##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    Commission File Number
    000-51562
  AMERICAN COMMERCIAL LINES
    INC.
 (Exact name of registrant as
    specified in its charter)
  
   Delaware

75-3177794(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)1701 East Market Street
    Jeffersonville, Indiana(Address of Principal
    Executive Offices)

47130(Zip
    Code)   (812) 288-0100 (Registrants telephone
    number, including area code)
  Not applicable (Former name, former address
    and former fiscal year, if changed since last report)
   þ o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
  þ o




---



##### 



AMERICAN
    COMMERCIAL LINES INC.
  QUARTERLY
    REPORT ON
    FORM 10-Q
    FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006
  TABLE OF
    CONTENTS
  
  PagePART I
    FINANCIAL INFORMATIONItem 1:

Financial
    Statements (unaudited)


3Condensed
    Consolidated Statements of Operations


3Condensed
    Consolidated Statements of Financial Position


4Condensed
    Consolidated Statements of Cash Flows


5Notes to Condensed
    Consolidated Financial Statements


6Item 2:

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


25Item 3:

Quantitative and
    Qualitative Disclosures About Market Risk


44Item 4:

Controls and
    Procedures


44PART II
    OTHER INFORMATIONItem 1:

Legal
    Proceedings


44Item 1A:

Risk
    Factors


44Item 2:

Unregistered
    Sales of Securities and Use of Proceeds


46Item 3:

Defaults on
    Senior Securities


53Item 4:

Submission of
    Matters to a Vote of Security Holders


53Item 6:

Exhibits


53Signatures


55Certification by CEOCertification by CFOCertification by CEOCertification by CFO   2




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS (UNAUDITED)  AMERICAN
    COMMERCIAL LINES INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(Unaudited)(In thousands, except shares and per share amounts)RevenuesTransportation Services

$
212,451


$
145,269


$
568,820


$
421,263Manufacturing


54,105



22,028



107,834



68,102Revenues


266,556



167,297



676,654



489,365Cost of SalesTransportation Services


154,098



124,759



430,737



365,314Manufacturing


51,972



19,996



99,125



63,108Cost of Sales


206,070



144,755



529,862



428,422Gross Profit


60,486



22,542



146,792



60,943Selling, General and Administrative
    Expenses


15,514



11,393



46,856



35,230Operating Income


44,972



11,149



99,936



25,713Other Expense (Income)Interest Expense


4,812



7,869



14,570



25,623Other, Net


(13
)


(96
)


(2,256
)


(4,952
)Other Expenses


4,799



7,773



12,314



20,671Income from Continuing
    Operations before Income Taxes


40,173



3,376



87,622



5,042Income Taxes


15,067



2,047



33,018



2,305Income from Continuing
    Operations


25,106



1,329



54,604



2,737Discontinued Operations, Net of
    Taxes (Note 9)


3,300



2,177



2,654



474Net Income

$
28,406


$
3,506


$
57,258


$
3,211Basic earnings per common
    share:Income from continuing operations

$
0.82


$
0.06


$
1.80


$
0.12Income from discontinued
    operations, net of tax


0.11



0.09



0.09



0.02Basic earnings per common
    share

$
0.93


$
0.15


$
1.89


$
0.14Earnings per common
    share  assuming dilution:Income from continuing operations

$
0.80


$
0.06


$
1.74


$
0.12Income from discontinued
    operations, net of tax


0.10



0.09



0.09



0.02Earnings per common
    share  assuming dilution

$
0.90


$
0.15


$
1.83


$
0.14Weighted Average
    Shares Outstanding:Basic


30,419,119



23,241,716



30,336,591



22,321,513Diluted


31,432,773



23,732,527



31,359,221



22,704,059    3




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  September 30,


December 31,2006


2005(Unaudited)(In thousands, except shares and per share amounts)ASSETSCurrent AssetsCash and Cash Equivalents

$
2,325


$
13,959Accounts Receivable, Net


120,011



96,526Inventory


58,368



44,976Deferred Tax Asset


2,559



4,644Assets Held for Sale


33,031



1,042Other Current Assets


31,714



15,745Total Current Assets


248,008



176,892Properties  Net


436,694



425,741Investment in Equity
    Investees


5,090



5,532Other Assets


15,146



15,119Total Assets

$
704,938


$
623,284LIABILITIESCurrent LiabilitiesAccounts Payable

$
28,519


$
47,517Accrued Payroll and Fringe Benefits


26,169



22,303Deferred Revenue


27,754



16,631Accrued Claims and Insurance
    Premiums


14,726



13,361Accrued Interest


2,035



5,179Customer Deposits


7,149



1,147Liabilities Related to Assets Held
    for Sale


9,295



Other Liabilities


35,835



24,550Total Current Liabilities


151,482



130,688Long Term Debt


192,800



200,000Pension Liability


19,951



17,867Deferred Tax
    Liability


12,820



4,644Other Long Term
    Liabilities


11,051



16,384Total Liabilities


388,104



369,583STOCKHOLDERS
    EQUITYCommon stock; authorized
    125,000,000 shares at $.01 par value;
    30,805,027 shares issued and outstanding as of
    September 30, 2006


308



307Treasury Stock 83,145 shares
    at September 30, 2006


(3,018
)


Other Capital


256,129



247,435Retained Earnings


69,071



11,813Accumulated Other Comprehensive
    Loss


(5,656
)


(5,854
)Total Stockholders Equity


316,834



253,701Total Liabilities and
    Stockholders Equity

$
704,938


$
623,284    4




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  Nine Months Ended September 30,2006


2005(Unaudited)(In thousands)Operating ActivitiesIncome from Continuing Operations

$
54,604


$
2,737Adjustments to Reconcile Income
    from Continuing Operations to Net Cash Provided by Operating
    Activities:Depreciation and Amortization


35,303



35,256Debt Issuance Cost Amortization


832



2,669Gain on Property Dispositions


(43
)


(4,248
)Contributions to Defined Benefit
    Pension Plan


(454
)


(3,417
)Other Operating Activities


15,610



3,781Changes in Operating Assets and
    Liabilities:Accounts Receivable


(33,959
)


(14,735
)Inventory


(14,192
)


(17,325
)Accrued Interest


(3,144
)


2,560Other Current Assets


(15,635
)


(2,973
)Other Current Liabilities


31,724



17,192Net Cash Provided by Operating
    Activities before Reorganization Items


70,646



21,497Reorganization Items Paid


(349
)


(12,988
)Net Cash Provided by Continuing
    Operating Activities


70,297



8,509Net Cash Provided (Used) by
    Operating Activities of Discontinued Operations


(2,697
)


1,848Net Cash Provided by Operating
    Activities


67,600



10,357Investing ActivitiesProperty Additions


(58,681
)


(26,129
)Proceeds from Property Dispositions


688



13,500Net Change in Restricted Cash






(1,148
)Investment in Vessel Leasing LLC






(2,500
)Other Investing Activities


(1,515
)


(2,042
)Net Cash Used in Investing
    Activities


(59,508
)


(18,319
)Financing ActivitiesLong Term Debt Repayments






(383,836
)Asset Based Revolver (Repayments)
    Borrowings


(6,700
)


170,7102015 Senior Note (Repayments)
    Borrowings


(500
)


200,000Outstanding Checks


(13,553
)


(2,814
)Debt Costs


(13
)


(13,233
)Tax Benefit of Share Based
    Compensation


4,063



Acquisition of Treasury Stock


(3,018
)


Other Financing Activities


(5
)


(1,782
)Net Cash Used in Financing
    Activities


(19,726
)


(30,955
)Net Decrease in Cash and Cash
    Equivalents


(11,634
)


(38,917
)Cash and Cash Equivalents at
    Beginning of Period


13,959



46,645Cash and Cash Equivalents at End
    of Period

$
2,325


$
7,728    5




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 (Dollars in thousands, except as otherwise indicated)
  Note 1.
    Reporting
    entity        Form 10-Q Regulation S-X.
       6




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Form 10-K
    Note 2.
    Earnings
    per Share    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Weighted average common shares
    outstanding (used to calculate basic earnings per share)


30,419,119



23,241,716



30,336,591



22,321,513Pro forma shares if all dilutive
    potential common shares outstanding during the period were
    exercised


1,013,654



490,811



1,022,630



382,546Shares used to calculate diluted
    EPS


31,432,773



23,732,527



31,359,221



22,704,059     Note 3.
    Acquisition
    and Merger of Vessel Leasing   7




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 4.
    Debt  September 30,


December 30,2006


2005Asset Based Revolver

$
63,300


$
70,0002015 Senior Notes


129,500



130,000Long Term Debt

$
192,800


$
200,000           Note 5.
    Inventory    September 30,


December 30,2006


2005Raw Materials

$
13,095


$
9,754Work In Process


22,487



13,913Parts and Supplies


22,786



21,309Inventory

$
58,368


$
44,976  8




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 6.
    Taxes        Note 7.
    Employee
    Benefit Plans    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Pension Components:Service costs

$
1,251


$
1,170


$
3,753


$
3,510Interest costs


2,143



2,024



6,429



6,072Expected return on plan assets


(2,739
)


(2,518
)


(8,217
)


(7,554
)Amortization of unrecognized loss


40







120



Net periodic benefit cost

$
695


$
676


$
2,085


$
2,028Post-retirement
    Components:Service costs

$
80


$
87


$
240


$
261Interest costs


161



162



483



486Net periodic benefit cost

$
241


$
249


$
723


$
747   Note 8.
    Business
    Segments    Form 10-K
 9




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Statement
    of Operating Income by Reportable Segment
  Reportable Segments


All Other


IntersegmentTransportation


Manufacturing


Segments(1)


Elimination


Total(Unaudited)Quarter ended
    September 30, 2006Total Revenue

$
211,150


$
54,661


$
1,479


$
(734
)

$
266,556Intersegment Revenue


162



556



16



(734
)


