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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   FORM 10-K
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934
 
                   FOR THE FISCAL YEAR ENDED MARCH 31, 1997
 
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
           FOR THE TRANSITION PERIOD FROM            TO
 
                        COMMISSION FILE NUMBER 33-6967
 
                           HALTER MARINE GROUP, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
              DELAWARE                                 75-2656828
   (STATE OR OTHER JURISDICTION OF          (IRS EMPLOYER IDENTIFICATION NO.)
   INCORPORATION OR ORGANIZATION)
 
 
                                                          39503
    13085 SEAWAY ROAD, GULFPORT,                       (ZIP CODE)
             MISSISSIPPI
   (ADDRESS OF PRINCIPAL EXECUTIVE
              OFFICES)
 
      Registrant's telephone number, including area code: (601) 896-0029
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<CAPTION>
                                                    NAME OF EACH EXCHANGE 
TITLE OF EACH CLASS                                  ON WHICH REGISTERED  
-------------------                                -----------------------
<S>                                                <C>                    
Common Stock, $.01 par value                       American Stock Exchange 
</TABLE>
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT
 
                                     None
 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 
                               Yes [X]   No [_]
 
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definite proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
 
  The aggregate market value of the Common Shares held by nonaffiliates of the
Registrant as of May 1, 1997 was approximately $332,100,000, based on the
closing price per share as reported by the American Stock Exchange.
 
  Common Shares outstanding as of May 1, 1997: 18,450,000.
 
  Portions of the Proxy Statement with respect to the 1997 annual Meeting of
Shareholders are incorporated by reference in Part III, Items 10, 11, 12 and
13 of this report.
 
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<PAGE>
 
                                    PART I
 
ITEMS 1 AND 2: BUSINESS
 
FORWARD LOOKING STATEMENTS
 
  See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Disclosure Regarding Forward Looking Statements" for a
discussion of forward looking statements contained in this report.
 
GENERAL
 
  Halter Marine Group, Inc. is a Delaware corporation incorporated on June 24,
1996 to serve as the parent of a new consolidated group that formerly
conducted the business of construction, repair and conversion of primarily
ocean-going vessels for the governmental and commercial markets for Trinity
Industries, Inc. ("Trinity"). On September 26, 1996, Halter Marine Group, Inc.
and subsidiaries (collectively, the "Company") completed an initial public
offering of 16.7% of its stock (18.7% after the underwriters exercised their
overallotment option). On March 31, 1997, Trinity distributed all of the
remaining stock of the Company to its stockholders.
 
  The Company is the seventh largest shipbuilder in the United States and the
largest U.S. builder of small to medium sized (from 50 to 400 feet) ocean-
going ships. The Company specializes in the construction, repair and
manufacturing of a wide variety of vessels for government, energy, commercial
and other markets. Its principal products include offshore support vessels,
offshore double hull tank barges, offshore tugs, harbor tugs, towboats, oil
spill recovery vessels, oceanographic research and survey ships, high speed
patrol boats, ferries and luxurious megayachts. The Company has built more
than 2,000 of these vessels in the past 40 years. At March 31, 1997, the
Company had eleven shipyards (including one that currently is idle), all of
which are strategically located along the Gulf Coast from Louisiana to
Florida.
 
  On April 4, 1997, the Company acquired a 51% interest in and obtained an
option to acquire the remaining 49% of Texas Drydock, Inc. (TDI), a leading
marine repair and manufacturing company for mobile offshore drilling units. On
May 16, 1997, the Company acquired the remaining 49% interest in TDI.
 
INDUSTRY OVERVIEW
 
  The U.S. shipbuilding industry has two distinct markets: (i) contracts with
domestic and foreign governments, principally the U.S. Navy, and (ii)
contracts with domestic and international commercial customers.
 
  Private U.S. shipbuilders generally fall into two categories: (i) the six
largest shipbuilders capable of building large scale vessels for the U.S. Navy
and (ii) other shipyards that build small to medium sized vessels for
governmental and commercial markets. Each of the six largest shipbuilders
builds substantially larger vessels than the Company. Included in the second
category are a number of shipbuilders, including the Company, that are capable
of building vessels up to 400 feet. This category also includes several
hundred companies engaged in shipbuilding and repair activities in the United
States, all of which management believes are smaller than the Company, having
one or two shipyards and specializing in the construction or repair of one or
a small number of types of vessels.
 
  In general, during the 1990's the U.S. shipbuilding industry has been
characterized by a substantial excess capacity because of the significant
decline in U.S. Navy shipbuilding spending and the difficulties experienced by
U.S. shipbuilders in competing successfully for international commercial
projects against foreign shipyards, many of which are heavily subsidized by
their governments. As a result of these factors, many shipyards closed or were
reduced in size. Competition among the remaining U.S. shipbuilders for
domestic commercial projects is intense.
 
<PAGE>
 
BUSINESS STRATEGY
 
  The Company's strategy has been to maintain its position as one of the most
cost-efficient shipyards in the United States, making it a low cost provider
of a wide variety of products to diversified markets. In recent years the
Company has included within its strategic objectives, a focus on increasing
its product offerings and facilities through internal expansion and asset
acquisitions or business combinations. The Company intends to consider, in the
future, business opportunities that it believes promote this business
strategy.
 
PRODUCTS AND MARKETS
 
  The Company specializes in the construction, repair, and conversion of a
wide variety of vessels for government, energy, commercial and other markets.
 
 A. Government
 
  The Company builds specialized vessels for the U.S. Navy, foreign nations,
and state and local governments. Its broad range of products for government
customers include oceanographic research and survey ships, high speed patrol
boats, tugs, landing craft, and passenger/vehicle ferries for local and ocean
operations.
 
  Fiscal 1997 revenue from the Company's government customers was $216
million, representing approximately 53% of total revenue. Revenue from
contracts with the U.S. Navy accounted for approximately 37.4% of revenue
during fiscal 1997. The continuation of any U.S. Navy shipbuilding program is
dependent upon the continuing availability of Congressional appropriations of
that program. With the end of the Cold War and the pressure of domestic budget
constraints, overall U.S. Navy spending for new vessel construction has
declined significantly since 1991.
 
  The Company's construction backlog of vessels for government customers was
$251 million, or 53% of total backlog, at March 31, 1997.
 
 B. Energy
 
  The Company's products sold to customers servicing the energy industry
include offshore supply vessels and large anchor handling tug/supply vessels
(collectively OSV's), tug boats and double hull ocean going fuel barges, and
the construction, conversion and repair of drilling rigs.
 
  Included in revenue for fiscal year 1997 was $86 million, or 21% of total
revenue, related to construction of marine products for customers in the
energy industry.
 
  At March 31, 1997, the Company had $156 million, or 33% of its total
backlog, from customers in the energy industry.
 
 C. Commercial
 
  Principal products constructed for commercial customers include harbor and
ocean going tugs, tow boats, non-energy related deckbarges and hopper barges.
Revenue from products constructed for these customers during fiscal 1997 were
$81 million, representing 20% of total revenue.
 
  Under the terms of a separation agreement with Trinity, the Company is
prohibited from building barges that compete with those built by Trinity,
except with the approval of Trinity. Such barges include inland hopper and
tank barges. The four year non-competition period begins on the date the
Company ceases to build such barges. As of this date, the Company is
continuing to build barges with the approval of Trinity. Revenue from
contracts for inland hopper barges and inland tank barges was approximately
$20 million, or 5% of total revenue in fiscal 1997.
 
  The Company's commercial backlog at March 31, 1997 was $49 million, or 10%
of total backlog.
 
                                       2
<PAGE>
 
 D. Other
 
  The Company's other products and services include the repair and conversion
of vessels, the construction of luxurious megayachts that the Company sells
under the name "Trinity Yachts" and associated marine products such as mud
tanks. Revenue from other products were approximately $24 million during
fiscal 1997, representing 6% of total contract revenue. The Company's backlog
of other products was approximately $22 million at March 31, 1997.
 
OPERATIONS
 
  The Company conducts its shipbuilding and repair and conversion operations
at ten active shipyards. The Company also owns a shipyard in Panama City,
Florida that was closed when it was acquired. The Panama City yard is not
currently operational but may be reopened, if justified by customer demand.
 
  The Company's shipyards employ advanced manufacturing techniques, including
modular construction methods, advanced welding techniques, panel line
fabrication, computerized plasma arc metal cutting and automated sandblasting
and painting. The Company's multiple shipyards, and large engineering team
provide the Company significant flexibility and efficiency in manufacturing a
wide variety of vessels. The Company believes that these factors, together
with its skilled and experienced work force, make the Company one of the most
versatile and cost-efficient shipbuilders in the United States.
 
  The Company's shipyards are well maintained facilities. The Company spent
$14.5 million on capital improvements for its existing facilities during
fiscal 1997, and has budgeted over $20 million for capital improvements
(excluding acquisitions) during fiscal 1998. Approximately $10 million of the
budgeted expenditures are being spent at the Company's Pascagoula facility in
order to accommodate the construction of mobile offshore drilling units, as
well as vessels, at the facility.
 
ENGINEERING
 
  The Company maintains a large marine engineering department, consisting of
approximately 150 employees, 30 of whom are engineers or naval architects. The
Company's engineering department has been instrumental in helping the Company
maintain its reputation as an innovative shipyard. On occasion, the Company
subcontracts to other engineering firms some of its engineering requirements.
 
MATERIALS AND SUPPLIES
 
  The principal materials used by the Company in its shipbuilding, conversion
and repair businesses are standard steel shapes, steel plate and paint. Other
materials used in large quantities include aluminum, steel pipe, electrical
cable and fittings. The Company also purchases component parts such as
propulsion systems, boilers, generators and other equipment. All these
materials and parts are currently available in adequate supply from domestic
and foreign sources. The Company's Equitable and Gulfport shipyards are
located on rail lines and typically obtain materials and supplies by rail,
truck or barge. The remainder of the Company's shipyards ordinarily obtain
materials and supplies by truck. The Company seeks to obtain favorable pricing
and payment terms for its purchases by coordinating purchases among all of its
shipyards and buying in large quantities. The Company has not engaged, and
does not presently intend to engage, in hedging transactions with respect to
its purchase requirements for materials. Management believes that the Company
will continue to be able to obtain steel at relatively favorable prices.
 
SALES AND MARKETING
 
  The Company's marketing efforts are geographically centralized at the
Company's headquarters in Gulfport, Mississippi, although some salesmen live
in other states. The Company's Gulfport Sales and Marketing
 
                                       3
<PAGE>
 
Department consists of a commercial section, which employs six persons, and an
international marketing section, which employs four persons. The Company also
has arrangements with certain sales agents in various foreign countries that
assist the Company with its international marketing efforts. The Company's
Government Projects Department includes 11 persons who engage in marketing and
sales activities.
 
COMPETITION
 
  The Company competes for domestic commercial shipbuilding contracts
principally with approximately 10 to 15 U.S. shipbuilders. The number and
identity of competitors on particular projects vary greatly, depending on the
type of vessel and size of project. The Company competes for foreign
commercial shipbuilding contracts principally with numerous shipyards in
several countries, many of whom are heavily subsidized by their governments.
Competition for both U.S. and foreign commercial contracts is intense.
 
CONTRACT STRUCTURE AND PRICING
 
  The Company's contracts for vessels generally are obtained through a
competitive bid process.
 
