-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PAp1fauSiElOWK/v5E8YgdFJPcIONmRsYYMtjQ17PXN7IsU5AHnemR2TR+w3UE5o IUoa9NpMo8FLS3sENbRyYQ== 0000950116-99-002003.txt : 19991110 0000950116-99-002003.hdr.sgml : 19991110 ACCESSION NUMBER: 0000950116-99-002003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARITRANS INC /DE/ CENTRAL INDEX KEY: 0000810113 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 510343903 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09063 FILM NUMBER: 99743822 BUSINESS ADDRESS: STREET 1: ONE LOGAN SQUARE 26TH FLOOR CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2158641200 MAIL ADDRESS: STREET 1: ONE LOGAN SQUARE STREET 2: 26TH FL CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: MARITRANS PARTNERS L P DATE OF NAME CHANGE: 19920703 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the Quarterly Period ended September 30, 1999 ------------------ or ___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from _________ to Commission File Number 1-9063 ------ MARITRANS INC. -------------- (Exact name of registrant as specified in its charter) DELAWARE 51-0343903 - ------------------------------- ---------- (State or other jurisdiction of (Identification No. incorporation or organization) I.R.S. Employer) 1818 MARKET STREET, SUITE 3540 PHILADELPHIA, PENNSYLVANIA 19103 -------------------------------- (Address of principal executive offices) (Zip Code) (215) 864-1200 -------------- Registrant's telephone number, including area code Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes X No --- --- Common Stock $.01 par value, 11,827,890 shares outstanding as of November 3, 1999 MARITRANS INC. INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 3 Condensed Consolidated Statements of Operations - Three months ended September 30, 1999 and 1998 4 Condensed Consolidated Statements of Operations - Nine months ended September 30, 1999 and 1998 5 Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 1999 and 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19
2 PART I: FINANCIAL INFORMATION MARITRANS INC. CONDENSED CONSOLIDATED BALANCE SHEETS ($000)
September 30, December 31, 1999 1998 ------------- ------------- (Unaudited) (Note 1) ASSETS Current assets: Cash and cash equivalents $ 18,452 $ 1,214 Trade accounts receivables 11,745 18,030 Other accounts receivable 5,515 9,434 Inventories 4,745 4,656 Deferred income tax benefit 5,000 4,627 Prepaid expenses 7,574 3,479 -------- -------- Total current assets 53,031 41,440 Vessels, terminals and equipment 335,574 358,197 Less accumulated depreciation 157,192 151,506 -------- -------- Net vessels, terminals and equipment 178,382 206,691 Other 6,086 6,775 -------- -------- Total assets $237,499 $254,906 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Debt due within one year $ 7,413 $ 11,873 Trade accounts payable 1,040 1,856 Accrued interest 2,405 1,351 Accrued shipyard cost 8,124 7,413 Accrued wages and benefits 5,226 3,559 Other accrued liabilities 9,411 8,559 -------- -------- Total current liabilities 33,619 34,611 Long-term debt 71,457 83,400 Deferred shipyard costs 12,185 11,119 Other liabilities 5,132 5,107 Deferred income taxes 30,612 30,854 Stockholders' equity 84,494 89,815 -------- -------- Total liabilities and stockholders' equity $237,499 $254,906 ======== ========
See notes to financial statements. 3 MARITRANS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ($000, except per share amounts)
July 1 to July 1 to September 30, 1999 September 30, 1998 ---------------- ----------------- Revenues $ 39,185 $ 38,389 Costs and expenses: Operation expense 22,637 23,044 Maintenance expense 6,957 6,316 General and administrative 2,613 2,113 Depreciation and amortization 5,223 4,845 -------- -------- Total operating expense 37,430 36,318 -------- -------- Operating income 1,755 2,071 Interest expense (1,623) (1,604) Other income (loss), net (4,829) 464 -------- -------- Income (loss) before income taxes (4,697) 931 Income tax provision (benefit) (1,788) 349 -------- -------- Net income (loss) $ (2,909) $ 582 ======== ======== Basic earnings (loss) per share $ (0.25) $ 0.05 Diluted earnings (loss) per share $ (0.25) $ 0.05 Dividends declared per share $ 0.10 $ 0.10
See notes to financial statements. 4 MARITRANS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) ($000, except per share amounts)
January 1 to January 1 to September 30, 1999 September 30, 1998 ----------------- ----------------- Revenues $ 117,417 $ 112,356 Costs and expenses: Operation expense 66,611 64,122 Maintenance expense 21,869 18,768 General and administrative 7,435 6,797 Depreciation and amortization 15,512 14,346 --------- --------- Total operating expense 111,427 104,033 --------- --------- Operating income 5,990 8,323 Interest expense (5,170) (5,122) Other income (loss), net (687) 1,002 --------- --------- Income before income taxes 133 4,203 Income tax provision 57 1,576 --------- --------- Net income $ 76 $ 2,627 ========= ========= Basic earnings per share $ 0.01 $ 0.22 Diluted earnings per share $ 0.01 $ 0.21 Dividends declared per share $ 0.30 $ 0.28