Revenue from external customers


210,988



54,105



1,463







266,556Operating ExpenseMaterials, Supplies and Other


65,633







596







66,229Rent


6,021







24







6,045Labor and Fringe Benefits


22,931







407







23,338Fuel


42,560















42,560Depreciation and Amortization


11,111







283







11,394Taxes, Other Than Income Taxes


4,477







55







4,532Cost of Goods Sold






51,972











51,972Total Cost of Sales


152,733



51,972



1,365







206,070Selling, General &
    Administrative


14,027



1,285



202







15,514Total Operating Expenses


166,760



53,257



1,567







221,584Operating Income (Loss)

$
44,228


$
848


$
(104
)

$



$
44,972Quarter ended
    September 30, 2005Total Revenue

$
143,859


$
34,919


$
1,514


$
(12,995
)

$
167,297Intersegment Revenue


100



12,891



4



(12,995
)


Revenue from external customers


143,759



22,028



1,510







167,297Operating ExpenseMaterials, Supplies and Other


53,778







606







54,384Rent


5,021







30







5,051Labor and Fringe Benefits


18,298







400







18,698Fuel


31,328















31,328Depreciation and Amortization


11,030







255







11,285Taxes, Other Than Income Taxes


3,954







59







4,013Cost of Goods Sold






19,996











19,996Total Cost of Sales


123,409



19,996



1,350







144,755Selling, General &
    Administrative


10,495



707



191







11,393Total Operating Expenses


133,904



20,703



1,541







156,148Operating Income (Loss)

$
9,855


$
1,325


$
(31
)

$



$
11,149     (1)
    
    Financial data for segments below the reporting thresholds is
    attributable to a segment that operates terminals along the
    U.S. inland waterways. 10




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Statement
    of Operating Income by Reportable Segment
  Reportable Segments


All Other


IntersegmentTransportation


Manufacturing


Segments(1)


Elimination


Total(Unaudited)Nine months ended
    September 30, 2006Total Revenue

$
564,936


$
153,322


$
4,447


$
(46,051
)

$
676,654Intersegment Revenue


510



45,488



53



(46,051
)


Revenue from external customers


564,426



107,834



4,394







676,654Operating ExpenseMaterials, Supplies and Other


180,921







1,482







182,403Rent


16,476







76







16,552Labor and Fringe Benefits


64,779







1,218







65,997Fuel


118,665















118,665Depreciation and Amortization


33,118







818







33,936Taxes, Other Than Income Taxes


13,022







162







13,184Cost of Goods Sold






99,125











99,125Total Cost of Sales


426,981



99,125



3,756







529,862Selling, General &
    Administrative


42,159



4,053



644







46,856Total Operating Expenses


469,140



103,178



4,400







576,718Operating Income (Loss)

$
95,286


$
4,656


$
(6
)

$



$
99,936Nine months ended
    September 30, 2005Total Revenue

$
416,820


$
85,820


$
4,929


$
(18,204
)

$
489,365Intersegment Revenue


469



17,718



17



(18,204
)


Revenue from external customers


416,351



68,102



4,912







489,365Operating ExpenseMaterials, Supplies and Other


153,693







1,543







155,236Rent


14,700







83







14,783Labor and Fringe Benefits


60,029







1,278







61,307Fuel


87,311















87,311Depreciation and Amortization


33,155







760







33,915Taxes, Other Than Income Taxes


12,585







177







12,762Cost of Goods Sold






63,108











63,108Total Cost of Sales


361,473



63,108



3,841







428,422Selling, General &
    Administrative


32,651



1,974



605







35,230Total Operating Expenses


394,124



65,082



4,446







463,652Operating Income

$
22,227


$
3,020


$
466


$



$
25,713     (1)
    
    Financial data for segments below the reporting thresholds is
    attributable to a segment that operates terminals along the
    U.S. inland waterways. 11




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 9.
    Discontinued
    Operations        Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Revenue

$
11,290


$
8,557


$
18,156


$
15,797Cost of Sales


4,269



4,285



11,882



11,822Selling, General and Administrative


1,261



1,415



2,354



3,537Other Expense (Income)


807



38



385



(821
)Income from Discontinued
    Operations Before Tax


4,953



2,819



3,535



1,259Income Tax


1,653



642



881



785Income from Discontinued Operations

$
3,300


$
2,177


$
2,654


$
474     Assets held for sale related to
    discontinued operationsNet book values at
    December 31, 2005Venezuelan Operations:Cash

$
5,543Other Current Assets


13,855Properties  Net


11,475Other assets


1,186Total assets


32,059Total liabilities


11,859Total

$
20,200Dominican Republic Operations:Properties  Net


814Total

$
814  12




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 10.
    Contingencies      Note 11.
    Share-Based
    Compensation          Restricted Shares
 13




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Restricted Stock

SharesNot vested at December 31,
    2005


596,744Vested during quarter ended
    March 31, 2006


214,272Not vested at March 31, 2006


382,472Vested during quarter ended
    June 30, 2006


18,690Not vested at June 30, 2006
    and September 30, 2006


363,782   Stock Options
    WeightedAverageExerciseStock Options

Shares


PriceUnder option at December 31,
    2005


1,105,192


$
4.19Exercisable at December 31,
    2005


208,000


$
4.16Granted during quarter ended
    March 31, 2006


181,968


$
33.17Forfeited during quarter ended
    March 31, 2006


5,018


$
33.63Under option at March 31, 2006


1,282,142


$
8.19Exercisable at March 31, 2006


525,701


$
4.68Exercised during quarter ended
    June 30, 2006


84,054


$
7.42Under option at June 30, 2006


1,198,088


$
8.24Exercisable at June 30, 2006


441,648


$
4.16Exercised during quarter ended
    September 30, 2006


45,756


$
4.32Under option at September 30,
    2006


1,152,332


$
8.40Exercisable at September 30,
    2006


599,357


$
5.40Shares available for future grants
    at September 30, 2006


908,742      14




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Restricted Stock Units
    Restricted Stock Units

SharesOutstanding at beginning of 2006


Granted during quarter ended
    March 31, 2006


208,660Forfeited during quarter ended
    March 31, 2006


2,320Not vested at March 31, 2006


206,340Forfeited during quarter ended
    June 30, 2006


3,095Not vested at June 30, 2006


203,245Granted during quarter ended
    September 30, 2006


4,635Forfeited during quarter ended
    September 30, 2006


4,702Vested during quarter ended
    September 30, 2006


1,160Not vested at September 30,
    2006


202,018   Performance Share Units
    Performance Share Units

SharesOutstanding at beginning of 2006


Granted during quarter ended
    March 31, 2006


41,074Forfeited during quarter ended
    March 31, 2006


1,338Not vested at March 31, 2006


39,736Vested during quarter ended
    June 30, 2006


2,478Not vested at June 30, 2006
    and September 30, 2006


37,258  15




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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 12.
    Debtor
    Guarantor Financial Statements        Combining
    Statement of Operations for the Quarter Ended September 30,
    2006
  Parent





Subsidiary


Non-





CombinedACL Inc.


Parent


Guarantor


Issuers


Guarantors


Guarantors


Eliminations


Totals(Unaudited)(In thousands)RevenuesTransportation Services

$



$



$



$
27,484


$
184,967


$



$



$
212,451Manufacturing


















54,661







(556
)


54,105Revenues














27,484



239,628







(556
)


266,556Cost of SalesTransportation Services














10,001



144,097











154,098Manufacturing


















52,528







(556
)


51,972Cost of Sales














10,001



196,625







(556
)


206,070Gross Profit














17,483



43,003











60,486Selling, General and Administrative
    Expenses










68



520



14,926











15,514Operating (Loss)
    Income










(68
)


16,963



28,077











44,972Other Expense (Income)Interest Expense














4,803



9











4,812Other, Net


(28,406
)


(28,406
)


(43,541
)


(31,381
)


(2,480
)






134,201



(13
)Other Expenses


(28,406
)


(28,406
)


(43,541
)


(26,578
)


(2,471
)






134,201



4,799Income from Continuing
    Operations before Income Taxes


28,406



28,406



43,473



43,541



30,548







(134,201
)


40,173Income Taxes










15,067



















15,067Income from Continuing
    Operations


28,406



28,406



28,406



43,541



30,548







(134,201
)


25,106Discontinued Operations, Net of
    Tax


















682



2,618







3,300Net Income

$
28,406


$
28,406


$
28,406


$
43,541


$
31,230


$
2,618


$
(134,201
)

$
28,406  16




---



##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Combining
    Statement of Operations for the Quarter Ended September 30,
    2005
  Parent





Subsidiary


Non-





CombinedACL Inc.


Parent


Guarantor


Issuers


Guarantors


Guarantors


Eliminations


Totals(Unaudited)(In thousands)RevenuesTransportation Services

$



$



$



$
8,130


$
136,080


$
1,059


$



$
145,269Manufacturing


















34,918







(12,890
)


22,028Revenues














8,130



170,998



1,059



(12,890
)


167,297Cost of SalesTransportation Services














8,780



115,559



420







124,759Manufacturing


















32,886







(12,890
)


19,996Cost of Sales














8,780



148,445



420



(12,890
)


144,755Gross Profit














(650
)


22,553



639







22,542Selling, General and Administrative
    Expenses














75



11,318











11,393Operating (Loss)
    Income














(725
)


11,235



639







11,149Other Expense (Income)Interest Expense














7,256



22



591







7,869Other, Net


(3,506
)


(3,506
)


(5,553
)


(13,534
)


(2,080
)


(73
)


28,156



(96
)Other Expenses


(3,506
)


(3,506
)


(5,553
)


(6,278
)


(2,058
)


518



28,156



7,773Income from Continuing
    Operations before Income Taxes


3,506



3,506



5,553



5,553



13,293



121



(28,156
)


3,376Income Taxes










2,047



















2,047Income from Continuing
    Operations


3,506



3,506



3,506



5,553



13,293



121



(28,156
)


1,329Discontinued Operations, Net of
    Tax


















257



1,920







2,177Net Income

$
3,506


$
3,506


$
3,506


$
5,553


$
13,550


$
2,041


$
(28,156
)

$
3,506  17




---



##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Combining
    Statement of Operations for the Nine Months Ended
    September 30, 2006
  Parent





Subsidiary


Non-





CombinedACL Inc.


