<PAGE>

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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K

<Table>
<S>          <C>
 (Mark One)
    [X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934



                     FOR THE FISCAL YEAR ENDED DECEMBER 27, 2002



                                   OR




    [ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
</Table>

                        Commission file number 333-62227

                             ---------------------

                         AMERICAN COMMERCIAL LINES LLC
             (Exact Name of Registrant as Specified in Its Charter)

<Table>
<S>                                            <C>
                  DELAWARE                                      52-2106600
        (State or Other Jurisdiction                           (IRS Employer
      of Incorporation or Organization)                     Identification No.)
</Table>

<Table>
<S>                                            <C>
           1701 EAST MARKET STREET
           JEFFERSONVILLE, INDIANA                                 47130
  (Address of Principal Executive Offices)                      (Zip Code)
</Table>

                                 (812) 288-0100
              (Registrant's Telephone Number, Including Area Code)
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  [X]     No  [ ]

     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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  Yes  [ ]     No  [X]

     State the aggregate market value of the voting and non-voting common equity
held by nonaffiliates of the registrant computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter. NOT APPLICABLE.
 AS OF MARCH 27, 2003, THE REGISTRANT HAD 100 MEMBERSHIP INTERESTS OUTSTANDING.
--------------------------------------------------------------------------------
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<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

                            FORM 10-K ANNUAL REPORT

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                        PAGE
                                                                        ----
<S>       <C>                                                           <C>
                                   PART I
Item 1.   Business....................................................    2
Item 2.   Properties..................................................   19
Item 3.   Legal Proceedings...........................................   19
Item 4.   Submission of Matters to a Vote of Security Holders.........   20

                                  PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   20
Item 6.   Selected Financial Data.....................................   20
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   21
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................   37
Item 8.   Financial Statements and Supplementary Data.................   40
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure....................................   79

                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........   79
Item 11.  Executive Compensation......................................   80
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   84
Item 13.  Certain Relationships and Related Transactions..............   85
Item 14.  Controls and Procedures.....................................   85

                                  PART IV
Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form
          8-K.........................................................   85
Signatures............................................................   91
Certifications........................................................   92
</Table>
<PAGE>

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements in this Annual Report on Form 10-K (the "Report") may
constitute "forward-looking" statements as defined in Section 27A of the
Securities Act of 1933 (the "Securities Act"), Section 21E of the Securities
Exchange Act of 1934 (the "Exchange Act"), the Private Securities Litigation
Reform Act of 1995 (the "PSLRA") or in releases made by the Securities and
Exchange Commission, all as may be amended from time to time. Such forward
looking statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance or
achievements of American Commercial Lines LLC ("ACL"), or industry results, to
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements. Statements that are not
historical fact are forward-looking statements. Forward looking statements can
be identified by, among other things, the use of forward-looking language, such
as the words "plan," "believe," "expect," "anticipate," "intend," "estimate,"
"project," "may," "will," "would," "could," "should," "seeks" or "scheduled to,"
or other similar words, or the negative of these terms or other variations of
these terms or comparable language, or by discussion of strategy or intentions.
These cautionary statements are being made pursuant to the Securities Act, the
Exchange Act and the PSLRA with the intention of obtaining the benefits of the
"safe harbor" provisions of such laws. ACL cautions investors that any
forward-looking statements made by ACL are not guarantees or indicative of
future performance. Important assumptions and other important factors that could
cause actual results to differ materially from those forward-looking statements
with respect to ACL include, but are not limited to, the risks and uncertainties
affecting our businesses described in Item 1, Business, Risk Factors -- Risks
Associated With Our Business, Exhibit 99.1 hereto, in other securities filings
by ACL and other important factors, including:

     - bankruptcy considerations, such as ACL's ability to: (i) continue as a
       going concern, (ii) operate in accordance with the terms of and maintain
       compliance with covenants of the DIP Credit Facility (as hereinafter
       defined) and other financing and contractual arrangements, (iii) obtain
       Bankruptcy Court approval with respect to motions in the Chapter 11 cases
       from time to time, (iv) develop, confirm and consummate a plan of
       reorganization with respect to the Chapter 11 cases described herein, (v)
       attract, motivate and retain key personnel, (vi) obtain and maintain
       normal terms with vendors and service providers, (vii) maintain contracts
       that are critical to our business and (viii) attract and retain
       customers;

     - substantial leverage and ability to service debt;

     - changing market, labor, legal and regulatory conditions and trends in the
       barge and inland shipping industries;

     - general economic and business conditions, including cyclical or other
       downturns in demand, a prolonged or substantial recession in the United
       States or certain international commodity markets such as the market for
       grain exports, significant pricing competition, unanticipated additions
       to industry capacity, fuel costs and interest rates; and

     - annual worldwide weather conditions, particularly those affecting North
       and South America.