See notes to financial statements. 5 MARITRANS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ($000)
Nine Months Ended September 30, 1999 1998 --------------------------------- Cash flows from operating activities: Net income $ 76 $ 2,627 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 15,512 14,346 Deferred income tax provision (615) (1,334) Stock compensation 682 282 Changes in receivables, inventories and prepaid expenses 6,019 (3,351) Changes in current liabilities, other than debt 3,468 (1,133) Non-current changes, net 1,489 (3,105) (Gain) loss on sale of fixed assets 1,493 -- -------- -------- 28,048 5,705 -------- -------- Net cash provided by operating activities 28,124 8,332 Cash flows from investing activities: Proceeds from litigation settlement -- 1,025 Cash proceeds from sale of equipment 21,136 -- Purchase of vessels, terminals and equipment (4,594) (25,553) -------- -------- Net cash provided by (used in) investing activities 16,542 (24,528) -------- -------- Cash flows from financing activities: Payment of long-term debt (10,776) (16,123) Borrowings under revolving credit facilities 14,908 25,950 Repayments of borrowing under revolving credit facilities (25,481) (1,865) Purchase of treasury stock (2,458) -- Dividends declared and paid (3,621) (3,266) -------- -------- Net cash provided by (used in) financing activities (27,428) 4,696 -------- -------- Net increase (decrease) in cash and cash equivalents 17,238 (11,500) Cash and cash equivalents at beginning of period 1,214 13,312 -------- -------- Cash and cash equivalents at end of period $ 18,452 $ 1,812 ======== ======== Noncash investing and financing activities Borrowings under long-term debt for purchase of vessel $ 4,947 --
See notes to financial statements 6 MARITRANS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1999 1. Basis of Presentation/Organization Maritrans Inc. owns Maritrans Operating Partners L.P. ("the Operating Partnership"), Maritrans General Partner Inc., Maritrans Tankers Inc., Maritrans Barge Co., Maritrans Holdings Inc. and other Maritrans entities (collectively, the "Company"). These subsidiaries, directly and indirectly, own and operate oil tankers, tugboats, and oceangoing petroleum tank barges principally used in the transportation of oil and related products, along the Gulf and Atlantic coasts. In the opinion of management, the accompanying condensed consolidated financial statements of Maritrans Inc., which are unaudited (except for the Condensed Consolidated Balance Sheet as of December 31, 1998, which is derived from audited financial statements), include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial statements of the consolidated entities. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Pursuant to the rules and regulations of the Securities and Exchange Commission, the unaudited condensed consolidated financial statements do not include all of the information and notes normally included with annual financial statements prepared in accordance with generally accepted accounting principles. These financial statements should be read in conjunction with the consolidated historical financial statements and notes thereto included in the Company's Form 10-K for the period ended December 31, 1998. 7 2. Earnings per Common Share The following data show the amounts used in computing basic and diluted earnings per share ("EPS"):
Three Months Ended Nine Months Ended September 30, September 30, 1999 1998 1999 1998 ---- ---- ---- ---- (000's) (000's) Income available to common stockholders used in basic EPS $ (2,909) $ 582 $ 76 $ 2,627 Weighted average number of common shares used in basic EPS 11,577 12,098 11,810 12,085 Effect of dilutive securities: Stock options and restricted shares 0 212 113 240 Weighted number of common shares and dilutive potential common stock used in diluted EPS 11,577 12,310 11,923 12,325