Parent


Guarantor


Issuers


Guarantors


Guarantors


Eliminations


Totals(Unaudited)(In thousands)RevenuesTransportation Services

$



$



$



$
54,711


$
514,109


$



$



$
568,820Manufacturing


















153,322







(45,488
)


107,834Revenues














54,711



667,431







(45,488
)


676,654Cost of SalesTransportation Services














28,707



402,030











430,737Manufacturing


















144,613







(45,488
)


99,125Cost of Sales














28,707



546,643







(45,488
)


529,862Gross Profit














26,004



120,788











146,792Selling, General and Administrative
    Expenses










203



760



45,893











46,856Operating (Loss)
    Income










(203
)


25,244



74,895











99,936Other Expense (Income)Interest Expense














14,534



36











14,570Other, Net


(57,258
)


(57,258
)


(90,479
)


(79,769
)


(4,166
)






286,674



(2,256
)Other Expenses


(57,258
)


(57,258
)


(90,479
)


(65,235
)


(4,130
)






286,674



12,314Income from Continuing
    Operations before Income Taxes


57,258



57,258



90,276



90,479



79,025







(286,674
)


87,622Income Taxes










33,018



















33,018Income from Continuing
    Operations


57,258



57,258



57,258



90,479



79,025







(286,674
)


54,604Discontinued Operations, Net of
    Tax


















600



2,054







2,654Net Income

$
57,258


$
57,258


$
57,258


$
90,479


$
79,625


$
2,054


$
(286,674
)

$
57,258  18




---



##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Combining
    Statement of Operations for the Nine Months Ended
    September 30, 2005
  Parent





Subsidiary


Non-





CombinedACL Inc.


Parent


Guarantor


Issuers


Guarantors


Guarantors


Eliminations


Totals(Unaudited)(In thousands)RevenuesTransportation Services

$



$



$



$
24,395


$
393,726


$
3,142


$



$
421,263Manufacturing


















85,820







(17,718
)


68,102Revenues














24,395



479,546



3,142



(17,718
)


489,365Cost of
    SalesTransportation Services














26,701



337,353



1,260







365,314Manufacturing


















80,826







(17,718
)


63,108Cost of Sales














26,701



418,179



1,260



(17,718
)


428,422Gross Profit














(2,306
)


61,367



1,882







60,943Selling, General and Administrative
    Expenses














308



34,922











35,230Operating (Loss)
    Income














(2,614
)


26,445



1,882







25,713Other Expense
    (Income)Interest Expense














23,802



77



1,744







25,623Other, Net


(3,211
)


(3,211
)


(5,516
)


(31,932
)


(1,109
)


(181
)


40,208



(4,952
)Other Expenses


(3,211
)


(3,211
)


(5,516
)


(8,130
)


(1,032
)


1,563



40,208



20,671Income from Continuing
    Operations before Income Taxes


3,211



3,211



5,516



5,516



27,477



319



(40,208
)


5,042Income Taxes










2,305



















2,305Income from Continuing
    Operations


3,211



3,211



3,211



5,516



27,477



319



(40,208
)


2,737Discontinued Operations, Net of
    Tax


















(177
)


651







474Net Income

$
3,211


$
3,211


$
3,211


$
5,516


$
27,300


$
970


$
(40,208
)

$
3,211  19




---



##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Combining
    Statement of Financial Position at September 30,
    2006
  Parent





Subsidiary


Non-





CombinedACL Inc.


Parent


Guarantor


Issuers


Guarantors


Guarantors


Eliminations


Totals(Unaudited)(In thousands)ASSETSCURRENT ASSETSCash and Cash Equivalents

$



$



$



$
1,717


$
29


$
579


$



$
2,325Accounts Receivable, Net














105



119,834



72







120,011Accounts Receivable 
    Intercompany










(19,279
)


141,798



(122,519
)










Inventory


















58,244



124







58,368Deferred Tax Asset 
    Current










2,559



















2,559Assets Held for Sale














461



2



32,568







33,031Other Current Assets














33



30,824



857







31,714Total Current Assets










(16,720
)


144,114



86,414



34,200







248,008PROPERTIES  Net














355,324



81,370











436,694INVESTMENT IN SUBSIDIARIES


316,834



316,834



347,783



48,737



77,998







(1,108,186
)


INVESTMENT IN EQUITY INVESTEES


















5,090











5,090OTHER ASSETS














6,395



8,749



2







15,146Total Assets

$
316,834


$
316,834


$
331,063


$
554,570


$
259,621


$
34,202


$
(1,108,186
)

$
704,938LIABILITIESCURRENT LIABILITIESAccounts Payable

$



$



$



$
7,603


$
20,910


$
6


$



$
28,519Accrued Payroll and Fringe Benefits














106



26,063











26,169Deferred Revenue


















27,754











27,754Accrued Claims and Insurance
    Premiums


















14,726











14,726Accrued Interest














2,035















2,035Customer Deposits


















7,149











7,149Liabilities Related to Assets Held
    for Sale






















9,295







9,295Other Liabilities










6,489



248



29,002



96







35,835Total Current Liabilities










6,489



9,992



125,604



9,397







151,482LONG-TERM DEBT














192,800















192,800PENSION LIABILITY


















19,951











19,951DEFERRED TAX LIABILITY










12,820



















12,820OTHER LONG-TERM LIABILITIES


















10,435



616







11,051Total Liabilities










19,309



202,792



155,990



10,013







388,104STOCKHOLDERS
    EQUITYCommon Stock


308



















1,795



(1,795
)


308Treasury Stock


(3,018
)


























(3,018
)Other Capital


256,129



253,419



253,419



249,356







7,936



(764,130
)


256,129Retained Earnings


69,071



69,071



63,991



111,586



112,795



14,261



(371,704
)


69,071Accumulated Other Comprehensive Loss


(5,656
)


(5,656
)


(5,656
)


(9,164
)


(9,164
)


197



29,443



(5,656
)Total Stockholders Equity


316,834



316,834



311,754



351,778



103,631



24,189



(1,108,186
)


316,834Total Liabilities and
    Stockholders Equity

$
316,834


$
316,834


$
331,063


$
554,570


$
259,621


$
34,202


$
(1,108,186
)

$
704,938  20




---



##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Combining
    Statement of Financial Position at December 31,
    2005
  Parent





Subsidiary


Non-





CombinedACL Inc.


Parent


Guarantors


Issuers


Guarantors


Guarantors


Eliminations


Totals(Unaudited)(In thousands)ASSETSCURRENT ASSETSCash and Cash Equivalents

$



$



$



$
7,740


$
38


$
6,181


$



$
13,959Accounts Receivable, Net














38



86,267



10,221







96,526Accounts Receivable 
    Intercompany










(11,479
)


152,705



(140,920
)


(306
)






Inventory


















43,358



1,618







44,976Deferred Tax Asset 
    Current










4,644



















4,644Assets Held for Sale






















1,042







1,042Other Current Assets














1,049



13,114



1,582







15,745Total Current Assets










(6,835
)


161,532



1,857



20,338







176,892PROPERTIES  Net














347,849



65,975



11,917







425,741INVESTMENT IN SUBSIDIARIES


253,701



253,701



255,492



(31,089
)


74,442







(806,247
)


INVESTMENT IN EQUITY INVESTEES


















4,408



1,124







5,532OTHER ASSETS














7,059



7,993



67







15,119Total Assets

$
253,701


$
253,701


$
248,657


$
485,351


$
154,675


$
33,446


$
(806,247
)

$
623,284LIABILITIESCURRENT LIABILITIESAccounts Payable

$



$



$



$
20,518


$
25,047


$
1,952


$



$
47,517Accrued Payroll and Fringe Benefits














(27
)


22,330











22,303Deferred Revenue


















16,631











16,631Accrued Claims and Insurance
    Premiums


















13,361











13,361Accrued Interest














5,179















5,179Customer Deposits


















1,147











1,147Other Liabilities










(4,608
)


195



23,819



5,144







24,550Total Current Liabilities










(4,608
)


25,865



102,335



7,096







130,688LONG-TERM DEBT














200,000















200,000PENSION LIABILITY


















17,867











17,867DEFERRED TAX LIABILITY










4,644



















4,644OTHER LONG-TERM LIABILITIES


















10,664



5,720







16,384Total Liabilities










36



225,865



130,866



12,816







369,583STOCKHOLDERS
    EQUITYCommon Stock


307



















1,813



(1,813
)


307Other Capital


247,435



247,742



247,742



247,742







53,746



(796,972
)


247,435Retained Earnings (Deficit)


11,813



11,813



6,733



21,106



33,171



(34,929
)


(37,894
)


11,813Accumulated Other Comprehensive Loss


(5,854
)


(5,854
)


(5,854
)


(9,362
)


(9,362
)






30,432



(5,854
)Total Stockholders Equity


253,701



253,701



248,621



259,486



23,809



20,630



(806,247
)


253,701Total Liabilities and
    Stockholders Equity

$
253,701


$
253,701


$
248,657


$
485,351


$
154,675


$
33,446


$
(806,247
)

$
623,284  21




---



##### Table of Contents





AMERICAN
    COMMERCIAL LINES INC.




NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)




Combining
    Statement of Cash Flows for the Nine Months Ended
    September 30, 2006




|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ------ | - | ------- | --------- |  | - | ------- | - |  | ---------- | ------- | - | ---------- | - | ------- | ------------ |  | - | -------- | - |  | - | -------- | - |  | - | ------- | -
|                                                                                                                 |  |                |         |   |        |   |         | Parent    |  |   |         |   |  | Subsidiary |         |   | Non-       |   |         |              |  |   | Combined |  
|                                                                                                                 |  | ACL Inc.       |         |   | Parent |   |         | Guarantor |  |   | Issuers |   |  | Guarantors |         |   | Guarantors |   |         | Eliminations |  |   | Totals   |  
|                                                                                                                 |  | (Unaudited)    |        
|                                                                                                                 |  | (In thousands) |        
|                                                                                                                
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|OPERATING ACTIVITIES                                                                                             |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Income from Continuing Operations                                                                                |  | $              | 57,258  |   |        | $ | 57,258  |           |  | $ | 57,258  |   |  | $          | 90,479  |   |            | $ | 79,025  |              |  | $ |         |   |  | $ | (286,674 | ) |  | $ | 54,604  |  
|Adjustments to Reconcile Income
    from Continuing Operations to Net Cash Provided by Operating
    Activities: |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Depreciation and Amortization                                                                                    |  |                |        |   |        |   |        |           |  |   |        |   |  |            | 28,124  |   |            |   | 7,179   |              |  |   |         |   |  |   |         |   |  |   | 35,303  |  
|Debt Issuance Cost Amortization                                                                                  |  |                |        |   |        |   |        |           |  |   |        |   |  |            | 832     |   |            |   |        |              |  |   |         |   |  |   |         |   |  |   | 832     |  
|(Gain) Loss on Property Dispositions                                                                             |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (119    | ) |            |   | 76      |              |  |   |         |   |  |   |         |   |  |   | (43     | )
|Contributions to Defined Benefit
    Pension Plan                                                                |  |                |        |   |        |   |        |           |  |   |        |   |  |            |        |   |            |   | (454    | )            |  |   |         |   |  |   |         |   |  |   | (454    | )
|Other Operating Activities                                                                                       |  |                | (57,258 | ) |        |   | (57,258 | )         |  |   | (82,303 | ) |  |            | (76,834 | ) |            |   | 968     |              |  |   | 1,621    |   |  |   | 286,674  |   |  |   | 15,610  |  
|Changes in Operating Assets and
    Liabilities:                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Accounts Receivable                                                                                              |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (67     | ) |            |   | (34,755 | )            |  |   | 863      |   |  |   |         |   |  |   | (33,959 | )
|Intercompany Accounts
    Receivable/Payable                                                                     |  |                | 3,018   |   |        |   |        |           |  |   | 7,800   |   |  |            | 10,907  |   |            |   | (21,210 | )            |  |   | (515     | ) |  |   |         |   |  |   |        |  
|Inventory                                                                                                        |  |                |        |   |        |   |        |           |  |   |        |   |  |            |        |   |            |   | (14,204 | )            |  |   | 12       |   |  |   |         |   |  |   | (14,192 | )
|Accrued Interest                                                                                                 |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (3,144  | ) |            |   |        |              |  |   |         |   |  |   |         |   |  |   | (3,144  | )
|Other Current Assets                                                                                             |  |                |        |   |        |   |        |           |  |   | 2,085   |   |  |            | (28     | ) |            |   | (17,100 | )            |  |   | (592     | ) |  |   |         |   |  |   | (15,635 | )
|Other Current Liabilities                                                                                        |  |                |        |   |        |   |        |           |  |   | 11,097  |   |  |            | 591     |   |            |   | 23,524  |              |  |   | (3,488   | ) |  |   |         |   |  |   | 31,724  |  
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Net Cash Provided by (Used in)
    Operating Activities before Reorganization Items                              |  |                | 3,018   |   |        |   |        |           |  |   | (4,063  | ) |  |            | 50,741  |   |            |   | 23,049  |              |  |   | (2,099   | ) |  |   |         |   |  |   | 70,646  |  
|Reorganization Items Paid                                                                                        |  |                |        |   |        |   |        |           |  |   |        |   |  |            |        |   |            |   | (349    | )            |  |   |         |   |  |   |         |   |  |   | (349    | )
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Net Cash Provided by (Used in)
    Continuing Operating Activities                                               |  |                | 3,018   |   |        |   |        |           |  |   | (4,063  | ) |  |            | 50,741  |   |            |   | 22,700  |              |  |   | (2,099   | ) |  |   |         |   |  |   | 70,297  |  
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Net Cash Provided by Operating
    Activities of Discontinued Segment                                            |  |                |        |   |        |   |        |           |  |   |        |   |  |            |        |   |            |   | 600     |              |  |   | (3,297   | ) |  |   |         |   |  |   | (2,697  | )
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Net Cash Provided by (Used in)
    Operating Activities                                                          |  |                | 3,018   |   |        |   |        |           |  |   | (4,063  | ) |  |            | 50,741  |   |            |   | 23,300  |              |  |   | (5,396   | ) |  |   |         |   |  |   | 67,600  |  
|INVESTING ACTIVITIES                                                                                             |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Property Additions                                                                                               |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (36,962 | ) |            |   | (21,711 | )            |  |   | (8       | ) |  |   |         |   |  |   | (58,681 | )
|Proceeds from Property Dispositions                                                                              |  |                |        |   |        |   |        |           |  |   |        |   |  |            | 515     |   |            |   | 173     |              |  |   |         |   |  |   |         |   |  |   | 688     |  
|Other Investing Activities                                                                                       |  |                |        |   |        |   |        |           |  |   |        |   |  |            | 222     |   |            |   | (1,539  | )            |  |   | (198     | ) |  |   |         |   |  |   | (1,515  | )
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Net Cash Used in Investing
    Activities                                                                        |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (36,225 | ) |            |   | (23,077 | )            |  |   | (206     | ) |  |   |         |   |  |   | (59,508 | )
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|FINANCING ACTIVITIES                                                                                             |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Asset Based Revolver Borrowings                                                                                  |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (6,700  | ) |            |   |        |              |  |   |         |   |  |   |         |   |  |   | (6,700  | )
|2015 Senior Note Repayments                                                                                      |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (500    | ) |            |   |        |              |  |   |         |   |  |   |         |   |  |   | (500    | )
|Outstanding Checks                                                                                               |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (13,321 | ) |            |   | (232    | )            |  |   |         |   |  |   |         |   |  |   | (13,553 | )
|Debt Costs                                                                                                       |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (13     | ) |            |   |        |              |  |   |         |   |  |   |         |   |  |   | (13     | )
|Tax Benefit of Share Based
    Compensation                                                                      |  |                |        |   |        |   |        |           |  |   | 4,063   |   |  |            |        |   |            |   |        |              |  |   |         |   |  |   |         |   |  |   | 4,063   |  
|Acquisition of Treasury Stock                                                                                    |  |                | (3,018  | ) |        |   |        |           |  |   |        |   |  |            |        |   |            |   |        |              |  |   |         |   |  |   |         |   |  |   | (3,018  | )
|Other Financing Activities                                                                                       |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (5      | ) |            |   |        |              |  |   |         |   |  |   |         |   |  |   | (5      | )
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Net Cash (Used in) Provided by
    Financing Activities                                                          |  |                | (3,018  | ) |        |   |        |           |  |   | 4,063   |   |  |            | (20,539 | ) |            |   | (232    | )            |  |   |         |   |  |   |         |   |  |   | (19,726 | )
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Decrease in Cash and Cash
    Equivalents                                                                        |  |                |        |   |        |   |        |           |  |   |        |   |  |            | (6,023  | ) |            |   | (9      | )            |  |   | (5,602   | ) |  |   |         |   |  |   | (11,634 | )
|Cash and Cash Equivalents at
    Beginning of Period                                                             |  |                |        |   |        |   |        |           |  |   |        |   |  |            | 7,740   |   |            |   | 38      |              |  |   | 6,181    |   |  |   |         |   |  |   | 13,959  |  
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  
|Cash and Cash Equivalents at End of
    Period                                                                   |  | $              |        |   |        | $ |        |           |  | $ |        |   |  | $          | 1,717   |   |            | $ | 29      |              |  | $ | 579      |   |  | $ |         |   |  | $ | 2,325   |  
|                                                                                                                 |  |                |         |   |        |   |         |           |  |   |         |   |  |            |         |   |            |   |         |              |  |   |          |   |  |   |          |   |  |   |         |  



22



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##### Table of Contents





AMERICAN
    COMMERCIAL LINES INC.




NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)




Combining
    Statement of Cash Flows for the Nine Months Ended
    September 30, 2005