     Although we believe that our plans, intentions and expectations reflected
in or suggested by such forward-looking statements are reasonable, actual
results could differ from a projection or assumption in any of our
forward-looking statements. Our future financial condition and results of
operations, as well as any forward-looking statements, are subject to change and
inherent risks and uncertainties discussed under Item 1, Business -- Risks
Associated With Our Business and elsewhere in this Report as well as in ACL's
other filings with the Securities and Exchange Commission. The forward-looking
statements contained in this Report are made only as of the date hereof and ACL
does not have or undertake any obligation to update or revise any
forward-looking statements whether as a result of new information, subsequent
events or otherwise, unless otherwise required by law.

                                        1
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

BANKRUPTCY CONSIDERATIONS

     During 2002 and the beginning of 2003, ACL experienced a decline in barging
rates, reduced shipping volumes and excess barging capacity during a period of
slow economic growth and a global economic recession. Due to these factors,
ACL's revenues and earnings did not meet expectations and ACL's liquidity was
significantly impaired and it was unable to comply with its various debt
covenants. As a result, ACL was unable to meet certain of its financial
obligations as they became due. On January 31, 2003 (the "Petition Date"), ACL
filed a petition with the U.S. Bankruptcy Court for the Southern District of
Indiana, New Albany Division (the "Bankruptcy Court") to reorganize under
Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy Code" or "Chapter 11")
under case number 03-90305. Included in the filing are ACL, ACL's direct parent
(American Commercial Lines Holdings LLC ("ACL Holdings")), American Commercial
Barge Line LLC ("ACBL"), Jeffboat LLC, Louisiana Dock Company LLC ("LDC") and
ten other U.S. subsidiaries of ACL (collectively with ACL, the "Debtors") under
case numbers 03-90306 through 03-90319. These cases are jointly administered for
procedural purposes before the Bankruptcy Court under case number 03-90305. The
Chapter 11 petitions do not cover any of ACL's foreign subsidiaries or certain
of its U.S. subsidiaries.

     ACL and the other Debtors will continue to operate their businesses as
debtors-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court. As debtors-in-possession, the Debtors may not engage in
transactions outside of the ordinary course of business without approval, after
notice and hearing, of the Bankruptcy Court. As part of the Chapter 11 cases,
the Debtors intend to develop and propose for confirmation pursuant to Chapter
11 a plan of reorganization that will restructure the operations and liabilities
of the Debtors to the extent necessary to result in the continuing viability of
ACL. A filing date for such a plan has not been determined, however, ACL has the
exclusive right to submit a plan of reorganization within the first 120 days of
the Petition Date.

     ACL and the other Debtors received approval from the Bankruptcy Court to
pay or otherwise honor certain of its pre-petition obligations, including but
not limited to employee wages and certain employee benefits, certain critical
vendor payments, certain insurance and claim obligations, and certain tax
obligations, as a plan of reorganization is developed.

     Furthermore, the Debtors have entered into a Bankruptcy Court approved
debtor-in-possession ("DIP") financing arrangement (which was originally entered
into on January 31, 2003 and which was amended on March 13, 2003, the "DIP
Credit Facility") that provides up to $75 million of financing. Current
commitments under the DIP Credit Facility total $60 million, of which the
Debtors have drawn $50 million, which was used to retire the Pre-Petition
Receivables Facility (as hereinafter defined) and which continues to be used to
fund the Debtors' day-to-day cash needs. The DIP Credit Facility is secured by
the same and additional assets that collateralized the Senior Credit Facility
(as hereinafter defined) and the Pre-Petition Receivables Facility, and bears
interest, at ACL's option, at London InterBank Offered Rates ("LIBOR") plus four
percent or an Alternate Base Rate (as defined in the DIP Credit Facility) plus
three percent. There are also certain interest rates applicable in the event of
a default under the DIP Credit Facility.

     The DIP Credit Facility also contains certain restrictive covenants that,
among other things, restrict the Debtors' ability to incur additional
indebtedness or guarantee the obligations of others. ACL is also required to
maintain minimum cumulative EBITDA, as defined in the DIP Credit Facility, and
limit its capital expenditures.

     As a result of the Chapter 11 filings, certain events of default under the
Senior Credit Facilities, Senior Notes, PIK Notes and Old Senior Notes (all as
hereinafter defined) have occurred subsequent to December 27, 2002, the effects
of which are stayed pursuant to certain provisions of the Bankruptcy Code.

