Ended
December 31, 1995 and December 31, 1996 ................. F-5
Consolidated Statements of Cash Flows for the periods ended
July 11, 1994 and December 31, 1994, and the Years Ended
December 31, 1995 and December 31, 1996.................. F -6
Consolidated Statement of Stockholders' Equity for
the periods ended July 11, 1994 and December 31, 1994,
and the Years Ended December 31, 1995 and
December 31, 1996........................................ F-7
Notes to Consolidated Financial Statements............... F-8 to F-21
(2) Financial Statement Schedules - Shipmor Associates #
The following Combined Financial Statements of certain partnerships (the
"Shipmor Associates") are included in this Report:
Report of Independent Auditors F-22
Combined Balance Sheet at December 31, 1993.......... F-23
Combined Statements of Operations for the Six Months ended
June 30, 1994 and for the Years Ended December 31, 1993 and
December 31, 1992..................................... F-24
Combined Statements of Cash Flows for the Six Months ended
June 30, 1994 and for the Years Ended December 31, 1993 and
December 31, 1992..................................... F-25
Notes to Combined Financial Statements................ F-26 to F-29
- ---------------
# The combined financial statements of Shipmor Associates have been included
with this filing in order to conform with Regulation S-X Rule 3-09 of the
Securities and Exchange Commission. Audited financial statements for the
affiliated partnerships were prepared as of June 30, 1994, as it was not
practical to obtain audited financial statements as of July 11, 1994. However,
the affiliated partnerships' results for the period July 1, 1994, through July
11, 1994, were not material to the Company. Effective July 11, 1994, Moran's
20% interest in Shipmor Associates was sold to the Stockholders of the
Predecessor.
29
<PAGE>
(3) Exhibits
The following is a list of Exhibits to this Report. Exhibits marked with a
"3/4" are management contracts or compensatory plans or arrangements required to
be filed as Exhibits to this report pursuant to Item 14(c) of this report.
Exhibit No. Description of Document
- ----------- -----------------------
3.1* Certificate of Incorporation of the Registrant
3.2* By-Laws of the Registrant.
4.1* Indenture, dated as of July 11, 1994, among the Registrant, the
Guarantors named therein and Fleet National Bank of Connecticut
(formerly Shawmut Bank Connecticut, National Association), as Trustee,
relating to the Notes (including forms of Notes and Guarantees).
4.1(a)** Supplemental Indenture No. 1, dated December 29, 1994.
4.1(b)***Supplemental Indenture No. 2, dated January 2, 1996.
4.1(c) Supplemental Indenture No. 3, dated December 31, 1996.
4.2* Form of Preferred Ship Mortgage, dated July 11, 1994, in favor of Fleet
National Bank of Connecticut (formerly Shawmut Bank Connecticut,
National Association), as Trustee.
4.3* Form of Preferred Fleet Mortgage, dated July 11, 1994, in favor of
Fleet National Bank of Connecticut (formerly Shawmut Bank Connecticut,
National Association), as Trustee.
10.2* Revolving Credit Agreement, dated as of July 11, 1994, among the
Registrant and the Restricted Subsidiaries named therein and The First
National Bank of Boston, the other lenders that may become parties
thereto, and The First National Bank of Boston, as agent.
10.2(a)**Instrument of Adherence dated December 29, 1994 by Barge Pennsylvania
Corporation.
10.2(b)***Instrument of Adherence dated January 2, 1996, by Moran Bulk
Corporation.
10.2(c) Instrument of Adherence dated December 31, 1996 by Seaboard Barge
Corporation, Petroleum Transport Corporation, and Moran Towing of
Delaware, Inc.
10.3* Security Agreement, dated as of July 11, 1994 among the Registrant, its
subsidiaries named therein and The First National Bank of Boston,
individually and as agent.
10.3(a) Security Agreement, dated December 31, 1996 among Seaboard barge
Corporation, Petroleum Transport Corporation and Moran Towing of
Delaware, Inc., and The First National Bank of Boston, individually and
as agent.
10.4* Note, dated July 11, 1994, of the Registrant and its subsidiaries named
therein, payable to the order of The First National Bank of Boston in
the principal amount of up to $10,000,000.
10.5* Stock Purchase Agreement (the "Stock Purchase Agreement"), dated as of
June 11, 1994, between the Registrant and the stockholders of Moran
Towing Corporation.
10.6* First Amendment, dated June 30, 1994, to the Stock Purchase Agreement.
10.7* Escrow Agreement, dated as of July 11, 1994, among the Registrant, each
of the persons listed on Annex A thereto, and Citibank, N.A., as escrow
agent, together with the side letter thereto, dated July 11, 1994.
30
<PAGE>
10.8* Security Agreement, dated as of July 11, 1994, among Moran Towing
Corporation, the Registrant, the Owner Participants named therein
and Overseas Shipholding Group, Inc.
10.9* Guaranty and Indemnity Agreement, dated October 31, 1975, among
Moran Towing Corporation, Overseas Shipholding Group, Inc., First
Chicago Leasing Corporation, and FCL Ship Seven, Inc., in
substantially the same form as the Guaranty and Indemnity
Agreements identified in the Schedule attached thereto.
10.10* Supplement to the Guaranty and Indemnity Agreement, dated July 11,
1994, among Moran Towing Corporation, the Registrant, Overseas
Shipholding Group, Inc., First Chicago Leasing Corporation and FCL
Ship Seven, Inc. in substantially the same form as the Supplements
to Guaranty and Indemnity Agreement identified in the Schedule
attached thereto.
10.11* Bareboat Charter dated as of October 31, 1975 between Manufacturers
Hanover Trust Company (as succeeded by Chemical Bank), as owner
trustee, and Fourth Shipmor Associates, in substantially the same
form as the Bareboat Charters identified in the Schedule attached
thereto.
10.12* 1994 Restated and Amended Agreement concerning Stockholders among
Overseas Shipholding Group, Inc., Moran Towing Corporation, San
Diego Tankers, Inc., San Jose Tankers, Inc., Santa Barbara Tankers,
Inc., Santa Monica Tankers, Inc., Thomas E. Moran, Lee R.
Christensen, Malcolm W. MacLeod, Edmond J. Moran, Jr., Russell G.
McVay and W. Anthony Watt.
10.13** Agreement, effective August 16, 1994, between Moran Towing of New
Hampshire, Inc. and Moran Towing of New Hampshire Employees
Association.
10.14***** Licensed Agreement, effective June 10, 1995, between Seafarers
International Union of North America, Atlantic, Gulf, Lakes and
Inland Waters District, AFL - CIO, and Moran Towing of Texas Inc.
10.15***** Unlicensed Agreement, effective June 10, 1995, between Seafarers
International Union of North America, Atlantic, Gulf, Lakes and
Inland Waters District, AFL - CIO, and Moran Towing of Texas Inc.
10.16* Agreement, effective November 21, 1993, between Seafarers
International Union of North America, Atlantic, Gulf, Lakes and
Inland Waters District, AFL - CIO, and Moran Mid-Atlantic
Corporation, Moran Towing of Maryland Division.
10.17* Agreement, effective November 24, 1993, between Seafarers
International Union of North America, Atlantic, Gulf, Lakes and
Inland Waters District, AFL - CIO, and Moran Mid-Atlantic
Corporation, Moran Towing of Pennsylvania Division.
10.18* Licensed Agreement, effective November 24, 1993, between American
Maritime Officers and Moran Mid-Atlantic Corporation, Moran Towing
of Pennsylvania Division.
10.19* Agreement, effective May 1, 1994, between International
Organization of Masters, Mates & Pilots and Moran Towing of
Florida, Inc.
10.20* Stockholder Agreement, dated as of July 11, 1994, between the
Registrant and Malcolm W. MacLeod.
10.22* Stockholder Agreement, dated as of July 11, 1994, between the
Registrant and Edmond J. Moran, Jr.
10.23* Stockholder Agreement, dated as of July 11, 1994, between the
Registrant and Alan L. Marchisotto.
10.24* Form of Stockholder Agreement, dated as of July 11, 1994, between
the Registrant and each of Lakes Shipping Company, Inc., Paul R.
Tregurtha, James R. Barker, Andrew P. Langlois, James A. Barker,
Mark W. Barker and Karen E. Barker.
10.25* 1994 Stock Option Plan of the Registrant.
31
<PAGE>
10.26* Form of 1994 Stock Option Agreement.
10.27* Moran Towing Corporation and Subsidiaries Supplemental Employee
Retirement Plan.
10.31****Marine Insurance Additional Retention Agreement between Global Marine
Enterprises Ltd., Interlake Steamship Company, Lakes Shipping Company,
Inc., Moran Towing Corporation and Mormac Marine Transport, Inc..
12.1 Statement regarding computation of ratio of earnings to fixed charges.
21.1 List of Subsidiaries.
27.1 Financial Data Schedule
- ------------------
* Filed as an Exhibit to the Registrant's Registration Statement on Form S-1
(No. 33 - 82624) and incorporated herein by reference.
** Filed as an Exhibit to the Registrant's Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
*** Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period
ended March 31, 1996 and incorporated herein by reference.
**** Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly period
ended September 30, 1995 and incorporated herein by reference.
*****Filed as an Exhibit to the Registrant's Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the last
quarter of the year covered by this report.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MORAN TRANSPORTATION COMPANY
(Registrant)
March 27, -1997 /s/ Jeffrey J. McAulay
-----------------------
Jeffrey J. McAulay
Vice President of
Finance and Administration
(Principal Financial Officer) and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
March 27, 1997 /s/ Paul R. Tregurtha
------------------------------------------------
Paul R. Tregurtha
Chairman of the Board and Director
March 27, 1997 /s/ James R. Barker
------------------------------------------------
James R. Barker
Vice-Chairman of the Board and Director
March 27, 1997 /s/ Malcolm W. MacLeod
------------------------------------------------
Malcolm W. MacLeod
President, Chief Executive Officer and Director
33
<PAGE>
SIGNATURES
March 27, 1997 /s/ Edmond J. Moran, Jr.
------------------------------------------------
Edmond J. Moran, Jr.
Director
March 27, 1997 /s/ Robert J. Patten
-----------------------------------------------
Robert J. Patten
Controller (Principal Accounting Officer)
March 27, 1997 /s/ Andrew P. Langlois
-----------------------------------------------
Andrew P. Langlois
Director
March 27, 1997 /s/ Mort Lowenthal
-----------------------------------------------
Mort Lowenthal
Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED
WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF
THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
The registrant has not sent, and does not presently intend to send, to its
security holders either: (1) An annual report to security-holders covering the
registrant's last fiscal year; or (2) A proxy statement, form of proxy or other
proxy soliciting material with respect to any annual or other meeting of
security-holders.
34
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors and Stockholders of
Moran Transportation Company
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, of cash flows and of changes in stockholders'
equity present fairly, in all material respects, the financial position of Moran
Transportation Company and its subsidiaries (the "Company") at December 31, 1996
and 1995, and the results of their operations and their cash flows for the years
ended December 31, 1996 and 1995 and for the period from July 12, 1994 to
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Stamford, Connecticut
February 20, 1997
F-1
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors and Stockholders of
Moran Towing Corporation
In our opinion, based upon our audit and the report of other auditors, the
accompanying consolidated statements of income, of cash flows and of changes in
stockholders' equity of Moran Towing Corporation and its subsidiaries (the
"Company") present fairly, in all material respects, the results of their
operations and their cash flows for the period from January 1, 1994 to July 11,
1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We did not audit the financial statements of four 20% owned
partnerships. The equity in the loss of these partnerships was $622,000 for the
period ended July 11, 1994. Those statements were audited by other auditors
whose report thereon has been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for such partnerships, is
based solely on the report of the other auditors. We conducted our audit of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit and the report of
other auditors provides a reasonable basis for the opinion expressed above.
As described in Note 1 to the consolidated financial statements, the Company was
acquired by Moran Transportation Company on July 11, 1994.
Price Waterhouse LLP
Stamford, Connecticut
February 20, 1997
F-2
<PAGE>
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
-------- --------
ASSETS
------
<S> <C> <C>
Current assets
Cash and cash equivalents................................... $ 3,006 $ 5,827
Accounts receivable, less allowance for doubtful accounts
of $263 and $323 at December 31, 1995 and 1996,
respectively............................................... 12,047 12,744
Inventory (note 5).......................................... 4,330 4,395
Unexpired insurance and other prepaid expense............... 1,948 2,065
Restricted funds held for contingent consideration (note 1). - 12,000
-------- --------
Total current assets...................................... 21,331 37,031
Investment in joint venture (note 7)........................ 2,959 2,892
Insurance claims receivable................................. 1,717 2,346
Fixed assets, net (note 4).................................. 126,771 121,325
Shipyard assets held for sale (note 14)..................... 2,648 3,036
Restricted funds held for contingent consideration (note 1). 13,600 1,600
Other assets................................................ 5,068 4,487
-------- --------
Total assets................................................ $174,094 $172,717
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
------------------
1995 1996
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Current liabilities
Trade accounts payable...................................... $ 3,468 $ 4,486
Current portion of long-term debt (note 9)................. 566 -
Accounts payable to joint venture........................... 135 1,066
Accrued insurance payable................................... 132 359
Accrued interest payable.................................... 4,309 4,308
Other accrued liabilities................................... 3,233 3,868
Backpay liability........................................... 885 885
Income taxes payable (note 10).............................. 995 926
Liability for contingent consideration (note 1)............. - 12,000
-------- --------
Total current liabilities................................. 13,723 27,898
Long-term debt (note 9)..................................... 82,848 80,000
Insurance claims reserves................................... 4,331 5,989
Deferred income taxes (note 10)............................. 36,048 34,150
Postretirement benefits other than pensions (note 11)....... 3,729 3,995
Liability for contingent consideration (note 1)............. 13,600 1,600
Other liabilities........................................... 8,095 6,060
-------- --------
Total liabilities......................................... 162,374 159,692
Commitments and contingencies (notes 12 and 13)
Mandatorily redeemable capital stock
(4,600 and 4,000 shares issued and outstanding at
December 31, 1995 and 1996, respectively) (note 17)........ 1,150 1,000
Stockholders' equity
Common stock, par value $0.01 per share authorized-100,000
shares, issued and outstanding - 40,000 and 40,600
shares at December 31, 1995 and 1996, respectively...... 1 1
Capital surplus............................................ 9,999 10,149
Retained earnings.......................................... 570 1,875
-------- --------
Total stockholders' equity................................. 10,570 12,025
-------- --------
Total liabilities and stockholders' equity................. $174,094 $172,717
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except per share amount)
<TABLE>
<CAPTION>
Predecessor Company
-------------- -----------------------------------
Period Period
Jan. 1, 1994 July 12, 1994 Year Ended
thru thru December 31,
--------------------
July 11, 1994 Dec. 31, 1994 1995 1996
-------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Operating revenue.......... $41,694 $37,482 $ 77,343 $ 91,458
Cost of operations
Operating expenses....... 27,341 22,355 45,672 57,451
Depreciation............. 3,119 3,217 7,412 7,719
------- ------- -------- --------
Total cost of operations 30,460 25,572 53,084 65,170
------- ------- -------- --------
Gross profit............... 11,234 11,910 24,259 26,288
General and administrative
expenses.................. 7,559 5,962 14,221 14,283
Provision for shipyard
sale (note 14)............ 589 - - -
------- ------- -------- --------
Operating income........... 3,086 5,948 10,038 12,005
Interest expense........... (975) (4,810) (10,192) (10,132)
Interest income............ 28 74 51 146
Equity in loss from
affiliated partnership
(note 6).................. (622) - - -
Equity in income/(loss)
from joint venture (note
7)........................ 220 106 (188) (66)
Other income............... 317 218 155 160
------- ------- -------- --------
Income/(loss) before
provision for income taxes 2,054 1,536 (136) 2,113
Provision for income taxes
(note 10)................. 785 630 200 808
------- ------- -------- --------
Net income/(loss)........ $ 1,269 $ 906 $ (336) $ 1,305
------- ------- -------- --------
Earnings/(loss) per share.. $20.31 $(7.53) $28.56
Weight average number of
shares outstanding (in
thousands) 44.6 44.6 45.7
------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Predecessor Company
-------------- ---------------------------------
Period Period
Jan. 1, 1994 July 12, 1994 Year Ended
thru thru December 31,
July 11, 1994 Dec. 31, 1994 1995 1996
-------------- -------------- -------- -------
<S> <C> <C> <C> <C>
Cash flows from operating
activities
Net income/(loss).......... $ 1,269 $ 906 $ (336) $ 1,305
Adjustments to reconcile net
income/(loss) to net
cash provided by operating
activities:
Depreciation and
amortization.............. 3,465 3,641 9,472 11,092
Deferred income taxes...... (1,020) 564 267 (1,898)
Equity in loss from
affiliated partnerships... 501 - - -
Equity in (income)/loss
from joint venture........ (220) (107) 188 66
Loss on disposal of
floating equipment........ - - - 128
Changes in operation assets
and liabilities:............