  Most of the contracts entered into by the Company, whether commercial or
governmental, are fixed-price contracts under which the Company retains all
cost savings on completed contracts but is also liable for the full amount of
all cost overruns. A limited number of the Company's contracts with the U.S.
Navy are fixed-price incentive contracts, which provide for sharing between
the government and the Company of cost savings and cost overruns based
primarily on a specified formula that compares the contract target cost with
actual cost. In addition, such fixed-price incentive contracts generally
provide for payment of escalation of costs based on published indices relating
to the shipbuilding industry. Although all cost savings are shared under
fixed-price incentive contracts, costs overruns in excess of a specified
amount must be borne entirely by the Company. Under government regulations,
certain costs, including certain financing costs, portions of research and
development costs and certain marketing expenses, are not allowable costs
under fixed-price incentive contracts. The Company's only current U.S. Navy
fixed-price incentive contracts relate to three oceanographic survey and
research ships. Two of these vessels have been delivered to and accepted by
the U.S. Navy and the remaining vessel is scheduled for delivery during the
first quarter of fiscal 1998.
 
  Contracts with the U.S. Navy are subject to termination by the government
either for its convenience or upon default by the Company. If the termination
is for the government's convenience, the contracts provide for payment upon
termination for items delivered to and accepted by the government, payment of
the Company's costs incurred plus the costs of settling and paying claims by
terminated subcontractors, other settlement expenses and a reasonable profit.
 
INSURANCE
 
  The Company maintains insurance against property damage caused by fire,
explosion and similar catastrophic events that may result in physical damage
or destruction to the Company's premises or properties. The Company also
maintains general liability and product liability insurance in amounts it
deems appropriate for its business.
 
  Some of the Company's contracts require a performance bond. The Company has
arranged a facility with a group of insurance companies to provide these bonds
when required.
 
EMPLOYEES
 
  As of March 31, 1997, the Company had 2,720 employees of which 633 were
salaried and 2,087 were employed on a hourly basis. None of the Company's
employees is represented by any collective bargaining unit.
 
REGULATION
 
 Environmental Regulation
 
  The Company is subject to extensive and changing Environmental Laws,
including laws and regulations that relate to air and water quality, impose
limitations on the discharge of pollutants into the environment and
 
                                       4
<PAGE>
 
establish standards for the treatment, storage and disposal of toxic and
hazardous wastes. Stringent fines and penalties may be imposed for non-
compliance with these Environmental Laws. Additionally, these laws require the
acquisition of permits or other governmental authorizations before undertaking
certain activities, limit or prohibit other activities because of protected
areas or species and impose substantial liabilities for pollution related to
Company operations or properties. The Company's operations are potentially
affected by the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"). CERCLA (also known as the
"Superfund" law) imposes liability (without regard to fault) on certain
categories of persons for particular costs related to releases of hazardous
substances at a facility into the environment which causes natural resource
damages. Because industrial operations have been conducted at some of the
Company's properties by the Company and previous owners and operators for many
years, various materials from these operations might have been disposed of at
such properties. This could result in obligations under Environmental Laws,
such as requirements to remediate environmental impacts. In addition, the
Company performs a tank cleaning and gas-freeing operation at its Gretna
facility that involves removal of residual fumes from vapor spaces in barges.
There are risks associated with the operation, including possible explosion
and emission of hazardous substances to the environment. The Company has taken
actions deemed by it to be appropriate to minimize these risks.
 
  The federal Resource Conservation and Recovery Act ("RCRA") and similar
state laws regulate the generation, treatment, storage, disposal, and other
handling of solid wastes, with the most stringent regulations applying to
solid wastes that are considered hazardous wastes. RCRA also may impose
stringent requirements on the closure, and the post-closure care, of
facilities where hazardous waste was treated, disposed of or stored. The
Company generates solid waste, including hazardous and non-hazardous waste, in
connection with its routine operations. Management believes that the Company's
wastes are handled properly under RCRA.
 
  Amendments to the federal Clean Air Act in 1990 resulted in numerous changes
which the Environmental Protection Agency and similar state agencies fully
implemented by regulations. The Company does not expect these Clean Air Act
amendments to result in material expenses at its properties, but the amount of
increased expenses, if any, resulting from such amendments is not presently
determinable.
 
 Health and Safety Matters
 
  The Company's facilities and operations are governed by laws and
regulations, including the federal Occupational Safety and Health Act,
relating to worker health and workplace safety. The Company believes that
appropriate precautions are taken to protect employees and others from
workplace injuries and harmful exposure to materials handled and managed at
its facilities.
 
 Jones Act
 
  The Jones Act requires that all vessels transporting products between U.S.
ports must be constructed in U.S. shipyards, owned and crewed by U.S. citizens
and registered under U.S. law, thereby eliminating competition from foreign
shipbuilders with respect to vessels to be constructed for the U.S. coastwise
trade. Many customers elect to have vessels constructed at U.S. shipyards,
even if such vessels are intended for international use, in order to maintain
flexibility to use such vessels in the U.S. coastwise trade in the future.
Last year a legislative bill seeking to substantially modify the provisions of
the Jones Act mandating the use of ships constructed in the United States for
U.S. coastwise trade was introduced in Congress, however it did not pass.
Similar bills seeking to rescind or substantially modify the Jones Act and
eliminate or adversely affect the competitive advantages it affords to U.S.
shipbuilders have been introduced in Congress from time to time and are
expected to be introduced in the future. Any recission or material
modification of the Jones Act could adversely affect the Company's future
prospects because many foreign shipyards with which the Company competes are
heavily subsidized by their governments.
 
 OPA '90
 
  Demand for double hull carriers has been created by OPA '90, which generally
requires U.S. and foreign vessels carrying fuel and certain other hazardous
cargos and entering U.S. ports to have double hulls by 2015.
 
                                       5
<PAGE>
 
OPA '90 established a phase-out schedule that began January 1, 1995 for all
existing single hull vessels based on the vessel's age and gross tonnage. The
Company estimates that OPA '90 will require 66 barges engaged in domestic
trade to be retrofitted or replaced by 2005 and another 22 such barges to be
retrofitted or replaced by 2010.
 
 Title XI Loan Guarantee Amendments and OECD
 
  In late 1993, Congress amended the loan guarantee program under Title XI of
the Merchant Marine Act of 1936 ("MARAD"), to permit MARAD to guarantee loan
obligations of foreign vessel owners who construct new vessels in the United
States. As a result of these amendments, MARAD was authorized to guarantee
loan obligations of foreign owners for foreign-flagged vessels that are built
in U.S. shipyards on terms generally more advantageous than available under
guarantee or subsidy programs of foreign countries. Under the OECD Accord,
which was negotiated in December 1994, among the United States, the European
Union, Finland, Japan, Korea, Norway and Sweden (which collectively control
over 75% of the market share for worldwide vessel construction), the Title XI
guarantee program will be required to be amended, once the OECD Accord is
ratified by the United States, to eliminate the competitive advantages
provided by the 1993 amendments to Title XI. In December 1995, a subcommittee
of the Ways and Means Committee of the U.S. House of Representatives passed a
bill providing for the implementation of the OECD Accord and elimination of
the competitive advantages provided by the 1993 amendments to Title XI. To
date, such bill has not been approved by either the U.S. House of
Representatives or the U.S. Senate. If the OECD Accord is ratified by the U.S.
and Japan (the only remaining parties to the OECD Accord that have not yet
ratified the OECD Accord), the OECD Accord would virtually eliminate all
direct and indirect governmental shipbuilding subsidies by the party nations.
Despite the fact that the OECD Accord will require the elimination of the
competitive advantages provided to U.S. shipbuilders by the 1993 amendments to
Title XI, management believes that the OECD Accord should significantly
improve the ability of U.S. shipbuilders to compete successfully for
international commercial contracts with foreign shipbuilders, many of which
currently are heavily subsidized by their governments. Some of the
governmental subsidies to foreign shipbuilders currently range as high as 25%
of the vessel construction cost.
 
PROPERTIES
 
 Equitable New Orleans Shipyard and Trinity Yachts Shipyard
 
  The Equitable shipyard is located on the Industrial Canal in New Orleans,
Louisiana. The yard has the capacity to build vessels up to the following
dimensions: 350 foot length; 90 foot beam; 25 foot water depth; and 110 foot
height. The shipyard has over 225,000 square feet of under-cover production
facilities which include a fabrication shop, a yacht fabricating building,
mold loft, pipe shop, carpentry shop, electrical shop and a machine shop. The
facility has two crawler cranes, one barge mounted crane and 12 track mounted
overhead cranes. The shipyard is served by direct rail access. The Company
occupies the shipyard under a lease that expires on December 31, 2016.
Generally, either party may terminate the lease upon one year's advance
notice. The Company's Trinity Yachts shipyard is a segregated portion of the
Equitable New Orleans shipyard.
 
 Gretna Machine & Iron Works Shipyard
 
  The Gretna shipyard is located in Harvey, Louisiana. The yard has the
capacity to build vessels up to the following dimensions: 600 foot length; 95
foot beam; 5.5 foot water depth; and 70 foot height. The shipyard contains
over 15,500 square feet of under-cover production facilities which include a
fabrication shop, mold loft, carpentry shop and electrical shop. The facility
has two graving docks, one with a length of 700 feet and the other with a
length of 300 feet, and has three crawler cranes, two track mounted gantry
cranes and two tower cranes. The Company occupies the shipyard pursuant to two
leases, which are renewable by the Company until 2026.
 
 Halter Moss Point Shipyard
 
  The Halter Moss Point shipyard is located in Moss Point, Mississippi. The
yard has the capacity to build vessels up to the following dimensions: 400
foot length; 85 foot beam; 18 foot water depth; and 85 foot height.
 
                                       6
<PAGE>
 
The facility consists of approximately 58 acres of property with 61,500 square
feet of shops, offices and warehouses and 60,165 square feet of outside
concrete construction platforms. The facility has six crawler cranes and six
track mounted gantry cranes.
 
 Lockport Shipyard
 
  The Lockport shipyard is located in Lockport, Louisiana. The yard has the
capacity to build vessels up to the following dimensions: 310 foot length; 80
foot beam; 10 foot water depth; and 68 foot height. The facility contains over
35,000 square feet of under-cover production facilities which include a
fabrication shop, mold loft, pipe shop, carpentry shop, electrical shop and a
machine shop and has 46,000 square feet of outside concrete construction
platforms and a 16,000 square foot warehouse. The yard has four crawler cranes
and six track mounted gantry cranes.
 
 Moss Point Marine Shipyard
 
  The Moss Point Marine shipyard is located in Escatawpa, Mississippi. The
yard has the capacity to build vessels up to the following dimensions: 420
foot length; 85 foot beam; 14 foot water depth; and 44 foot height. The yard
contains over 35,000 square feet of under-cover production facilities which
include a fabrication shop, mold loft, carpentry shop, electrical shop and
warehouse, and has 40,000 square feet of outside construction platforms. The
yard has four crawler cranes and nine track mounted gantry cranes.
 
 Gulfport Shipyard
 
  The Gulfport shipyard is located in Gulfport, Mississippi. The yard has the
capacity to build vessels up to the following dimensions: 360 foot length; 80
foot beam; 12 foot water depth; and 90 foot height. The facility consists of
113 acres on Bernard Bayou Industrial Park and includes an environmentally
controlled 38,000 square foot sandblasting and painting facility and 400,000
square feet of under-cover production facilities. The yard has 116,500 square
feet of outside concrete erection ways, two crawler cranes, 15 track mounted
overhead cranes, two track mounted gantry cranes and two tower cranes. The
shipyard is served by direct rail access.
 