     Under Chapter 11, actions by creditors to collect claims in existence at
the filing date are stayed or deferred absent specific Bankruptcy Court
authorization to pay such pre-petition claims while the Debtors

                                        2
<PAGE>

continue to manage their businesses as debtors-in-possession and act to develop
a plan of reorganization for the purpose of emerging from these proceedings. A
claims bar date has not yet been established.

     The amount of the claims to be filed against the Debtors by their creditors
could be significantly different than the amount of the liabilities recorded by
the Debtors. The Debtors also have numerous executory contracts and other
agreements that could be assumed or rejected during the Chapter 11 proceedings.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the Bankruptcy Code, applicable Bankruptcy rules and orders
of the Bankruptcy Court. Under these Chapter 11 proceedings, the rights of and
ultimate payments to pre-petition creditors, rejection damage claimants and
equity investors (ACL's indirect parent, Danielson Holding Corporation ("DHC"),
controls and indirectly wholly owns 100% of the ACL equity interests) may be
substantially altered. This could result in claims being allowed and/or
satisfied in the Chapter 11 proceedings at less (possibly substantially less)
than 100% of their face value, and the membership interests of ACL's equity
investors being diluted or cancelled. The Debtors have not yet proposed a plan
of reorganization. The Debtors' pre-petition creditors and ACL's equity
investors will each have a vote in the plan of reorganization.

     The United States Trustee has appointed an unsecured creditors committee.
The official committee and its legal representatives have a right to be heard on
all matters that come before the Bankruptcy creditors.

     The Chapter 11 process presents inherent material uncertainty; it is not
possible to determine the additional amount of claims that may arise or
ultimately be filed, or predict the length of time that the Debtors will
continue to operate under the protection of Chapter 11, the outcome of the
Chapter 11 proceedings in general, whether the Debtors will continue to operate
in their present organizational structure, or the effects of the proceedings on
the business of ACL, the other Debtors and its non-filing subsidiaries and
affiliates, or on the interests of the various creditors, security holders and
equity holders. The ultimate recovery, if any, by creditors, security holders
and equity holders (DHC and its subsidiaries own 100% of the equity interests in
ACL Holdings, which wholly owns ACL and the other Debtors) will not be
determined until, at the earliest, confirmation of a plan of reorganization. No
assurance can be given as to what value will be ascribed in the bankruptcy
proceedings to each of these constituencies. Accordingly, ACL and the other
Debtors urge that appropriate caution be exercised with respect to existing and
future investments in any of these securities.

     The consolidated financial statements contained herein have been prepared
on a going concern basis, which assumes continuity of operations and realization
of assets and satisfaction of liabilities in the ordinary course of business.
The ability of ACL and the other Debtors to continue as a going concern is
predicated, among other things, on the confirmation of a reorganization plan,
compliance with the provisions of the DIP Credit Facility, the ability of ACL
and the other Debtors to generate the required cash flows from operations and,
where necessary, obtaining financing sources sufficient to satisfy future
obligations.

HISTORY

     ACL, a Delaware limited liability company, was formed in April 1998 in
connection with the conversion by merger of its predecessor American Commercial
Lines, Inc. ("ACL Inc."), a Delaware corporation, into a limited liability
company. ACL Inc. was formed in 1953 as the holding company for a family of
barge transportation and marine service companies with an operating history
beginning in 1915.

     In 1998, ACL was recapitalized by its owners pursuant to a Recapitalization
Agreement, dated April 17, 1998, among CSX Corporation ("CSX"), Vectura Group
Inc., a Delaware corporation now Vectura Group LLC ("Vectura"), a Delaware
limited liability company, ACL Holdings, ACL and National Marine, Inc., a
Delaware corporation now National Marine LLC ("National Marine"), a Delaware
limited liability company, whereby ACL Holdings completed a recapitalization in
a series of transactions (the "Recapitalization") and combined the barging
operations of Vectura, National Marine and their subsidiaries with that of ACL.

     To finance the Recapitalization, ACL incurred secured debt under a Credit
Agreement, dated June 30, 1998, with certain lenders and J.P. Morgan Chase Bank
(formerly, The Chase Manhattan Bank), as administrative agent (the "Senior
Credit Facilities"), consisting of a $200.0 million Tranche B Term Loan due
June, 2006, a $235.0 million Tranche C Term Loan due June, 2007 (collectively
the "Term Loans") and a revolving credit facility providing for revolving loans
and the issuance of letters of credit for the account of

                                        3
<PAGE>

ACL in an aggregate principal amount of up to $100.0 million due June, 2005 (the
"Revolving Credit Facility"). ACL also issued $300.0 million of unsecured
10 1/4% Senior Notes due June 2008 (the "Old Senior Notes"), pursuant to an
indenture (the "Indenture") with United States Trust Company of New York, as
trustee.

