FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission file number: 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, Connecticut 06830
(Address of principal executive offices)
(Zip Code)
(203) 625-7800
(Registrant's telephone number, including area code)
Not Applicable
________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
________________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of August 12, 1998, 44,600 shares of the common stock, par value $0.01
per share, of Moran Transportation Company, were issued and outstanding.
1
MORAN TRANSPORTATION COMPANY
FORM 10 - Q
INDEX
PAGE
----
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements of Moran Transportation
Company and Subsidiaries
Consolidated Balance Sheets at December 31, 1997 and
June 30, 1998 3
Consolidated Statements of Income for the six
months ended June 30, 1997 and June 30, 1998 5
Consolidated Statements of Income for the three
months ended June 30, 1997 and June 30, 1998 6
Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and June 30, 1998 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DEC 31, JUNE 30,
1997 1998
---- ----
(UNAUDITED)
ASSETS
------
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . $ 9,945 $ 13,061
Accounts receivable, less allowance for doubtful
accounts of $288 and $361 at December 31, 1997
and June 30, 1998, respectively . . . . . . . . . 14,319 13,246
Inventory . . . . . . . . . . . . . . . . . . . . . 4,161 4,087
Unexpired insurance and other prepaid expenses . . . 2,487 2,007
-------- --------
Total Current Assets. . . . . . . . . . . . . . . 30,912 32,401
Investment in joint venture . . . . . . . . . . . . . . 3,164 3,252
Insurance claims receivable . . . . . . . . . . . . . . 2,563 2,148
Fixed assets, net . . . . . . . . . . . . . . . . . . . 119,920 122,878
Other assets. . . . . . . . . . . . . . . . . . . . . . 3,731 3,373
-------- --------
Total Assets. . . . . . . . . . . . . . . . . . . $160,290 $164,052
======== ========
See accompanying notes to consolidated financial statements
3
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DEC 31, JUNE 30,
1997 1998
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,602 $ 7,049
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . 168 176
Accounts payable to joint venture . . . . . . . . . . . . . . . . . . . 477 1,508
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . . . . 4,331 4,340
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 3,936 2,246
Backpay liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 837 837
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . - 290
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 13,351 16,446
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,252 83,162
Insurance claims reserves. . . . . . . . . . . . . . . . . . . . . . . . . 7,227 6,123
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 32,450 32,482
Postretirement benefits other than pensions. . . . . . . . . . . . . . . . 4,321 4,538
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,045 4,667
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 145,646 147,418
-------- --------
Commitments and contingencies (Note 4)
Mandatorily redeemable capital stock-4,000 shares outstanding. . . . . . . 1,000 1,000
-------- --------
Stockholders' Equity
Common stock, par value $0.01 per share authorized - 100,000 shares
issued and outstanding - 40,600 shares . . . . . . . . . . . . . . . 1 1
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,149 10,149
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,494 5,484
-------- --------
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 13,644 15,634
-------- --------
Total Liabilities and Stockholders' Equity. . . . . . . . . . . . . . . $160,290 $164,052
======== ========
See accompanying notes to consolidated financial statements
4
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1997 1998
---- ----
Operating revenue. . . . . . . . . . . . . . . . . . . . . . $50,048 $52,393
Cost of operations
Operating expenses. . . . . . . . . . . . . . . . . . . . 32,108 32,951
Depreciation. . . . . . . . . . . . . . . . . . . . . . . 3,923 3,954
------- -------
Total cost of operations . . . . . . . . . . . . . . . . . . 36,031 36,905
------- -------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . 14,017 15,488
General and administrative expenses. . . . . . . . . . . . . 7,335 7,654
------- -------
Operating income . . . . . . . . . . . . . . . . . . . . . . 6,682 7,834
Interest expense . . . . . . . . . . . . . . . . . . . . . . (5,020) (5,107)
Interest income. . . . . . . . . . . . . . . . . . . . . . . 96 248
Equity in (loss)/income from joint venture . . . . . . . . . (268) 88
Other income . . . . . . . . . . . . . . . . . . . . . . . . 1 48
------- -------
Income before provision for income taxes . . . . . . . . . . 1,491 3,111
Provision for income taxes . . . . . . . . . . . . . . . . . 536 1,121
------- -------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 955 $ 1,990
======= =======
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21.41 $ 44.62
======= =======
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . $ 20.85 $ 43.26
======= =======
Weighted average number of shares outstanding (in thousands)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . 44.6 44.6
==== ====
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . 45.8 46.0
==== ====
See accompanying notes to consolidated financial statements
5
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1997 1998