 Panama City Shipyard
 
  The Panama City shipyard is located in Panama City, Florida. The yard
contains over 35,000 square feet of under-cover production facilities which
include a fabrication shop, mold loft, carpentry shop, electrical shop and
warehouse. The yard has the capacity to build vessels up to the following
dimensions: 420 foot length; 75 foot beam; 14 foot water depth; and 44 foot
height. The facility has not been operational since its acquisition by the
Company in 1992.
 
 Gulf Coast Fabrication Shipyard
 
  The Gulf Coast Fabrication shipyard is located in Pearlington, Mississippi.
The facility contains over 15,000 square feet of under-cover production
facilities which include a shear, mechanical press, electrical shop and
warehouse. The facility has a 460 foot graving dock. The yard has the capacity
to build vessels up to the following dimensions: 460 foot length; 140 foot
beam; 12 foot water depth; and unlimited height. The yard has two crawler
cranes, two track mounted gantry cranes and one tower crane.
 
 Gulf Repair Shipyard
 
  The Gulf Repair shipyard is located on the Industrial Canal across from the
Company's Equitable New Orleans shipyard. The facility contains 72,000 square
feet of under-cover production facilities which include a fabrication shop,
pipe shop, carpentry shop, electrical shop and a machine shop. The facility
has a 586 foot dry dock with 20,000 ton capacity, a 200 foot dry dock with
3,750 ton capacity, a 285 foot drydock with 3,700 ton capacity, a 162 foot
drydock with 1,500 ton capacity, and a 240 foot drydock with 5,000 ton
capacity. The yard
 
                                       7
<PAGE>
 
has the capacity to build vessels up to the following dimensions: 325 foot
length; 120 foot beam; 21 foot water depth; and 137 foot height. The yard has
one crawler crane, seven track mounted gantry cranes and two barge mounted
cranes. The Company occupies the shipyard pursuant to a lease that expires on
December 31, 2016.
 
 Pascagoula Shipyard
 
  The Pascagoula shipyard was acquired by the Company in 1995 and is located
in Pascagoula, Mississippi. The yard consists of approximately 88 acres of
property and has the capacity to build vessels up to the following dimensions:
800 foot length; 115 foot beam; 20 foot water depth; and unlimited height. The
yard has over 42,000 square feet of under-cover production facilities which
include a fabrication shop, paint shop, maintenance shop, and warehouse. The
yard has a 900 foot slip for wet dock work and a 300 ton shore mounted crane.
The yard has three crawler cranes and two track mounted gantry cranes. A major
expansion is underway at the Pascagoula yard, which will significantly
increase its production capacity.
 Corporate Headquarters
 
  The Company's corporate headquarters are located at the same site as the
Company's Gulfport shipyard. The headquarters occupy approximately 39,660
square feet of such site. The Company's engineering headquarters are located
one-half mile from the corporate headquarters and contains approximately
33,600 square feet of offices and a separate secure office for classified
work.
 
ITEM 3: LEGAL PROCEEDINGS
 
  The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse effect on the Company's business,
financial condition, results of operations or liquidity.
 
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
 
ITEM 4A: EXECUTIVE OFFICERS OF THE REGISTRANT
 
 Executive Officers of the Company
 
  The executive officers of the company are as follows:
 
<TABLE>
<CAPTION>
                 NAME                 AGE                POSITION
                 ----                 ---                --------
 <C>                                  <C> <S>
 John Dane III.......................  46 Chairman, President and Chief
                                          Executive Officer since September,
                                          1996. President of the Company since
                                          1987. Employed 1987.
 Rick S. Rees........................  44 Director since September, 1996.
                                          Executive Vice President since April,
                                          1997. President, Maritime Holdings,
                                          Inc. from September, 1996 to April,
                                          1997. President Maritime Capital
                                          Corporation, 1989 to 1996. Employed
                                          1997.
 Vincent R. Almerico.................  56 Senior Vice President, Overseas
                                          Operations since April, 1997. Senior
                                          Vice President since 1992. Employed
                                          1987.
 Wayne J. Bourgeois..................  42 Senior Vice President, Operations
                                          since August, 1996. Vice President
                                          from 1994 to August, 1996. Employed
                                          1977.
</TABLE>
 
 
                                       8
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<TABLE>
<CAPTION>
                 NAME                 AGE                POSITION
                 ----                 ---                --------
 <C>                                  <C> <S>
 Richard T. McCreary.................  41 Senior Vice President, Administration
                                          since April, 1997. From April 1995 to
                                          1997, President Gulf Division,
                                          Maritrans Operating Partners. From
                                          1990 to 1995 Vice President
                                          Operations, Canal Barge Company, Inc.
                                          Employed 1997.
 Sidney C. Mizell....................  54 Senior Vice President, Sales and
                                          Marketing since August, 1996. Vice
                                          President, Sales and Marketing, 1988-
                                          1996. Employed 1988.
 Anil Raj............................  46 Senior Vice President, Government
                                          Projects since August, 1996. Vice
                                          President, Government Projects from
                                          1994 to 1996. Employed 1987.
 Harvey B. Walpert...................  64 Senior Vice President, Corporate
                                          Affairs since August, 1996. Senior
                                          Vice President, Administration from
                                          1992-1996. Employed 1978.
 Keith L. Voigts.....................  53 Senior Vice President, Finance since
                                          April, 1997. Vice President, Finance
                                          1995-1996. Chief Financial Officer,
                                          Healthcare Communications, Inc. 1994-
                                          1995. From 1991 to 1994 owner of KLV
                                          Group, an accounting, consulting and
                                          investments firm. Employed 1995.
 J. J. French, Jr....................  66 Secretary since 1996. President of
                                          Joe French & Associates, a
                                          Professional Corporation, attorneys,
                                          since 1993. For at least five years
                                          prior thereto, employed by Locke
                                          Purnell Rain Harrell, a Professional
                                          Corporation, attorneys.
</TABLE>
 
There are no family relationships between the officers of the Company. The
Company's officers are elected annually by the Board of Directors and serve
for one-year terms or until their successors are elected.
 
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
 
  The approximate number of holders of the Company's common stock as of a
recent date is incorporated herein by reference from "Voting Securities and
Stockholders" in the definitive proxy statement for the Company's 1997 Annual
Meeting of Stockholders. The following table sets forth the high and low
closing sales price of the Company's common stock as reported on the American
Stock Exchange Composite Tape. The first day of trading for the Company's
stock was September 26, 1996.
 
Fiscal Year 1997
 
<TABLE>
<CAPTION>
               QUARTER                        HIGH                        LOW
               -------                       ------                      ------
               <S>                           <C>                         <C>
               Second                        $12.25                      $11.75
               Third                          15.00                       11.50
               Fourth                         18.00                       13.50
</TABLE>
 
  The Company has paid no dividends.
 
                                       9
<PAGE>
 
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
 
  The following table sets forth selected consolidated financial data for the
Company as of the dates and for the periods indicated. The selected
consolidated balance sheet data as of March 31, 1997, 1996 and 1995 and
consolidated income statement data for the fiscal years ended March 31, 1997,
1996, 1995 and 1994 have been derived from the audited consolidated financial
statements of the Company and the selected consolidated balance sheet data as
of March 31, 1994 and 1993 and consolidated income statement data for the
fiscal year ended March 31, 1993 have been derived from unaudited financial
information of the Company but in the opinion of management includes all
adjustments necessary for a fair presentation of the financial information.
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and
related notes included elsewhere in this report.
 
<TABLE>
<CAPTION>
                                            YEAR ENDED MARCH 31,
                                  --------------------------------------------
                                    1997     1996     1995     1994     1993
                                  --------  -------  -------  -------  -------
                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>       <C>      <C>      <C>      <C>
INCOME STATEMENT DATA:
Contract revenue earned.......... $406,797  254,294  250,586  275,310  304,385
Cost of revenue earned...........  355,209  214,559  207,398  228,833  259,819
                                  --------  -------  -------  -------  -------
Gross profit.....................   51,588   39,735   43,188   46,477   45,566
Selling, general and
 administrative expenses.........   21,361   15,911   13,471   12,874   12,363
                                  --------  -------  -------  -------  -------
Operating income.................   30,227   23,824   29,717   33,603   32,203
Interest expense.................    3,232    3,268    3,844    1,902    1,937
Other, net.......................       (8)     (11)      (5)     (33)     (24)
                                  --------  -------  -------  -------  -------
Income before income taxes.......   27,003   20,567   25,878   31,734   30,290
Provision for income taxes.......   10,887    8,102   10,170   12,227   10,704
                                  --------  -------  -------  -------  -------
Net income....................... $ 16,116   12,465   15,708   19,507   19,586
                                  ========  =======  =======  =======  =======
Net income per share (pro forma
 for 1996) (1)................... $   0.88     0.70
NET CASH PROVIDED (REQUIRED) BY:
Operating activities............. $ 12,488   23,742   14,803  (28,175)  51,841
Investing activities............. $(14,491) (15,687) (10,443)  (3,440)  (8,546)
Financing activities............. $  8,410   (7,907)  (4,057)  31,300  (43,292)
OTHER DATA:
EBITDA (2)....................... $ 38,134   30,579   35,136   38,266   36,762
Depreciation and amortization.... $  7,899    6,744    5,414    4,630    4,535
Capital expenditures (3)......... $ 14,491    5,568    6,337    3,529    5,064
<CAPTION>
                                                 MARCH 31,
                                  --------------------------------------------
                                    1997     1996     1995     1994     1993
                                  --------  -------  -------  -------  -------
                                               (IN THOUSANDS)
<S>                               <C>       <C>      <C>      <C>      <C>
BALANCE SHEET DATA:
Working capital.................. $ 85,534   36,601   40,855   31,296    8,972
Total assets..................... $209,411  141,374  124,271  120,784   94,056
Long-term debt (4)............... $ 52,000   25,000   25,000   25,000   25,000
Total equity..................... $ 93,301   66,743   54,278   38,570   19,063
BACKLOG DATA..................... $478,803  431,292  244,229  256,965  293,770
</TABLE>
--------
(1) Shares outstanding for 1996 have been assumed to be 18,000,000 (the total
    number of shares issued to Trinity and the public as a result of the
    initial public offering, exclusive of the underwriters' overallotment
    option of 450,000 shares) for purposes of calculating pro forma net income
    per share.
(2) EBITDA (earnings before interest, taxes, depreciation and amortization
    expense) is presented here not as a measure of operating results, but
    rather as a measure of the Company's operating performance and ability to
    service debt. EBITDA should not be construed as an alternative to
    operating income (determined in accordance with GAAP) as an indicator of
    the Company's operating performance or as an alternative to cash flows
    from operating activities (determined in accordance with GAAP) as a
    measure of liquidity. EBITDA measures presented herein may not be
    comparable to similarly titled measures of other companies.
(3) Excludes payments for business acquisitions.
(4) Prior to March 31, 1997, long-term debt represented intercompany notes due
    to Trinity.
 