DANIELSON ACQUISITION AND RECAPITALIZATION OF ACL

     ACL is a wholly owned subsidiary of its parent holding company, ACL
Holdings. ACL Holdings is an indirect wholly owned subsidiary of DHC.

     Through May 28, 2002, ACL was in default under its bank and bond debt, as
well as its receivables facility, due to nonpayment of interest on the debt as
well as other covenant violations. On December 31, 2001, and subsequent thereto,
ACL elected not to pay the interest due on its bank and bond debt due to ongoing
negotiations with its bankers and noteholders regarding the restructuring of the
debt. ACL obtained forbearance agreements or waivers which enabled it to
complete the Danielson Recapitalization and the debt restructuring described
below and in Notes 1, 3 and 6 to consolidated financial statements.

     On March 15, 2002, ACL entered into a definitive recapitalization agreement
regarding the acquisition and recapitalization of ACL (the "Danielson
Recapitalization") by DHC and certain DHC subsidiaries (collectively with DHC,
"Danielson"). On April 15, 2002, ACL launched an exchange offer pursuant to
which ACL offered to exchange the Old Senior Notes for a new series of 11.25%
senior notes due January 1, 2008 (the "Senior Notes") and a new class of 12%
pay-in-kind senior subordinated notes due July 1, 2008 (the "PIK Notes").

     On April 11, 2002, ACL and certain lenders executed an amendment agreement
under which the Senior Credit Facilities would be amended and restated upon the
satisfaction of certain conditions set forth in the amendment agreement,
including the consummation of the Danielson Recapitalization.

     Effective May 29, 2002, the Danielson Recapitalization was consummated with
$58.5 million of the Old Senior Notes and interest thereon, if any, contributed
by Danielson to ACL Holdings; $230 million, plus accrued interest, of the
remaining $236.5 million in Old Senior Notes exchanged for new Senior Notes, and
new PIK Notes and the Senior Credit Facilities amended. As part of the Danielson
Recapitalization, DHC contributed $25.0 million in cash to ACL Holdings, which
was immediately used to reduce the outstanding term loan debt under the Senior
Credit Facilities. In addition, $50.0 million of the amount outstanding under
the Revolving Credit Facility was converted into a new term loan (the "Tranche A
Term Loan").

     Upon completion of the Danielson Restructuring, ACL became an indirect
wholly owned subsidiary of DHC. At that same time, SZ Investments, LLC increased
its equity ownership in DHC to approximately 18%. SZ Investments, LLC is
affiliated with Samuel Zell, DHC's Chief Executive Officer. Mr. Zell is also
affiliated with HY I Investments, LLC, a holder of approximately 42% of ACL's
Senior Notes and PIK Notes. Philip Tinkler (Chief Financial Officer of DHC) and
William Pate (a director of DHC) are also officers of SZ Investments, LLC and HY
I Investments, LLC.

     As of May 29, 2002, after the $25.0 million reduction in outstanding term
loans, and after the $50.0 million Revolving Credit conversion to a "Tranche A
Term Loan," ACL's secured debt issued under the amended Senior Credit Facilities
consisted of a $46.6 million Tranche A Term Loan due June 30, 2005, a $134.0
million Tranche B Term Loan due June 30, 2006, a $157.7 million Tranche C Term
Loan due June 30, 2007 (collectively the "Term Loans") and the Revolving Credit
Facility providing for revolving loans and the issuance of letters of credit for
the account of ACL in an aggregate principal amount of up to $50.0 million due
June 30, 2005.

     As noted earlier, ACL was unable to meet its payment and other obligations
under these restructured loans and filed for protection under Chapter 11 of the
Bankruptcy Code on January 31, 2003.

                                        4
<PAGE>

GENERAL

     ACL is an integrated marine transportation and service company, providing
barge transportation and ancillary services. The principal cargoes carried are
steel and other bulk commodities, grain, coal and liquids including a variety of
chemicals, petroleum and edible oils. ACL supports its barging operations by
providing towboat and barge design and construction and terminal services. ACL,
through its domestic barging subsidiary American Commercial Barge Line LLC, is
the leading provider of river barge transportation throughout the inland United
States and Gulf Intracoastal Waterway Systems, which include the Mississippi,
Illinois, Ohio, Tennessee and the Missouri Rivers and their tributaries and the
Intracoastal Canals that parallel the Gulf Coast (collectively, the "Inland
Waterways"). In addition, since expanding its barge transportation operations to
South America in 1993, ACL has become the leading provider of barge
transportation services on the Orinoco River in Venezuela and the
Parana/Paraguay River system serving Argentina, Brazil, Paraguay, Uruguay and
Bolivia.