3. Income Taxes The Company's effective tax rate differs from the federal statutory rate due primarily to state and local income taxes. 4. Gain/Loss on Sale of Assets In the first quarter of 1999, the Company sold five vessels that were no longer deemed core to the Company's operations. The vessels consisted of two tug and barge units that were working in Puerto Rico and a tugboat working on the Atlantic Coast. The gain on the sale of these assets, net of non-cash adjustments, was $3.7 million and is included in other income on the Statement of Operations. In September 1999, the Company sold its petroleum storage terminal operations, located in Philadelphia, PA and Salisbury, MD. The proceeds of the sale totaled $10 million, of which $3.6 million was used to payoff the outstanding debt on the Philadelphia terminal. The loss on the sale of these assets was $5.9 million and is included in other income on the Statement of Operations. 8 5. Share Buyback Program On February 9, 1999, the Board of Directors authorized a share buyback program for the acquisition of up to one million shares of the Company's common stock. This amount represents approximately 8 percent of the 12.1 million shares outstanding at the beginning of the program. As of September 30, 1999, 439,400 shares have been repurchased under the plan and have been financed from internally generated funds. Maritrans intends to hold the majority of the shares as treasury stock, some of which may be used for employee compensation plans, acquisition currency, and/or other corporate purposes. 6. Purchase of Vessel In August 1999, the Company entered into an agreement to purchase the MV Port Everglades, a tugboat. The purchase price of the vessel was $7.4 million, $2.5 million of which was paid at the closing and $4.9 million payable to the previous owner in the form of a note payable. The note is secured by a Mellon Bank NA Letter of Credit. 7. Corporate Relocation and Downsizing In September 1999, the Company announced its intent to relocate the corporate headquarters from Philadelphia, PA to Tampa, FL. At the same time, the Company announced a reduction of approximately twenty-five percent of the shoreside staff. The Company accrued $0.9 million of severance costs in the current quarter for the cash benefits to be paid to the employees who have been terminated. None of this amount has been paid at September 30, 1999. 8. Subsequent Events In October 1999, the Company announced an agreement to sell 26 vessels, most of which work in the Northeastern U.S. coastal waters, to Vane Line Bunkering Inc. and K-SEA Transportation LLC. The transactions, which include 15 barges and 11 tugs, represent a divestiture of approximately twenty-five percent of the Company's cargo-carrying capacity. The proceeds from the transactions are expected to generate $48 million comprised of $39 million in cash and $9 million in notes. It is expected that the transactions will be completed before the end of the year. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Month Comparison - ---------------------- Revenue in the third quarter of 1999 increased over the third quarter of 1998. Although barrels of cargo transported decreased from 67.4 million to 64.5 million, vessel utilization increased. Overall vessel utilization, including changes in the fleet, as measured by revenue days divided by calendar days available, increased from 78.3 percent in the third quarter of 1998 to 80.4 percent in the third quarter of 1999. The majority of this increased utilization was a result of the Company's high level of contract business. Additionally, there were refinery disruptions, which started in the second quarter of 1999 and extended into the third quarter, which created temporary opportunities to move refined oil from the Gulf of Mexico to the West Coast. Revenues also increased due to the addition of a 260,000 barrel oil tanker to the Gulf of Mexico fleet late in 1998. In the current quarter and the comparative quarter of 1998, revenue was negatively affected by heavy weather delays in the Gulf of Mexico and the Northeast. Operating expenses increased in the third quarter of 1999 compared to the third quarter of 1998 due to the addition of the 260,000 barrel oil tanker discussed above. The increase due to the additional vessel was offset by lower operating expenses resulting from the sale, in the first quarter of 1999, of two units that were operating in Puerto Rico in the comparative quarter of 1998 and by lower levels of chartered in oil transportation capacity to cover contract commitments. Fuel expenses for vessels increased, as the average price per gallon was higher than in the same quarter of last year. Additionally, in September 1999, the Company announced a reduction of approximately twenty-five percent of the shoreside staff. The Company recorded severance expense for those employees in the quarter. Operating income decreased as a result of the aforementioned changes in revenue and expenses. Other income includes a loss of $5.9 million on the sale of the Company's two petroleum storage terminals during the quarter. Net income for the third quarter of 1999 decreased compared to the third quarter of 1998 due to the aforementioned changes in revenue and expenses along with the loss on the sale of assets. 