|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|---------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ------ | - | ------ | --------- |  | - | ------- | - |  | ---------- | -------- | - | ---------- | - | ------- | ------------ |  | - | -------- | - |  | - | ------- | - |  | - | -------- | -
|                                                                                                                 |  |                |        |   |        |   |        | Parent    |  |   |         |   |  | Subsidiary |          |   | Non-       |   |         |              |  |   | Combined |  
|                                                                                                                 |  | ACL Inc,       |        |   | Parent |   |        | Guarantor |  |   | Issuers |   |  | Guarantors |          |   | Guarantors |   |         | Eliminations |  |   | Totals   |  
|                                                                                                                 |  | (Unaudited)    |       
|                                                                                                                 |  | (In thousands) |       
|                                                                                                                
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|OPERATING ACTIVITIES                                                                                             |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Income from Continuing Operations                                                                                |  | $              | 3,211  |   |        | $ | 3,211  |           |  | $ | 3,211   |   |  | $          | 5,516    |   |            | $ | 27,477  |              |  | $ | 319      |   |  | $ | (40,208 | ) |  | $ | 2,737    |  
|Adjustments to Reconcile Income
    from Continuing Operations to Net Cash Provided by Operating
    Activities: |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Depreciation and Amortization                                                                                    |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 26,701   |   |            |   | 7,313   |              |  |   | 1,242    |   |  |   |        |   |  |   | 35,256   |  
|Debt Issuance Cost Amortization                                                                                  |  |                |        |   |        |   |       |           |  |   |        |   |  |            | 2,562    |   |            |   |        |              |  |   | 107      |   |  |   |        |   |  |   | 2,669    |  
|Gain on Property Dispositions                                                                                    |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (4,209   | ) |            |   | (38     | )            |  |   | (1       | ) |  |   |        |   |  |   | (4,248   | )
|Contributions to Defined Benefit
    Pension Plan                                                                |  |                |       |   |        |   |       |           |  |   |        |   |  |            |         |   |            |   | (3,417  | )            |  |   |         |   |  |   |        |   |  |   | (3,417   | )
|Other Operating Activities                                                                                       |  |                | (3,211 | ) |        |   | (3,211 | )         |  |   | (2,897  | ) |  |            | (62,822  | ) |            |   | 36,730  |              |  |   | (526     | ) |  |   | 39,718  |   |  |   | 3,781    |  
|Changes in Operating Assets and
    Liabilities:                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Accounts Receivable                                                                                              |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (108     | ) |            |   | (14,965 | )            |  |   | 338      |   |  |   |        |   |  |   | (14,735  | )
|Intercompany Accounts
    Receivable/Payable                                                                     |  |                |       |   |        |   |       |           |  |   | (2,519  | ) |  |            | 27,612   |   |            |   | (22,593 | )            |  |   | (2,500   | ) |  |   |        |   |  |   |         |  
|Inventory                                                                                                        |  |                |       |   |        |   |       |           |  |   |        |   |  |            |         |   |            |   | (17,498 | )            |  |   | 173      |   |  |   |        |   |  |   | (17,325  | )
|Accrued Interest                                                                                                 |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 2,243    |   |            |   | 37      |              |  |   | 280      |   |  |   |        |   |  |   | 2,560    |  
|Other Current Assets                                                                                             |  |                |       |   |        |   |       |           |  |   | (2,146  | ) |  |            | 761      |   |            |   | (2,009  | )            |  |   | (138     | ) |  |   | 559     |   |  |   | (2,973   | )
|Other Current Liabilities                                                                                        |  |                |       |   |        |   |       |           |  |   | 4,351   |   |  |            | 1,835    |   |            |   | 11,676  |              |  |   | (601     | ) |  |   | (69     | ) |  |   | 17,192   |  
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Net Cash Provided by (Used in)
    Operating Activities before Reorganization Items                              |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 91       |   |            |   | 22,713  |              |  |   | (1,307   | ) |  |   |        |   |  |   | 21,497   |  
|Reorganization Items Paid                                                                                        |  |                |       |   |        |   |       |           |  |   |        |   |  |            |         |   |            |   | (12,988 | )            |  |   |         |   |  |   |        |   |  |   | (12,988  | )
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Net Cash Provided by (Used in)
    Operating Activities                                                          |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 91       |   |            |   | 9,725   |              |  |   | (1,307   | ) |  |   |        |   |  |   | 8,509    |  
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Net Cash Provided by Operating
    Activities of Discontinued Segment                                            |  |                |       |   |        |   |       |           |  |   |        |   |  |            |         |   |            |   | (177    | )            |  |   | 2,025    |   |  |   |        |   |  |   | 1,848    |  
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Net Cash Provided by Operating
    Activities                                                                    |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 91       |   |            |   | 9,548   |              |  |   | 718      |   |  |   |        |   |  |   | 10,357   |  
|INVESTING ACTIVITIES                                                                                             |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Property Additions                                                                                               |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (21,129  | ) |            |   | (4,969  | )            |  |   | (31      | ) |  |   |        |   |  |   | (26,129  | )
|Proceeds from Property Dispositions                                                                              |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 12,663   |   |            |   | 537     |              |  |   | 300      |   |  |   |        |   |  |   | 13,500   |  
|Net Change in Restricted Cash                                                                                    |  |                |       |   |        |   |       |           |  |   |        |   |  |            |         |   |            |   |        |              |  |   | (1,148   | ) |  |   |        |   |  |   | (1,148   | )
|Investment in Vessel Leasing LLC                                                                                 |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (2,500   | ) |            |   |        |              |  |   |         |   |  |   |        |   |  |   | (2,500   | )
|Other Investing Activities                                                                                       |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 206      |   |            |   | (2,306  | )            |  |   | 58       |   |  |   |        |   |  |   | (2,042   | )
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Net Cash Used in Investing
    Activities                                                                        |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (10,760  | ) |            |   | (6,738  | )            |  |   | (821     | ) |  |   |        |   |  |   | (18,319  | )
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|FINANCING ACTIVITIES                                                                                             |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Long-Term Debt Repaid                                                                                            |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (382,146 | ) |            |   |        |              |  |   | (1,690   | ) |  |   |        |   |  |   | (383,836 | )
|Asset Based Revolver Borrowings                                                                                  |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 170,710  |   |            |   |        |              |  |   |         |   |  |   |        |   |  |   | 170,710  |  
|2015 Senior Note Borrowings                                                                                      |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 200,000  |   |            |   |        |              |  |   |         |   |  |   |        |   |  |   | 200,000  |  
|Outstanding Checks                                                                                               |  |                |       |   |        |   |       |           |  |   |        |   |  |            |         |   |            |   | (2,814  | )            |  |   |         |   |  |   |        |   |  |   | (2,814   | )
|Debt Costs                                                                                                       |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (13,233  | ) |            |   |        |              |  |   |         |   |  |   |        |   |  |   | (13,233  | )
|Other Financing Activities                                                                                       |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (619     | ) |            |   |        |              |  |   | (1,163   | ) |  |   |        |   |  |   | (1,782   | )
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Net Cash Used in Financing
    Activities                                                                        |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (25,288  | ) |            |   | (2,814  | )            |  |   | (2,853   | ) |  |   |        |   |  |   | (30,955  | )
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Decrease in Cash and Cash
    Equivalents                                                                        |  |                |       |   |        |   |       |           |  |   |        |   |  |            | (35,957  | ) |            |   | (4      | )            |  |   | (2,956   | ) |  |   |        |   |  |   | (38,917  | )
|Cash and Cash Equivalents at
    Beginning of Period                                                             |  |                |       |   |        |   |       |           |  |   |        |   |  |            | 39,452   |   |            |   | 30      |              |  |   | 7,163    |   |  |   |        |   |  |   | 46,645   |  
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  
|Cash and Cash Equivalents at End of
    Period                                                                   |  | $              |       |   |        | $ |       |           |  | $ |        |   |  | $          | 3,495    |   |            | $ | 26      |              |  | $ | 4,207    |   |  | $ |        |   |  | $ | 7,728    |  
|                                                                                                                 |  |                |        |   |        |   |        |           |  |   |         |   |  |            |          |   |            |   |         |              |  |   |          |   |  |   |         |   |  |   |          |  



23



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##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13.
    Subsequent
    Events   24




---



##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  This MD&A includes certain forward-looking
    statements that involve many risks and uncertainties. When
    used, words such as anticipate, expect,
    believe, intend, may be and
    will be and similar words or phrases, or the
    negative thereof, unless the context requires otherwise, are
    intended to identify forward-looking statements. These
    forward-looking statements are based on managements
    present expectations and beliefs about future events. As with
    any projection or forecast, these statements are inherently
    susceptible to uncertainty and changes in circumstances. The
    Company is under no obligation to, and expressly disclaims any
    obligation to, update or alter its forward- looking statements
    whether as a result of such changes, new information, subsequent
    events or otherwise.
  See the risk factors included in Item 1A of this report
    for a detailed discussion of important factors that could cause
    actual results to differ materially from those reflected in such
    forward-looking statements. The potential for actual results to
    differ materially from such forward-looking statements should be
    considered in evaluating our outlook.
  INTRODUCTION
    
    Overview.  This section provides a general
    description of the Company and its business, as well as
    developments the Company believes are important in understanding
    the results of operations and financial condition or in
    understanding anticipated future trends.
    Results of Operations.  This section provides
    an analysis of the Companys results of operations for the
    quarter and nine months ended September 30, 2006 compared
    to the results of operations for the quarter and nine months
    ended September 30, 2005.
    Liquidity and Capital Resources.  This section
    provides an overview of the Companys sources of liquidity,
    a discussion of the Companys debt that existed as of
    September 30, 2006 and an analysis of the Companys
    cash flows for the nine months ended September 30, 2006.
    Changes in Accounting Standards.  This section
    discusses certain changes in accounting and reporting standards
    applicable to the Company.
    Critical Accounting Policies.  This section
    discusses any significant changes in accounting policies that
    are considered important to the Companys financial
    condition and results of operations, that require significant
    judgment and that require estimates on the part of management in
    application from those previously described in the
    Companys filing on
    Form 10-K
    for the year ended December 31, 2005. The Companys
    significant accounting policies include those considered to be
    critical accounting policies.
    Quantitative and Qualitative Disclosures about Market
    Risk.  This section discusses our analysis of
    significant changes in exposure to potential loss arising from
    adverse changes in fuel prices, interest rates and foreign
    currency exchange rates in the period since our filing on
    Form 10-K
    for the fiscal year ended December 31, 2005.
    Risk Factors and Caution Concerning Forward-Looking
    Statements.  This section references important
    factors that could adversely affect the operations, business or
    financial results of the Company or its business segments and
    the use of forward-looking information appearing in this filing
    on
    Form 10-Q,
    including in MD&A and the condensed consolidated financial
    statements. Such information is based on managements
    current expectations about future events, which are inherently
    susceptible to uncertainty and changes in circumstances. 25




---



##### Table of Contents



OVERVIEW
  Our
    Business
  ®
  The
    Industry
  Transportation Services Industry:
   26




---



##### Table of Contents



The Manufacturing Industry:
  Consolidated
    Financial Overview
  year-to-date,
 27




---



##### Table of Contents



year-to-date
    Transportation Services:
    year-to-date
  ton-miles.
    ton-miles ton-miles
 28