     ACL's position as a leader in South American barging was expanded on
October 24, 2000, when an ACL 80% owned subsidiary, ACBL Hidrovias, Ltd.
("ACBLH"), entered into an agreement with UP River Holdings Ltd. ("Ultrapetrol")
to combine the inland river barge transportation divisions of Ultrapetrol and
ACBLH which operate on the Parana/Paraguay River system in South America. ACBLH
has a 50% ownership interest in the joint venture company, UABL Limited
("UABL"). UABL operates 19 towboats and a combined fleet of 369 dry cargo and
tank barges. UABL serves commodity shippers in Argentina, Bolivia, Brazil,
Paraguay and Uruguay.

     At year end, ACBL's combined barge fleet was the largest in the United
States, consisting of 3,551 covered and 609 open barges, used for the
transportation of dry cargo, and 421 tank barges used for transportation of
liquid cargo. ACBL's barge fleet is supported by the largest towboat fleet in
the United States, consisting of 187 towboats at year end. ACBL has a strong and
diverse customer base consisting of several of the leading industrial and
agricultural companies in the United States.

     ACBL has numerous long-standing customer relationships, with 20 of its top
25 customers having been customers of ACBL for over 20 years. In many cases,
these relationships have resulted in multi-year contracts with these customers.
Certain long-term contracts provide for minimum tonnage or requirements
guarantees, which allow ACBL to plan its logistics more effectively.
Historically, a majority of ACBL's contracts for non-grain cargoes are at a
fixed price [(with inflation-indexed escalation and fuel adjustment clauses)],
increasing the stability and predictability of operating revenue. While ACL's
customer base has remained relatively stable and certain of its operations
provide steady rate levels and profit margins, its results of operations can be
impacted by a variety of external factors. These factors include fluctuations in
rates for shipping grain, which in turn affect rates for shipping other dry
cargoes, weather and river conditions and fluctuations in fuel prices.

     ACL, through its Jeffboat LLC ("Jeffboat") subsidiary, designs and
manufactures towboats and barges for ACBL, other ACL subsidiaries and
third-party customers. Through its American Commercial Terminals LLC ("ACT")
subsidiary, which operates two river terminal sites along the Inland Waterways,
ACL supports its barging operations with transfer and warehousing capabilities
for coal and liquid commodity products moving between barge, truck and rail.
Other terminal locations are owned or operated by Global Materials Services LLC
("GMS"), a joint venture between ACT and Mid-South Terminal Company, L.P., an
unaffiliated third party. Through its Louisiana Dock Company LLC subsidiary, ACL
maintains facilities throughout the Inland Waterways that provide fleeting,
shifting, cleaning and repair services for both towboats and barges, primarily
to ACL but also to third-party customers.

     ACL's objective is to achieve earnings growth in its core barging business
as well as its shipbuilding and terminals operations. Through effective
coordination of its barging, shipbuilding, terminals, fleeting and other
services, ACL reduces costs while maintaining each business unit's ability to
generate third-party revenue. In addition, ACL believes it is a technology
leader in the barging industry. ACL has made significant investments that allow
it to maximize operating efficiency through technologies such as real-time cargo
tracking. This investment in technology strengthens ACL's ability to compete by
lowering its cost structure and enhancing the quality of the services and
products provided.

                                        5
<PAGE>

     Over the past several years, ACL has been able to successfully complete and
integrate multiple large acquisitions, including SCNO Barge Lines, Inc., Hines
Incorporated The Valley Line Company, and the barging operations of Continental
Grain Company, National Marine and Peavey Barge Line and the assets of the other
inland marine transport divisions of ConAgra, Inc. ("Peavey").

     In recent years, ACL also has become the leading provider of river barge
transportation in South America. ACL conducts its international operations
mainly through American Commercial Lines International LLC and its foreign
subsidiaries, ACBL de Venezuela, C.A., ACBL Dominicana SA and ACBL Hidrovias,
Ltd. (collectively, "ACL International"), and through its investment in UABL.
ACL International's fleet consisted at year end of six covered and 113 open
hopper barges, three tank barges, seven deck barges and six towboats. Through
UABL, ACL International participates in the operation of an additional 318
covered hoppers, 15 open hopper barges, 36 tank barges and 19 boats. ACL
International entered the South American market in 1993 by establishing
operations to serve a new customer's shipping needs along the Orinoco River in
Venezuela. Since then, the focus of ACL International's strategy has been to
serve customers that require reliable, low-cost marine transportation abroad.
ACL International works closely with current and potential customers to
establish mutually beneficial long-term contracts to serve these needs. By
following this strategy, ACL International has become the leading provider of
barge transportation on the Orinoco River in Venezuela and, through UABL, the
leading provider of barge transportation on the Parana/ Paraguay River system
serving Argentina, Brazil, Paraguay, Uruguay and Bolivia. Through formation of
the ACBL Dominicana SA subsidiary in 2001, ACL International also began
operations on the Higuamo River in the Dominican Republic. Because demand for
transportation in South America is expected to grow and there are several
consolidation opportunities in the South American market, ACL International has
the opportunity to broaden the scope of its operations over the long term.