10 Nine Month Comparison - --------------------- Revenue in the first nine months of 1999 increased over the same period of 1998. Although barrels of cargo transported decreased from 196.1 million to 192.8 million, vessel utilization increased. Overall vessel utilization, including changes in the fleet, as measured by revenue days divided by calendar days available, increased from 79.8 percent in the first nine months of 1998 to 81.7 percent for the first nine months of 1999. The main factors of the revenue increase were the addition of a 260,000 barrel oil tanker to the fleet late in 1998, a high level of contract business and a temporary increase in vessel demand due to refinery disruptions on the West Coast. These increases were offset by the reduction in revenue and in barrels transported because two units operating in Puerto Rico were sold in the first quarter of 1999. Utilization in the current year has been negatively affected by a shortage of qualified marine personnel, particularly in the first six months. The Company has hired qualified personnel to fill the open positions, thereby lessening the impact of the shortage discussed in the first quarter of 1999. Total operating expenses increased in the first nine months of 1999 compared to the first nine months of 1998 due to the addition of a 260,000 barrel oil tanker to the Gulf of Mexico fleet, costs associated with turnover of qualified seagoing personnel and crew costs related to vessels working in 1999 which had been in the shipyard during the related period in 1998. These increases were offset by the sale of the two tug and barge units used in the Puerto Rico operations. Additionally, the Company recorded a severance charge in the current quarter, for the impact of the Company's twenty-five percent reduction of shoreside staff, which was announced in September 1999. Operating income decreased as a result of the aforementioned changes in revenue and expenses. Other income for the first nine months of 1999 includes a loss, net of non-cash adjustments, of $1.5 million, on the disposition of a number of assets that were no longer deemed core to the Company's operations. The assets consisted of two tug and barge units, which were working in Puerto Rico, a tugboat working on the Atlantic Coast and two petroleum storage terminals on the East Coast. Net income for the first nine months of 1999 decreased compared to the first nine months of 1998 due to the aforementioned changes in revenue and expenses along with the loss on the sale of assets. Liquidity and Capital Resources - ------------------------------- For the nine months ended September 30, 1999, funds provided by operating activities were sufficient to meet debt service obligations and loan agreement restrictions, to make capital acquisitions and improvements and to allow Maritrans Inc. to pay a dividend of $0.10 per common share in the current quarter. Dividend payments are expected to continue quarterly in 1999. The ratio 11 of total debt to the sum of total debt and stockholders equity is .48 at September 30, 1999. Management believes that in 1999 funds provided by operating activities, augmented by financing and investing transactions, will be sufficient to provide funds necessary for operations, anticipated capital expenditures, lease payments, dividend payments and required debt repayments. On February 9, 1999, the Board of Directors authorized a share buyback program for the acquisition of up to one million shares of the Company's common stock. This amount represents approximately 8 percent of the 12.1 million shares outstanding at the beginning of the program. As of September 30, 1999, 439,400 shares have been repurchased under the plan and have been financed from internally generated funds. The Company intends to hold the majority of the shares as treasury stock, some of which may be used for employee compensation plans, acquisition currency, and/or other corporate purposes. On July 30, 1999, the Company awarded a contract to rebuild a second large single hull barge, the OCEAN 244, to a double hull configuration. The project will begin early in the second quarter of 2000 and have a total cost of approximately $12 million. As of September 30, 1999 the Company has advanced $2.3 million on this project to the shipyard contractor for prefabrication and other advance design work. The Company expects to finance this project from internally generated funds. In August 1999, the Company entered into an agreement to purchase the MV Port Everglades, a tugboat. The purchase price of the vessel was $7.4 million, $2.5 million of which was paid at the closing and $4.9 million payable to the previous owner in the form of a note payable. The note is secured by a Mellon Bank NA Letter of Credit. In September 1999, the Company announced its intent to relocate the corporate headquarters from Philadelphia, PA to Tampa, FL. The move will be completed by the summer of 2000. A fleet center will be maintained in the Philadelphia area. Also in September 1999, the Company announced a reduction of approximately twenty-five percent of the shoreside staff. The Company accrued $0.9 million of severance costs in the current quarter for the cash benefits to be paid to the employees who have been terminated. None of this amount has been paid at September 30, 1999. 