                                      10
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS
 
GENERAL
 
  The Company is the seventh largest shipbuilder, and the largest builder of
small to medium sized ocean-going ships and barges and inland tow boats, in
the United States. The Company, which has built more than 2,000 vessels in the
past 40 years, specializes in the construction, repair and conversion of a
wide variety of vessels for the government, energy, commercial and other
markets. The Company's principal products include offshore support vessels,
offshore double hull tank barges, large offshore tug boats and oil spill
recovery vessels for commercial use and oceanographic survey and research
ships, high speed patrols boats and ferries for government use. At March 31,
1997, the Company had eleven shipyards (including one that currently is idle),
which are strategically located along the Gulf Coast from Louisiana to
Florida. On April 4, 1997, the Company acquired a 51% interest in Texas
Drydock, Inc. ("TDI") and on May 16, 1997 acquired the remaining 49% interest.
TDI is a leading marine repair and manufacturing company for mobile offshore
drilling and workover units.
 
  As of March 31, 1997, the Company had firm contracts with an aggregate
remaining value of approximately $479 million (excluding unexercised options
held by customers), covering a total of 174 vessels (including 105 inland
hopper barges). Of this contract value, approximately $251 million was
attributable to contracts to build ships for the Company's government
customers, including the U.S. Navy, foreign governments and state and local
governments. The Company anticipates that approximately $416 million of the
aggregate remaining value of the firm contracts as of March 31, 1997 will be
filled during fiscal 1998.
 
  The shipbuilding industry is a highly competitive industry. In general,
during the 1990's, the U.S. shipbuilding industry has been characterized by
substantial excess capacity, resulting in substantial pressure on pricing and
profit margins.
 
  Revenue derived from the construction of U.S. Navy vessels accounted for
approximately 37.4%, 47.3% and 38.8% of the Company's revenue in fiscal 1997,
1996 and 1995, respectively. There can be no assurance that the Company will
be successful in obtaining new U.S. Navy contracts, all of which are
competitively bid. The U.S. Navy has options for vessels with a total
potential contract value of $118 million. There is no assurance that the U.S.
Navy will exercise any or all of its options. Overall U.S. Navy spending for
new vessel construction has declined significantly since 1991. Although the
Company believes that the small to medium sized U.S. Navy vessels for which it
competes are less likely to be cut back and, in some cases, do not require
specific Congressional appropriations, the Company generally expects revenue
and gross profit attributable to its current and any future U.S. Navy
contracts to decline over the next several years. Such decreases, if not
offset by increased revenue and profit from contracts with other customers,
could have a material adverse effect on the Company's business, financial
condition, results of operations and liquidity.
 
  All of the Company's commercial contracts and a substantial majority of its
government contracts to build ships are currently performed on a fixed-price
basis. The Company attempts to cover anticipated increased costs of labor and
materials through an estimation of such costs, which is reflected in the
original contract price. Despite these attempts, however, the revenue, costs
and gross profit realized on a fixed-price contract may vary from the
estimated amounts because of changes in job conditions and in labor and plant
productivity over the contract term or other unanticipated changes. As a
result, the Company may experience reduced profitability or losses on
projects; however, historically cost overruns on fixed price contracts have
not been a significant problem for the Company.
 
  The Company uses the percentage of completion method to account for its
contracts in process. Under this method, revenues from construction contracts
are measured by the percentage of labor hours incurred as compared to
estimated total labor hours for each contract. The timing of recognition of
revenues and expenses for financial reporting purposes may differ materially
from the timing of actual cash flows from contract payments received and
expenses paid. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined.
 
 
                                      11
<PAGE>
 
  The Company believes it is well positioned to take advantage of the expected
upturn in the market for new offshore support vessels. The Company expects
that substantial orders for new offshore support vessels may be made in the
next several years due to the demand for larger vessels to support deep water
oil and gas exploration and production activities, as well as the substantial
worldwide fleet attrition over the past ten years and the aging of the
remaining fleet. The Company currently has fourteen offshore support vessels
under contract, of which twelve contracts have been entered into since July 1,
1996. The Company also has outstanding options for eight additional vessels,
and is bidding on a number of potential orders for such vessels. The timing of
the expected upturn in the offshore support market will depend principally
upon conditions in the offshore oil and gas industry, particularly an increase
in drilling activity and dayrates for offshore support vessels, which in turn
depend upon oil and gas prices and demand. No assurances can be given
regarding the timing or magnitude of an upturn in the market for offshore
support vessels.
 
  The Company also expects to capitalize on the anticipated increase in
offshore tank barge construction and conversion resulting from OPA '90 and the
aging of the worldwide fleet. The Company currently has three offshore double
hull tank barges under construction. In addition, the Company is bidding on a
number of other barge construction projects.
 
  Pursuant to the provisions of a separation agreement with Trinity, the
Company will be prohibited, for four years plus an additional period under
certain circumstances after the separation from Trinity, from engaging in
Trinity businesses, which include the construction of inland hopper barges and
inland tank barges. Under special arrangements with Trinity, the Company has
built a limited number of such vessels. Revenue related to this business were
$19.9 million, $26.2 million and $13.3 million for fiscal years 1997, 1996 and
1995, respectively. The Company's gross profit (loss) from such activities was
$2.2 million, $3.1 million and ($0.9) million for fiscal years 1997, 1996 and
1995, respectively. The Company's management does not believe that the
restrictions imposed pursuant to the Separation Agreement will have a material
adverse effect on the Company's business, financial condition, results of
operations or liquidity.
 
  Shipyards in certain portions of southern Louisiana, including the Company's
Lockport yard, are experiencing severe shortages of skilled shipyard labor.
This labor shortage has resulted in increased costs of labor at this shipyard
and may in the future limit the Company's ability to expand operations at such
shipyard. The areas in which the Company's other shipyards are located are not
currently experiencing any such labor shortages, although no assurances can be
given regarding whether shortages will be experienced at other shipyards in
the future.
 
  The principal materials used by the Company in its shipbuilding, conversion
and repair businesses are standard steel shapes, steel plate and paint. Other
materials used in large quantities include aluminum, steel pipe, electrical
cable and fittings. The Company has not engaged, and does not presently intend
to engage, in hedging transactions with respect to its purchase requirements
for materials.
 
  The Company's selling, general and administrative costs have increased after
the separation from Trinity because of new and additional costs the Company
has incurred as a result of becoming a stand-alone enterprise and because of
its significant revenue growth. However, as a result of increased revenue,
these expenses were 5.3% of revenue as compared to 6.3% of revenue in fiscal
1996.
 
  All statements (other than statements of historical fact) contained in the
Company's Annual Report, including the President's Letter to Stockholders, and
in this Form 10-K, including statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" concerning the
Company's financial position and liquidity, results of operations, prospects
for U.S. Navy contracts, ability to take advantage of new vessel construction
and conversion opportunities, labor supply and costs, selling, general and
administrative costs and other matters, are forward looking statements.
Forward-looking statements in this document generally are accompanied by words
such as "anticipate," "believe," "estimate" or "expect" or similar statements.
Although the Company believes that the expectations reflected in such forward
looking statements are reasonable, no assurance can be given that such
expectations will prove correct. Factors that could
 
                                      12
<PAGE>
 
cause the Company's results to differ materially from the results discussed in
such forward looking statements include risks such as lack of independent
operating history, dependence on U.S. Navy contracts, potential conflicts of
interest with Trinity after the Separation, intense competition and
contractual, labor, regulatory and other risks in the shipbuilding industry
and risks relating to the market for offshore support vessels and offshore
double hull tank barges. All forward looking statements in this document are
expressly qualified in their entirety by the cautionary statements in this
paragraph.
 
RESULTS OF OPERATIONS
 
  The following table sets forth certain statement of income information as a
percentage of the Company's revenue for the periods indicated:
 
<TABLE>
<CAPTION>
                                                YEAR ENDED MARCH 31,
                                    --------------------------------------------
                                         1997           1996           1995
                                    -------------- -------------- --------------
                                    AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
                                    ------ ------- ------ ------- ------ -------
                                               (DOLLARS IN MILLIONS)
<S>                                 <C>    <C>     <C>    <C>     <C>    <C>
Contract revenue earned:
  Government (1)................... $215.8  53.1%  $135.7  53.4%  $150.1  59.9%
  Energy (2).......................   86.0  21.1     54.4  21.4     53.1  21.2
  Other commercial (3).............   81.4  20.0     49.4  19.4     16.2   6.4
  Other (4)........................   23.5   5.8     14.8   5.8     31.3  12.5
</TABLE>
--------
(1) Consists of revenue from the Company's government customers, including the
    U.S. Navy, state and local governments and foreign governments.
(2) Consists of revenue from the construction or conversion of vessels for
    customers in energy related businesses. Vessels include offshore support
    vessels, offshore double-hull barges and tank barges.
(3) Consists of revenue from the Company's commercial customers and include
    vessels such as tugboats, hopper barges, inland tow boats and other
    vessels.
(4) Consists of revenue from customers for the construction of yachts, vessel
    repairs and assorted marine products.
 
 Fiscal 1997 Compared with Fiscal 1996
 
  Contract revenue increased 60.0% to $406.8 million in the fiscal year ended
March 31, 1997 compared with $254.3 million in the fiscal year ended March 31,
1996. An increase in revenue from all customer groups was experienced.
Specifically, government revenue increased by $80.1 million or 59.0%; energy
revenue increased by $31.6 million or 58.1%; commercial revenue increased by
$32.0 million or 64.8%; and other revenue increased by $8.7 million or 58.8%.
Major new government contracts included a large ferry for a state government
and a US Navy oceanographic research vessel. The increase in energy revenue
was principally a result of increased construction of offshore support
vessels. The increase in other commercial revenue occurred in part from the
construction of five casino barges. The increase in other revenue was a result
of a $9.2 million increase in revenue from yacht construction as well as
increased repair and conversion business.
 
  The gross profit margin decreased to 12.7% in fiscal 1997 compared to 15.6%
in fiscal 1996. This decrease is attributable, in part, to the favorable
margin received on a major contract in fiscal 1996. The Company did not
replace that contract with a similarly performing contract in 1997. Further,
fiscal 1997 gross profit was favorably impacted by a reduction in the workers
compensation reserve. This benefit was substantially offset by specific
writedowns in work in process inventory. In addition, in fiscal 1997,
contracts with energy customers had lower than normal margins reflecting the
Company's efforts to regain entry into a previously dormant market. It is
expected that the lower than normal margins earned on some offshore support
vessels will continue into fiscal 1998.
 
                                      13
<PAGE>
 
  Selling, general and administrative expenses increased to $21.4 million in
fiscal 1997, an increase of $5.5 million over fiscal 1996. These expenses
amounted to 5.3% of revenue in fiscal 1997 compared to 6.3% of revenue in
fiscal 1996. The increase in dollar costs can be attributed to the general
overall growth of the Company and the new and additional costs the Company
incurred as a result of becoming a stand alone enterprise. Specifically,
salaries and employee benefit costs increased by $2.6 million, primarily as a
result of increased personnel, and research and development costs increased by
$1.2 million resulting from lower billings to the U.S. Government for such
costs as compared to fiscal 1996.
 