INDUSTRY

     Domestic barging focuses on four core commodity groups: steel/other bulk
commodities, grain, coal and liquids. Because barging provides a low-cost
transportation alternative for high mass/high volume cargoes, many bulk
commodity shippers choose barging as their preferred mode of transportation.
Coal is the barging industry's largest transport commodity from a tonnage
standpoint, while grain is a material driver for the industry's overall freight
rate structure for dry cargo movements due to the effect the varying levels of
grain export demand has on capacity and rates. Chemicals are the primary liquid
cargo handled by liquid barge carriers, along with petroleum products, edible
oils, molasses and ethanol. Safety and quality control are essential factors in
serving this market.

     The barging industry uses two types of equipment to move freight: towboats,
providing the power source, and barges, providing the freight capacity. Each
standard dry cargo barge is capable of transporting approximately 1,500 tons of
cargo with the most common tank barges being either 10,000 barrel or 30,000
barrel capacity. The combination of a towboat and barges is called a tow, and
usually consists of one towboat and from 5 to 40 barges. The number of barges in
a tow will depend upon the horsepower of the towboat, the river capacity and
conditions, the load and empty mix of the tow, the direction of travel and the
commodity carried.

     Since 1980, the industry has been consolidating as acquiring companies have
moved towards attaining the widespread geographic reach necessary to support
major national customers. ACL's management believes the consolidation process
will continue. Following Ingram Industries Inc.'s (which operated 1,700 barges
and 62 towboats) acquisition of Midland Enterprises Inc. (which operated 2,300
barges and 80 towboats) on July 2, 2002, there are five major domestic barging
companies that operate more than 1,000 barges. There are also 12 mid-sized
operators that operate more than 200 barges, and approximately 14% of the
barging capacity is held by small carriers that operate fewer than 200 barges.
As the industry continues to consolidate, ACL believes that it could realize
cost savings and synergies by merging smaller operators into its existing
network.

                                        6
<PAGE>

COMPANY OPERATIONS

  DOMESTIC BARGING

     In 2002, ACBL maintained its position as the leading provider of barge
transportation in the United States, operating over nearly 11,000 miles of the
Inland Waterways and transporting a wide variety of commodities, including
steel/other bulk commodities, grain, coal and liquids. ACBL is ranked first in
the United States in terms of revenues, barges operated and gross tons hauled.
In terms of annual riverborne tonnage, ACBL is the leading grain transporter in
the industry, and is the second largest liquids transporter. As of year end,
ACBL's fleet consisted of 4,160 dry cargo hopper barges and 421 double-skinned
tank barges. ACBL operated 1,601 of these dry cargo hopper barges and 42 of
these tank barges pursuant to charter agreements. The charter agreements have
expiration dates ranging from one to fifteen years. ACBL expects generally to be
able to renew or replace such charter agreements as they expire. Although ACBL
does not expect to purchase a material number of new barges in the year 2003,
ACBL has a program to renew its fleet through which certain third party lenders
or entities will acquire new equipment from Jeffboat and lease that equipment to
ACBL. ACBL anticipates that it will obtain 50 new barges through this program in
2003.

                    DOMESTIC FLEET PROFILE BY BARGE TYPE(1)

<Table>
<Caption>
                                                                          AVERAGE AGE
                                                                            (YEARS)
                                                            NUMBER OF   ---------------
BARGE TYPES                                                  BARGES     ACBL   INDUSTRY
-----------                                                 ---------   ----   --------
<S>                                                         <C>         <C>    <C>
Covered Hoppers...........................................    3,551      18       17
Open Hoppers..............................................      609      26       15
Tank Barges...............................................      421      22       22
                                                              -----
          Total...........................................    4,581      19       17
                                                              =====
</Table>

---------------

(1) Includes both owned and chartered equipment and excludes marine equipment
    used in international operations. See below in this Report at Item 1,
    Business, Company Operations -- International Barging.