Accounts receivable........ 2,759 (622) (1,500) (697)
Other current assets....... (2,561) 2,118 (425) (182)
Accounts payable and
accrued expenses.......... (1,408) (37) (2,528) 2,811
Income taxes payable....... (671) 481 151 (69)
Insurance claims receivable 182 (326) (823) (629)
Insurance claims reserve... 310 16 530 1,658
Other assets and
liabilities............... 1,333 (107) 495 (2,158)
------- -------- ------- -------
Net cash provided by
operating activities....... 3,939 6,527 5,491 11,427
------- -------- ------- -------
Cash flows from investing
activities
Capital expenditures....... (963) (6,160) (5,832) (5,110)
Acquisition of Moran
Towing Corporation........ - (68,645) - -
Proceeds from sale of
assets.................... - 1,250 - -
Dividends received from
affiliated partnerships
and joint venture.......... 1,780 - - -
------- -------- ------- -------
Net cash provided by/(used
for) investing activities.. 817 (73,555) (5,832) (5,110)
------- -------- ------- -------
Cash flows from financing
activities
Proceeds from borrowings... 546 86,000 1,000 2,250
Repayment of debt.......... (3,483) (24,433) (1,512) (5,664)
Proceeds from issuance of
common stock.............. - 10,000 - -
Proceeds from issuance of
mandatorily redeemable
capital stock.............. - 1,150 - -
Debt issuance costs........ - (3,875) (140) (82)
Dividends paid to
stockholders.............. (1,700) - - -
------- -------- ------- -------
Net cash (used for)
provided by financing
activities................. (4,637) 68,842 (652) (3,496)
------- -------- ------- -------
Net increase/(decrease) in
cash and cash equivalents... 119 1,814 (993) 2,821
Cash and cash equivalents at
beginning of period......... 2,066 2,185 3,999 3,006
------- -------- ------- -------
Cash and cash equivalents at
end of period............... $ 2,185 $ 3,999 $ 3,006 $ 5,827
------- -------- ------- -------
Cash paid during period for
Interest................... $ 839 $ 36 $ 9,743 $ 9,816
-------- ------- -------
Income taxes............... $ 2,475 $ 327 $ 469 $ 2,742
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Capital Retained
Stock Surplus Earnings Total
------ ------- --------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1993.............. $200 $1,100 $18,832 $20,132
Net income................................ - - 1,269 1,269
Dividends declared........................ - - (1,700) (1,700)
------ ------- ------- -------
Balance at July 11, 1994.................. $200 $1,100 $18,401 $19,701
====== ======= ======= =======
Balance at July 12, 1994.................. $ 1 $ 9,999 $ - $10,000
Net income................................ - - 906 906
------ ------- ------- -------
Balance at December 31, 1994.............. 1 9,999 906 10,906
Net loss.................................. - - (336) (336)
------ ------- ------- -------
Balance at December 31, 1995.............. $ 1 $ 9,999 $ 570 $10,570
Transfer of Mandatorily Redeemable Stock.. - 150 - 150
Net income................................ - - 1,305 1,305
------ ------- ------- -------
Balance at December 31, 1996.............. $1 $10,149 $1,875 $12,025
====== ======= ======= =======
</TABLE>
F-7
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
(1) Moran Transportation Company
Moran Transportation Company ("Moran" or the "Company") is a Delaware
corporation, incorporated on June 2, 1994. Moran was organized to acquire (the
"Acquisition") all of the outstanding common stock of Moran Towing Corporation
(the "Predecessor"), a company which provided tug services and marine
transportation services, primarily on the East and Gulf coasts of the United
States. On July 11, 1994, the Acquisition was consummated and was accounted for
as a purchase. In connection with the Acquisition, the Predecessor transferred
its 20% equity interest in four partnerships to entities formed by the
stockholders of the Predecessor. When the Company acquired the Predecessor,
certain contingent liabilities of the Predecessor, primarily related to certain
limited and defined guarantees given by the Predecessor, were assumed. These
liabilities were fully reserved and funded by placing $13.6 million in escrow.
If these liabilities become due, the escrowed funds will be used to satisfy the
liability. If the guarantees expire without being called, the funds will be
paid to previous stockholders. In February 1997, $12.0 million of the escrow
amount was released to the former shareholders upon the Company's release from
the guarantees. There will be no impact on the Company, other than assets and
liabilities being reduced.
(2) Basis of Presentation
A vertical line has been used to separate the post-Acquisition consolidated
financial statements of the Company from the pre-Acquisition consolidated
financial statements of the Predecessor. The effects of the Acquisition and
related financings resulted in a new basis of accounting reflecting estimated
fair values of assets and liabilities at that date. The financial statements of
the Predecessor are presented at the Predecessor's historical cost. The
"periods ended July 11, 1994, December 31, 1994, December 31, 1995 and December
31, 1996" relate to the 192 day period ended July 11, 1994, the 173 day period
ended December 31, 1994 and the years ended December 31, 1995 and December 31,
1996, respectively.
(3) Summary of Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Moran
Transportation Company and its subsidiaries. The financial statements also
include a 50% owned joint venture in a marine tank barge operation which is
accounted for under the equity method of accounting. All material intercompany
items and transactions are eliminated in consolidation.
Reclassifications
Certain reclassifications have been made to the prior periods' consolidated
financial statements to conform with the December 31, 1996 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures, at the
date of the financial statements. Similarly, estimates and assumptions are
required for the reporting of revenues and expenses. Actual results could
differ from the estimates that were used.
F-8
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
Change in Accounting Principles
In October 1995, Financial Accounting Standard No. 123 (FAS 123) - "Accounting
for Stock-Based Compensation" was issued and is effective for the Company on
January 1, 1996. FAS 123 permits, but does not require, a fair value based
method of accounting for employee stock option plans which results in
compensation expense being recognized in the results of operations when stock
options are granted. The Company plans to continue to use the current intrinsic
value based method of accounting for its plan.
Revenue Recognition
Tug and barge revenue is recognized as services are performed.
Drydocking Expenses
Drydocking and related costs are capitalized when incurred and amortized over
the period until the next drydocking, usually 30 months. The Predecessor
expensed these costs as incurred.
Fixed Assets/Depreciation
Fixed assets include the cost of land, building, floating equipment, capitalized
drydocking costs, construction work-in-progress, improvements to leaseholds and
equipment. Interest incurred during the construction of floating equipment is
capitalized. Depreciation is provided on the straight-line method over the
estimated useful lives of the assets which range from three to twenty-five
years. The Predecessor depreciated floating equipment over 18 years. As of the
Acquisition, floating equipment was recorded at fair market value and is being
depreciated over the remaining estimated useful life of ten to twenty-five
years. Major renewals and betterment's are capitalized, while replacements,
maintenance and repairs which do not improve or extend the life of the assets
are expensed.
Income Taxes
The Company and its wholly owned domestic subsidiaries file a consolidated
Federal income tax return. The Company accounts for deferred income taxes
using the asset and liability method as prescribed under Financial Accounting
Standard No. 109, "Accounting for Income Taxes" (FAS 109). The Company provides
a valuation allowance if it is more likely than not that some portion or all of
the deferred tax asset will not be realized.
F-9
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
Cash and Cash Equivalents
The Company considers all highly liquid investments having original maturities
of three months or less to be cash equivalents.
Inventory
Inventories are valued at the lower of cost (first-in, first-out basis) or
market and include fuel, replacement parts, supplies and repair materials.
Deferred Financing Costs
Expenses incurred in connection with debt issuance have been deferred and are
being amortized using the interest method over the terms of the related debt
agreements.
Environmental Expenditures
Environmental expenditures are expensed or capitalized, as appropriate.
Expenditures that result from the remediation of an existing condition caused by
past operations, that are not attributable to current or future revenues, are
expensed. Liabilities are recognized for remedial activities when the cleanup
is probable and the cost can be reasonably estimated, generally coinciding with
the Company's commitment to a formal plan of action.
Earnings Per Share
Earnings per share is determined by dividing net income/(loss) by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period. Per share amounts for the Predecessor have not
been presented since management does not believe such information would be
meaningful.
(4) Fixed Assets
<TABLE>
<CAPTION>
Fixed assets consist of the following:
Dec. 31, Dec. 31,
1995 1996
-------- --------
<S> <C> <C>
Floating equipment............................. $132,430 $133,828
Capitalized drydocking costs................... 5,119 7,875
Construction in progress....................... 160 125
Shipyard & Pier improvements................... 53 70
Furniture, fixtures & leasehold improvements... 591 641
Equipment...................................... 147 147
Land........................................... 663 663
-------- --------
Less: Accumulated depreciation & amortization.. 12,392 22,024
-------- --------
Total.......................................... $126,771 $121,325
-------- --------
</TABLE>
F-10
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
(5) Inventories of Fuel, Supplies and Repair Materials
The components of inventory are as follows:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1996
-------- --------
<S> <C> <C>
Fuel....................................... $ 900 $1,103
Diesel parts............................... 1,663 1,564
Propeller wheels & shafts.................. 1,281 1,230
Rope, fenders, supplies and miscellaneous.. 486 498
------ ------
Total...................................... $4,330 $4,395
====== ======
</TABLE>
(6) Investment in affiliated partnerships
Subsidiaries of the Predecessor had a 20% interest in each of four partnerships
with subsidiaries of Overseas Shipholding Group, Inc., each of which partnership
is the bareboat charterer of one U.S. flag tanker. These interests were
transferred to the stockholders of the Predecessor as part of the Acquisition.
The Predecessor had provided certain financial guarantees in connection with the
acquisition of the affiliated partnerships. These undertakings are limited to
$12,000 in the aggregate and among others, guarantee (i) payment of the equity
portion of charter hire to the owner of the affiliated partnerships tankers,
(ii) certain indemnity obligations arising under the bareboat charters,
including tax indemnity obligations, and (iii) the obligation of the
partnerships to maintain and insure the tankers. These guarantees survived the
Acquisition and remain the obligation of the Company. To secure these
guarantees, $12,000 of the purchase price was put into escrow to be released
when the guarantees expire in 2003, to the extent not called upon. These funds
are included in restricted funds held for contingent consideration. In February
1997, the Company was released of these obligations and the $12.0 million escrow
related to these guarantees was distributed to the previous shareholders.
The Predecessor's 20% interest in the revenues, expenses and loss of the four
partnerships for the period ended June 30, 1994 is summarized as follows:
<TABLE>
<CAPTION>
June 30,
1994
--------
<S> <C>
Total revenues..................... $3,966
======
Total expense...................... $4,577
======
Equity in loss..................... $ 611
------
</TABLE>
Audited financial statements for the affiliated partnerships were prepared as of
June 30, 1994 as it was not practical to obtain audited financial statements as
of July 11, 1994. However, the results for the period July 1, 1994 through July
11, 1994 were not material to the Company's financial statements.
(7) Investment in Joint Venture
The Company has invested in a 50% owned joint venture which owns and operates an
ocean going petroleum barge. The Company accounts for the joint venture under
the equity method.
F-11
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
Cumulative unremitted earnings from the Company's 50% investment in the joint
venture were $521 at July 11, 1994, $742 at December 31, 1994, $794 at December
31, 1995 and $968 at December 31, 1996. The Company received cash dividends
from the joint venture totaling $1,500 in the period ended July 11, 1994, and $0
in the periods ended December 31, 1994, 1995 and 1996, respectively.
The Company's 50% interest in the assets, liabilities, revenues, expenses and
income of the joint venture is summarized as follows:
<TABLE>
<CAPTION>
As of
------------------
Dec. 31, Dec. 31,
1995 1996
-------- --------
<S> <C> <C>
Total assets............ $1,132 $1,483
------ --------
Total liabilities....... $ 338 $ 516
------ --------
<CAPTION>
For the periods ended
-------------------------
July 11, Dec. 31, Dec. 31, Dec. 31,
1994 1994 1995 1996
------ ------ ------ --------
<S> <C> <C> <C> <C>
Total Revenues.......... $1,034 $1,019 $1,939 $2,528
------ ------ ------ --------
Total Expenses.......... $ 814 $ 798 $1,887 $2,354
------ ------ ------ --------
Equity in Income........ $ 220 $ 221 $ 52 $ 174
------ ------ ------ --------
</TABLE>
In connection with the Acquisition, the Company increased the carrying value of
its investment by $2,519 to fair market value. The Company is amortizing the
increase over ten years, representing the remaining useful life of the joint
venture's barge. Amortization was $115, $240 and $240 for the periods ending
December 31, 1994, 1995 and 1996, respectively.
(8) Insurance Subsidiary
The consolidated financial statements include the accounts of the Company's
wholly-owned insurance subsidiary whose fiscal year end is March 31. Summarized
unaudited financial information based on the Company's reporting periods is as
follows:
<TABLE>
<CAPTION>
As of
------------------
Dec. 31, Dec. 31,
1995 1996
-------- --------
<S> <C> <C>
Total assets............ $2,000 $2,122
-------- --------
Total liabilities....... $ 384 $ 387
-------- --------
<CAPTION>
For the periods ended
-------------------------
July 11, Dec. 31, Dec. 31, Dec. 31,
1994 1994 1995 1996
----- ----- -------- --------
<S> <C> <C> <C> <C>
Total income (a)........ $ 15 $ 28 $ 10 $ 118
----- ----- -------- --------
</TABLE>
(a) Total income includes interest income of $29, $37, $23 and $156 for the
and the periods ended July 11, 1994, December 31, 1994, December 31, 1995,
and December 31, 1996, respectively.