12 In September 1999, the Company sold its petroleum storage terminal operations to ST Services. The terminals were located in Philadelphia, PA and Salisbury, MD. The proceeds of the sale totaled $10 million, of which $3.6 million was used to payoff the outstanding debt on the Philadelphia terminal. In October 1999, the Company announced an agreement to sell 26 vessels, most of which work in the Northeastern U.S. coastal waters, to Vane Line Bunkering Inc. and K-SEA Transportation LLC. The transactions, which include 15 barges and 11 tugs, represent a divestiture of approximately twenty-five percent of the Company's cargo-carrying capacity. The proceeds from the transactions are expected to generate $48 million comprised of $39 million in cash and $9 million in notes. The transactions will require the clearance of Hart-Scott-Rodino anti-trust filings. It is expected that the transactions will be completed before the end of the year. Debt Obligations and Borrowing Facility - --------------------------------------- At September 30, 1999, the Company had $78.9 million in total outstanding debt, secured by mortgages on most of the fixed assets of the Company. The current portion of this debt at September 30, 1999 was $7.4 million. The Company has a $10 million working capital facility, secured by its receivables and inventories. At September 30, 1999, there is no balance outstanding under this facility, although the Company utilizes this facility from time to time. In 1997, Maritrans entered into a multi-year revolving credit facility for amounts up to $33 million with Mellon Bank, N.A. This facility is collateralized by mortgages on tankers acquired in 1998 and 1997. At September 30, 1999, $22 million was outstanding under this facility. The Company entered into an agreement with Coastal Tug and Barge Inc. on August 5, 1999 to purchase the MV Port Everglades. The outstanding debt on this transaction is $4.9 million payable to Coastal Tug and Barge Inc. and is secured by a Mellon Bank NA Letter of Credit. The current portion of this debt at September 30, 1999 is $0.9 million. The mortgage on the Philadelphia terminal, which was held by Mellon Bank NA had an outstanding balance of $3.6 million at the time of the terminal sale. This debt was paid off with the proceeds of the sale. 13 Impact of Year 2000 - ------------------- Some of the Company's older computer programs and embedded computer components had suffered from Year 2000 incompatibilities. If left unchanged, this may have caused a system failure or miscalculations causing disruptions in operations, including, among other things, the inability to operate vessel systems, a temporary inability to process transactions, to send invoices, or to engage in normal similar business activities. Following is a brief description of the tasks incorporated in the Company's Year 2000 effort:
Software Inventory: List all custom software components that may have a dependency on Year 2000. Software Assessment: Analyze each software component to determine if a Year 2000 dependency exists; if so then determine magnitude of impact and effort for remediation. Prioritize remediation efforts. Software Remediation: Implement corrections or develop alternative plans to work around the problem. Imbedded Systems Inventory: Develop a list of all devices which contain embedded computer chips, such as radars, the Global Positioning System, rudder controls, engine controls and truck rack monitors. Imbedded Systems Assessment: Work with the individual manufacturing companies to identify any problems with specific devices. Conduct independent tests to identify any possible problems. Imbedded Systems Remediation: Work with the manufacturing companies to implement replacement or work around plans. Collaborate with other companies that have the same dependencies to reduce cost and increase effectiveness. Service Provider Assessment: Verify that service providers are investigating their own Year 2000 problems and that the Company's interactions with them are Year 2000 compliant. Identify key service providers and conduct in-depth analyses to verify that service to Maritrans will not be impacted. Customer Assessment: Verify that customers are proceeding with their own Year 2000 efforts. Collaborate with the customers to ensure that both parties have a smooth transition into the new millennium. Contingency Planning: Identify and document contingency plans for core business processes.