     In addition, at year end ACBL operated 187 towboats with an average age of
approximately 26 years. No comparative industry data is available with respect
to towboats. At year end, 48 of these towboats were operated by ACBL pursuant to
charter agreements. The charter agreements have expiration dates ranging from
one to five years. ACBL expects to be able to renew such charter agreements as
they expire.

     The size and diversity of ACBL's towboat fleet allows it to deploy the
towboats to the portions of the Inland Waterways where they can most effectively
operate. For example, ACBL's towboats that have in excess of 9,000 horsepower
operate with tow sizes of as many as 40 barges along the Lower Mississippi River
where the river channels are wider and there are no restricting locks and dams.
ACBL's 5,600 horsepower towboats operate along the Ohio, Upper Mississippi and
Illinois Rivers where the river channels are narrower and restricting locks and
dams are more prevalent. ACBL deploys smaller horsepower towboats for shuttle
and harbor services.

                       DOMESTIC TOWBOATS BY HORSEPOWER(1)

<Table>
<Caption>
                                                              NUMBER OF   AVERAGE AGE
HORSEPOWER                                                    TOWBOATS      (YEARS)
----------                                                    ---------   -----------
<S>                                                           <C>         <C>
6,700 -- 10,500.............................................      15          24
5,000 --  6,500.............................................      60          26
1,950 --  4,900.............................................      31          29
1,800 and below.............................................      81          26
                                                                 ---
          Total.............................................     187          26
                                                                 ===
</Table>

---------------

(1) Includes both owned and chartered equipment and excludes marine equipment
    used in international operations. See below in this Report at Item 1,
    Business, Company Operations -- International Barging.

                                        7
<PAGE>

     ACBL's barging operations encompass four core commodity groups: steel/other
bulk commodities, grain, coal and liquids. In terms of tonnage and revenue,
grain and coal are ACBL's largest transport commodities with steel/other bulk
commodities and liquids second and third, respectively.

                  ACL DOMESTIC BARGING OPERATIONS BY COMMODITY

<Table>
<Caption>
                                     2002                                2001                                2000
                       ---------------------------------   ---------------------------------   ---------------------------------
                       REVENUE     %     TONNAGE     %     REVENUE     %     TONNAGE     %     REVENUE     %     TONNAGE     %
                       -------   -----   -------   -----   -------   -----   -------   -----   -------   -----   -------   -----
                                                           (DOLLARS AND TONNAGE IN MILLIONS)
<S>                    <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
Grain/Coal...........   $240      41.2    38.9      55.2    $270      42.4    40.9      56.5    $229      38.7    37.2      55.0
Bulk/Steel...........    162      27.8    23.3      33.0     167      26.3    23.2      32.0     153      25.8    22.1      32.7
Liquids..............     97      16.7     8.3      11.8     111      17.5     8.3      11.5     113      19.1     8.3      12.3
Other(1).............     83      14.3     0.0       0.0      88      13.8     0.0       0.0      97      16.4     0.0       0.0
                        ----     -----    ----     -----    ----     -----    ----     -----    ----     -----    ----     -----
         Total.......   $582     100.0    70.5     100.0    $636     100.0    72.4     100.0    $592     100.0    67.6     100.0
                        ====     =====    ====     =====    ====     =====    ====     =====    ====     =====    ====     =====
</Table>

---------------

(1) Includes towing and demurrage.

     To support its domestic barging operations, ACL maintains shore-based
facilities throughout the Inland Waterways that provide fleeting, shifting,
cleaning and repair services for both towboats and barges, including five
towboat dry-docks and nine barge dry-docks.

  INTERNATIONAL BARGING

     ACL launched its international barging operations in South America in 1993.
ACL International currently operates on the Orinoco River, with headquarters in
Puerto Ordaz, Venezuela, and through UABL on the Parana/Paraguay River system,
with headquarters in Buenos Aires, Argentina. ACL International also operates on
the Higuamo River in the Dominican Republic with headquarters in Santa Domingo.
International operations generated 6% of ACL's 2002 operating revenue, and
management expects revenues from international operations to increase in the
coming years. ACL International's expansion in South America has been
accomplished by introducing new equipment and technology to the South American
river systems, utilizing systems used in the United States, developing new
processes to meet local requirements and consolidating operations to improve
efficiencies. ACL International expects to use its expertise to expand its
barging operations into new regions.