  The Company's construction backlog increased 11% to $478.8 million at March
31, 1997 compared to $431.3 million at March 31, 1996. Energy related backlog
increased by $108.6 million and other backlog increased by $9.0 million. The
increase in energy backlog is attributable to new contracts to build offshore
support vessels. The increase in other backlog was attributable to new
contracts to build megayachts. The above increases were offset by a decrease
in government related backlog of $59 million and commercial related backlog of
$11.2 million. The decrease in government backlog was primarily due to revenue
recognition during fiscal 1997 on a U.S. Navy contract to build two barracks
barges and the State of Alaska contract to build a 383 foot ferry. The
decrease in commercial backlog is due primarily to completion of large coal
barge in fiscal 1997.
 
 Fiscal 1996 Compared with Fiscal 1995
 
  Contract revenue earned increased 1.5% to $254.3 million in the fiscal year
ended March 31, 1996 compared with $250.6 million in the fiscal year ended
March 31, 1995. Commercial revenue increased by $33.2 million. The increase
was primarily due to the inclusion of results of the Gulf Coast Fabrication
shipyard for a full year in fiscal 1996 compared to five months in fiscal 1995
and new contracts for tug boats. Energy related revenue increased by $1.4
million due primarily to increased tank barge production. These increases were
offset by decreases in other revenue ($16.5 million) and governmental revenue
($14.4 million). These decreases were attributable to the completion of casino
vessel contracts and patrol vessel contracts for the Philippine government.
 
  Gross profit margin declined in fiscal 1996 to 15.6% of contract revenue
earned compared to 17.2% in fiscal 1995. The decrease in the gross profit
margin principally resulted from (i) the substantial completion in fiscal 1995
of certain contracts for the construction of large U.S. Navy vessels under
which the Company achieved higher than anticipated profitability that was
recognized in later stages of the contracts, (ii) wage increases at the
Lockport shipyard and (iii) reduced margins resulting from the re-entry of
certain Company shipyards into the general commercial market following the
completion of casino vessel construction contracts.
 
  Selling, general and administrative expenses increased 18.1% to $15.9
million during fiscal 1996 from $13.5 million in fiscal 1995. Such increase
resulted principally from the addition of new employees, normal salary
increases for existing employees and increased selling efforts relating to
foreign shipbuilding contracts.
 
  Interest expense decreased 15.0% to $3.3 million during fiscal 1996 from
$3.8 million during fiscal 1995 due to lower levels of intercompany
borrowings. Historically, Trinity charged the Company interest on outstanding
intercompany balances at market rates based on Trinity's borrowing costs.
 
  Taxes decreased approximately 20.3% to $8.1 million in fiscal 1996 from
$10.2 million in fiscal 1995. See Note 10 of Notes to Consolidated Financial
Statements.
 
  Total backlog increased 76.6% to $431.1 million at March 31, 1996 compared
to $244.2 million at March 31, 1995. Government backlog increased by $137.4
million, commercial backlog increased by $36.1 million, other backlog
increased by $13.0 million and energy related backlog increased minimally by
$0.6 million.
 
  The increase in governmental backlog was attributable to contracts awarded
in fiscal 1996 for the construction of a 383 foot ferry for the State of
Alaska, the construction of two barracks barges for the U.S. Navy, and the
construction of a large ocean surveillance vessel for the U.S. Navy. The
increase in commercial backlog was primarily due to new contracts awarded the
Company to build tugs, hopper barges and other barges. The increase in other
backlog was attributable to new contracts awarded to build megayachts.
 
                                      14
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES
 
  The Company's principal needs for capital are the funding of ongoing
shipbuilding operations, capital expenditures and acquisitions. The Company's
principal sources of liquidity during fiscal 1997 were cash provided by
operating activities, borrowings from a revolving line of credit and a sale of
stock to the public. Cash flows during 1997 from these sources were $12
million from operating activities, $52 million from financial institutional
borrowings, and $35 million from an initial public offering. These sources
were used primarily to pay taxes and intercompany loans of $79 million in the
aggregate to Trinity.
 
  In September 1996, the Company entered into a long term financial
arrangement with a group of banks ("Credit Facility") which provides a $135
million revolving line of credit for general corporate purposes and working
capital. All amounts outstanding under the Credit Facility will become payable
on September 30, 1999. Of the total amount available, $10 million is set aside
for use as a letter of credit in conjunction with the Company's captive
insurance subsidiary with all other letters of credit issued being limited to
$50 million. The interest rate is 0.625% to 1.25% over the London Interbank
Offering Rate ("LIBOR"), or the base rate (as defined), depending on the
Company's choice. The range of rates over LIBOR is set quarterly, depending on
the ratio of the Company's borrowed debt to EBITDA (as defined). Under the
loan agreement, the Company is obligated to pay certain fees, including an
annual commitment fee in an amount of .25% to .375% of the unused portion of
the commitment. The loan agreement contains certain restrictive covenants,
including minimum net worth requirements and the encumbering of assets. In
addition, the Company, among other things, is required to maintain certain
financial ratios, including an interest coverage ratio (as defined), a debt
service coverage ratio (as defined) and a current ratio (as defined). At March
31, 1997, the Company was obligated to the group of banks for $52 million
under the Credit Facility.
 
  Prior to the Separation from Trinity, a significant portion of the Company's
existing contracts for the construction, repair or conversion of vessels
required that the Company's performance be guaranteed by Trinity, by a surety
company or other third party pursuant to a contract bid or performance bond,
letter of credit or similar obligation. These guarantees, bonds, letters of
credit and similar obligations will remain in effect until they expire and
Trinity will remain liable for the obligations on the same basis as any other
guarantor. The Company has indemnified Trinity against any liability under
these obligations. For the protection of Trinity in the event Trinity is
called upon to satisfy any such obligations, Trinity has been granted security
interests in certain assets of the Company which relate to the Company's
contracts from which such obligations arise and possesses the rights to
complete performance of any such contract on behalf of the Company in the
event of nonperformance by the Company. Such rights and remedies are similar
to the rights possessed by surety companies that have issued performance bonds
on behalf of the Company. The Company has arranged to obtain its own contract
bid and performance bonds, letters of credit and similar obligations in
connection with its business since September 26, 1996. The Company believes
that amounts available under the Credit Facility and bonding commitment will
be adequate to meet these obligations as they are required. As of March 31,
1997, the total of all of the Company's outstanding performance obligations
was approximately $132.5 million.
 
  The Company made capital expenditures, including construction in process, of
$14.5 million and $5.6 million in fiscal 1997 and 1996, respectively. The
Company currently has budgeted over $20 million (excluding acquisitions) for
planned capital projects at its current operating facilities for fiscal 1998,
including $10 million for projects at its Pascagoula shipyard. When completed,
the Pascagoula shipyard will be a state of the art manufacturing facility for
offshore drilling rigs and vessels. The Company is currently exploring, with
the assistance of the Mississippi Business Finance Corporation and the Jackson
County Economic Development Board, the possibility of financing the proposed
improvements at the Pascagoula facility through the issuance of industrial
revenue bonds. It is possible that the Company may decide in fiscal 1998 to
reopen its Panama City yard which is currently inactive. Such a decision to
reopen this yard in fiscal 1998 would depend upon the market demand for the
Company's products. Should such a decision be made, expenditures necessary to
reopen the yard are estimated to be approximately $3 million and are not
currently budgeted for fiscal 1998.
 
                                      15
<PAGE>
 
  On May 16, 1997, the Company completed its 100% acquisition of Texas
Drydock, Inc. ("TDI") for a total price of $46.4 million. TDI is a leading
marine repair and manufacturing company for mobile offshore drilling rigs and
workover units. It operates six shipyards in southeast Texas. Of the total
purchase price, $27.0 million has been financed by issuing promissory notes
due January 5, 1998 to the former owners of TDI, and approximately $19.4
million was paid in cash utilizing the Company's credit facility. In addition,
$3.5 million was advanced to TDI for certain non-recurring operating expenses
related to the sale and $1.1 million was advanced for asset acquisitions. The
Company is exploring various alternative long-term financing strategies that
will repay the borrowings incurred in connection with the TDI acquisition as
well as other borrowings related to the Company's capital expansion plans.
 
  The Company believes that cash flow from operations, together with funds
available under the Credit Facility, new permanent financing and the
possibility of revenue bonds, will be sufficient to fund its requirements for
working capital, capital expenditures, acquisitions and other capital needs
for at least the next 12 months.
 
INFLATION AND CHANGING PRICES
 
  The Company does not believe that general price inflation has had a
significant impact on the Company's results of operations during the periods
presented. To the extent that the effects of inflation are not offset by
improvements in manufacturing and purchasing efficiency and labor
productivity, the Company generally has been able to take such effects into
account in pricing its contracts with customers. There can be no assurance,
however, that inflation will not have a material effect on the Company's
business in the future.
 
                                      16
<PAGE>
 
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
   <S>                                                                      <C>
   Report of Independent Auditors..........................................  18
   Consolidated Balance Sheets.............................................  19
   Consolidated Income Statements..........................................  20
   Consolidated Statements of Stockholders' Equity.........................  21
   Consolidated Statements of Cash Flows...................................  22
   Notes to Consolidated Financial Statements..............................  23
</TABLE>
 
                                       17
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
Board of Directors and Stockholders
Halter Marine Group, Inc.
 
  We have audited the accompanying consolidated balance sheets of Halter
Marine Group, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended March 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Halter Marine
Group, Inc. and Subsidiaries at March 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended March 31, 1997 in conformity with generally accepted
accounting principles.
 
                                                              ERNST & YOUNG LLP
 
New Orleans, Louisiana
May 8, 1997, except for
Note 15, as to
which the date is May 16,
1997
 
                                      18
<PAGE>
 
                   HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                   MARCH 31
                                                               ----------------
                                                                 1997    1996
                                                               -------- -------
                            ASSETS
                            ------
<S>                                                            <C>      <C>
Current Assets:
  Cash........................................................ $  7,079     672
  Contract receivables........................................   36,053   8,340
  Due from affiliate..........................................   11,513      --
  Costs and estimated earnings in excess of billings on
   uncompleted contracts......................................   77,704  67,905
  Inventories.................................................   10,827   6,063
  Deferred income taxes.......................................       --   2,865
  Other current assets........................................    4,501     387
                                                               -------- -------
    Total current assets......................................  147,677  86,232
Property, plant and equipment, net............................   61,449  54,857
Other assets..................................................      285     285
                                                               -------- -------
                                                               $209,411 141,374
                                                               ======== =======
<CAPTION>
             LIABILITIES AND STOCKHOLDERS' EQUITY
             ------------------------------------
<S>                                                            <C>      <C>
Current Liabilities:
  Accounts payable and accrued liabilities.................... $ 39,290   3,799
  Due to affiliate............................................       --  17,519
  Income taxes payable to affiliate...........................       --  15,785
  Billings in excess of costs and estimated earnings on
   uncompleted contracts......................................   19,956  12,528
  Deferred income taxes.......................................    2,897      --
                                                               -------- -------
    Total current liabilities.................................   62,143  49,631
Long-term debt................................................   52,000      --
Long-term note to an affiliate................................       --  25,000
Other noncurrent liabilities..................................    1,967      --
Stockholders' equity:
  Common stock, $.01 par value; authorized 50,000 shares;
   issued 18,450 shares.......................................      185      --
  Preferred stock, authorized 50,000 shares; issued, none.....       --      --
  Additional paid-in capital..................................   84,213      --
  Retained earnings...........................................    8,903      --
  Stockholder's net investment................................       --  66,743
                                                               -------- -------
    Total equity..............................................   93,301  66,743
                                                               -------- -------
                                                               $209,411 141,374
                                                               ======== =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       19
<PAGE>
 
                   HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
                         CONSOLIDATED INCOME STATEMENTS
 
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31
                                                    --------------------------
                                                      1997     1996     1995
                                                    --------  -------  -------
<S>                                                 <C>       <C>      <C>
Contract revenue earned............................ $406,797  254,294  250,586
Cost of revenue earned.............................  355,209  214,559  207,398
                                                    --------  -------  -------
  Gross profit.....................................   51,588   39,735   43,188
Selling, general and administrative expenses.......   21,361   15,911   13,471
                                                    --------  -------  -------
  Operating income.................................   30,227   23,824   29,717
Other (income) expenses:
  Interest expense.................................    3,232    3,268    3,844
  Other, net.......................................       (8)     (11)      (5)
                                                    --------  -------  -------
                                                       3,224    3,257    3,839
                                                    --------  -------  -------
Income before income taxes.........................   27,003   20,567   25,878
Provision (benefit) for income taxes:
  Current..........................................    5,125   15,785    9,836
  Deferred.........................................    5,762   (7,683)     334
                                                    --------  -------  -------
                                                      10,887    8,102   10,170
                                                    --------  -------  -------
Net income......................................... $ 16,116   12,465   15,708
                                                    ========  =======  =======
Net income per share (pro forma for 1996).......... $   0.88     0.70
                                                    ========  =======
Weighted average shares outstanding (pro forma for
 1996).............................................   18,255   18,000
</TABLE>
 
 
          See accompanying notes to consolidated financial statements.
 