---- ----
Operating revenue. . . . . . . . . . . . . . . . . . . . . . $25,219 $26,681
Cost of operations
Operating expenses. . . . . . . . . . . . . . . . . . . . 16,126 16,539
Depreciation. . . . . . . . . . . . . . . . . . . . . . . 1,969 1,977
------- -------
Total cost of operations . . . . . . . . . . . . . . . . . . 18,095 18,516
------- -------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . 7,124 8,165
General and administrative expenses. . . . . . . . . . . . . 3,664 3,897
------- -------
Operating income . . . . . . . . . . . . . . . . . . . . . . 3,460 4,268
Interest expense . . . . . . . . . . . . . . . . . . . . . . (2,508) (2,548)
Interest income. . . . . . . . . . . . . . . . . . . . . . . 65 129
Equity in (loss)/income from joint venture . . . . . . . . . (171) 144
Other income . . . . . . . . . . . . . . . . . . . . . . . . - 33
------- -------
Income before provision for income taxes . . . . . . . . . . 846 2,026
Provision for income taxes . . . . . . . . . . . . . . . . . 296 732
------- -------
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 550 $ 1,294
======= =======
Earnings per share
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.33 $ 29.01
======= =======
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.01 $ 28.13
======= =======
Weighted average number of shares outstanding (in thousands)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . 44.6 44.6
==== ====
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . 45.8 46.0
==== ====
See accompanying notes to consolidated financial statements
6
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1997 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 955 $ 1,990
------- -------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization . . . . . . . . . . . . . . 5,894 6,191
Deferred income taxes . . . . . . . . . . . . . . . . . . (1,087) 32
Equity in loss/(income) from joint venture. . . . . . . . 268 (88)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . (618) 1,073
Other current assets. . . . . . . . . . . . . . . . . . . 251 554
Accounts payable and accrued expenses . . . . . . . . . . (921) 2,805
Income taxes payable. . . . . . . . . . . . . . . . . . . 48 290
Insurance claims receivable . . . . . . . . . . . . . . . (1,096) 415
Insurance claims reserves . . . . . . . . . . . . . . . . 435 (1,104)
Other assets and liabilities. . . . . . . . . . . . . . . (345) (177)
------- -------
Net cash provided by operating activities. . . . . . . . . . 3,784 11,981
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . (3,053) (8,775)
------- -------
Net cash used for investing activities . . . . . . . . . . . (3,053) (8,775)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt . . . . . . . . . . . . . . . . . . . . - (90)
------- -------
Net cash used for financing activities . . . . . . . . . . . - (90)
------- -------
Net increase in cash and cash equivalents. . . . . . . . . . 731 3,116
Cash and cash equivalents at beginning of period . . . . . . 5,827 9,945
------- -------
Cash and cash equivalents at end of period . . . . . . . . . $ 6,558 $13,061
======= =======
See accompanying notes to consolidated financial statements
7
MORAN TRANSPORTATION COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE NOTED)
(UNAUDITED)
NOTE 1 - MORAN TRANSPORTATION COMPANY
- -------------------------------------
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Interim results are not necessarily
indicative of the results that may be expected for a full year. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 1997.
NOTE 2 - CHANGES IN STOCKHOLDERS' EQUITY
- ----------------------------------------
COMMON CAPITAL RETAINED
STOCK SURPLUS EARNINGS TOTAL
----- ------- -------- -----
Balance at December 31, 1997 $ 1 $ 10,149 $3,494 $13,644
Net Income - - 1,990 1,990
--- -------- ------ -------
Balance at June 30, 1998 $ 1 $ 10,149 $5,484 $15,634
=== ======== ====== =======
NOTE 3 - 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". 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.
NOTE 4 - CONTINGENT LIABILITIES
- -------------------------------
In February 1994, a lawsuit was filed in the United States District Court for
the Eastern District of New York by the Town of Oyster Bay (the "Town"), New
York, against a subsidiary of 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.
8
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 subsidiary's portion of the hazardous materials
disposed of 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.
NOTE 5 - FINANCIAL STATEMENTS OF GUARANTORS
- -------------------------------------------
All of the Company's subsidiaries ("Guarantors") have guaranteed the Company's
$80 million of 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. Therefore,
separate financial statements concerning the Guarantors are not deemed material
to investors.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
- ---------------------
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
OPERATING REVENUES: Operating revenues increased 4.7% during the first six
months of 1998 as compared to the comparable period in 1997. Tug services
revenues increased by 8.4%, to $31.8 million, primarily due to strong
shipdocking in the majority of the Company's ports. Marine transportation
revenues decreased by 0.6% to $20.6 million primarily due to the drydocking of
the barge FLORIDA in the first half of the year. In addition, lower coal
transportation was replaced by increased transportation of scrap and other
cargos.