F-12
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
(9) Long-term Debt
Long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
11.75% Series B First Preferred Ship Mortgage Notes due July 15, 2004.... $80,000 $80,000
10.00% term loan due November 29, 2000................................... 3,414 -
------- -------
$83,414 $80,000
Less: Current maturities.............................................. 566 -
------- -------
Long-term portion..................................................... $82,848 $80,000
------- -------
</TABLE>
As part of the Acquisition, the Company issued $80,000 of 11.75% First Preferred
Ship Mortgage Notes due July 15, 2004. In November 1994, pursuant to an
Exchange and Registration Rights Agreement, the Company exchanged all of such
Notes for its 11.75% Series B First Preferred Ship Mortgage Notes, the issuance
of which had been registered under the federal securities laws. Interest on the
notes is payable semi-annually on January 15 and July 15. The Notes are
redeemable, in cash, at the option of the Company, in whole or in part in
amounts of $1,000 or an integral multiple of $1,000 on or after July 15, 1999 at
the redemption prices set forth below, plus accrued and unpaid interest if
redeemed during the 12-month period commencing on July 15 of the year indicated
below:
<TABLE>
<S> <C>
1999 108%
2000 106
2001 104
2002 102
2003 and thereafter 100
</TABLE>
All of the Company's subsidiaries (the "Guarantors") have guaranteed the $80,000
of Series B First Preferred Ship Mortgage Notes. Accordingly, the financial
statements of the Guarantors have not been included, individually or on a
combined basis, because the guarantors have fully and unconditionally guaranteed
such Notes on a joint and several basis, and because the aggregate net assets,
earnings and equity of the Guarantors are substantially equivalent to the net
assets, earnings and equity of the Company on a consolidated basis and,
therefore, separate financial statements concerning the Guarantors are not
deemed material to investors.
The Notes rank pari passu with all existing and future senior indebtedness of
the Company and senior to all subordinated indebtedness of the Company and are
secured by substantially all of the Company's floating equipment. The indenture
contains certain restrictions on incurrence of debt, liens, sales of assets,
investments, capital expenditures, and dividend and upstream payments. The
Company must also comply with certain other financial covenants.
On December 29, 1994, the Company purchased a tug and a barge. As part of that
transaction, a subsidiary of the Company entered into a $4,000 term loan which
was repaid in its entirety on December 28, 1996. The guaranty by the Company's
subsidiary of the Company's obligation under the Notes is not secured by the two
purchased vessels.
The Company has a Senior Credit Facility which consists of a revolving line of
credit (the "Revolving Credit Facility") of up to $10,000, including a letter
of credit facility (the "Letter of Credit Facility") of up to $5,000.
F-13
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
Any amount outstanding under the letter of Credit Facility reduce the available
credit under the Revolving Credit Facility. The Revolving Credit Facility is
primarily secured by the accounts receivable and inventory of the Company. At
December 31, 1995 and 1996, letters of credit outstanding were $472 and $472,
respectively. At year end, the Company had no borrowings outstanding under the
Revolving Credit Facility which expires on July 11, 1997. The Company is
currently reviewing a proposal to renew this Senior Credit Facility.
The Company has deferred debt placement costs incurred in connection with the
$80,000 of First Preferred Ship Mortgage Notes. The unamortized balance of such
fees were $3,326 and $2,854 at December 31, 1995 and 1996, respectively.
(10) Income Taxes
In accordance with FAS 109, the deferred tax provision was determined under the
asset and liability approach. Deferred tax assets and liabilities were
recognized on differences between the book and tax basis of assets and
liabilities using current tax rates. The provision for income taxes is the sum
of the amount of income tax paid or payable for the year as determined by
applying current tax laws to the taxable income for the current year and the net
change in the Company's deferred tax assets and liabilities during the year.
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
For the periods ended
---------------------
July 11, Dec. 31, Dec. 31, Dec. 31,
1994 1994 1995 1996
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Current................. $1,632 $ 292 $ 776 $ 2,680
Deferred................ (847) 338 (576) (1,872)
------ ----- ----- -------
$ 785 $ 630 $ 200 $ 808
------ ----- ----- -------
</TABLE>
This provision includes state tax expense for the periods ended July 11, 1994
and December 31, 1994 and the years ended December 31, 1995 and 1996 of $230,
$152, $279 and $34 respectively.
F-14
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
The reconciliation's of the Company's effective income tax rate and the
statutory income tax rate are as follows:
<TABLE>
<CAPTION>
For the periods ended
----------------------------------------
July 11, Dec 31, Dec. 31, Dec. 31
1994 1994 1995 1996
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Statutory income tax rate...... 34.0% 34.0% (34.0)% 35.0%
Increases (decreases) due to:
State taxes.................. 7.4 6.5 135.8 6.4
Meals and entertainment...... 1.4 1.3 40.7 2.0
Rate differential............ - - - (2.6)
Other-net.................... (4.6) (0.8) 4.8 (2.6)
---- ---- ------ ----
Effective income tax rate...... 38.2% 41.0% 147.3% 38.2%
---- ---- ------ ----
</TABLE>
Under FAS 109, temporary differences which give rise to a significant portion of
net deferred tax liabilities were as follows:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets
State and local taxes......................... $306 $816
Insurance claims reserves..................... 435 746
Post retirement benefits other than pensions.. 1,268 1,358
Additional compensation....................... 260 234
Hull insurance aggregate reserves............. 516 759
P & I insurance aggregates reserve............ 405 373
Backpay liability............................. 2,108 1,782
Deferred alternative minimum tax (AMT)........ 159 -
Other items-net............................... 361 445
-------- --------
Total deferred tax assets..................... 5,818 6,513
-------- --------
Deferred tax liabilities
Depreciation and amortization................. (38,090) (36,307)
Pension benefits.............................. (521) (466)
Capitalized drydocking costs.................. (1,352) (1,606)
Land valuation................................ (197) (197)
Fuel inventory costs.......................... (306) (374)
Capitalized environmental remediation costs... (816) (820)
-------- --------
Total deferred tax liabilities................ (41,282) (39,770)
Valuation allowance........................... - (335)
-------- --------
Net Deferred tax liabilities.................. $(35,464) $(33,592)
-------- --------
</TABLE>
The current portion of net deferred income taxes of $584 and $558 at
December 31, 1995 and 1996, respectively, are included in other prepaid
expenses.
F-15
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
(11) Pension, Postretirement Benefit and Profit Sharing Plans
Pension
The net periodic pension expense for the Company's defined benefit pension plan
is comprised of the following:
<TABLE>
<CAPTION>
For the periods ended
---------------------
July 11, Dec. 31, Dec. 31, Dec. 31,
1994 1994 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Service cost-benefits earned
during the period $ 139 $ 123 $ 286 $ 327
Interest cost projected benefit
obligation 274 243 557 559
Actual return on plan assets (356) (315) (988) (757)
Net amortization and deferral (69) - 425 117
----- ----- ----- -----
Net periodic pension
expense(income) $ (12) $ 51 $ 280 $ 246
----- ----- ----- -----
</TABLE>
All of the Predecessor's pension liabilities were assumed by the Company. In
connection with the Acquisition, the Company recorded a pension asset to reflect
the actual funded status of the plan.
The following table sets forth the defined benefit pension plan's funded status
and amounts recognized in the Company's financial statements at December 31,
1995 and December 31, 1996:
<TABLE>
<CAPTION>
Dec. 31, Dec. 31,
1995 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits obligation............................... $6,421 $5,176
------ ------
Accumulated benefit obligation........................... $6,656 $5,383
------ ------
Projected benefit obligation............................. $8,480 $7,099
Fair value of plan assets................................ 8,319 7,775
------ ------
Plan assets (less than)/in excess of projected benefit
obligation.............................................. (161) 676
Unamortized loss......................................... 1,706 691
------ ------
Prepaid pension costs.................................... $1,545 $1,367
Dec. 31, Dec. 31,
1995 1996
------ ------
The actuarial assumptions are:
Discount rate............................................ 7.25% 7.50%
Rate of increase in compensation levels.................. 3.5% 4.0%
Expected long-term rate of return on assets.............. 8.0% 8.0%
</TABLE>
The Company has a defined benefit pension plan covering substantially all
shoreside non-union employees. The plan generally provides benefit payments
using a formula that is based on an employee's compensation and length of
service. The Company's policy is to fund current service costs. The plan's
assets are primarily
F-16
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
invested in a managed bond portfolio with a portion invested in a managed equity
portfolio. In 1996, a $69 contribution was made for the 1995 plan year. Since
the plan is fully funded, no contribution is required for the 1996 plan year. In
addition, the Company has an unfunded supplemental employee retirement plan
("SERP") for certain executives. The Company's pension SERP liability was $648
and $575 at December 31, 1995 and December 31, 1996 respectively.
In accordance with contractual agreements, the Company makes contributions to
union-sponsored pension and welfare plans. Such contributions were $516, $472,
$956 and $1,030 for periods ended July 11, 1994, December 31, 1994, December 31,
1995 and December 31, 1996, respectively. In addition, the Company has a
defined contribution pension plan for non-union fleet employees. The Company
made contributions of $103, $92, $182 and $201 for the periods ended July 11,
1994, December 31, 1994, December 31, 1995 and December 31, 1996, respectively.
Profit Sharing Plan
The Company has a non-contributory profit-sharing plan covering substantially
all shoreside non-union employees. Company contributions are at the discretion
of the Board of Directors. The Company made contributions of $293, $261, $556
and $674 for the periods ended July 11, 1994, December 31, 1994, December 31,
1995 and December 31, 1996, respectively. In addition, the Company has an
unfunded profit sharing SERP for certain executives. The Company's profit
sharing SERP liability was $117 and $114 at December 31, 1995 and December 31,
1996, respectively.
Post Retirement Benefits
The Company provides certain health care and life insurance benefits to all
employees who retire from the Company and satisfy certain service and age
requirements.
Generally, the medical coverage pays a stated percentage of most medical
expenses reduced for any deductible and payments made by Medicare or other group
coverage. Benefits are administered through an insurance carrier paid by the
Company. The cost of providing these benefits is shared with retirees. The
cost sharing provisions will vary depending on the retirement date and the plan
is unfunded. The premium cost of providing these benefits was $140, $140, $281
and $265 for the periods ended July 11, 1994, December 31, 1994, December 31,
1995 and December 31, 1996, respectively.
The Company accounts for retiree health care costs in accordance with
Financial Accounting Standard No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." This statement requires the accrual of the cost
of providing postretirement benefits, including medical and life insurance
coverage, during the active service period of the employee. The Company
recorded a liability of $4,181 in connection with the Acquisition. The
Predecessor recognized the related benefit expense in the year the benefits were
paid.
F-17
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
The following table sets forth the Company's accrued postretirement benefit
liability recognized in the Company's Consolidated Balance Sheet at December 31,
1995 and 1996 and related postretirement cost for the periods ended December 31,
1995 and 1996.
<TABLE>
<CAPTION>
December 31,
------------
1995 1996
---- ----
<S> <C> <C>
Actuarial present value of postretirement benefit obligation:
Retirees...................................................... $2,959 $2,955
Fully eligible active participants............................ 716 890
Other active participants..................................... 457 801
------ ------
Accumulated postretirement benefit obligation.................. 4,132 4,646
Unrecognized net loss.......................................... 403 663
------ ------
Accrued postretirement benefit liability....................... $3,729 $3,983
------ ------
</TABLE>
Net periodic postretirement benefit cost for periods ended December 31, 1995 and
December 31, 1996 included the following components:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Service cost of benefits earned................................ $ 121 $ 161
Interest cost on accumulated postretirement benefits obligation 285 318
Amortization of unrecognized (gain)/loss....................... - 32
----- -----
Net periodic postretirement benefit cost....................... $ 406 $ 511
----- -----
</TABLE>
The discount rate used in determining the APBO was 8.0% in fiscal 1995 and 7.5%
in 1996. The assumed health care cost trend rate used for measuring the APBO
was divided into two categories:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Under age 65 participants...................................... 13.1% 11.9%
Over age 65 participants....................................... 16.5% 14.5%
</TABLE>
Over 18 years, rates were assumed to remain unchanged at 6.1% for the under age
65 participants and 6.3% for the over age 65 participants, for 1995 and for
1996.
If the health care cost trend rate was increased 1 percent, the APBO as of
December 31, 1995, would have increased 11.2%. The effect of this change on the
aggregate of service and interest cost for period ended December 31, 1995 would
be an increase of 14.8%. As of December 31, 1996, the effect on the APBO would
be an increase of 11.6% and for period service and interest an increase of
14.3%.
F-18
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
(12) Commitments
On November 8, 1996, a subsidiary of the Company entered into a 10 year bareboat
charter for the barge Portsmouth. The Company has an option to purchase the
barge at the end of the seventh year and at the end of the lease term. The
annual charterhire for this vessel is $1.0 million over the term of the lease.
Minimum annual rental commitments at December 31, 1996, under non-cancelable
operating leases, , including the bareboat charter for the Portsmouth, are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997................................. $1,805
1998................................. 1,706
1999................................. 1,690
2000................................. 1,681
2001................................. 1,681
2002 and beyond...................... 6,119
</TABLE>
Total gross rent expense was $577, $520, $1,054 and $1,160 for the periods ended
July 11, 1994, December 31, 1994, December 31, 1995 and December 31, 1996,
respectively.
(13) Contingent Liabilities
In February 1994, a lawsuit was filed in United States District Court for the
Eastern District of New York by the Town of Oyster Bay (the "Town"), New York,
against the Company and several other potentially responsible parties ("PRP").
The Town is seeking indemnification for remediation and investigation costs that
have been or will be incurred for a Federal Superfund site in Syosset, New York,
which served as a Town owned and operated landfill between 1933 and 1975. In a
Record of Decision issued on or about September 27, 1990, the EPA set forth a
remedial design plan, the cost of which was estimated at $25,000 and is
reflected in the Town's lawsuit. In an Administrative Consent Decree entered
into between the EPA and the Town on December 6, 1990, the Town agreed to
undertake remediation at the site.
While the current state of law imposes joint and several liability upon PRPs, as
a practical matter costs of these sites are typically shared with other PRPs.
The Company believes that its portion of the hazardous materials disposed at the
site, if any, is insignificant when compared to that of the other PRPs. While
management is unable to estimate the Company's future liability, if any, it does
not believe such liability would have a material adverse effect on the Company's
financial position or results of operations.
(14) Provision for Shipyard Sale
In 1992, the operations of a subsidiary of the Company, Jakobson Shipyard, Inc.
were discontinued. Discussions have been held with the Town of Oyster Bay
concerning the purchase of Jakobson's leasehold interest in the shipyard
property. Management expects to enter into an agreement in principle for the
sale of its property within a year. In anticipation of this sale, the Company
has capitalized $2,648 of environmental remediation costs which, based upon the
Company's estimates, are expected to be recovered from the proceeds of the sale.
Management believes that there will not be a material adverse effect on the
Company's financial position or results from operations upon sale.
F-19
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
The Predecessor's provision for shipyard sale includes the pretax operating
losses incurred during the year, anticipated carrying costs prior to the sale
and the provision for clean-up costs to ready the property for sale that are in
excess of the costs expected to be recovered through the sale proceeds. The
provision for clean-up and carrying costs is $577 for the period ended July 11,
1994. As part of the Acquisition accounting, the Company established reserves
totaling $1,193 related to anticipated clean up and carrying costs subsequent to
the Acquisition. In addition, in connection with the acquisition, the sellers
of the Predecessor agreed to bear certain carrying costs related to the shipyard
arising from and after January 1, 1995.