                                       20
<PAGE>
 
                   HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                     ADDITIONAL          STOCKHOLDER'S
                              COMMON  PAID-IN   RETAINED      NET
                              STOCK   CAPITAL   EARNINGS  INVESTMENT    TOTAL
                              ------ ---------- -------- ------------- -------
<S>                           <C>    <C>        <C>      <C>           <C>
Balance, March 31, 1994......                              $ 38,570    $38,570
  Net income.................                                15,708     15,708
                                                           --------    -------
Balance, March 31, 1995......                                54,278     54,278
  Net income.................                                12,465     12,465
                                                           --------    -------
Balance, March 31, 1996......                                66,743     66,743
  Net income prior to initial
   public offering...........                                 7,213      7,213
  Debt assumed from parent...                               (25,000)   (25,000)
  Proceeds from initial
   public offering...........  $185   $35,257                    --     35,442
  Transfer to additional
   paid-in capital...........    --    48,956               (48,956)        --
  Net income subsequent to
   initial public offering...    --        --    $8,903          --      8,903
                               ----   -------    ------    --------    -------
Balance, March 31, 1997......  $185   $84,213    $8,903    $     --    $93,301
                               ====   =======    ======    ========    =======
</TABLE>
 
 
 
          See accompanying notes to consolidated financial statements.
 
                                       21
<PAGE>
 
                   HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED MARCH 31
                                                    --------------------------
                                                      1997     1996     1995
                                                    --------  -------  -------
<S>                                                 <C>       <C>      <C>
Cash flows from operating activities:
 Net income........................................  $16,116   12,465   15,708
 Adjustments to reconcile net income to net cash
  provided (required) by operating activities:
  Depreciation and amortization....................    7,899    6,744    5,414
  Deferred provision (benefit) for income taxes....    5,762   (7,683)     334
  Net equipment transfers from affiliates..........       --   (7,776)  (1,120)
  Changes in assets and liabilities:
   (Increase) decrease in contract receivables.....  (27,713)  (1,053)  19,954
   (Increase) decrease in costs and estimated
    earnings in excess of billings on uncompleted
    contracts......................................   (9,799)   3,120  (12,825)
   (Increase) decrease in inventories..............   (4,764)     455   (3,823)
   (Increase) decrease in other current assets.....   (4,114)     107     (341)
   Increase in accounts payable and accrued
    liabilities....................................   35,491      420    1,132
   Increase (decrease) in income taxes payable to
    affiliate......................................  (15,785)   5,949   (3,221)
   Increase (decrease) in billings in excess of
    costs and estimated earnings on uncompleted
    contracts......................................    7,428   10,994   (6,409)
   Increase in other noncurrent liabilities........    1,967       --       --
                                                    --------  -------  -------
    Total adjustments..............................   (3,628)  11,277     (905)
                                                    --------  -------  -------
  Net cash provided by operating activities........   12,488   23,742   14,803
                                                    --------  -------  -------
Cash flows from investing activities:
 Capital expenditures..............................  (14,491)  (5,568)  (6,337)
 Payments for acquisitions.........................       --  (10,119)  (4,106)
                                                    --------  -------  -------
  Net cash required by investing activities........  (14,491) (15,687) (10,443)
                                                    --------  -------  -------
Cash flows from financing activities:
 Net proceeds from sale of stock...................   35,442       --       --
 Net repayments to parent..........................  (79,032)  (7,907)  (4,057)
 Net borrowings under line of credit...............   52,000       --       --
                                                    --------  -------  -------
  Net cash provided (required) by financing
   activities......................................    8,410   (7,907)  (4,057)
                                                    --------  -------  -------
Net increase in cash...............................    6,407      148      303
Cash at beginning of year..........................      672      524      221
                                                    --------  -------  -------
Cash at end of year................................ $  7,079      672      524
                                                    ========  =======  =======
Cash paid for interest............................. $  1,586       --       --
                                                    ========  =======  =======
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       22
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                                MARCH 31, 1997
 
1. GENERAL INFORMATION
 
  Halter Marine Group, Inc. is a Delaware corporation incorporated on June 24,
1996 to serve as the parent of a new consolidated group that formerly
conducted the business of construction, repair and conversion of primarily
ocean-going vessels for the governmental and commercial markets for Trinity
Industries, Inc. ("Trinity"). On September 26, 1996, Halter Marine Group, Inc.
and subsidiaries (collectively, the "Company") completed an initial public
offering of 16.7% of its stock (18.7% after the underwriters exercised their
overallotment option). On March 31, 1997, Trinity distributed all of the
remaining stock of the Company to its stockholders. As part of the
transactions related to the spin-off, the Company assumed $25 million of
indebtedness of Trinity associated with the Company's businesses.
 
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
 
 (a) Basis of Presentation
 
  The consolidated financial statements include the accounts of Halter Marine
Group, Inc. and its wholly owned subsidiaries and have been prepared using
Trinity's historical basis in the assets and liabilities of the Company. All
significant intercompany accounts and transactions have been eliminated. The
consolidated financial statements reflect the results of operations, financial
condition and cash flows of the Company as a component of Trinity prior to
October 1, 1996 and those results may not be indicative of actual results of
operations and financial position of the Company under other ownership.
Management believes that the consolidated income statements include a
reasonable allocation of the administrative costs incurred by Trinity on the
Company's behalf prior to October 1, 1996. These costs include payroll
services, benefits administration, and cash management. The allocations of
such costs to the Company were approximately $1.8 million and $1.7 million in
1996 and 1995, respectively, and approximately $1.2 million for the six months
ended September 30, 1996.
 
  Additionally, prior to the initial public offering, the Company provided
administrative services for Trinity's Inland Marine division in the areas of
accounting, human resources, marketing and public relations. The allocation of
such costs to the Inland Marine division were approximately $2.6 million and
$2.0 million in 1996 and 1995, respectively, and approximately $1.6 million
for the six months ended September 30, 1996.
 
 (b) Estimates
 
  The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
 (c) Construction contracts
 
  The Company uses the percentage of completion method to account for its
contracts in process. Under this method, revenues of construction contracts
are measured by the percentage of labor hours incurred to date to estimated
total labor hours for each contract. Management considers expended labor hours
to be the best available measure of progress on these contracts. Changes in
estimated profitability may result in revisions to income and costs and are
recognized in the period in which the revisions are determined. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined. Other changes, including those arising from contract
penalty provisions, and final contract settlements are recognized in the
period in which the revisions are determined.
 
  Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as indirect labor,
supplies, tools, repairs and depreciation costs. Selling, general and
administrative costs are charged to expense as incurred.
 
                                      23
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The asset, "Costs and estimated earnings in excess of billings and
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of costs and estimated earnings on
uncompleted contracts," represents billings in excess of revenues recognized.
 
  For income tax purposes, the Company reports contract profits as earned
under the percentage of completion capitalized cost method as originally
prescribed by the Tax Reform Act of 1986 and subsequently modified by the
Revenue Act of 1987 and the Technical and Miscellaneous Revenue Act of 1988.
 
 (d) Inventories
 
  Inventories, which consist primarily of steel and other marine vessel
components, are valued at the lower of cost or market. Inventory cost is
determined principally on the specific identification method. Market is
replacement cost or net realizable value.
 
 (e) Depreciation
 
  Additions to property, plant and equipment are recorded at cost.
Depreciation and amortization are generally computed by the straight-line
method on the estimated useful lives of the assets which range from 3 to 30
years for buildings and improvements and 2 to 28 years for machinery and
equipment. The costs of ordinary maintenance and repair are charged to
expense, while renewals and major replacements are capitalized.
 
 (f) Allocation of expenses
 
  Indirect manufacturing costs are allocated on the basis of labor hours
incurred on the respective contracts.
 
 (g) Income taxes
 
  The Company files a consolidated federal income tax return. The Company
accounts for income taxes using the liability method. Temporary differences
occur between the financial reporting and tax bases of assets and liabilities.
Deferred tax assets and liabilities are recorded for these differences based
on enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
 
 (h) Net income per share
 
  Net income per share has been computed based on the weighted average number
of shares outstanding during each period presented. Shares outstanding for
1996 have been assumed to be 18,000,000 (the total number of shares issued to
Trinity and the public as a result of the initial public offering, exclusive
of the underwriters' overallotment option of 450,000 shares) for purposes of
calculating pro forma net income per share. Pro forma net income for the year
ended March 31, 1996 was $12.7 million and reflected a reduction in interest
expense, net of tax, resulting from the use of the net proceeds of the
offering to retire outstanding debt to Trinity as of the beginning of the
period.
 
 (i) Stock-based compensation
 
  Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," (SFAS 123) encourages, but does not require companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related Interpretations. Accordingly, compensation cost for stock options
is measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock (see Note 8).
 
                                      24
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 (j) New Accounting Standard
 
  In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share", which
is required to be adopted for the quarter ended December 31, 1997. At that
time, the Company will be required to change the method currently used to
compute earnings per share and present both basic earnings per share and
diluted earnings per share. All prior periods will be restated. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options will be excluded. The change is expected to result in an
increase in primary earnings per share (basic earnings per share when SFAS No.
128 is adopted) for the year ended March 31, 1997 of $0.01 per share. The
change will have no impact on pro forma primary earnings per share for the
year ended March 31, 1996. The Company was not previously required to present
diluted earnings per share. For the year ended March 31, 1997, diluted
earnings per share would have been $0.88 if the Company had been required to
adopt SFAS No. 128.
 
3. BUSINESS ACQUISITIONS
 
  The Company made certain business acquisitions during fiscal 1996 and 1995.
All have been accounted for by the purchase method. The operations of these
companies have been included in the consolidated financial statements from the
effective dates of the acquisitions.
 