OPERATING EXPENSES: Operating expenses increased by $0.8 million, or 2.6%, to
$33.0 million in the first six months of 1998. The increase is primarily due to
increased costs for labor and outside towing due to the increased activity
discussed above. Partially offsetting these increased costs have been lower fuel
costs and lower outside charter hire due to the purchase of the tug APRIL in
December of 1997. The Company also had higher drydocking amortization expense,
compared to the first half of 1997.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
increased by $0.3 million, or 4.3%, to $7.7 million in the first six months of
1998. No individual expense categories have increased or decreased materially.
OPERATING INCOME: Operating income increased by $1.2 million, or 17.2%, to $7.8
million in the first six months of 1998. This improvement is primarily due to
the increased revenues described above, partially offset by higher operating and
general and administrative costs.
EQUITY IN INCOME/(LOSS) IN JOINT VENTURE - Equity income/(loss) from the
Company's joint venture increased from a loss of $268,000 in the first half of
1997 to a profit of $88,000 in the first half of 1998. This increase was due to
higher rates and utilization compared to the first six months of 1997. The
joint venture's barge had a drydocking in 1997 which began in the second
quarter.
NET INCOME: Net income increased by $1.0 million, to $2.0 million in the first
six months. The improvement in overall profitability was principally driven by
higher operating profit, together with higher equity income in joint venture.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
OPERATING REVENUES: Operating revenues increased 5.8% during the second quarter
of 1998 as compared to the comparable period in 1997. Tug services revenues
increased by 15.4%, to $16.4 million, primarily due to strong shipdocking in the
majority of the Company's ports. Marine transportation revenues decreased by
6.7% to $10.3 million primarily due to the drydocking of the barge FLORIDA in
the first half of the year, as lower coal movements effectively were replaced by
higher scrap and other movements.
10
OPERATING EXPENSES: Operating expenses increased by $0.4 million, or 2.6%, to
$16.5 million in the second quarter of 1998. The increase is primarily due to
increased costs for labor and outside towing due to the increased activity
discussed above. Partially offsetting this increase has been the impact of
lower fuel prices as compared to the comparable period last year.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses
increased by $0.2 million, or 6.4%, to $3.9 million in the second quarter of
1998. No individual expense categories have increased or decreased materially.
OPERATING INCOME: Operating income increased by $0.8 million or 23.4%, to $4.3
million in the second quarter of 1998. This increase was due to the increased
revenues described above, partially offset by higher operating and general and
administrative costs.
EQUITY IN INCOME/(LOSS) IN JOINT VENTURE - Equity income/(loss) from the
Company's joint venture increased from a loss of $171,000 in the second quarter
of 1997 to a profit of $144,000 in the second quarter of 1998. This increase
was due to higher rates and utilization compared to the comparable period in
1997. The joint venture's barge had a drydocking in 1997, which began in the
second quarter.
NET INCOME: Net income increased by $0.7 million, or 135.3%, to $1.3 million
in the second quarter. The improvement in overall profitability was principally
driven by higher operating profit, together with higher equity income in joint
venture.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and cash equivalents for the six months ended June 30, 1998 increased by
$3.1 million. This increase was attributable to the factors discussed below:
In the six months ending June 30, 1998, net cash provided by operating
activities was $12.0 million. This was used to fund capital expenditures of
$8.8 million (primarily drydockings as well as the capital associated with the
vessels being built for the Florida Power & Light contract) and to repay debt of
$0.1 million, resulting in a net increase of cash and cash equivalents of $3.1
million.
The Company believes that cash flow from current levels of operations and, to a
lesser extent, 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 ongoing capital expenditures.
A subsidiary of the Company has entered into a long-term contract to provide tug
and barge services to Florida Power & Light, a major Florida utility. The five
year contract begins on October 1, 1998. Under the terms of the contract, the
subsidiary is building a number of tug and barge units. Capital expenditures
associated with the project is expected to be $10 million, which will be
completed this year. The Company is currently financing this expenditure with
internally generated cash flow.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Memorandum of Understanding, effective June 1, 1998, between
Seafarers International Union of North America, Atlantic, Gulf,
Lakes and Inland Waters District, AFL-CIO, and Moran Towing of
Texas Inc.
27 Financial data schedule
(b) Reports on Form 8-K.
None
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MORAN TRANSPORTATION COMPANY
By:/s/ Malcolm W. MacLeod
-------------------------------
Name: Malcolm W. MacLeod
Title: President and Chief Executive Officer
Date: 8/12/98 By:/s/ Jeffrey J. McAulay
-------- -------------------------------
Name: Jeffrey J. McAulay
Title: Vice President, Finance
and Administration
(principal financial officer)
13