(15) Financial Instruments
The following disclosure of the estimated fair value of financial instruments at
December 31, 1995 and 1996 is made in accordance with the requirements of SFAS
No 107, "Disclosure about Fair Market of Financial Instruments". The estimated
fair value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The Company's financial instruments consist of cash, short-term trade
receivables and payables, and short and long-term debt. With the exception of
long-term debt, the carrying amounts of these financial instruments approximate
their fair value.
Based upon the average of the bid and asked price for the 11.75% Series B First
Preferred Ship Mortgage Notes at their respective year ends, the fair value of
the Company's Notes as of December 31, 1995 and 1996 is approximately $76,400
and $86,700 respectively. The Company's other long-term debt is considered to
be at fair value.
Financial instruments which potentially subject the Company to concentration of
credit risk consist solely of trade receivables. The Company grants credit
terms in the normal course of business to its customers. The Company has a
diverse customer base and as part of its on-going procedures the Company
monitors the credit worthiness of its customers. Bad debt write-offs have
historically been minimal.
The fair value information presented herein is based on pertinent information
available to management as of December 31, 1995 and 1996. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these consolidated financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
(16) Related Party Transactions
In 1995, the Company and certain related parties (the "Group") negotiated
insurance coverage with third party providers in order to obtain lower premiums.
In connection with the new coverage, the Group entered into a risk sharing
agreement whereby the Company would bear a portion of certain claims expense of
the Group in proportion to its past experience. This percentage is reset each
year. The Company believes its agreement is at arms length. The amount due
from related parties at December 31, 1996 was $482.
F-20
<PAGE>
MORAN TRANSPORTATION COMPANY
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Three-year period ended December 31, 1996
(17) Mandatorily Redeemable Capital Stock
Mandatorily Redeemable Capital Stock is the same as the Company's Common Stock
in terms of voting rights, dividends and other attributes except that under
certain circumstances it is redeemable at the option of stockholders or the
Company at fair market value. As of December 31, 1995 and 1996, the fair market
value of the shares was $250 per share. The Company's Common Stock contains no
redemption features. During 1996, 600 shares of mandatorily redeemable stock
were transferred into 600 shares of common stock and are no longer subject to
any put rights or mandatorily redeemable features.
(18) Stock Option Plan
On July 11, 1994 the Company adopted a Stock Option Plan (the "1994 Plan") which
became effective on the date of the Acquisition to provide an incentive to
certain employees of the Company to remain in the employ of the Company and to
increase their personal interest in the success of the Company. The maximum
number of shares of the Company's Common Stock issuable under the 1994 Plan is
2,000, of which 1,640 were granted in the period ended December 31, 1994 at a
price equal to the fair market value of the Company's Common Stock at the date
of the grant. None of the options granted were exercised in the period ended
December 31, 1996. Participation in the 1994 Plan is limited to employees of
the Company designated by the Plan Committee. Non-employee directors of the
Company are not eligible to participate. No options were granted in 1996.
The Company applies APB Opinion 25 and related Interpretations in accounting for
the 1994 Plan. Accordingly, no compensation cost has been recognized for its
fixed stock options plan. Had the compensation cost for the stock based
compensation plan been determined in accordance with FAS 123, the Company's
net income and earnings per share would not have been materially different.
F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
First Shipmor Associates
Second Shipmor Associates
Third Shipmor Associates
Fourth Shipmor Associates
We have audited the accompanying combined balance sheet of First Shipmor
Associates, Second Shipmor Associates, Third Shipmor Associates and Fourth
Shipmor Associates (collectively "Shipmor Associates") as of December 31, 1993
and the related combined statements of operations and cash flows for the six
month period ended June 30, 1994 and for each of the two years in the period
ended December 31, 1993. These combined financial statements are the
responsibility of the partnerships' management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Shipmor Associates
at December 31, 1993, and the combined results of their operations and their
cash flows for the six month period ended June 30, 1994 and each of the two
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
February 21, 1995
F-22
<PAGE>
SHIPMOR ASSOCIATES
Combined Balance Sheet
<TABLE>
<CAPTION>
December 31,
1993
----
<S> <C>
Assets
Current assets:
Cash, including interest-bearing deposits of................ $ 12,395,047
Receivables:
Voyage.................................................... 549,888
Other..................................................... 1,224,922
Prepaid expenses............................................ 1,095,787
------------
Total current assets.................................... 15,265,644
Notes receivable from Overseas Shipholding Group, Inc. (Note B1) 27,568,818
Restricted funds (Note B1).................................... 4,913,601
Vessels under capital leases and related improvements, at
cost, less
accumulated amortization of $93,408,346 (Note B)............. 58,641,902
Other assets.................................................. 966,054
-------------
Total assets............................................ $107,356,019
=============
Liabilities and partners' capital
Current liabilities:
Accounts payable, sundry liabilities and accrued expenses,
including
accrued interest of $1,037,894........................... $ 4,972,938
Current obligations under capital leases (Note B1)......... 6,355,484
-------------
Total current liabilities............................... 11,328,422
Obligations under capital leases (Note B1).................... 75,903,542
Advance time charter revenues................................. 1,135,438
Other comment (Note F2)
Partners' capital (Notes B1 and C)............................ 18,988,617
-------------
Total liabilities and partners' capital................. $107,356,019
=============
</TABLE>
See notes to combined financial statements
F-23
<PAGE>
SHIPMOR ASSOCIATES
Combined Statements of Operations
<TABLE>
<CAPTION>
Six Months
ended
June 30, Year ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue............................... $19,828,458 $46,218,227 $40,284,708
Interest and dividend income, included
interest of $405,009 (1994), $796,253
(1993) and $427,471 (1992) from
Overseas Shipholding Group, Inc.
(Note B1)............................ 724,900 1,426,822 1,903,630
Gain of sales of securities........... - 109,846 -
----------- ----------- -----------
20,553.358 47,754,895 42,188,338
----------- ----------- -----------
Expenses:
Vessel and voyage (note A5 and D).... 15,032,487 24,773,244 31,772,106
Amortization of capital leases and
related improvements................ 3,363,747 6,605,408 6,265,383
Agency fees (Note D)................. 1,459,752 2,793,495 2,940,368
General and administrative........... 278,478 430,252 445,983
Interest............................. 3,474,291 7,374,153 7,857,837
----------- ----------- -----------
23,608,755 41,976,552 49,281,677
----------- ----------- -----------
Net income (loss) (Note F1)........... $(3,055,397) 5,778,343 $(7,093,339)
=========== =========== ===========
</TABLE>
See notes to combined financial statements
F-24
<PAGE>
SHIPMOR ASSOCIATES
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months
ended Year ended December 31,
June 30, 1994 1993 1992
-------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating
activities
Net income (loss).................. $(3,055,397) $ 5,778,343 $ (7,093,339)
Items included in net income
(loss) not affecting cash flows:
Amortization of capital leases
and related improvements......... 3,363,747 6,605,408 6,265,383
Interest on notes receivable..... (405,009) (796,253) (427,471)
Items included in net income
related in investing activities:
Gain on sales of securities...... - (109,846) -
Changes in operating assets and
liabilities:
Decrease (increase) in
receivables..................... (1,515,058) 472,962 (661,789)
Net change in prepaid items and
accounts payable, sundry
liabilities and accrued expenses. 1,159,593 (1,881,917) (992,839)
Increase in advance time charter
revenue......................... - - 158,402
----------- ----------- ------------
Net cash (used in) provided by
operating activities.............. (452,124) 11,068,697 (2,751,653)
----------- ----------- ------------
Cash flows from investing
activities
Repayment of notes receivable from
Overseas Shipholding
Group Inc........................ 5,700,000 - 3,600,000
Notes receivable from Overseas
Shipholding Group, Inc............ - (5,500,000) (24,445,094)
Proceeds from sales of marketable
securities........................ - 4,578,596 -
Improvements to vessels under
capital leases.................... (1,523,482) - (6,528,040)
----------- ----------- ------------
Net cash provided by (used in)
investing activities.............. 4,176,518 (921,404) (27,373,134)
----------- ----------- ------------
Cash flows from financing
activities:
Payment on obligations under
capital leases.................... (3,110,893) (5,842,515) (5,370,967)
Deposits made to restricted funds.. (83,246) - (666,526)
Withdrawals from restricted funds.. 90,593 193,366 20,683,182
Distribution to partners........... (1,400,000) - -
----------- ----------- ------------
Net cash (used in) provided by
financing activities.............. (4,503,546) (5,649,149) 14,645,689
----------- ----------- ------------
Net cash (decrease in cash......... (779,152) 4,498,144 (15,479,098)
Cash, including interest-bearing
deposits, at beginning of year.... 12,395,047 7,896,903 23,376,001
----------- ----------- ------------
Cash including interest-bearing
deposits, at end of period........ $11,615,895 $12,395,047 $ 7,896,903
=========== =========== ============
Supplemental disclosure of cash
flow information
Interest paid...................... $ 3,532,942 $ 7,445,156 $ 7,916,704
=========== =========== ============
</TABLE>
See notes to combined financial statements
F-25
<PAGE>
SHIPMOR ASSOCIATES
Notes to Combined Financial Statements
A. Summary of Significant Accounting Policies
1. The combined financial statements include the accounts of First Shipmor
Associates, Second Shipmor Associates, Third Shipmor Associates and Fourth
Shipmor Associates (the "Partnerships"). The entities are Delaware
partnerships in which subsidiaries of Overseas Shipholding Group, Inc.
("Overseas") own an 80% interest. In July 1994, in connection with the sale
of Moran Towing Corporation ("Moran") to a third party, the 20% interest
previously held by subsidiaries of Moran was transferred to newly formed
corporations ("Newco"). Moran's guarantee obligations (see Note B1) continue
and have been cash collateralized by the shareholders of Newco. The partners
share in the profit and losses of each partnership in the same proportion as
their equity interests.
2. As required by Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows", only interest-bearing deposits that are highly
liquid investments and have a maturity of three months or less when
purchased are considered cash equivalents.
3. Revenues from time charters (which represent all of the revenues from
voyages) are reported ratably based on the rates provided in the charters.
4. Each partnership has a bareboat charter-in on a U.S. flag vessel that is
accounted for as a capital lease. Amortization of capital leases and related
improvements is computed by the straight-line method over 25 years,
representing the terms of the leases.
5. Drydocking expenses are charged to operations by the Partnerships in the
year incurred as are other maintenance and repairs. The estimated annual
expense for drydockings scheduled to occur during the year is allocated
ratable to quarterly periods during the year. Vessel and voyage expenses
include expenses for drydockings and other maintenance and repairs of
$1,962,695 (1993) and $9,758,219 (1992). Vessel and voyage expenses for the
six months ended June 30, 1994 include expenses for drydockings and other
maintenance and repairs of $4,879,772, including $4,073,953 for the prorata
portion of drydockings which occurred during that period and those scheduled
to occur during the remainder of the year ended December 31, 1994.
A vessel scheduled as of June 30, 1994 to drydock in the second half of
1994, at a budgeted cost of approximately $2,750,000, did not drydock during
1994. In addition, the budgeted cost of drydockings on certain other vessels
exceeded the actual cost by approximately $1,550,000. Accordingly,
drydocking expense for the six months ended June 30, 1994 was approximately
$2,150,000 greater than it would have been had the full year's actual
drydocking expense been known at June 30, 1994. Revisions in estimates are
charged or credited to results of operations in the quarterly period in
which such information becomes available.
F-26
<PAGE>
SHIPMOR ASSOCIATES
Notes to Combined Financial Statements-(Continued)
B. Leases
1. Charters-in
As of December 31, 1993, the approximate minimum commitments under the
noncancelable charters-in were:
<TABLE>
<S> <C>
1994......................................... $ 13,288,000
1995......................................... 13,288,000
1996......................................... 13,228,000
1997......................................... 13,228,000
1998......................................... 13,228,000
Beyond 1998.................................. 53,482,000
------------
Net minimum lease payments................... 119,922,000
Less amount representing interest............ 37,663,000
------------
Present value of net minimum lease payments.. $ 82,259,000
------------
</TABLE>
Overseas and Moran have severally guaranteed, to the extend of their
respective partnership interests, the performance of certain of the
Partnerships' obligations under their charters-in.
Amounts in the restricted funds represent collateral for the debt issued by
the owners of the vessels. The Partnerships are permitted to withdraw from their
respective restricted funds the amounts in excess of 50% of the related debt
that is outstanding from time to time. Also, under these agreements, as of
December 31, 1993, certain of the partnerships are permitted, under a formula,
to make cash distributions from partners' capital not to exceed an aggregate of
$1,629,000 (Such partnerships made cash distributions of $1,400,000 in early
1994). During 1992, the agreements requiring the maintenance of restricted funds
were amended and, as permitted thereby, $20,280,827, representing Overseas 80%
share, was withdrawn from the restricted funds and distributed to Overseas as
was $4,164,267 of working capital. During 1993, as permitted by the 1992
amendment, an additional $5,500,000 was distributed to Overseas. Amounts are
distributed to Overseas in exchange for promissory notes bearing interest at the
London interbank market bid rate. Some or all of the principal amount of the
notes, together with accrued interest, becomes payable if certain requirements
related to the financial condition of the Partnerships or Overseas are not met.
In accordance with the agreements, in December 1992, $3,600,000 was repaid to
the Partnerships. The repayment terms of any balance of the notes outstanding
when the debt issued by the owners of the vessels has been paid in full will be
determined at that time.
2. Charters-out
Three of the Partnerships' vessels were time chartered to U.S. oil companies
and, as of June 30, 1994, one vessel was idle. The charters expire at various
dates from August 1994 through March 1995. As of February 21, 1995, two of the
Partnerships' vessels were idle. The approximate aggregate future charter
revenues to be received subsequent to June 30, 1994 on these noncancelable
operating leases are $16,005,000 (July 1, 1994 to December 31, 1994) and
$5,762,000 (1995).
Revenues from a time charter are dependent upon the ability to operate the
vessel in accordance with the charter terms. The Partnerships do not receive
any revenues from a time charterer when a vessel is off-hire, including time
required for periodic maintenance of the vessel. In arriving at future charter
revenues, an estimated time off-hire to perform periodic maintenance has been
deducted.
F-27
<PAGE>
SHIPMOR ASSOCIATES
Notes to Combined Financial Statements-(Continued)
<TABLE>
<CAPTION>
C. Partners' Capital
<S> <C>
Partners' capital as of December 31, 1991.. $20,303,613
Net loss - 1992............................ (7,093,339)
-----------
Partners' capital as of December 31, 1992.. 13,210,274
Net Income-1993............................ 5,778,343
-----------
Partners' capital as of December 31, 1993.. $18,988,617
===========
</TABLE>
The allowance for unrealized loss on noncurent marketable equity securities
deducted from partners' capital decreased $495,000 (1993) and $1,189,375 (1992).
D. Agency Fees and brokerage Commissions
Each partnership is a party to an agreement with Maritime Overseas
Corporation ("Maritime") which provides, among other matters, for Maritime to
render services related to the chartering and operation of the vessel and
certain general and administrative services, for which Maritime received
specified compensation. Vessel and voyage expenses include $648,145 (for the six
month period ended June 30, 1994), $1,909,499 (1993) and $1,680,564 (1992) of
brokerage commissions to Maritime.
Maritime is owned by a director of Overseas; directors or officers of
Overseas constitute all four of the directors and the majority of the principal
officers of Maritime.
E. Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and interest-bearing deposits: The carrying amount reported in the
balance sheet for interest-bearing deposits approximates its fair value.
Notes receivable: The carrying amount of the notes receivable from Overseas
approximates its fair value.
Debt: The fair values of the capital lease obligations are estimated using
discounted cash flow analyses, based on the rates currently available for debt
with similar terms and remaining maturities.
F-28
<PAGE>
SHIPMOR ASSOCIATES
Notes to Combined Financial Statements-(Continued)
The estimated fair value of the Partnerships' financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1993
-----------------
Carrying Fair
Amounts Value
-------- -----
<S> <C> <C>
Cash and interest-bearing deposits............. $11,320,047 $11,320,047
Interest-bearing deposits in restricted funds.. 4,830,355 4,830,355
Notes receivable............................... 27,568,818 27,568,818
Debt........................................... 82,259,026 87,877,000
</TABLE>
F. General Comments
1. No provision has been made in the accompanying combined financial statements
for Federal income taxes, since such taxes are the responsibilities of the
partners.
2. The Partnerships and certain affiliated domestic companies make
contributions to union sponsored multi-employer pension plans covering
seagoing personnel. The Employee Retirement Income Security Act requires
employers who are contributors to domestic multi-employer plans to continue
funding their allocable share of each plan's unfunded vested benefits in the
event of withdrawal from or termination of such plans. The Partnerships have
been advised by the trustees of such plans that they have no withdrawal
liability as of December 31, 1993.
Certain other seagoing personnel are covered under a defined contribution
plan of a subsidiary of Overseas, the cost of which is funded as accrued.
F-29
<PAGE>
EXHIBIT 4.1(c)
SUPPLEMENTAL INDENTURE NO. 3
This SUPPLEMENTAL INDENTURE NO. 3, dated as of December ___, 1996, is by
and among MORAN TRANSPORTATION COMPANY, a Delaware corporation (the "Company"),
MORAN TOWING CORPORATION, a New York corporation ("Moran Towing"), the
Guarantors listed on Annex I hereto (collectively, the "Guarantors"), MATC,
INC., a Delaware corporation, MEC I, INC., a Delaware corporation, and BPC I,
INC., a Delaware corporation, and FLEET NATIONAL BANK (formerly known as Shawmut
Bank Connecticut, National Association), as trustee (the "Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, the Trustee and certain of the Guarantors (other than
Seaboard Barge Corporation, a Delaware corporation ("Seaboard"), Petroleum
Transport Corporation, a Delaware corporation ("PETC"), and Moran Towing of
Delaware, Inc., a Delaware corporation ("Moran Delaware," and collectively with
Seaboard and PETC, the "New Guarantors"), which are becoming Guarantors
hereunder) are parties to that certain Indenture dated July 11, 1994, as amended
by Supplemental Indentures No. 1 and 2 (as so supplemented, the "Indenture"),
pertaining to the Company's 11-3/4% Series B First Preferred Ship Mortgage Notes
due 2004 issued under the Indenture (the "Notes");
WHEREAS, after giving effect to the transactions and mergers described
below, the Guarantors listed on Annex I hereto will constitute all of the
Subsidiaries of the Company.
A. Prior Dissolutions; Mergers
---------------------------
1. Prior Dissolutions
------------------
WHEREAS, prior to or on the date hereof, the following Guarantors were
dissolved in compliance with Section 5.14 of the Indenture (as described below):
Belair Picton Co., Caribbean Barge Corporation, James River Towing Company, John
E. Moore Company, Lewes Curtis Bay Towing Co., Moran Salvage Company Inc., Moran
Tankship No. 1 Inc., Moran Tankship No. 2 Inc., Moran Tankship No. 3 Inc., Moran
Tankship No. 4 Inc., Moran Towing of Maine, Inc., Moran Container Corporation,
and Moran Towing of Puerto Rico, Inc.;
2. Transactions Involving Moran Towing & Transportation Co., Inc.
--------------------------------------------------------------
WHEREAS, pursuant to certain agreements and plans of mergers, effective
December 31, 1996, the following Restricted Subsidiaries shall merge with and
into Moran Towing &
<PAGE>
Transportation Co., Inc., a New York corporation ("MT&T"), which will be the
surviving corporation in such merger:
Aberdeen Curtis Bay Co.
Annapolis Curtis Bay Co.
Curtis Bay Towing Company of Delaware
Elkton Curtis Bay Co.
Irvington Curtis Bay Co.
Kirkwood Curtis Bay Co.
Laurel Picton Co.
Warwick Curtis Bay Co.
WHEREAS, subsequent to such mergers, MT&T shall transfer all of its assets
to Moran Towing in exchange for a promissory note from Moran Towing, and then
subsequently MT&T shall transfer such promissory note to a newly formed
subsidiary of MT&T, Moran Delaware, after which MT&T will merge with and into
Moran Towing, all effective as of January 1, 1996;
3. Moran Towing of Miami, Inc./Moran Towing of Florida, Inc.
---------------------------------------------------------
WHEREAS, pursuant to an agreement and plan of merger, effective December
31, 1996, Moran Towing of Miami, Inc., a Delaware corporation, shall merge with
and into Moran Towing of Florida, Inc., a Florida corporation ("Moran Florida"),
which will be the surviving corporation in such merger;
WHEREAS, pursuant to an agreement and plan of merger, effective January 1,
1997, Moran Florida shall merge with and into Moran Towing, which will be the
surviving corporation in such merger;
4. Moran Mid-Atlantic Corporation
------------------------------
WHEREAS, Moran Mid-Atlantic Corporation, a Delaware corporation, shall,
pursuant to a dividend which will be paid effective as of December 31, 1996,
distribute all of its assets (other than certain real property, which will be
retained) to Moran Towing and shall be renamed "Hampton Roads Land Co., Inc.",
effective December 31, 1996;
5. Petroleum Transport Corporation
-------------------------------
WHEREAS, each of the following Restricted Subsidiaries shall establish
wholly-owned Restricted Subsidiaries, which will be Delaware corporations, to
which such Restricted Subsidiaries shall contribute the vessels specified below,
effective December 31, 1996:
2
<PAGE>
Subsidiary Wholly-Owned Subsidiary Vessel
---------- ----------------------- ------
Moran Atlantic Towing Corporation MATC, Inc. Maine
Moran Enterprises Corporation MEC I, Inc. Texas
Florida
Barge Pennsylvania Corporation BPC I, Inc. Pennsylvania
WHEREAS, after giving effect to such contributions, each of Moran Atlantic
Towing Corporation, Moran Enterprises Corporation and Barge Pennsylvania
Corporation (which will own the vessel Valentine Moran, which is not, and will
---------------
not be, a Mortgaged Vessel) will merge, effective December 31, 1996, with and
into Moran Towing, with Moran Towing being the surviving corporation in such
merger;
WHEREAS, each of MATC, Inc., MEC I, Inc., BPC I, Inc. (which will own the
vessel Pennsylvania, which is not, and will not be, a Mortgaged Vessel),
------------
Seaboard Shipping Corporation and Moran Power Corporation shall merge, effective
December 31, 1996, with and into PETC, which shall be the surviving corporation
in such merger;
6. Other Mergers with and into Moran Towing
----------------------------------------
WHEREAS, in addition to the mergers of MT&T, Moran Florida, Moran Atlantic
Towing Corporation, Moran Enterprises Corporation and Barge Pennsylvania
Corporation with and into Moran Towing, as described above, pursuant to certain
agreements and plans of merger, the Guarantors listed on Annex II (collectively,
the "Other Merged Guarantors") hereto shall merge (collectively, the "Mergers")
with and into Moran Towing, effective December 31, 1996, with Moran Towing being
the surviving corporation in such Mergers.
7. General
-------
WHEREAS, Section 6.03 of the Indenture provides that (a) a Qualified
Restricted Subsidiary shall have the right to merge with any other Qualified
Restricted Subsidiary provided that the Qualified Restricted Subsidiary which is
the surviving corporation shall execute a supplemental indenture (in a form
reasonably satisfactory to the Trustee) pursuant to which such surviving
corporation shall (i) expressly assume the obligations under the applicable
Guarantee of the merged Qualified Restricted Subsidiary which is not the
surviving corporation in such merger and (ii) confirm the due and punctual
performance of the Guarantee of such surviving corporation and every covenant in
the Indenture on the part of such surviving corporation to be performed or
observed; and that (b) a Restricted Subsidiary that is not a Qualified
Restricted Subsidiary shall have the right to merge with any other Restricted
Subsidiary which is not a Qualified Restricted Subsidiary provided that the
Restricted Subsidiary which is the surviving corporation shall (i) execute a
supplemental indenture (in a form reasonably satisfactory to the Trustee)
pursuant to which such surviving corporation shall
3
<PAGE>
(1) expressly assume the obligations under the applicable Guarantee of the
merged Restricted Subsidiary which is not the surviving corporation in such
merger and (2) confirm the due and punctual performance of the Guarantee of such
surviving corporation and every covenant in the Indenture and the Collateral
Documents on the part of such surviving corporation to be performed or observed
and (ii) execute any instrument required by the Trustee pursuant to Section 3.4
of the applicable Ship Mortgage(s);
WHEREAS, each of Moran Florida, Barge Pennsylvania Corporation and Moran
Towing of New Hampshire, Inc. is a Qualified Restricted Subsidiary, and Moran
Towing is a Restricted Subsidiary which is not a Qualified Restricted
Subsidiary;
WHEREAS, notwithstanding Section 6.03 of the Indenture, which relates to
mergers of (i) Qualified Restricted Subsidiaries with other Qualified Restricted
Subsidiaries and (ii) Restricted Subsidiaries which are not Qualified Restricted
Subsidiaries with other Restricted Subsidiaries which are not Qualified
Restricted Subsidiaries, the Company and Moran Towing intend that the Mergers of
each of Moran Florida, Barge Pennsylvania Corporation and Moran Towing of New
Hampshire, Inc. with and into Moran Towing fulfill the requirements of the
proviso to Section 5.14 of the Indenture;
WHEREAS, Section 5.14 of the Indenture provides that subject to Article 6
of the Indenture, the Company will do or cause to be done all things necessary
to preserve and keep in full force and effect (i) its corporate existence and
the corporate existence of each of its Restricted Subsidiaries, in accordance
with their respective organizational documents (as the same may be amended from
time to time) and (ii) its (and its Restricted Subsidiaries') rights (charter
and statutory), licenses and franchises; provided, however, that the Company
-------- -------
shall not be required to preserve any such right, license or franchise, or the
corporate existence of any Restricted Subsidiary, if the Board of Directors of
the Company shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
taken as a whole and that the loss thereof is not adverse in any material
respect to the Holders;
WHEREAS, Sections 10.01(g) and (h) of the Indenture provide that the
Trustee, the Company, the Guarantors and a Subsidiary, as applicable, may amend
or supplement the Indenture without the consent of any Holder to make any
changes that do not adversely affect the legal rights of any Holder or to
supplement the Indenture to provide for mergers of Restricted Subsidiaries
pursuant to Section 6.03, and
WHEREAS, the Company, Moran Towing and the Guarantors intend that this
Supplemental Indenture No. 3 fulfill the requirements of such Sections 5.14 and
6.03, and that Moran Towing assume the obligations under the Guarantees, the
Indenture and the Collateral Documents of the Merged Guarantors.
4
<PAGE>
B. New Guarantors
--------------
WHEREAS, the Company has organized PETC as a Subsidiary with the intention
that PETC become a Guarantor under the Indenture and a Restricted Subsidiary
that is not a Qualified Restricted Subsidiary pursuant to the terms of the
Indenture;
WHEREAS, the Company has organized each of Seaboard and Moran Delaware as a
Subsidiary with the intention that each of Seaboard and Moran Delaware become a
Guarantor under the Indenture and a Qualified Restricted Subsidiary pursuant to
the terms of the Indenture;
WHEREAS, Section 5.23 of the Indenture provides that any Person that was
not a Guarantor on the date of the Indenture may become a Guarantor by executing
and delivering to the Trustee, among other things, a supplemental indenture in
form and substance satisfactory to the Trustee, which subject such Person to the
provisions (including the representations and warranties) of the Indenture as a
Guarantor;
WHEREAS, Section 10.01(h) of the Indenture provides that the Trustee, the
Company, the Guarantors and a Subsidiary, as applicable, may amend or supplement
the Indenture without the consent of any Holder to supplement the Indenture to
provide for additional Guarantors pursuant to Section 5.23; and
WHEREAS, the Company and each of the New Guarantors intend that this
Supplemental Indenture fulfill the requirements of such Section 5.23, thereby
making each of the New Guarantors a Guarantor.
NOW THEREFORE, the parties agree as follows, for the benefit of each other
and for the equal and ratable benefit of the Holders of the Notes:
Section 1.01 Defined Terms. Capitalized terms used in this Supplemental
-------------
Indenture but not defined herein shall have the meanings given such terms in the
Indenture.
Section 2.01 Acceptance by Trustee. The Trustee accepts the modifications
---------------------
of the Indenture hereby effected only upon the terms and conditions set forth in
the Indenture as supplemented by this Supplemental Indenture No. 3. Without
limiting the generality of the foregoing, the Trustee shall not be responsible
for the correctness of the recitals contained herein, which shall be taken as
statements of the Company, and the Trustee makes no representations and shall
have no responsibility for, or in respect of, the validity or sufficiency of
this Supplemental Indenture No. 3.
5
<PAGE>
Section 2.02 Construction. This Supplemental Indenture No. 3 is executed
------------
as and shall constitute an instrument supplemental to the Indenture and shall be
construed in connection with and as part of the Indenture.
Section 2.03 Ratification. Except as modified and expressly amended by
------------
this Supplemental Indenture No. 3, the Indenture is, in all respects, ratified
and confirmed and all the terms, provisions and conditions thereof shall be and
remain in full force and effect.
Section 2.04 MT&T
----
Prior to its merger with and into Moran Towing, MT&T hereby agrees as
follows:
(a) to assume the obligations of the following Restricted Subsidiaries
under the Guarantees of such Restricted Subsidiaries:
Aberdeen Curtis Bay Co.
Annapolis Curtis Bay Co.
Curtis Bay Towing Company of Delaware
Elkton Curtis Bay Co.
Irvington Curtis Bay Co.
Kirkwood Curtis Bay Co.
Laurel Picton Co.
Warwick Curtis Bay Co.; and
(b) that MT&T confirms the due and punctual performance by MT&T of the
Guarantee and the Collateral Documents of MT&T and/or such Restricted
Subsidiaries and every covenant in the Indenture and the Collateral Documents to
be performed or observed by MT&T and/or such Restricted Subsidiaries.
Section 2.05 Moran Florida
-------------
Prior to its merger with and into Moran Towing, Moran Florida hereby agrees
as follows:
(a) to assume the obligations of Moran Towing of Miami, Inc. under the
Guarantee of such Guarantor; and
(b) that Moran Florida confirms the due and punctual performance by Moran
Florida of the Guarantee of Moran Florida and/or Moran Towing of Miami, Inc. and
every covenant in the Indenture to be performed by Moran Florida and/or Moran
Towing of Miami, Inc.