---



##### Table of Contents



% Change to Prior





% Change to PriorQuarter Ended


Year Quarter


Nine Months Ended


Year YTDKey Operating Statistics

September 30, 2006


Increase (Decrease)


September 30, 2006


Increase (Decrease)Affreightment Ton Miles (in
    thousands):Total Dry


9,904,199



12.0
%


28,407,955



4.8
%Ton-miles
    per average dry affreightment barge


3,531



12.8
%


10,159



5.8
%Liquid barge affreightment:Total Liquid


938,374



1.7
%


2,852,757



(7.7
)%Ton-miles
    per average liquid affreightment barge


3,475



10.4
%


10,152



0.1
%Total ton miles


10,842,573



10.6
%


31,260,712



3.5
%Ton-miles
    per average affreightment barge


3,526



12.5
%


10,158



5.2
% 29




---



##### Table of Contents



% Change to Prior





% Change to PriorQuarter Ended


Year Quarter


Nine Months Ended


Year YTDKey Operating Statistics

September 30, 2006


Increase (Decrease)


September 30, 2006


Increase (Decrease)Rates per ton mile/Revenues per
    average barge:Increase in dry rate per ton mile






37.6
%






33.4
%Increase in fuel neutral dry rate
    per ton mile






31.8
%






27.7
%Increase in liquid rate per ton
    mile






21.0
%






22.3
%Increase in fuel neutral liquid
    rate per ton mile






11.0
%






11.9
%Overall rate per ton mile

$
15.96



34.1
%

$
14.72



30.4
%Overall fuel neutral rate per ton
    mile

$
15.19



27.6
%

$
14.00



24.0
%Revenue per average barge operated

$
66,265



47.2
%

$
177,772



37.3
%Fuel Price and Volume
    Data:Fuel price per gallon

$
2.09



34.2
%

$
1.99



28.7
%Fuel Gallons


20,347



13.7
%


59,781



5.6
%Revenue data (in
    thousands):Affreightment revenue

$
172,910



48.9
%

$
459,699



34.9
%Towing


13,563



69.0
%


35,563



53.6
%Charter and Day rate


12,235



93.6
%


30,067



86.0
%Demurrage


9,556



(1.5
)%


28,566



17.4
%Other


2,724



(24.3
)%


10,532



(14.3
)%Non-affreightment revenue


38,078



37.7
%


104,727



37.9
%Total domestic transportation
    revenue

$
210,988



46.8
%

$
564,426



35.6
%     Barge
    Fleet Changes  Barges  Quarter Ended September 30, 2006

Dry


Tankers


TotalBarges operated as of the end of
    the 2nd quarter 2006


2,815



378



3,193Retired


(15
)


(4
)


(19
)New builds










Change in number of barges leased










Barges operated as of the end of
    the 3rd quarter 2006


2,800



374



3,174   Barges  Nine Months Ended September 30,
    2006

Dry


Tankers


TotalBarges operated as of the end of
    2005


2,803



371



3,174Retired


(48
)


(15
)


(63
)New builds


50



16



66Change in number of barges leased


(5
)


2



(3
)Barges operated as of the end of
    the 3rd quarter 2006


2,800



374



3,174  30




---



##### Table of Contents



Owned
    Boat Counts and Average Age by Horsepower Class  AverageHorsepower Class

Number


Age1950 or less


44



30.0Less than 4300


20



33.3Less than 6200


43



31.87000 or over


15



29.2Total/overall average age


122



31.1     Transportation Services (continued):
  year-to-date
  year-to-date ton-mile year-to-date ton-miles.
  ton-miles
  ton-miles
  Manufacturing:
 31




---



##### Table of Contents



Manufacturing
    segment units produced for external sales or internal
    use
  Quarters Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005External sales:Liquid tank barges


7



17



17



46Ocean tank barges


2



0



2



1Dry cargo barges


59



1



136



1Total external units sold


68



18



155



48Internal into production:Liquid tank barges


0



13



16



16Dry cargo barges


0



0



50



0Total units into production


0



13



66



16Total units produced


68



31



221



64   year-to-date.
  Consolidated
    Financial Overview  Non-GAAP Financial Measure
    Reconciliation
  AMERICAN
    COMMERCIAL LINES INC.
  NET
    INCOME TO EBITDA RECONCILIATION
  Quarter Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(Unaudited)(Dollars in thousands)Income from Continuing Operations

$
25,106


$
1,329


$
54,604


$
2,737Discontinued Operations, Net of
    Taxes


3,300



2,177



2,654



474Consolidated Net
    Income

$
28,406


$
3,506


$
57,258


$
3,211Adjustments from Continuing
    Operations:Interest Income


(6
)


(73
)


(26
)


(273
)Interest Expense


4,812



7,869



14,570



25,623Depreciation and Amortization


11,862



11,745



35,303



35,256Taxes


15,067



2,047



33,018



2,305Adjustments from Discontinued
    Operations:Interest Income


(195
)


(122
)


(583
)


(379
)Depreciation and Amortization


386



488



1,428



1,479Taxes


1,652



644



881



785EBITDA from Continuing
    Operations


56,841



22,917



137,469



65,648EBITDA from Discontinued
    Operations


5,143



3,187



4,380



2,359Consolidated EBITDA

$
61,984


$
26,104


$
141,849


$
68,007 32




---



##### Table of Contents



Quarter Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(Unaudited)(Dollars in thousands)Transportation Net Income
    (Loss)

$
24,445


$
31


$
49,999


$
(798
)Interest Income


(6
)


(73
)


(26
)


(273
)Interest Expense


4,812



7,869



14,570



25,623Depreciation and Amortization


11,111



11,030



33,118



33,155Taxes


15,067



2,047



33,018



2,305Transportation EBITDA

$
55,429


$
20,904


$
130,679


$
60,012Manufacturing Net
    Income

$
886


$
2,784


$
13,420


$
4,542Interest Income














Interest Expense














Depreciation and Amortization


468



460



1,367



1,341Taxes














Total Manufacturing
    EBITDA


1,354



3,244



14,787



5,883Intersegment Profit


(120
)


(1,454
)


(8,845
)


(1,477
)External Manufacturing
    EBITDA

$
1,234


$
1,790


$
5,942


$
4,406       Outlook
  Transportation Services:
   33




---



##### Table of Contents



ton-miles ton-miles year-to-date
  year-to-date
  year-to-date
 34




---



##### Table of Contents











Manufacturing:














35



---



##### Table of Contents



AMERICAN
    COMMERCIAL LINES INC.




OPERATING RESULTS BY BUSINESS SEGMENT


Quarter Ended September 30, 2006 as compared with
    Quarter Ended September 30, 2005




|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|------------------------------------------------------------------ |  | ----------------------------------------- | ------- | - | ---- | - | ------- | ----------- |  | - | ----------------- | - |  | ---- | ----- | -- |  |  | ----- | --
|                                                                   |  |                                           |         |   |      |   |         |             |  |   | % of Consolidated |  
|                                                                   |  | Quarters Ended                            |         |   |      |   |         | Revenue     | 
|                                                                   |  | September 30,                             |         |   |      |   |         | 3rd Quarter | 
|                                                                   |  | 2006                                      |         |   | 2005 |   |         | Variance    |  |   | 2006              |   |  | 2005 |      
|                                                                   |  | (Unaudited)                               |        
|                                                                   |  | (Dollars in thousands except where noted) |         |   |      |   |         |             | 
|                                                                  
|REVENUE                                                            |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Transportation                                                     |  | $                                         | 210,988 |   |      | $ | 143,759 |             |  | $ | 67,229            |   |  |      | 79.2  | %  |  |  | 85.9  | % 
|Manufacturing (external and
    internal)                          |  |                                           | 54,661  |   |      |   | 34,919  |             |  |   | 19,742            |   |  |      | 20.5  | %  |  |  | 20.9  | % 
|Other                                                              |  |                                           | 1,463   |   |      |   | 1,510   |             |  |   | (47               | ) |  |      | 0.6   | %  |  |  | 0.9   | % 
|Intersegment manufacturing
    elimination                         |  |                                           | (556    | ) |      |   | (12,891 | )           |  |   | 12,335            |   |  |      | (0.2  | )% |  |  | (7.7  | )%
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Consolidated Revenue                                               |  |                                           | 266,556 |   |      |   | 167,297 |             |  |   | 99,259            |   |  |      | 100.0 | %  |  |  | 100.0 | % 
|OPERATING EXPENSE                                                  |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Transportation                                                     |  |                                           | 166,760 |   |      |   | 133,904 |             |  |   | 32,856            |   |  |      |       |    |  |  |       |   
|Manufacturing (external and
    internal)                          |  |                                           | 53,693  |   |      |   | 32,140  |             |  |   | 21,553            |   |  |      |       |    |  |  |       |   
|Other                                                              |  |                                           | 1,567   |   |      |   | 1,541   |             |  |   | 26                |   |  |      |       |    |  |  |       |   
|Intersegment manufacturing
    elimination                         |  |                                           | (436    | ) |      |   | (11,437 | )           |  |   | 11,001            |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Consolidated Operating Expense                                     |  |                                           | 221,584 |   |      |   | 156,148 |             |  |   | 65,436            |   |  |      | 83.1  | %  |  |  | 93.3  | % 
|OPERATING INCOME                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Transportation                                                     |  |                                           | 44,228  |   |      |   | 9,855   |             |  |   | 34,373            |   |  |      |       |    |  |  |       |   
|Manufacturing (external and
    internal)                          |  |                                           | 968     |   |      |   | 2,779   |             |  |   | (1,811            | ) |  |      |       |    |  |  |       |   
|Other                                                              |  |                                           | (104    | ) |      |   | (31     | )           |  |   | (73               | ) |  |      |       |    |  |  |       |   
|Intersegment manufacturing
    elimination                         |  |                                           | (120    | ) |      |   | (1,454  | )           |  |   | 1,334             |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Consolidated Operating Income                                      |  |                                           | 44,972  |   |      |   | 11,149  |             |  |   | 33,823            |   |  |      | 16.9  | %  |  |  | 6.7   | % 
|Interest Expense                                                   |  |                                           | 4,812   |   |      |   | 7,869   |             |  |   | (3,057            | ) |  |      |       |    |  |  |       |   
|Other Expense (Income)                                             |  |                                           | (13     | ) |      |   | (96     | )           |  |   | 83                |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Income from Continuing Operations
    before Income Taxes          |  |                                           | 40,173  |   |      |   | 3,376   |             |  |   | 36,797            |   |  |      |       |    |  |  |       |   
|Income Taxes                                                       |  |                                           | 15,067  |   |      |   | 2,047   |             |  |   | 13,020            |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Income from Continuing Operations                                  |  |                                           | 25,106  |   |      |   | 1,329   |             |  |   | 23,777            |   |  |      |       |    |  |  |       |   
|Discontinued Operations, Net of Tax                                |  |                                           | 3,300   |   |      |   | 2,177   |             |  |   | 1,123             |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Net Income                                                         |  | $                                         | 28,406  |   |      | $ | 3,506   |             |  | $ | 24,900            |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |             |  |   |                   |   |  |      |       |    |  |  |       |   
|Domestic Barges Operated (average
    of period beginning and end) |  |                                           | 3,184   |   |      |   | 3,194   |             |  |   | (10               | ) |  |      |       |    |  |  |       |   
|Revenue per Domestic Barge
    Operated (Actual)                   |  | $                                         | 66,265  |   |      | $ | 45,009  |             |  | $ | 21,256            |   |  |      |       |    |  |  |       |   