  In fiscal 1996, the Company acquired the assets of American Marine
Corporation (now known as Halter Gulf Repair) and CBI-Con, Inc. (now known as
Halter Pascagoula). The assets of these businesses are utilized in the
manufacture and repair of marine products. The aggregate purchase price of
approximately $10.1 million was allocated entirely to the assets acquired.
Contribution of these acquisitions to revenues and operating profit during
fiscal 1996 is not material.
 
  In fiscal 1995, the Company acquired 100% of the common stock of Gulf Coast
Fabrication, Inc., a company engaged in the manufacture and repair of marine
vessels. The purchase price of approximately $4.1 million was allocated
entirely to assets acquired.
 
  See Note 15, "Subsequent Event," for a discussion of the acquisition of
Texas Drydock, Inc.
 
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
 
<TABLE>
<CAPTION>
                                                                    MARCH 31
                                                                ----------------
                                                                  1997    1996
                                                                -------- -------
                                                                 (IN THOUSANDS)
<S>                                                             <C>      <C>
Costs incurred on uncompleted contracts........................ $555,918 479,811
Estimated earnings.............................................  103,565 110,558
                                                                -------- -------
                                                                 659,483 590,369
Less billings to date..........................................  601,735 534,992
                                                                -------- -------
                                                                $ 57,748  55,377
                                                                ======== =======
Included in accompanying balance sheet under the following
 captions:
  Costs and estimated earnings in excess of billings on
   uncompleted contracts....................................... $ 77,704  67,905
  Billings in excess of costs and estimated earnings on
   uncompleted contracts.......................................   19,956  12,528
                                                                -------- -------
                                                                $ 57,748  55,377
                                                                ======== =======
</TABLE>
 
                                      25
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
5. PROPERTY, PLANT AND EQUIPMENT
 
<TABLE>
<CAPTION>
                                                                   1997    1996
                                                                  ------- ------
<S>                                                               <C>     <C>
Land............................................................. $ 8,427  5,686
Buildings and improvements.......................................  26,929 23,660
Machinery and equipment..........................................  53,118 58,874
Construction in progress.........................................  12,696  3,688
                                                                  ------- ------
                                                                  101,170 91,908
Less accumulated depreciation....................................  39,721 37,051
                                                                  ------- ------
Property, plant and equipment, net............................... $61,449 54,857
                                                                  ======= ======
</TABLE>
 
6. LONG-TERM DEBT
 
  The Company has a revolving credit agreement, totaling $135 million, with a
group of banks. All amounts outstanding under this revolving credit agreement
will become payable on September 30, 1999. Of the total amount, $10 million is
set aside for use as a letter of credit in conjunction with the Company's
captive insurance subsidiary. All other letters of credit issued are limited
to $50 million. The interest rate is 0.625% to 1.25% over the London Interbank
Offered Rate (LIBOR), or the base rate (as defined), depending on the
Company's choice. The range of rates over LIBOR is set quarterly, depending on
the ratio of the Company's borrowed debt to EBITDA (as defined).
 
  Under the credit agreement, the Company is obligated to pay certain fees,
including an annual commitment fee in an amount ranging from 0.25% to 0.375%
of the unused portion of the commitment. The loan agreement contains certain
restrictive covenants, including minimum net worth requirements and the
encumbering of assets. In addition, the Company, among other things, is
required to maintain certain financial ratios, including an interest coverage
ratio (as defined), a debt service coverage ratio (as defined), and a current
ratio (as defined).
 
  At March 31, 1997, the Company was obligated to the banks for $50 million
under the line of credit.
 
  The fair value of the Company's long-term debt approximates its recorded
value.
 
7. RELATED PARTY TRANSACTIONS
 
  John Dane III, Chief Executive Officer and Chairman of the Company, acquired
25% of the stock of United States Marine, Inc. ("USMI") in June 1996. Mr. Dane
has the option to acquire up to an additional 50% of the stock of USMI over
the next five years. USMI manufactures custom composite marine products for
various customers and performs services for the Company as a subcontractor
with respect to the production of high speed composite vessels for the U.S.
Navy. During fiscal 1997, 1996 and 1995, the Company paid USMI fees of
approximately $7.2 million, $5.5 million and $3.9 million, respectively, for
subcontractor services.
 
  Subsequent to its initial public offering, the Company repaid to Trinity its
intercompany balance, including $21.6 million for income taxes and $25.0
million in debt assumed by the Company from Trinity. Such amounts aggregated
approximately $79.0 million.
 
  As of March 31, 1997, the Company had a receivable from Trinity of $11.5
million, representing the year-end settlement of excess amounts of income tax
estimates paid to Trinity during the year, the settlement of the Company's
portion of assets in Trinity's captive insurance subsidiary, and various other
intercompany charges and credits.
 
                                      26
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Upon completion of the initial public offering, the Company and Trinity
entered into various agreements for the purpose of establishing the terms
governing their on-going arrangements and relationships. These agreements
contained various provisions including a non-compete provision, a provision
regarding the settlement of income tax matters and a provision related to the
settlement of other transactions between the Company and Trinity. The Company
expects to settle the income tax matters and other transactions during fiscal
year 1998. The agreements are not expected to have a significant impact on the
Company's business, financial position, results of operations or liquidity.
 
8. STOCK OPTIONS
 
  On September 24, 1996 the Company established the 1996 Stock Option and
Incentive Plan (the "1996 Plan") which provides for awards to employees and
directors in the form of grants of stock options, stock appreciation rights,
restricted or non-restricted stock or units denominated in stock (collectively
referred to as "Awards"). All stock options granted under the 1996 Plan vest
in equal annual amounts over a five-year period and expire 10 years from the
date of grant. The 1996 Plan also provides that shares of common stock which
are the subject of awards that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of common stock or in a manner such
that all or some of the shares covered thereby are not issued or are exchanged
for Awards that do not involve common stock will again immediately become
available for Awards under the 1996 Plan.
 
  Following is a summary of the option activity during the year ended March
31, 1997:
 
<TABLE>
<CAPTION>
                                                                SHARES   PRICE*
                                                               --------- ------
<S>                                                            <C>       <C>
Options at beginning of year..................................        --     --
  Granted.....................................................   250,000 $11.00
  Canceled....................................................        --     --
                                                               --------- ------
Outstanding at end of year....................................   250,000 $11.00
                                                               ========= ======
Exercisable at end of year....................................        --     --
Available for grant........................................... 1,150,000
</TABLE>
--------
* Weighted average exercise price for the year.
 
  The Company accounts for options granted under the 1996 Plan as prescribed
by the provisions of APB 25 and, accordingly, no compensation expense has been
recognized for stock options granted. Had compensation expense for the 1996
Plan been determined based on the fair value at the grant dates consistent
with the method of SFAS 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below. For purposes
of these pro forma disclosures, the estimated fair value of the options
granted in fiscal 1997 is amortized to expense over the options' vesting
period.
 
<TABLE>
<CAPTION>
                                                              MARCH 31, 1997
                                                           (IN THOUSANDS, EXCEPT
                                                            EARNINGS PER SHARE)
                                                           ---------------------
      <S>                                                  <C>
      Net income:
        As reported.......................................        $16,116
        Pro forma.........................................        $15,912
      Net income per share:
        As reported.......................................         $ 0.88
        Pro forma.........................................         $ 0.87
</TABLE>
 
  The weighted average grant date fair value of options granted during the
year ended March 31, 1997 was $6.81. The fair value of options was calculated
by using the Black-Scholes option pricing model using the following weighted
average assumptions for fiscal year activity: risk free interest rate of
5.98%, expected life of 7 years, expected volatility of .801 and no dividend
yield.
 
                                      27
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing model does not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
 
9. EMPLOYEE BENEFIT PLANS
 
  The Company's employees are included in a pension plan which provides income
and death benefits for eligible employees. The Company's policy is to fund
retirement costs accrued but only to the extent such amounts are deductible
for income tax purposes. Plan assets include cash, short-term debt securities,
and other investments. Benefits are based on years of credited service and
compensation.
 
  Net periodic pension expense includes the following components (in
thousands):
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED
                                                                    MARCH 31
                                                                   ------------
                                                                   1997   1996
                                                                   ----  ------
<S>                                                                <C>   <C>
Service cost-benefits earned during the period.................... $807     598
Interest cost on projected benefit obligation.....................  501     386
Actual return on assets...........................................  143  (1,112)
Net amortization and deferral..................................... (603)    699
                                                                   ----  ------
Net periodic pension expense...................................... $848     571
                                                                   ====  ======
</TABLE>
 
  Amounts recognized in the Company's consolidated balance sheet follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                                   MARCH 31
                                                                 --------------
                                                                  1997    1996
                                                                 -------  -----
<S>                                                              <C>      <C>
Actuarial present value of benefit obligation:
  Vested benefit obligation..................................... $ 3,946  3,484
                                                                 =======  =====
  Accumulated benefit obligation................................ $ 4,875  4,452
                                                                 =======  =====
Projected benefit obligation.................................... $ 6,644  6,306
Plan assets at fair value.......................................   5,437  5,931
                                                                 -------  -----
Projected benefit obligation in excess of plan assets...........  (1,207)  (375)
Unrecognized net asset at April 1, 1996.........................     (42)   (75)
Unrecognized net loss...........................................   1,903  1,741
                                                                 -------  -----
Prepaid pension expense......................................... $   654  1,291
                                                                 =======  =====
</TABLE>
 
  Assumptions used for the valuation of the projected benefit obligation for
1997 and 1996 were a discount rate of 7.75%, an increase in compensation
levels of 4.75% and an expected long-term rate of return on assets of 9.00%.
 
  The Company has a contributory 401(k) plan in which employees of the Company
may participate. Under the plan, eligible employees are allowed to make
voluntary pre-tax contributions which are matched, up to certain limits, by
the Company. Expenses related to this plan approximated $896 and $614 in 1997
and 1996, respectively.
 
  The Company incurred expense of $875 in 1995 applicable to its pension and
401(k) plans.
 
                                      28
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
10. INCOME TAXES
 
  The Company is included in the consolidated federal income tax return of
Trinity. Trinity has periodically charged the Company amounts representing
applicable estimated income tax payments that the Company would have been
obligated to pay if it had filed a separate tax return. The Company and
Trinity have entered into a tax allocation agreement under which the Company
and Trinity have agreed upon the allocation of certain tax liabilities and
related matters. For years ending after March 31, 1997, the Company will file
its own consolidated income tax returns.
 