The Company completed an assessment of its business computing systems, commercial off-the-shelf systems, and embedded systems and has developed new software programs and replaced commercial systems to take advantage of newer technologies. As a result of this initiative, the Company believes its business operating systems, critical embedded systems, and commercial off-the-shelf systems are Year 2000 compliant. 14 For the Company's less critical commercial vessel systems' embedded components, the Company has worked closely with the manufacturers to verify compliance and has completed remediation efforts. The Company is collaborating with its key service providers and customers to ensure their Year 2000 efforts will identify and address common risks as well as developing contingency plans where necessary. The Company's major customers do not expect to incur major disruptions in the need for services due to any Year 2000 issues. While the Company has completed its major efforts in assessing its business partners, it will continue collaboration efforts to ensure a smooth transition into Year 2000. However, there can be no assurances that the companies with which the Company does business will achieve a Year 2000 conversion in a timely fashion, or that such failure to convert by another company will not have a material adverse effect on Maritrans. The Company's contingency planning effort has identified critical business processes and the Year 2000 dependencies that these processes may have. The Company has prioritized these processes and developed contingency plans to eliminate or manage any Year 2000 failures that may occur. These contingency plans consider the internal systems and facilities, customer and supplier readiness, and infrastructure concerns. The Company has completed a majority of its contingency planning efforts but plans on continuing its implementation and fine-tuning of these plans up through the end of 1999. The Company believes that with the conversions to new software, the Year 2000 issue will not pose significant operational problems for its business computing systems. The Company believes that with its program of verifying vessel systems with manufacturers and replacing any non-compliant systems, the Year 2000 issue will not pose significant operational problems. Due to the fact that there is little standardization of equipment types aboard the vessels, the Company also believes that if such verifications are faulty, these isolated problems will not have a material adverse affect on operations. Completion of the Company's Year 2000 efforts does not guarantee that Year 2000 will not have a material adverse effect on the Company. The Company believes that the most reasonably likely worst case Year 2000 scenario would be that some of the customers' supply chains would be disrupted. This would cause fewer barrels to be moved, interruption of normal distribution patterns, and/or inability to transfer product, possibly leaving the vessels empty and crippling the delivery system. In this event, the Company expects less than half of the fleet would be impacted with a maximum of 5-day delays for product loading. Vessels attempting to discharge would be rerouted to other ports or customers and thus it is believed, not incur significant delays. As part of the contingency planning efforts, the Company is addressing this specific issue internally and with customers to reduce the likelihood and impact of this scenario. The total cost of the Company's Year 2000 remediation efforts is expected to be $0.6 million, with approximately $0.1 million to be incurred during the 15 remainder of the project. This amount is being financed from internally generated funds. The costs of the project and the date on which the Company believes it will complete the Year 2000 conversions are based on management's best estimates. However, there can be no guarantees that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to upgrade all relevant operating systems, and similar uncertainties. Forward Looking Information - --------------------------- In this report, the statements contained or incorporated by reference that are not historical facts or statements of current condition are forward-looking statements. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes", "expects", "forecasts", "will" or "anticipates", or the negative thereof or other variations thereon or comparable terminology, or by discussion of strategies or intentions. These forward-looking statements, such as statements regarding present or anticipated utilization, future revenues and customer relationships, capital expenditures, future financings and other statements regarding matters that are not historical facts, involve predictions. The Company's actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Potential risks and uncertainties that could affect the Company's actual results, performance or achievements include, but are not limited to, the factors outlined in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 1998 and general financial, economic, environmental and regulatory conditions affecting the oil and marine transportation industry in general. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. Furthermore, the Company disclaims any obligation or intent to update any such factors or forward-looking statements to reflect future events or developments. Additionally, important factors that could cause actual results of the expected transactions to differ from anticipated results include contractual obligations of the parties to the agreements and the availability of commercially reasonable financing to the buyers. 16 Part II: OTHER INFORMATION ITEM 1. Legal Proceedings ----------------- In Maritrans Inc., et al v. United States, Maritrans sued the United States in 1996 alleging that the double hull requirement of the Oil Pollution Act of 1990 ("OPA") which requires retirement of Maritrans' fleet of single-hulled barges, is a "taking" under the fifth amendment to the U.S. Constitution. Maritrans is seeking in excess of $250 million in compensation for this taking. A trial was held in July 1997 on the preliminary issue of whether Maritrans had a cognizable property interest that could be subject to taking. In an Order dated October 29, 1997, the United States Court of Federal Claims held that, at the time Maritrans built or acquired its single-hulled tank barges, it could not have reasonably anticipated that double hulls would be required within the working lifetime of the vessels. This Order cleared the way for further proceedings which will determine whether OPA's double-hull requirements constitute a taking, and, if so, the amount of compensation to be paid to Maritrans. The written opinion of this Order was handed down on April 24, 1998. In May 1998, the United States filed a Motion for Reconsideration, which was denied by the Court some weeks later. Subsequently, also in May, the United States filed a further Motion for Summary Judgment. On March 11, 1999, the United States Court of Federal Claims ("the Court") dismissed Maritrans' suit in response to the Motion for Summary Judgment, deciding essentially that the Company's cause of action is not yet ripe for judicial determination because Maritrans' vessels have not yet been forced out of service by OPA's phase-out provisions. The Court determined that since the vessels are continuing to generate income, the Company has not suffered the degree of economic harm sufficient to constitute a Fifth Amendment taking. Maritrans, by Motion of March 22, 1999, asked the Court to reconsider its dismissal. On April 30, 1999, following a hearing, the Court did order the case reinstated on its trial docket as to a portion of the vessels within the Maritrans fleet. On July 20, 1999, the United States filed a motion asking that the Court certify various issues to the Court of Appeals for the Federal Circuit, which the court denied. Maritrans and the United States have agreed on a joint proposed schedule which calls for discovery on the remaining issues to commence in December 1999 and for the trial to occur in October 2000. The parties are awaiting a court response to the proposed scheduling order. 17 ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits No. 27 - Financial Data Schedule. (b) Reports on Form 8-K (1) No reports on Form 8-K were filed during the quarter ended September 30, 1999. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MARITRANS INC. (Registrant) By: /s/ H. William Brown Dated: November 5, 1999 ----------------------------------- H. William Brown Chief Financial Officer (Principal Financial Officer) By: /s/ Walter T. Bromfield Dated: November 5, 1999 ----------------------------------- Walter T. Bromfield Treasurer and Controller (Principal Accounting Officer) 19 EXHIBIT INDEX Exhibit Page Number - ------- ----------- 27 Financial Data Schedule -- 20 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 18,452 0 13,011 1,266 4,745 53,031 335,574 157,192 237,499 33,619 71,457 0 0 132 84,362 237,499 0 117,417 0 111,427 0 0 5,170 133 57 76 0 0 0 76 $.01 $.01
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