RESULTS
    OF OPERATIONS




Quarter
    ended September 30, 2006 comparison to quarter ended
    September 30, 2005




Revenue.




ton-mile


36



---



##### Table of Contents



ton-miles ton-miles ton-miles
  ton-mile ton-mile
    Operating Expense.
    start-up
  Operating Income.
      Interest Expense.
 37




---



##### Table of Contents



Income Tax Expense.




Discontinued Operations, Net of Taxes.




Net Income.




AMERICAN
    COMMERCIAL LINES INC.






OPERATING RESULTS by BUSINESS SEGMENT


Nine Months Ended September 30, 2006 as compared with
    Nine Months Ended September 30, 2005




|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|------------------------------------------------------------------ |  | ----------------------------------------- | ------- | - | ---- | - | ------- | ----------------- |  | - | ----------------- | - |  | ---- | ----- | -- |  |  | ----- | --
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   | % of Consolidated |  
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   | Revenue           |  
|                                                                   |  | Nine Months Ended                         |         |   |      |   |         | Nine Months Ended | 
|                                                                   |  | September 30,                             |         |   |      |   |         | September 30,     | 
|                                                                   |  | 2006                                      |         |   | 2005 |   |         | Variance          |  |   | 2006              |   |  | 2005 |      
|                                                                   |  | (Unaudited)                               |        
|                                                                   |  | (Dollars in thousands except where noted) |         |   |      |   |         |                   | 
|                                                                  
|REVENUE                                                            |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Transportation                                                     |  | $                                         | 564,426 |   |      | $ | 416,351 |                   |  | $ | 148,075           |   |  |      | 83.4  | %  |  |  | 85.1  | % 
|Manufacturing (external and
    internal)                          |  |                                           | 153,322 |   |      |   | 85,820  |                   |  |   | 67,502            |   |  |      | 22.7  | %  |  |  | 17.5  | % 
|Other                                                              |  |                                           | 4,394   |   |      |   | 4,912   |                   |  |   | (518              | ) |  |      | 0.7   | %  |  |  | 1.0   | % 
|Intersegment manufacturing
    elimination                         |  |                                           | (45,488 | ) |      |   | (17,718 | )                 |  |   | (27,770           | ) |  |      | (6.7  | )% |  |  | (3.6  | )%
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Consolidated Revenue                                               |  |                                           | 676,654 |   |      |   | 489,365 |                   |  |   | 187,289           |   |  |      | 100.0 | %  |  |  | 100.0 | % 
|OPERATING EXPENSE                                                  |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Transportation                                                     |  |                                           | 469,140 |   |      |   | 394,124 |                   |  |   | 75,016            |   |  |      |       |    |  |  |       |   
|Manufacturing (external and
    internal)                          |  |                                           | 139,821 |   |      |   | 81,323  |                   |  |   | 58,498            |   |  |      |       |    |  |  |       |   
|Other                                                              |  |                                           | 4,400   |   |      |   | 4,446   |                   |  |   | (46               | ) |  |      |       |    |  |  |       |   
|Intersegment manufacturing
    elimination                         |  |                                           | (36,643 | ) |      |   | (16,241 | )                 |  |   | (20,402           | ) |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Consolidated Operating Expense                                     |  |                                           | 576,718 |   |      |   | 463,652 |                   |  |   | 113,066           |   |  |      | 85.2  | %  |  |  | 94.8  | % 
|OPERATING INCOME                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Transportation                                                     |  |                                           | 95,286  |   |      |   | 22,227  |                   |  |   | 73,059            |   |  |      |       |    |  |  |       |   
|Manufacturing (external and
    internal)                          |  |                                           | 13,501  |   |      |   | 4,497   |                   |  |   | 9,004             |   |  |      |       |    |  |  |       |   
|Other                                                              |  |                                           | (6      | ) |      |   | 466     |                   |  |   | (472              | ) |  |      |       |    |  |  |       |   
|Intersegment manufacturing
    elimination                         |  |                                           | (8,845  | ) |      |   | (1,477  | )                 |  |   | (7,368            | ) |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Consolidated Operating Income                                      |  |                                           | 99,936  |   |      |   | 25,713  |                   |  |   | 74,223            |   |  |      | 14.8  | %  |  |  | 5.3   | % 
|Interest Expense                                                   |  |                                           | 14,570  |   |      |   | 25,623  |                   |  |   | (11,053           | ) |  |      |       |    |  |  |       |   
|Other Expense (Income)                                             |  |                                           | (2,256  | ) |      |   | (4,952  | )                 |  |   | 2,696             |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Income from Continuing Operations
    before Income Taxes          |  |                                           | 87,622  |   |      |   | 5,042   |                   |  |   | 82,580            |   |  |      |       |    |  |  |       |   
|Income Taxes                                                       |  |                                           | 33,018  |   |      |   | 2,305   |                   |  |   | 30,713            |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Income from Continuing Operations                                  |  |                                           | 54,604  |   |      |   | 2,737   |                   |  |   | 51,867            |   |  |      |       |    |  |  |       |   
|Discontinued Operations, Net of Tax                                |  |                                           | 2,654   |   |      |   | 474     |                   |  |   | 2,180             |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Net Income                                                         |  | $                                         | 57,258  |   |      | $ | 3,211   |                   |  | $ | 54,047            |   |  |      |       |    |  |  |       |   
|                                                                   |  |                                           |         |   |      |   |         |                   |  |   |                   |   |  |      |       |    |  |  |       |   
|Domestic Barges Operated (average
    of period beginning and end) |  |                                           | 3,175   |   |      |   | 3,215   |                   |  |   | (40               | ) |  |      |       |    |  |  |       |   
|Revenue per Domestic Barge
    Operated (Actual)                   |  | $                                         | 177,772 |   |      | $ | 129,503 |                   |  | $ | 48,269            |   |  |      |       |    |  |  |       |   



38



---



##### Table of Contents



Nine
    months ended September 30, 2006 comparison to nine months
    ended September 30, 2005




Revenue.




ton-mile ton-miles ton-miles




ton-mile ton-mile








Operating Expense.








Year-to-date,




Operating Income.


39



---



##### Table of Contents



Interest Expense.




Other Income.




Income Tax Expense.




Discontinued Operations, Net of Tax. start-up




Net Income.




LIQUIDITY
    AND CAPITAL RESOURCES
















Our
    Indebtedness






40



---



##### Table of Contents



Net
    Cash, Capital Expenditures and Cash Flow
              CHANGES
    IN ACCOUNTING STANDARDS
   41




---



##### Table of Contents



Chapter 4-Issued
           42




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES
    Form 10-K
  QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    Fuel
    Price Risk
    Interest
    Rate and Other Risks
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##### Table of Contents



Foreign
    Currency Exchange Rate Risks
    ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    ITEM 4.
    CONTROLS
    AND PROCEDURES  Evaluation of Disclosure Controls and
    Procedures. Rule 13a-15(b)).
  Changes in Internal Control over Financial
    Reporting. Rules 13a-15(f) 15d-15(f)
 PART II 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS    Current Legal Proceeding.
  Miller Appeal. Trust A-4,
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Environmental Litigation.
  