  The significant components of the provision (benefit) for income taxes
follow:
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED MARCH 31
                                                          ----------------------
                                                           1997    1996    1995
                                                          ------- ------  ------
                                                             (IN THOUSANDS)
<S>                                                       <C>     <C>     <C>
Current
  Federal................................................ $ 3,440 13,475   8,174
  State..................................................   1,685  2,310   1,662
                                                          ------- ------  ------
                                                            5,125 15,785   9,836
Deferred
  Federal................................................   4,771 (6,692)    334
  State..................................................     991   (991)     --
                                                          ------- ------  ------
                                                            5,762 (7,683)    334
                                                          ------- ------  ------
    Total................................................ $10,887  8,102  10,170
                                                          ======= ======  ======
</TABLE>
 
  Deferred income tax was provided in the financial statements for temporary
differences between financial and taxable income. The components of deferred
tax liabilities and assets follow:
 
<TABLE>
<CAPTION>
                                                                  MARCH 31
                                                               ---------------
                                                                1997     1996
                                                               -------  ------
                                                               (IN THOUSANDS)
<S>                                                            <C>      <C>
Deferred tax liabilities:
  Excess of tax depreciation over financial statement
   depreciation............................................... $(3,555) (2,771)
  Profits on long-term contracts recorded on the percentage of
   completion method for financial statement purposes and
   related items..............................................    (257)     --
  Pensions and other benefits.................................    (640)   (711)
  Other.......................................................     (62)    (50)
                                                               -------  ------
    Total deferred tax liabilities............................  (4,514) (3,532)
                                                               -------  ------
Deferred tax assets:
  Profits on long-term contracts recorded on the percentage of
   completion method for financial statement purposes.........      --   5,406
  Reserve for unpaid insurance claims.........................   1,617      --
  State taxes.................................................      --     991
                                                               -------  ------
    Total deferred tax assets.................................   1,617   6,397
                                                               -------  ------
Net deferred tax asset (liability)............................ $(2,897)  2,865
                                                               =======  ======
</TABLE>
 
                                      29
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  A reconciliation between the effective tax rate and the statutory tax rate
is as follows:
 
<TABLE>
<CAPTION>
                                                               1997  1996  1995
                                                               ----  ----  ----
<S>                                                            <C>   <C>   <C>
Statutory rate................................................ 35.0% 35.0% 35.0%
State taxes...................................................  4.1   4.2   4.2
Other.........................................................  1.2   0.2   0.1
                                                               ----  ----  ----
Effective tax rate............................................ 40.3% 39.4% 39.3%
                                                               ====  ====  ====
</TABLE>
 
11. STOCKHOLDER RIGHTS PLAN
 
  The Company has adopted a stockholder rights plan under which one right is
assigned to each share of common stock. Each right entitles the stockholder to
purchase from the Company one one-hundredth of a share of Series A Preferred
Stock at an exercise price to be determined by the Board when the rights are
issued. The rights are not exercisable or detachable from the common stock
until ten business days after a person acquires beneficial ownership of 15% or
more of the common stock or if a person or group commences a tender or
exchange offer upon consummation of which that person or group would
beneficially own 15% or more of the common stock.
 
  If any person becomes a beneficial owner of 15% or more of the common stock
other than pursuant to an offer, as defined, for all shares determined by
certain directors to be fair to the stockholders and otherwise in the best
interests of both the Company and its stockholders (other than by reason of
share purchases by the Company), each right not owned by that person or
related parties enables its holder to purchase, at the right's then current
exercise price, shares of the Company's common stock having a calculated value
of twice the right's exercise price.
 
  The rights, which are subject to adjustment, may be redeemed by the Company
at a price of one cent per right at any time prior to their expiration ten
years from issuance or the point at which they become exercisable.
 
12. SIGNIFICANT CUSTOMERS
 
  Revenue related to fiscal 1997 and 1996 includes revenue from the U.S. Navy
which totaled approximately 37% and 47% of total revenue in each respective
year.
 
  In fiscal 1995, revenue from the U.S. Navy and the Phillipine government
accounted for 38.8% and 10.2%, respectively, of total revenue. Also, in fiscal
1995, revenue from foreign governments accounted for 13.6% of total revenue.
 
13. COMMITMENTS AND CONTINGENCIES
 
  The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse effect on the Company's financial
position, results of operations or liquidity.
 
  Prior to September 30, 1996, Trinity had guaranteed certain contract
performance obligations of the Company. These guarantees, bonds, letters of
credit and similar obligations will remain in effect until they expire and
Trinity will remain liable until that time as any other guarantor. The Company
has indemnified Trinity for any losses incurred by Trinity under this
arrangement.
 
  Subsequent to September 30, 1996, the Company obtained its own contract bid
and performance bonds, letters of credit and similar obligations in connection
with its business. As of March 31, 1997, the total of all outstanding
performance obligations was approximately $132.5 million.
 
                                      30
<PAGE>
 
                  HALTER MARINE GROUP, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
14. SUPPLEMENTARY UNAUDITED QUARTERLY DATA
 
<TABLE>
<CAPTION>
                                              FIRST  SECOND   THIRD  FOURTH
                                             QUARTER QUARTER QUARTER QUARTER
                                             ------- ------- ------- -------
                                                       (IN THOUSANDS)
<S>                                          <C>     <C>     <C>     <C>     <C>
Year ended March 31, 1997:
  Contract revenue earned................... $85,981 94,457  112,496 113,863
  Gross profit.............................. $11,286 12,779   12,558  14,965
  Net income................................ $ 3,342  3,871    4,192   4,711
  Net income per share ..................... $  0.19   0.22     0.23    0.26
Year ended March 31, 1996:
  Contract revenue earned................... $72,008 53,904   56,625  71,757
  Gross profit.............................. $11,132  7,943   10,848   9,812
  Net income................................ $ 3,669  2,419    3,757   2,620
  Pro forma net income per share............ $  0.20   0.13     0.21    0.15
</TABLE>
 
15. SUBSEQUENT EVENT
 
  On April 4, 1997, the Company acquired a 51% interest in and obtained an
option to acquire the remaining 49% of Texas Drydock, Inc. (TDI), a company
engaged principally in the construction, conversion and repair of offshore oil
drilling rigs. The purchase price was approximately $19.4 million and
coincident with the acquisition, the Company advanced TDI approximately $4.5
million for working capital and a fixed asset acquisition. All amounts were
paid in cash. On May 16, 1997, the Company acquired the remaining 49% of TDI
for $27 million. A substantial portion of the total purchase price will be
allocated to cost in excess of net assets acquired.
 
                                      31
<PAGE>
 
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
 
  None
 
                                   PART III
 
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS
 
  Information concerning Directors and Executive Officers is incorporated by
reference from the Proxy Statement for the annual Meeting of Stockholders to
be held July 15, 1997.
 
ITEM 11: EXECUTIVE COMPENSATION
 
  Information concerning executive compensation is incorporated by reference
from the proxy statement described in Item 10 of this report.
 
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  Information concerning security ownership of certain beneficial owners and
management is incorporated by reference from the proxy statement described in
Item 10 of this report.
 
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  Information concerning certain relationships and related transactions is
incorporated by reference from the proxy statement described in Item 10 of
this report.
 
                                    PART IV
 
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
 
  (a) Exhibits
 
<TABLE>
<CAPTION>
  EXHIBIT
   NUMBER                               DESCRIPTION
  -------                               -----------
 <C>        <S>
   3.1***   --Form of Restated Certificate of Incorporation of Halter Marine
             Group, Inc. (the "Company"), as amended
   3.2***   --Form of Amended and Restated Bylaws of the Company
   3.3***   --Form of Certificate of Designations of Series A Junior
             Participating Preferred Stock of the Company
   4.1***   --Form of Certificate evidencing Common Stock
  10.1***   --Intentionally Omitted
  10.2***   --Form of Separation Agreement between the Company and Trinity
             Industries, Inc.
  10.3***   --Intentionally Omitted
  10.4***   --Form of Tax Sharing and Tax Benefit Reimbursement Agreement
             between the Company and Trinity Industries, Inc.
  10.5***   --Form of Trademark License Agreement between the Company and
             Trinity Industries, Inc.
  10.6***   --Form of Rights Agreement between the Company and The Bank of New
             York, as Rights Agent
  10.7***   --Form of Noncompetition Agreement between the Company and John
             Dane III
  10.8***   --Form of Credit Agreement among the Company and certain Lenders
  10.9***   --Form of Inland Barge Agreement between Halter Marine, Inc. and
             Trinity Marine Products, Inc.
</TABLE>
 
                                      32
<PAGE>
 
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                               DESCRIPTION
 -------                               -----------
 <C>      <S>
 10.10*** --Form of Executive Severance Agreement between the Company and
            various Executive Officers. The Agreement between the Company and
            John Dane III is included herein as an example.
 10.11    --Intentionally Omitted
    to
 10.16
 10.17    --Intentionally Omitted
    to
 10.29
 10.30*** --Form of Indemnity and Security Agreement between Trinity
            Industries, Inc. and the Company
 10.31*** --Exchange Agreement between Trinity Industries, Inc. and the Company
 10.32*** --Assumption Agreement between Trinity Industries, Inc. and the
            Company
 10.33**  --Form of Amended and Restated 1996 Stock Option and Incentive Plan
 10.34*   --Form of Amended and Restated Revolving Credit Agreement effective
            December 31, 1996, among the Company and certain Lenders
 10.35*   --Form of Consent of Lenders and First Amendment to Amended and
            Restated Revolving Credit Agreement, effective April 4, 1997 among
            the Company and certain Lenders
 10.36*   --Form of Amended and Restated Consent of Lenders and First Amendment
            of Amended and Restated Revolving Credit Agreement entered into May
            15, 1997, effective April 4, 1997 among the Company and certain
            Lenders
 10.37*   --Form of 401(k) profit Sharing Plan of the Company
 10.38*   --Form of Pension Plan of the Company
  21***   --Subsidiaries of the Company
  27*     --Financial Data Schedule
</TABLE>
--------
  * Filed herewith
 ** Filed as Exhibit A to the 1997 Proxy Statement and incorporated herein by
    reference.
*** Incorporated by reference to the same exhibits in Amendment No. 3 to the
    Registration Statement (Registration No. 333-6967) filed on September 23,
    1996 with the Securities and Exchange Commission.
 
  (b) Financial Statement Schedules
 
    Copies of Consolidated Financial Statements are included within Form
     10-K and are incorporated herein by reference (See Index To
     Consolidated Financial Statements at page 18 of Form 10-K).
 
    Financial Statement Schedules other than the Financial Statements have
     been omitted because the required information is contained in the
     consolidated financial statements and notes thereto or because such
     schedules are not required or applicable.
 
  (c) Reports on Form 8-K
 
  The following Forms 8-K were filed with the Securities and Exchange
Commission during the fourth quarter of fiscal 1997 on the dates indicated:
 
    1.  Announcement of the agreement to acquire, subject to Board approval,
        51% of the common stock of Texas Drydock, Inc. filed on February 14,
        1997.
 
    2.  Announcement of the declaration of a property distribution of fifteen
        million shares of common stock of the Company by Trinity to its
        shareholders filed on March 13, 1997.
 
    3.  Announcement of the completion of the property distribution of
        fifteen million shares of common stock of the Company by Trinity to
        its shareholders filed on March 31, 1997.
 
                                      33
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934. THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
                                          HALTER MARINE GROUP, INC.
 
 
                                          By:    /s/  John Dane, III
                                          By __________________________________
                                                     John Dane, III
                                              Chairman, President and Chief
                                                    Executive Officer
 
Date: June 12, 1997
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
 
<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
 
<S>                                  <C>                           <C>
     /s/    John Dane, III           Chairman, President, Chief      June 12, 1997
____________________________________ Executive Officer and
           John Dane, III            Director
 
    /s/   Keith L. Voigts            Sr. Vice President of           June 12, 1997
____________________________________ Finance and Chief Financial
          Keith L. Voigts            Officer (Principal Financial
                                     and Accounting Officer)
 
    /s/   Kenneth W. Lewis           Director                        June 12, 1997
____________________________________
          Kenneth W. Lewis
 
   /s/   Daniel J. Mortimer          Director                        June 12, 1997
____________________________________
        Daniel J. Mortimer
 
   /s/      Rick S. Rees             Director                        June 12, 1997
____________________________________
            Rick S. Rees
</TABLE>
 
                                      34