6
<PAGE>
Section 2.06 Transfers of Barges to Newly-Created Wholly-Owned
-------------------------------------------------
Subsidiaries; Subsequent Merger with and Into PETC
- --------------------------------------------------
(a) Prior to the merger of each of the following Restricted Subsidiaries
with and into PETC, each of the following Restricted Subsidiaries listed in the
column entitled "Wholly-Owned Subsidiary" below hereby agrees to be bound by and
subject to all the terms of the Indenture (including representations and
warranties) as a Guarantor, including without limitation the provisions of
Article 3 of the Indenture, as if such Restricted Subsidiaries were a signatory
to the Indenture. In addition, prior to, or concurrently with, the contribution
of the following Mortgaged Vessels to each of MATC, INC. and MEC I, INC., each
of Moran Atlantic Towing Corporation, Moran Enterprises Corporation, MATC, Inc.
and MEC I, Inc. shall execute and deliver a Ship Mortgage, or an assumption to
ship or fleet mortgages, as the case may be, with respect to the vessels set
forth opposite their names below (provided that BPC I, Inc., which will own the
vessel Pennsylvania, which is not a Mortgaged Vessel, will not execute a Ship
------------
Mortgage or an assumption to a ship mortgage), which Mortgaged Vessels are
presently subject to First Preferred Fleet Mortgages in favor of the Trustee:
Subsidiary Wholly-Owned Subsidiary Vessel
---------- ----------------------- ------
Moran Atlantic Towing Corporation MATC, Inc. Maine
Moran Enterprises Corporation MEC I, Inc. Texas
Florida
Barge Pennsylvania Corporation BPC I, Inc. Pennsylvania
(b) After giving effect to the merger of the Restricted Subsidiaries
listed in Section 2.06(a) with and into PETC, PETC hereby agrees to be bound by
and subject to all the terms of the Indenture (including representations and
warranties) as a Guarantor, including without limitation the provisions of
Article 3 of the Indenture, as if PETC were a signatory to the Indenture.
(c) Concurrently with the merger of the Restricted Subsidiaries listed
in Section 2.06(a) with and into PETC, PETC shall execute and deliver Ship
Mortgages, or assumptions to ship or fleet mortgages, as the case may be, with
respect to each of the following Mortgaged Vessels (provided that PETC, which
will own the vessel Pennsylvania, which is not a Mortgaged Vessel, will not
------------
execute a Ship Mortgage or an assumption to a ship mortgage with respect to such
vessel):
Maine (Official No. 571982)
Texas (Official No. 630729)
Florida (Official No. 623034)
New Jersey (Official No. 523392)
Rhode Island (Official No. 537350)
Connecticut (Official No. 999754)
7
<PAGE>
Section 2.07 Seaboard; Moran Delaware. Each of Seaboard and Moran Delaware
------------------------
agrees to be bound by and subject to all the terms of the Indenture (including
representations and warranties) as a Guarantor, including without limitation the
provisions of Article 3 of the Indenture, as if Seaboard and Moran Delaware were
signatories to the Indenture.
Section 2.08 Moran Towing. Moran Towing hereby agrees as follows:
------------
(a) to assume the obligations of MT&T, Moran Florida, Moran Atlantic
Towing Corporation, Moran Enterprises Corporation, Barge Pennsylvania
Corporation and the Other Merged Guarantors under each of the Guarantees of
MT&T, Moran Florida, Moran Atlantic Towing Corporation, Moran Enterprises
Corporation, Barge Pennsylvania Corporation and the Other Merged Guarantors;
(b) that Moran Towing confirms the due and punctual performance by Moran
Towing of the Guarantee and the Collateral Documents, to the extent applicable,
of Moran Towing and/or MT&T, Moran Florida, Moran Atlantic Towing Corporation,
Moran Enterprises Corporation, Barge Pennsylvania Corporation and the Other
Merger Guarantors and every covenant in the Indenture and the Collateral
Documents, to the extent applicable, to be performed or observed by Moran Towing
and/or MT&T, Moran Florida, Moran Atlantic Towing Corporation, Moran Enterprises
Corporation, Barge Pennsylvania Corporation and the Other Merged Guarantors; and
(c) Concurrently herewith, Moran Towing has executed and delivered
assumptions of Ship Mortgages in compliance with Section 3.4 of the Ship
Mortgages with respect to the Mortgaged Vessels heretofore owned by MT&T, Moran
Atlantic Towing Corporation, Moran Enterprises Corporation and the Other Merged
Guarantors.
Section 2.09 Exhibit F. Effective as of the date of this Supplemental
---------
Indenture No. 3, Exhibits F-1, F-2 and F-3 to the Indenture shall be replaced
with Annex I attached hereto.
Section 2.10 Counterparts. This Supplemental Indenture No. 3 may be
------------
executed in any number of counterparts; each signed copy shall be an original,
but all of them together represent the same agreement.
Section 2.11 Governing law. This Supplemental Indenture No. 3 shall be
-------------
subject to the governing law and choice of forum provisions of Section 13.09 of
the Indenture.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 3 to be duly executed as of the day and year first above written.
MORAN TRANSPORTATION COMPANY
By: /s/ Jeffrey J. McAulay
-----------------------------------
Name:
Title: Vice President
MORAN TOWING CORPORATION
By: /s/ Jeffrey J. McAulay
-----------------------------------
Name:
Title: Vice President
THE GUARANTORS LISTED ON ANNEX I HERETO
By: /s/ Alan L. Marchisotto
-----------------------------------
Name:
Title: Secretary As to each of the Guarantors
listed in Annex I, as Vice President,
unless otherwise stated.
MATC, INC. (to be merged, as described in Section 2.06)
By: /s/ Alan L. Marchisotto
-----------------------------------
Name:
Title: Secretary
9
<PAGE>
MEC I, INC. (to be merged, as described in Section 2.06)
By: /s/ Alan L. Marchisotto
-----------------------------------
Name:
Title: Secretary
BPC I, INC. (to be merged, as described in Section 2.06)
By: /s/ Alan L. Marchisotto
----------------------------------
Name:
Title: Secretary
FLEET NATIONAL BANK,
as Trustee
By: /s/ Susan T. Keller
----------------------------------
Name:
Title: Vice President
10
<PAGE>
ANNEX I
GUARANTORS
----------
Guarantors after Giving Effect to the Mergers
---------------------------------------------
and the Other Transactions Described Herein
-------------------------------------------
A. Restricted Subsidiaries
- -- -----------------------
1. Restricted Subsidiaries which are Not Qualified Restricted Subsidiaries
-- -----------------------------------------------------------------------
Moran Towing Corporation
Petroleum Transport Corporation
2. Qualified Restricted Subsidiaries
-- ---------------------------------
Florida Towing Company
Curtis Bay Towing Company of Pennsylvania
Curtis Bay Towing Company of Virginia
Moran Insurance Company Limited
Moran Towing of Texas, Inc.
Moran Shipyard Corporation
Jakobson Shipyard, Inc.
Moran Barge Corporation
Portsmouth Navigation Corporation
Hampton Roads Land Co., Inc.
Moran Services Corporation
Moran Bulk Corporation
Moran Towing of Delaware, Inc.
Seaboard Barge Corporation
B. Unrestricted Subsidiaries
- -- -------------------------
None
<PAGE>
ANNEX II
OTHER MERGED GUARANTORS
-----------------------
Merged Guarantors which are Qualified Restricted Subsidiaries
-------------------------------------------------------------
Moran Towing of New Hampshire, Inc.
Merged Guarantors which are Restricted Subsidiaries,
----------------------------------------------------
but not Qualified Restricted Subsidiaries
-----------------------------------------
Amy Moran Inc.
Berkley Curtis Bay Co.
Chesapeake Barge Corp.
Chestertown Curtis Bay Co.
Commodore Point Co.
Drummond Point Co.
Easton Picton Co.
Hampton Curtis Bay Co.
Judy Moran Inc.
Moran Bucksport Corporation
Moran Coal Company, Inc.
Moran Energy Corporation
Moran Somerset Corporation
Moran Towboat Corp.
Moran Trade Corporation
Naticoke Curtis Bay Co.
Perryville Curtis Bay Co.
Perth Amboy Tugs, Inc.
Portland Towboat Company, Inc.
Portsmouth Curtis Bay Co.
Queenstown Curtis Bay Co.
Sykesville Curtis Bay Co.
Towboat Betty Moran Corp.
Tug Cathleen E. Moran Corp.
Tug Cynthia Moran, Inc.
Tug E.F. Moran, Jr. Inc.
Tug Elizabeth W. Moran, Inc.
Tug Eugene F. Moran, Inc.
Tug Harriet Moran, Inc.
Tug Helen B. Moran, Inc.
Tug Junior Moran, Inc.
Tug Mary Moran, Inc.
Tug Nancy Moran, Inc.
Williamsburg Curtis Bay Co.
<PAGE>
EXHIBIT 10.2(c)
INSTRUMENT OF ADHERENCE
-----------------------
December 31, 1996
To the Banks Referred to Below
c/o The First National Bank of Boston, as Agent
100 Federal Street
Boston, Massachusetts 02110
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement, dated as of July 11,
1994, as the same is amended, restated, modified or supplemented from time to
time (such agreement, as in effect from time to time, the "Credit Agreement"),
among Moran Transportation Company, each of the other Borrowers (as defined in
the Credit Agreement) (each of the foregoing, individually, a "Borrower", and,
collectively, the "Borrowers"), The First National Bank of Boston, such other
lenders as are or may become parties thereto from time to time (collectively,
the "Banks") and The First National Bank of Boston as agent for the Banks (the
"Agent"). Capitalized terms which are used herein without definition and which
are defined in the Credit Agreement shall have the same meanings herein as in
the Credit Agreement.
Each of (i) SEABOARD BARGE CORPORATION, a Delaware corporation, (ii)
PETROLEUM TRANSPORT CORPORATION, a Delaware corporation, and (iii) MORAN TOWING
OF DELAWARE, INC., a Delaware corporation, hereby agrees to become a Borrower
under the Credit Agreement and to comply with and be bound by all of the terms,
conditions and covenants thereof. Without limiting the generality of the
preceding sentence, each of the undersigned agrees that it shall be jointly and
severally liable, together with the Borrowers, for the payment and performance
of all obligations of the Borrowers under the Credit Agreement as supplemented
hereby. Concurrently, each of the undersigned has executed an Allonge, of even
date herewith, to the original Note.
Each of the undersigned represents and warrants to the Banks and the Agent
that:
<PAGE>
(a) it is a Restricted Subsidiary of Moran;
(b) no provision of its charter, other incorporation papers, by-
laws or stock provisions prohibits the undersigned from making
distributions to the Borrowers;
(c) it is capable of complying with and is in compliance with all
of the provisions of the Credit Agreement; and
(d) its chief executive office and principal place of business is
located at Two Greenwich Plaza, Fairfield, CT 06830, at which
location its books and records are kept.
Each of the undersigned hereby affirms that each of the representations and
warranties set forth in (S)7 of the Credit Agreement is true and correct with
respect to the undersigned as of the date hereof.
The following documents are delivered to the Agent concurrently with this
Instrument of Adherence:
(a) a legal opinion of Finn Dixon & Herling LLP as to the legal,
valid and binding nature of the Loan Documents, as supplemented
hereby, with respect to the Borrowers, including, without limitation,
each of the undersigned;
(b) copies, certified by a duly authorized officer of each of the
undersigned to be true and complete as of the date hereof, of each of
(i) the charter documents of each of the undersigned as in effect on
the date hereof, (ii) the by-laws of each of the undersigned as in
effect on the date hereof, (iii) the resolutions of the Board of
Directors of each of the undersigned authorizing the execution and
delivery of this Instrument of Adherence and each of the undersigned's
performance of all of the transactions contemplated hereby and by the
Credit Agreement as supplemented hereby, and (iv) an incumbency
certificate giving the name and bearing a specimen signature of each
individual who shall be authorized to sign, in each of the
undersigned's name and on its behalf, each of this Instrument of
Adherence, the Allonge and the other Loan Documents, and to give
notices and to take other action on its behalf under the Loan
Documents; and
2
<PAGE>
(c) a certificate of the Secretary of State of Delaware of a recent
date as to each of the undersigned's corporate existence, good
standing and tax payment status.
[Remainder of page intentionally left blank]
3
<PAGE>
This Instrument of Adherence shall take effect as a sealed instrument and
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts.
Very truly yours,
SEABOARD BARGE CORPORATION
By:/s/ Alan Marchisotto
--------------------
Name: Alan Marchisotto
Title: Secretary
PETROLEUM TRANSPORT CORPORATION
By: /s/ Alan Marchisotto
---------------------
Name /s/ Alan Marchisotto
Title: Secretary
MORAN TOWING OF DELAWARE, INC.
By: /s/ Jeffrey J. McAulay
----------------------
Name: Jeffrey J. McAulay
Title: Vice President
Accepted and Agreed:
- --------------------
THE FIRST NATIONAL BANK OF
BOSTON, INDIVIDUALLY AND AS AGENT
By: /s/ Victor Garcia
------------------
Name: Victor Garcia
Title: Vice President
4
<PAGE>
EXHIBIT 10.3(a)
SECURITY AGREEMENT
-------- ---------
SECURITY AGREEMENT, dated as of December 31, 1996 among SEABOARD BARGE
CORPORATION, a Delaware corporation, PETROLEUM TRANSPORT CORPORATION, a Delaware
corporation, and MORAN TOWING OF DELAWARE, INC., a Delaware corporation (each, a
"Borrower", and collectively, the "Borrowers"), and THE FIRST NATIONAL BANK OF
BOSTON, as agent (hereinafter, in such capacity, the "Agent") for itself and
other banking institutions (hereinafter, collectively, the "Banks") which are or
may become parties to that certain Revolving Credit Agreement, dated as of July
11, 1994, as the same may be amended and in effect from time to time (such
agreement, as amended and in effect from time to time, the "Credit Agreement"),
among Moran Transportation Company, a Delaware corporation, ("Moran"), the
Borrowers, certain other borrowers referred to therein, the Banks and the Agent.
WHEREAS, the Borrowers, pursuant to a separate Instrument of Adherence,
dated as of the date hereof, have become party to the Credit Agreement; and
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending credit under the Credit Agreement to the Borrowers and the
other borrowers referred to in the Credit Agreement that the Borrowers execute
and deliver to the Agent, for the benefit of the Banks and the Agent, a security
agreement in substantially the form hereof; and
WHEREAS, each of the Borrowers wishes to grant security interests in favor
of the Agent, for the benefit of the Banks and the Agent, as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
(S)1. DEFINITIONS. All capitalized terms used herein without definitions
-----------
shall have the respective meanings provided therefor in the Credit Agreement.
All terms defined in the Uniform Commercial Code of the Commonwealth of
Massachusetts and used herein shall have the same definitions herein as
specified therein.
(S)2. GRANT OF SECURITY INTEREST.