    SBA Shipyard, Jennings, Louisiana.  SBA
    Shipyard is a remediation site that was operated by a
    third-party barge cleaning service provider utilized by National
    Marine, Inc., an entity whose assets were combined with ours in
    1998. A potentially responsible party group of barge operators,
    which includes the Company, has been formed to coordinate final
    cleanup of this site. The removal action was completed pursuant
    to a work plan accepted by the U.S. Environmental
    Protection Agency (U.S. EPA) and on
    February 24, 2006, the U.S. EPA approved the final
    work plan for the site. As of September 30, 2006 we had
    expended approximately $710,000 in connection with this site. No
    additional contributions are required or anticipated at this
    time.
    EPS, Marietta, Ohio.  EPS, Inc., a wholly owned
    subsidiary of Vectura Group Inc., is the owner of Connex Pipe
    Systems closed solid waste landfill located in Marietta,
    Ohio (Connex). We assumed liability for the
    monitoring and potential cleanup of Connex (up to
    $30,000 per year) pursuant to our combination with Vectura
    Group in 1998. In 1986, Connex was subject to an Ohio consent
    judgment (Consent Judgment) 45




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under which it agreed to remediate and monitor the closed
    landfill for a period of three years. Connex complied with the
    Consent Judgment, and in 1994 the Ohio Environmental Protection
    Agency (Ohio EPA) issued a letter confirming
    Connexs compliance. In 1998, the Ohio EPA changed its
    regulations with respect to monitoring requirements to require
    longer monitoring periods for closed sites and sought to apply
    those new regulations to Connex retroactively. In November 1998,
    the Ohio EPA issued finalized guidance (Final
    Guidance) regarding retroactive application of the Ohio
    EPA requirements. We have requested written confirmation from
    the Ohio EPA that the new regulations do not retroactively apply
    and that our monitoring responsibilities with respect to the
    property have been fulfilled. Currently, we coordinate
    inspections of the property four times a year for integrity and
    maintenance of the cap with minimal associated cost.  
    Third Site, Zionsville, Indiana.  Jeffboat LLC
    has been named a potentially responsible party at Third Site by
    the U.S. EPA. Third Site was utilized for the storage of
    hazardous substances and wastes during the remediation of the
    Environmental Conservation and Chemical Corporation and
    Northside Sanitary Landfill (ECC/NSL) in Zionsville,
    Indiana. As a potentially responsible party at ECC/ NSL,
    Jeffboat is responsible for 3.6% of the total volume of
    materials to be remediated at Third Site as well. Remediation
    activities are ongoing at Third Site, and, as of
    September 30, 2006, Jeffboat had contributed approximately
    $230,000 toward that remediation. No additional contributions
    are required or anticipated at this time.
    Barge Cleaning Facilities, Port Arthur,
    Texas.  American Commercial Barge Line LLC
    received notices from the U.S. EPA in 1999 and 2004 that it
    is a potentially responsible party at the State Marine of Port
    Arthur and the Palmer Barge Line Superfund Sites in Port Arthur,
    Texas with respect to approximately 50 barges that were cleaned
    by State Marine and approximately five barges that were cleaned
    by Palmer Barge Line for us in the early 1980s. The
    U.S. EPA has made no assessments with respect to these
    sites.
    Tiger Shipyard, Baton Rouge, Louisiana.  At the
    direction of the State of Louisiana, we have participated in a
    cleanup of a former barge cleaning operation at this site
    involving the cleaning of approximately seven barges and the
    disposal of barge wash water. As of September 30, 2006, we
    had incurred costs of approximately $6.7 million in
    connection with this site. The barge cleaning activities are
    complete.
    PHI/ Harahan Site, Harahan, Louisiana.  We have
    been contacted by the State of Louisiana in connection with the
    investigation and cleanup of diesel
    and/or jet
    fuel in soil at this site. We believe contamination may have
    been caused by a tenant on the property and have so notified the
    regulatory authorities. On March 22, 2005, we submitted an
    investigation work plan for approval by the State of Louisiana.
    We do not know what level of fuel may be discovered in this
    investigation or whether cleanup will be required. We have paid
    approximately $20,000 in consultant fees related to
    investigation at this site.  ITEM 1A.
    RISK
    FACTORS    RISKS
    RELATED TO OUR INDUSTRY
  Freight
    transportation rates for the Inland Waterways fluctuate from
    time to time and may decrease.
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An
    oversupply of barging capacity may lead to reductions in freight
    rates.
    Yields
    from North American and worldwide grain harvests could
    materially affect demand for our barging services.
    Diminishing
    demand for new barge construction may lead to a reduction in
    sales prices for new barges.
    Higher
    fuel prices, if not recouped from our customers, could
    dramatically increase operating expenses and adversely affect
    profitability.
    We are
    subject to adverse weather and river conditions.
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Seasonal
    fluctuations in industry demand could adversely affect our
    operating results, cash flow and working capital
    requirements.
    The
    aging infrastructure on the Inland Waterways may lead to
    increased costs and disruptions in our operations.
    The
    inland barge transportation industry is highly competitive;
    increased competition could adversely affect us.
    Global
    trade agreements, tariffs and subsidies could decrease the
    demand for imported and exported goods, adversely affecting the
    flow of import and export tonnage through the Port of New
    Orleans and the demand for barging services.
    Our
    failure to comply with domestic or international government
    regulations affecting the domestic or foreign barging
    industries, or changes in these regulations, may cause us to
    incur significant expenses or affect our ability to
    operate.
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and/or
    The
    Jones Act restricts foreign ownership of our stock, and the
    repeal, suspension or substantial amendment of the Jones Act
    could increase competition on the Inland Waterways and have a
    material adverse effect on our business.
    U.S.-citizen
  RISKS
    RELATED TO OUR BUSINESS
  Our
    aging fleet of dry cargo barges may lead to increased costs and
    disruptions in our operations.
    We may
    not be successful in our plans to upgrade our production lines
    in our shipyard and realize increased levels of
    efficiency.
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Our
    cash flows and borrowing facilities may not be adequate for our
    additional capital needs and, if we incur additional borrowings,
    our future cash flow and capital resources may not be sufficient
    for payments of interest and principal of our substantial
    indebtedness.
    There
    could be adverse consequences if the pending appeal of the
    confirmation of our Plan of Reorganization is
    successful.
  Trust A-4,
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As
    part of the Companys growth strategy, we may make
    selective acquisitions the integration and consolidation of
    which may disrupt operations and could negatively impact our
    business including our margins.
    The
    loss of one or more key customers, or material nonpayment or
    nonperformance by one or more of our key customers, would have a
    material adverse effect on our revenue and
    profitability.
    A
    major accident or casualty loss at any of our facilities could
    significantly reduce production.
    Our
    employees are covered by federal maritime laws that may subject
    us to job-related claims in addition to those provided by state
    laws.
    We
    have experienced significant work stoppages by union employees
    in the past, and future work stoppages may disrupt our services
    and adversely affect our operations.
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The
    loss of key personnel, including highly skilled and licensed
    vessel personnel, could adversely affect our
    business.
    Failure
    to comply with environmental, health and safety regulations
    could result in substantial penalties and changes to our
    operations.
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We are
    subject to, and may in the future be subject to, disputes, or
    legal or other proceedings that could involve significant
    expenditures by us.
    Investor
    confidence and the market price of our common stock may be
    adversely impacted if we are unable to comply with
    Section 404 of the Sarbanes-Oxley Act of
    2002.
  Form 10-K
  ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES   ITEM 4.  SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   53




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ITEM 6.
    EXHIBITS.  ExhibitNo.

Description3
.1

Second Amended and Restated Bylaws
    of American Commercial Lines Inc., dated July 27, 2006
    (Incorporated by reference to Exhibit 3.1 to the Current
    Report of American Commercial Lines Inc. on
    Form 8-K
    (File No. 000-51562) filed with the Securities and Exchange
    Commission on August 1, 2006).4
.1

First Supplemental Indenture,
    dated as of September 6, 2006 to the Indenture dated
    February 11, 2005, among American Commercial Lines LLC, ACL
    Finance Corp., the guarantors named therein and the Wilmington
    Trust Company, as Trustee (Incorporated by reference to
    Exhibit 4.1 to the Current Report of American Commercial
    Lines Inc. on
    Form 8-K
    (File No. 000-51562) filed with the Securities and Exchange
    Commission on September 11, 2006).10
.1

Amendment to Employment Agreement
    by and between American Commercial Lines Inc. and Jerry R.
    Linzey, effective as of August 1, 2006 (Incorporated by
    reference to Exhibit 10.1 to the Current Report of American
    Commercial Lines Inc. on
    Form 8-K
    (File No. 000-51562) filed with the Securities and Exchange
    Commission on August 11, 2006).31
.1

Certification by Mark R. Holden,
    Chief Executive Officer, required by
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934.31
.2

Certification by Christopher A.
    Black, Chief Financial Officer, required by
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934.32
.1

Certification by Mark R. Holden,
    Chief Executive Officer, pursuant to 18 U.S.C.
    Section 1350.32
.2

Certification by Christopher A.
    Black, Chief Financial Officer, pursuant to 18 U.S.C.
    Section 1350.  54




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SIGNATURES      By:
    /s/  Mark
    R. Holden      By:
    /s/  Christopher
    A. Black         55




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INDEX TO
    EXHIBITS
  ExhibitNo.

Description3
.1

Second Amended and Restated Bylaws
    of American Commercial Lines Inc., dated July 27, 2006
    (Incorporated by reference to Exhibit 3.1 to the Current
    Report of American Commercial Lines Inc. on
    Form 8-K
    (File No. 000-51562) filed with the Securities and Exchange
    Commission on August 1, 2006).4
.1

First Supplemental Indenture,
    dated as of September 6, 2006 to the Indenture dated
    February 11, 2005, among American Commercial Lines LLC, ACL
    Finance Corp., the guarantors named therein and the Wilmington
    Trust Company, as Trustee (Incorporated by reference to
    Exhibit 4.1 to the Current Report of American Commercial
    Lines Inc. on
    Form 8-K
    (File No. 000-51562) filed with the Securities and Exchange
    Commission on September 11, 2006).10
.1

Amendment to Employment Agreement
    by and between American Commercial Lines Inc. and Jerry R.
    Linzey, effective as of August 1, 2006 (Incorporated by
    reference to Exhibit 10.1 to the Current Report of American
    Commercial Lines Inc. on
    Form 8-K
    (File No. 000-51562) filed with the Securities and Exchange
    Commission on August 11, 2006).31
.1

Certification by Mark R. Holden,
    Chief Executive Officer, required by
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934.31
.2

Certification by Christopher A.
    Black, Chief Financial Officer, required by
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934.32
.1

Certification by Mark R. Holden,
    Chief Executive Officer, pursuant to 18 U.S.C.
    Section 1350.32
.2

Certification by Christopher A.
    Black, Chief Financial Officer, pursuant to 18 U.S.C.
    Section 1350.  56