----- -- -------- --------
(S)2.1. COLLATERAL GRANTED. Each of the Borrowers hereby grants to
---------- -------
the Agent, for the benefit of the Banks and the Agent, to secure the
<PAGE>
payment and performance in full of all of the Obligations, a security
interest in and so pledges and assigns to the Agent, for the benefit
of the Banks and the Agent, the following properties, assets and
rights of such Borrower, wherever located, whether now owned or
hereafter acquired or arising, and all proceeds and products thereof
(all of the same being hereinafter called the "Collateral"):
All goods consisting of inventory, all accounts, contract
rights for the payment of monies due, notes, bills, drafts, and all
other debts, obligations and liabilities for the payment of monies
due, in whatever form owing to such Borrower and all other rights
of any such Borrower to the payment of money from any person, firm
or corporation or any other legal entity, whether now existing or
hereinafter arising, now or hereafter received by or belonging or
owing to such Borrower and in each case relating to goods sold or
leased or services rendered (but not including, for purposes of
clarification, any amount owed in connection with the sale of or
other disposition of any vessel), and all guaranties and securities
therefore, all rights of an unpaid seller to merchandise or
services and in the proceeds thereof, all chattel paper, documents
and instruments if any, evidencing any of the foregoing rights to
payment, and all computer programs, computer software, customer
lists, and all recorded data of any kind or nature, regardless of
the medium of recording evidencing or relating to any of the
foregoing.
(S)2.2. DELIVERY OF INSTRUMENTS, ETC. Pursuant to the terms hereof,
-------- -- ------------ ---
each of the Borrowers has endorsed, assigned and delivered to the
Agent all negotiable or non-negotiable instruments and chattel paper,
if any, pledged by it hereunder, together with instruments of transfer
or assignment duly executed in blank as the Agent may have specified.
In the event that any of the Borrowers shall, after the date of this
Agreement, acquire any other negotiable or non-negotiable instruments
or chattel paper to be pledged by it hereunder, such Borrower shall
forthwith endorse, assign and deliver the same to the Agent,
accompanied by such instruments of transfer or assignment duly
executed in blank as the Agent may from time to time specify. Each of
the Borrowers hereby acknowledges that the Agent may, in its
discretion, appoint one or more financial institutions to act as the
Agent's agent in holding in custodial account instruments or other
financial assets in which the Agent is granted a security interest
hereunder, including, without limitation, certificates of deposit and
other instruments evidencing short term obligations.
(S)3. TITLE TO COLLATERAL, ETC. The Borrowers are the owners of the
----- -- ----------- ---
Collateral free from any adverse lien, security interest or other encumbrance,
2
<PAGE>
except for the security interest created by this Agreement and other liens
permitted by the Credit Agreement. None of the Collateral constitutes, or is the
proceeds of, "farm products" as defined in (S)9-109(3) of the Uniform Commercial
Code of the Commonwealth of Massachusetts.
(S)4. CONTINUOUS PERFECTION. Each Borrower's place of business or, if
---------- ----------
more than one, chief executive office is indicated on the Perfection Certificate
delivered by such Borrower to the Agent herewith (the "Perfection Certificate").
None of the Borrowers will change the same, or its name, identity or corporate
structure in any manner, without providing at least 30 days prior written notice
to the Agent. The Collateral, to the extent not delivered to the Agent pursuant
to (S)2.2 hereof or transferred in accordance with (S)6 hereof, will be kept at
those locations listed on the Perfection Certificate delivered by the applicable
Borrower and none of the Borrowers will remove the Collateral from such
locations without providing at least 30 days prior written notice to the Agent
unless such Collateral is moved to a location for which appropriate Uniform
Commercial Code financing statements showing such Borrower as debtor and the
Agent as secured party have been filed.
(S)5. NO LIENS. Except for the security interest herein granted and
-- -----
other liens permitted by the Credit Agreement, a Borrower shall be the owner of
the Collateral free from any lien, security interest or other encumbrance, and
the Borrowers shall defend the same against all claims and demands of all
persons at any time claiming the same or any interests therein adverse to the
Agent or any of the Banks. None of the Borrowers shall pledge, mortgage or
create, or suffer to exist a security interest in the Collateral in favor of any
person other than the Agent, for the benefit of the Banks and the Agent, except
for liens permitted by the Credit Agreement.
(S)6. NO TRANSFERS. None of the Borrowers will sell or offer to sell
-- ---------
or otherwise transfer the Collateral or any interest therein except as provided
in the Credit Agreement. It is understood and agreed that as long as an Event of
Default is not continuing, the Borrowers shall have the right, in the ordinary
course of business, to place inventory on board various vessels of the
Borrowers, the other borrowers referred to in the Credit Agreement and/or any of
their Subsidiaries, and upon such placement, such inventory so placed shall no
longer be Collateral hereunder (unless and to the extent that such inventory is
subsequently removed from such vessel and returned to "shoreside" inventory).
(S)7. INSURANCE.
---------
(S)7.1. MAINTENANCE OF INSURANCE. Each of the Borrowers will maintain
----------- -- ---------
with financially sound and reputable insurers insurance with respect
to its properties and business against such casualties and
contingencies as shall be in accordance with general practices of
3
<PAGE>
businesses engaged in similar activities in similar geographic areas.
Such insurance shall be in such minimum amounts that none of the
Borrowers will be deemed a co-insurer under applicable insurance laws,
regulations and policies and otherwise shall be in such amounts,
contain such terms, be in such forms and be for such periods as may be
reasonably satisfactory to the Agent. In addition, all such insurance
on the Collateral shall be payable to the Agent as loss payee for the
benefit of the Banks and the Agent. Without limiting the foregoing,
each of the Borrowers will maintain, in amounts and with deductibles
equal to those generally maintained by businesses engaged in similar
activities in similar geographic areas, general public liability
insurance against claims of bodily injury, death or property damage
occurring, on, in or about the properties of such Borrower.
(S)7.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance in
--------- --------
respect of any casualty loss of any of the Collateral shall, subject
to the rights, if any, of other parties with a prior interest in the
property covered thereby, (a) so long as no Default or Event of
Default has occurred and is continuing, be disbursed to the applicable
Borrower for direct application by such Borrower solely to the repair
or replacement of such Borrower's property so damaged or destroyed
and/or to the payment of the Obligations and (b) in all other
circumstances, be held by the Agent as cash collateral for the
Obligations. The Agent may, at its sole option, disburse from time to
time all or any part of such proceeds so held as cash collateral, upon
such terms and conditions as the Agent may reasonably prescribe, for
direct application by the applicable Borrower solely to the repair or
replacement of such Borrower's property so damaged or destroyed, or
the Agent may apply all or any part of such proceeds to the
Obligations with the Total Commitment (if not then terminated) being
reduced by the amount so applied to the Obligations.
(S)7.3. NOTICE OF CANCELLATION, ETC. All policies of insurance shall
------ -- ------------ ---
provide for at least 30 days prior written cancellation notice to the
Agent. In the event of failure by the Borrowers to provide and
maintain insurance as herein provided, the Agent may, at its option,
provide such insurance and charge the amount thereof to the Borrowers.
The Borrowers shall furnish the Agent with certificates of insurance
and policies evidencing compliance with the foregoing insurance
provision.
(S)8. GOVERNMENT CONTRACTS. Each of the Borrowers agrees that it shall
---------- ---------
execute all such documents, and take all such actions, as the Agent shall
determine to be necessary or appropriate from time to time under the Federal
Assignment of Claims Act of 1940, as amended, in order to confirm and assure to
the Agent its rights under this Agreement with respect to any and all Collateral
consisting of such Borrower's rights to moneys due or to become due under any
4
<PAGE>
contracts or agreements with or orders from the United States government or any
agency or department thereof, the assignment of which is not prohibited by such
contract or agreement (collectively, "Government Receivables"). Without limiting
the generality of the foregoing, each of the Borrowers agrees that
simultaneously with the execution and delivery of this Agreement it shall
execute and deliver to the Agent a confirmatory assignment substantially in the
form of Exhibit A attached hereto (a "Confirmatory Assignment") with respect to
---------
each Government Receivable existing on the date hereof where the aggregate
proceeds payable to such Borrower thereunder exceeds $10,000, and within ten
(10) Business Days after the creation of any such new Government Receivable, the
applicable Borrower shall execute and deliver to the Agent a Confirmatory
Assignment with respect thereto. Notwithstanding the preceding sentence, if at
any time the aggregate proceeds payable to any Borrower under all Government
Receivables exceeds $200,000, such Borrower shall execute and deliver to the
Agent a Confirmatory Assignment with respect to each such Government Receivable.
Each of the Borrowers hereby irrevocably authorizes the Agent, or its designee,
at such Borrower's expense, after the occurrence and during the continuance of
any Event of Default, to file with the United States government (or the
appropriate agency or instrumentality thereof) a notice of each assignment of a
Government Receivable substantially in the form of Exhibit B attached hereto (a
---------
"Notice of Assignment"), to which a copy of the relevant Confirmatory Assignment
may be attached, and appoints the Agent as such Borrower's attorney-in-fact to
execute and file any such Confirmatory Assignments, Notices of Assignment and
any ancillary documents relating thereto.
(S)9. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW. Each of the
----------- -- ----------- ---------- ---- ---
Borrowers shall keep or cause to be kept records of accounts which are complete
and accurate in all material respects, and from time to time upon the reasonable
request of the Agent, shall deliver to the Agent a list of the names, addresses,
face value and dates of invoices for each debtor obligated on such account
receivable. Each of the Borrowers will keep the tangible Collateral in good
order and repair, subject to normal wear and tear, and will not use the same in
violation of law or any policy of insurance thereon. The Agent, or its designee,
may inspect the Collateral, wherever located, at any reasonable time, and, if no
Default or Event of Default has occurred and is continuing, upon reasonable
prior written notice to Moran. The Borrowers will pay promptly when due all
taxes, assessments, governmental charges and levies upon the Collateral or
incurred in connection with the use or operation of such Collateral or incurred
in connection with this Agreement, provided that any such tax, assessment,
--------
charge, levy or claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if the
applicable Borrower shall have set aside on its books adequate reserves with
respect thereto; and provided further that such Borrower will pay all such
-------- -------
taxes, assessments, charges, levies or claims forthwith upon the commencement of
5
<PAGE>
proceedings to foreclose any lien that may have attached as security therefor.
Each of the Borrowers has at all times operated, and each of the Borrowers will
continue to operate, in all material respects, its business in compliance with
all applicable provisions of the federal Fair Labor Standards Act, as amended,
and with all applicable provisions of federal, state and local statutes and
ordinances dealing with the control, shipment, storage or disposal of hazardous
materials or substances.
(S)10. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
---------- ---------- -------- ------------ -- ----------
(S)10.1. EXPENSES INCURRED BY AGENT. In its discretion, the Agent
-------- -------- -- -----
may discharge taxes and other encumbrances at any time levied or
placed on any of the Collateral, make repairs thereto and pay any
necessary filing fees. Each of the Borrowers jointly and severally
agrees to reimburse the Agent on demand for any and all reasonable
expenditures so made. The Agent shall have no obligation to the
Borrowers to make any such expenditures, nor shall the making thereof
relieve any of the Borrowers of any default.
(S)10.2. AGENT'S OBLIGATIONS AND DUTIES. Anything herein to the
------- ----------- --- ------
contrary notwithstanding, the Borrower that is the party thereto shall
remain liable under each contract or agreement related to the
Collateral to be observed or performed by such Borrower thereunder.
Neither the Agent nor any Bank shall have any obligation or liability
under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Agent or any Bank of any payment
relating to any such contract or agreement, nor shall the Agent or any
Bank be obligated in any manner to perform any of the obligations of
any of the Borrowers under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Bank in respect of the Collateral
or as to the sufficiency of any performance by any party under any
such contract or agreement, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Agent or to which the
Agent or any Bank may be entitled at any time or times. The Agent's
sole duty with respect to the custody, safe keeping and physical
preservation of the Collateral in its possession, under *9-207 of
the Uniform Commercial Code of the Commonwealth of Massachusetts or
otherwise, shall be to deal with such Collateral in the same manner as
the Agent deals with similar property for its own account.
(S)11. SECURITIES AND DEPOSITS. The Agent may at any time after the
---------- --- --------
occurrence and during the continuance of an Event of Default, at its option,
transfer to itself or any nominee any securities (if any) constituting
Collateral, receive any income thereon and hold such income as additional
Collateral or
6
<PAGE>
apply it to the Obligations. During the continuance of an Event of Default and
whether or not any Obligations are due, the Agent may demand, sue for, collect,
or make any settlement or compromise which it reasonably deems desirable with
respect to the Collateral. Regardless of the adequacy of Collateral or any other
security for the Obligations, during the continuance of any Event of Default,
any deposits or other sums at any time credited by or due from the Agent or any
Bank to any of the Borrowers may at any time be applied to or set off against
any of the Obligations.
(S)12. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS. If an Event
------------ -- ------- ------- --- ----- --------
of Default shall have occurred and be continuing, each of the Borrowers shall,
at the request of the Agent, notify its account debtors and other obligors on
accounts and other Collateral for which such Borrower is an obligee of the
security interest of the Agent in any account and other Collateral and that
payment thereof is to be made directly to the Agent or to any financial
institution designated by the Agent as the Agent's agent therefor, and the Agent
may itself, if an Event of Default shall have occurred and be continuing,
without notice to or demand upon any of the Borrowers, so notify account debtors
and obligors. After the making of such a request or the giving of any such
notification, each of the Borrowers shall hold any proceeds of collection of
accounts and other Collateral received by such Borrower as trustee for the
Agent, for the benefit of the Banks and the Agent, without commingling the same
with other funds of such Borrower and shall turn the same over to the Agent in
the identical form received, together with any necessary endorsements or
assignments. The Agent shall apply the proceeds of collection of accounts and
other Collateral received by the Agent to the Obligations, such proceeds to be
immediately entered after final payment in cash or solvent credits of the items
giving rise to them.
(S)13. FURTHER ASSURANCES. Each of the Borrowers, at its own expense,
------- ----------
shall do, make, execute and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Agent may reasonably require
more completely to vest in and assure to the Agent and the Banks their
respective rights hereunder or in any of the Collateral, including, without
limitation, (a) executing, delivering and, where appropriate, filing financing
statements and continuation statements under the Uniform Commercial Code, (b)
obtaining governmental and other third party consents and approvals, and (c)
obtaining waivers from landlords.
(S)14. POWER OF ATTORNEY.
----- -- --------
(S)14.1. APPOINTMENT AND POWERS OF AGENT. Each of the Borrowers
----------- --- ------ -- -----
hereby irrevocably constitutes and appoints the Agent and any officer
or agent thereof, with full power of substitution, as its true and
lawful attorneys-in-fact with full irrevocable power and authority in
the
7
<PAGE>
place and stead of such Borrower or in the Agent's own name, for
the purpose of carrying out the terms of this Agreement, to take any
and all appropriate action and to execute any and all documents and
instruments that may be reasonably necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the power and
right, on behalf of such Borrower, without notice to or assent by such
Borrower, to do the following:
(a) upon the occurrence and during the continuance of an Event
of Default, generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral in
such manner as is consistent with the Uniform Commercial Code of
the Commonwealth of Massachusetts and as fully and completely as
though the Agent were the absolute owner thereof for all purposes,
and to do at such Borrower's expense, at any time, or from time to
time, all acts and things which the Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral and
the Agent's security interest therein, in order to effect the
intent of this Agreement, all as fully and effectively as such
Borrower might do, including, without limitation, the execution,
delivery and recording, in connection with any sale or other
disposition of any Collateral, of the endorsements, assignments or
other instruments of conveyance or transfer with respect to such
Collateral; and
(b) to file such financing statements with respect hereto, with
or without such Borrower's signature, or a photocopy of this
Agreement in substitution for a financing statement, as the Agent
may deem appropriate and to execute in such Borrower's name such
financing statements and amendments thereto and continuation
statements which may require such Borrower's signature.
(S)14.2. RATIFICATION BY THE BORROWERS. To the extent permitted by
------------ -- --- ---------
law, each of the Borrowers hereby ratifies all that said attorneys
shall lawfully do or cause to be done by virtue hereof (except for
acts of gross negligence or willful misconduct). This power of
attorney is a power coupled with an interest and shall be irrevocable.
(S)14.3. NO DUTY ON AGENT. The powers conferred on the Agent
-- ---- -- -----
hereunder are solely to protect the interests of the Agent and the
Banks in the Collateral and shall not impose any duty upon the Agent
to exercise any such powers. The Agent shall be accountable only for
the amounts that it actually receives as a result of the exercise of
such powers and neither it nor any of its officers, directors,
employees or agents shall be
8
<PAGE>
responsible to any of the Borrowers for any act or failure to act,
except for the Agent's own gross negligence or willful misconduct.
(S)15. REMEDIES. If an Event of Default shall have occurred and be
--------
continuing, the Agent may, without notice to or demand upon any of the
Borrowers, declare this Agreement to be in default, and the Agent shall
thereafter have in any jurisdiction in which enforcement hereof is sought, in
addition to all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code, including, without limitation, the
right to take possession of the Collateral, and for that purpose the Agent may,
so far as the Borrowers can give authority therefor, enter upon any premises on
which the Collateral may be situated and remove the same therefrom. The Agent
may in its discretion require any of the Borrowers to assemble all or any part
of the Collateral at such location or locations within the state(s) of such
Borrower's principal office(s) or at such other locations as the Agent may
designate and which are reasonably convenient to such Borrower and the Agent.
Unless the Collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, the Agent shall give Moran
(and Moran shall give the Borrowers) at least ten Business Days prior written
notice of the time and place of any public sale of Collateral or of the time
after which any private sale or any other intended disposition is to be made.
Each of the Borrowers hereby acknowledges that ten Business Days prior written
notice of such sale or sales to Moran shall be reasonable notice. In addition,
each of the Borrowers waives any and all rights that it may have to a judicial
hearing in advance of the enforcement of any of the Agent's rights hereunder,
including, without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights with respect
thereto.
(S)16. NO WAIVER, ETC. Each of the Borrowers waives demand, notice,
-- ------- ---
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description (except as provided
herein or in the other Loan Documents). With respect to both the Obligations and
the Collateral, each of the Borrowers assents to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of or failure to perfect any security interest in any Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Agent may deem advisable. The Agent shall have no duty as to the collection or
protection of the Collateral or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in (S)10.2
hereof. The Agent shall not be deemed to have waived any of its rights upon or
under the Obligations or the Collateral unless such waiver
9
<PAGE>
shall be in writing and signed by the Agent with the consent of the Majority
Banks. No delay or omission on the part of the Agent in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion. All rights and remedies of the Agent with respect to the Obligations
or the Collateral, whether evidenced hereby or by any other instrument or
papers, shall be cumulative and may be exercised singularly, alternatively,
successively or concurrently at such time or at such times as the Agent deems
expedient.
(S)17. MARSHALLING. Neither the Agent nor any Bank shall be required
-----------
to marshal any present or future collateral security (including but not limited
to this Agreement and the Collateral) for, or other assurances of payment of,
the Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of the rights of the
Agent hereunder and of the Agent or any Bank in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights, however existing or arising. To the extent that it lawfully
may, each of the Borrowers hereby agrees that it will not invoke any law
relating to the marshalling of collateral which might cause delay in or impede
the enforcement of the Agent's rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
each of the Borrowers hereby irrevocably waives the benefits of all such laws.
(S)18. PROCEEDS OF DISPOSITIONS; EXPENSES. The Borrowers shall pay to
-------- -- ------------- --------
the Agent on demand any and all reasonable expenses, including reasonable
attorneys' fees and disbursements, incurred or paid by the Agent in protecting,
preserving or enforcing the Agent's rights under or in respect of any of the
Obligations or any of the Collateral. After deducting all of said expenses, the
residue of any proceeds of collection or sale of the Obligations or Collateral
shall, to the extent actually received in or reduced to cash, be applied to the
payment of the Obligations in such order or preference as is provided in the
Credit Agreement, proper allowance and provision being made for any Obligations
not then due. Upon the final payment and satisfaction in full of all of the
Obligations and after making any payments required by Section 9-504(1)(c) of the
Uniform Commercial Code of the Commonwealth of Massachusetts, any excess shall
be returned to the Borrowers, and the Borrowers shall remain jointly and
severally liable for any deficiency in the payment of the Obligations.
(S)19. OVERDUE AMOUNTS. Until paid, all amounts due and payable by
------- -------
the Borrowers hereunder shall be a debt secured by the Collateral and shall
bear, whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Credit Agreement.
10
<PAGE>
(S)20. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS
--------- ---- ------- -- ------------
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
Each of the Borrowers agrees that any suit for the enforcement of this Agreement
may be brought in the courts of the Commonwealth of Massachusetts or any federal
court sitting therein and consents to the non-exclusive jurisdiction of such
court and to service of process in any such suit being made upon such Borrower
by mail at the address specified in (S)20 of the Credit Agreement. Each of the
Borrowers hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient court.
(S)21. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS WAIVES ITS RIGHT TO A
------ -- ---- -----
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, each
of the Borrowers waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual or incidental damages. Each of the Borrowers (a) certifies that neither
the Agent or any Bank nor any representative, agent or attorney of the Agent or
any Bank has represented, expressly or otherwise, that the Agent or any Bank
would not, in the event of litigation, seek to enforce the foregoing waivers and
(b) acknowledges that, in entering into the Credit Agreement and the other Loan
Documents to which the Agent or any Bank is a party, the Agent and the Banks are
relying upon, among other things, the waivers and certifications contained in
this (S)21.
(S)22. MISCELLANEOUS. The headings of each section of this Agreement
-------------
are for convenience only and shall not define or limit the provisions thereof.
This Agreement and all rights and obligations hereunder shall be binding upon
each of the Borrowers and its respective successors and assigns, and shall inure
to the benefit of the Agent, the Banks and their respective successors and
assigns. If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby, and this Agreement shall be construed and be enforceable as if
such invalid, illegal or unenforceable term had not been included herein. This
Agreement and any amendment hereof may be executed in several counterparts and
by each party on a separate counterpart, each of which when executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought. Notices hereunder shall be given in the manner and to
11
<PAGE>
the addresses set forth in (S)20 of the Credit Agreement. Each of the Borrowers
acknowledges receipt of a copy of this Agreement.
12
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the
Borrowers has caused this Agreement to be duly executed as of the date first
above written.
SEABOARD BARGE CORPORATION
By: /s/ Alan Marchisotto
---------------------
Name: Alan Marchisotto
Title: Secretary
PETROLEUM TRANSPORT CORPORATION
By: /s/ Alan Marchisotto
---------------------
Name: Alan Marchisotto
Title: Secretary
MORAN TOWING OF DELAWARE, INC.
By: /s/ Jeffrey J. McAulay
-----------------------
Name: Jeffrey J. McAulay
Title: Secretary
Accepted:
- ---------
THE FIRST NATIONAL BANK OF BOSTON
as Agent
By: /s/ Victor Garcia
-------------------
Name: Victor Garcia
Title: Vice President
13
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CONNECTICUT )
-------------)
) ss.
COUNTY OF FAIRFIELD )
-------------)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 23rd day of December, 1996, personally appeared Jeffrey J.
McAulay to me known personally, and who, being by me duly sworn, deposes and
says that he is the Vice President of Moran Towing of Delaware, Inc., and that
said instrument was signed and sealed on behalf of said corporation by authority
of its Board of Directors, and said acknowledged said instrument to be the free
act and deed of said corporation.
/s/ Daniel Klaben
---------------------
Notary Public
My commission expires: October 31, 1998
16
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CONNECTICUT )
-------------)
) ss.
COUNTY OF FAIRFIELD )
-------------)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 23rd day of December, 1996, personally appeared Alan
Marchisotto to me known personally, and who, being by me duly sworn, deposes and
says that he is the Secretary of Seaboard Barge Corporation, and that said
instrument was signed and sealed on behalf of said corporation by authority of
its Board of Directors, and said acknowledged said instrument to be the free act
and deed of said corporation.
/s/ Daniel Klaben
--------------------
Notary Public
My commission expires: October 31, 1998
15
<PAGE>
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF CONNECTICUT )
--------------)
) ss.
COUNTY OF FAIRFIELD )
--------------)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 23rd day of December, 1996, personally appeared Alan
Marchisotto to me known personally, and who, being by me duly sworn, deposes and
says that he is the Secretary of Petroleum Transport Corporation, and that said
instrument was signed and sealed on behalf of said corporation by authority of
its Board of Directors, and said acknowledged said instrument to be the free act
and deed of said corporation.
/s/ Daniel Klaben
-----------------
Notary Public
My commission expires: October 31, 1998
14
<PAGE>
EXHIBIT A
---------
FORM OF CONFIRMATORY ASSIGNMENT OF CONTRACT
---- -- ------------ ---------- -- --------
This ASSIGNMENT, dated as of ____________________, is by [INSERT NAME
OF APPLICABLE BORROWER], a [_________________] corporation (the "Debtor") in
favor of The First National Bank of Boston (the "Agent") as agent for itself and
certain other lenders (the "Lenders").
WHEREAS, the Debtor is party to Contract No. ________________ dated
____________________________ between the Debtor and ___________________ (the
"Contract"); and
WHEREAS, the Debtor and the Agent have entered into a certain Security
Agreement, dated as of December __, 1996 (the "Security Agreement"), pursuant to
which the Debtor has granted to the Agent, for the benefit of the Lenders, a
security interest in certain assets of the Debtor, including all of the Debtor's
rights in and to any interest in and to all money due or to become due under the
Contract, to secure the Obligations referred to in the Security Agreement;
NOW, THEREFORE, the Debtor hereby confirms, acknowledges and agrees
that, pursuant to and subject to the terms of the Security Agreement, the Debtor
hereby assigns, transfers, pledges and grants to the Agent, for the benefit of
itself and the Lenders, a security interest in all of the Debtor's right, title
and interest in and to all moneys due or to become due under the Contract.
EXECUTED as of the date first above written.
[____________________________]
By:____________________________
Title:
17
<PAGE>
EXHIBIT B
---------
FORM OF NOTICE OF ASSIGNMENT OF
ACCOUNTS RECEIVABLE AS SECURITY
-------------------------------
The First National Bank of Boston
Date:
To: [Contracting Official or Head of Agency, and Disbursing Official]
Re: Contractor: [_______________________]
Address:
Contract Number:
Made by the United States of America
Department:
Division:
Address:
For:
Dated:
Ladies and Gentlemen:
PLEASE TAKE NOTICE that moneys due or to become due to [INSERT NAME OF
APPLICABLE BORROWER] (the "Contractor") under the contract described above have
been assigned to The First National Bank of Boston (the "Agent"), as agent for
itself and certain other lenders (the "Lenders") under the provisions of the
Assignment of Claims Act of 1940, as amended (31 U.S.C. (S)3727, 41 U.S.C.
(S)315).
A true copy of the instrument of assignment executed by the Contractor
on December __, 1996 is attached to the original notice.
Payments due or to become due to the Debtor under the contract
described above should be made to the undersigned assignee.
Please return to the undersigned (in the enclosed, self-addressed
stamped envelope) the three enclosed copies of this notice with appropriate
notations showing the date and hour of receipt, and signed by the person
acknowledging receipt on behalf of the addressee.
18
<PAGE>
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON, as agent for
the secured parties under that certain Security
Agreement dated as of December __, 1996
By:____________________________________
Authorized Official
100 Federal Street
Boston, MA 02110
ACKNOWLEDGMENT OF RECEIPT
-------------------------
Receipt is acknowledged of the above notice and a copy of the
instrument of assignment. They were received at ____________________ a.m./p.m.
on _____________________, 199_.
________________________________
Signature
________________________________
Title:
On behalf of
[Name of addressee of this notice.]
19
<PAGE>
EXHIBIT 12.1
MORAN TRANSPORTATION COMPANY
Computation of Ratio of Earnings to Fixed Charges
(Amounts in thousands)
<TABLE>
<CAPTION>
Period Period
Jan 1, 1994 July 1, 1994
Year Ended December 31 Thru Thru Year Ended December 31
------ -------------- July 11, Dec. 31, ----- ----------
1992 1993 1994 1994 1995 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Pretax income from
continuing operations $ 5,461 $ 9,764 $2,054 $1,536 $ (136) $ 2,113
Capitalized interest 0 (28) (62) 0 0 0
Undistributed
from affiliiated
partnership (Shipmor) 0 (1,149) 0 0 0 0
Undistributed income
from joint venture (MMA) (101) 0 0 0 0 0
------ ------- ------ ------ ------- -------
$ 5,360 $ 8,587 $1,992 $1,536 $ (136) $ 2,113
====== ======= ====== ====== ======= =======
Fixed charges
Interest expense and
amortization of debt discount
and premium on all
indebtedness (a) $ 3,092 $ 2,077 $ 975 $4,810 $10,192 $10,132
Rentals
1/3 rent expense (b) 444 366 192 173 351 387
------ ------- ------ ------ ------- -------
Total fixed charges $ 3,536 $ 2,443 $1,167 $4,983 $10,543 $10,519
====== ======= ====== ====== ======= =======
Earnings before
income taxes and
fixed charges $ 8,896 $11,030 $3,159 $6,519 $10,407 $12,632
====== ======= ====== ====== ======= =======
Ratio of earnings to
fixed charges 2.5 4.5 2.7 1.3 1.0 1.2
====== ======= ====== ====== ======= =======
</TABLE>
(a) Included in interest expense is capitalized interest related to the
construction of new equipment.
(b) The portion of rentals classified as fixed charges is deemed to be
representative of the interest factor.
<PAGE>
Exhibit 21_1
Subsidiaries of Moran Transportation Company
---------------------------------------------
Moran Towing Corporation
Moran Towing of Texas, Inc.
Seaboard Barge Corporation
Petroleum Transport Corporation
Moran Bulk Corporation
Moran Insurance Company Limited
Moran Services Corporation
Moran Towing of Delaware, Inc.
Jakobson Shipyard, Inc.
Moran Shipyard Corporation
Hampton Roads Land Co., Inc.
Portsmouth Navigation Corporation
Moran Barge Corporation
Curtis Bay Towing Company of Virginia
Curtis Bay Towing Company of Pennsylvania
Florida Towing Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,827
<SECURITIES> 0
<RECEIVABLES> 12,744
<ALLOWANCES> 323
<INVENTORY> 4,395
<CURRENT-ASSETS> 37,031
<PP&E> 121,325
<DEPRECIATION> 22,024
<TOTAL-ASSETS> 172,717
<CURRENT-LIABILITIES> 27,898
<BONDS> 80,000
1,000
0
<COMMON> 1
<OTHER-SE> 12,024
<TOTAL-LIABILITY-AND-EQUITY> 172,717
<SALES> 91,458
<TOTAL-REVENUES> 91,458
<CGS> 57,451
<TOTAL-COSTS> 79,453
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,132
<INCOME-PRETAX> 2,113
<INCOME-TAX> 808
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,305
<EPS-PRIMARY> 28.56
<EPS-DILUTED> 0
</TABLE>