           INTERNATIONAL FLEET PROFILE BY BARGE TYPE (EXCLUDES UABL)

<Table>
<Caption>
                                                              NUMBER OF   AVERAGE AGE
BARGE TYPES                                                    BARGES       (YEARS)
-----------                                                   ---------   -----------
<S>                                                           <C>         <C>
Covered Hoppers.............................................       6          17
Open Hoppers................................................     113          18
Tank Barges.................................................       3          30
Deck........................................................       7          10
                                                                 ---
          Total.............................................     129          18
                                                                 ===
</Table>

     At year end, ACL International operated 20 dry cargo barges pursuant to
charter agreements with expiration dates of one year. ACL International expects
generally to be able to renew such charter agreements as they expire. In
addition, ACL International operated six towboats.

BARGE AND TOWBOAT DESIGN AND MANUFACTURING

     Jeffboat manufactures both towboats and barges for ACBL, ACL International,
and other customers primarily for inland river service, and also produces
coastal and offshore equipment and other special purpose vessels such as cruise
boats, casino boats, and U.S. Army Corps of Engineers vessels. Jeffboat has long
been recognized as a leader in inland marine technology, incorporating designs
and propulsion systems derived from

                                        8
<PAGE>

ongoing model basin studies. Jeffboat also provides around-the-clock vessel
repair services, including complete dry-docking capabilities, back-up support
for emergency cargo salvage and equipment recovery, and full machine shop
facilities for repair and storage of towboat propellers, rudders and shafts. In
2002, Jeffboat was a leading producer of inland barges in the United States,
producing approximately one-third of the new supply of inland barges for the
barging industry.

     ACL believes that the relationship between its transportation operations
and Jeffboat provides a competitive advantage to ACL, permitting optimization of
construction schedules and asset utilization between ACL's internal requirements
and sales to customers. The relationship also gives Jeffboat's engineers an
opportunity to collaborate with ACL's barge operations on innovations that
optimize towboat performance and barge life.

     Operations at Jeffboat were interrupted in 2002 by a strike of its
unionized employees from April 30, 2002 until July 9, 2002.

     Due to sharply decreased demand for new barges and other marine equipment,
Jeffboat has subsequently laid off a substantial number of its employees.

TERMINALS

     ACL's terminal subsidiary, ACT, directly operates two facilities located on
the Inland Waterways at St. Louis, Missouri and Memphis, Tennessee. GMS, ACL's
terminal joint venture, operates 22 terminal or warehouse facilities at
Guntersville, Alabama; Jeffersonville and Evansville, Indiana; Louisville,
Kentucky; Omaha and Nebraska City, Nebraska; Cincinnati, Ohio; Decatur, Alabama
(two sites); Helena, Pine Bluff, West Memphis (two sites) and Ft. Smith (two
sites), Arkansas; Chicago, Illinois; Industry, Pennsylvania (two sites);
Memphis, Tennessee (two sites); Houston, Texas; and Vlissingen, The Netherlands.
GMS also operates four service operations at Battle Creek, Michigan; Mingo
Junction, Ohio; Brooklyn Junction, West Virginia; and Vancouver, Canada. In
addition, GMS and ACL are equity investors in a terminal operation in Puerto
Ordaz, Venezuela.

CUSTOMERS

     ACBL's primary customers include many of the nation's major industrial and
agricultural companies. ACBL enters into a wide variety of short and long-term
contracts with these customers ranging from annual one-year contracts to
multi-year extended contracts with inflation adjustments. ACBL's top 25
customers accounted for 54% of ACL's fiscal 2002 operating revenue. One
customer, Cargill, Inc., accounted for more than 10% of ACL's fiscal 2002
consolidated operating revenue.

     ACBL operates a 24-hour planning center at its headquarters in
Jeffersonville, Indiana to provide around-the-clock customer contact and
planning capability. In addition to enhanced customer service, the planning
center has improved communication between vessels and office staff for more
efficient logistics and better asset utilization.

COMPETITION

     ACL's barging operations compete on the basis of price, service and
equipment availability. Primary competitors of ACL's barging operations include
other barge lines, railroads, trucks and pipelines. Barge transportation
provides the lowest unit cost of delivery of any major form of transportation
for high volume, bulk products, delivering 12% of the volume of U.S. freight for
2% of the total U.S. freight cost, according to data available from the U.S.
Department of Transportation. One standard hopper barge has the equivalent
carrying capacity of 15 railcars or 58 trucks. In areas where shippers have
access to water transportation, the rate per ton-mile is significantly less than
rail rates and approximately 80% to 90% lower than truck rates. While it is
generally less expensive to move large volumes of certain liquids by pipeline
when both the origin and destination have a direct connection to the pipeline,
barge transportation of liquids has greater flexibility with respect to the
origins and destinations that can be served.

                                        9
<PAGE>

     Competition within the barging industry for major commodity contracts is
intense. There are a number of companies offering transportation services on the
Inland Waterways. Carriers compete not only on the basis of commodity shipping
rates, but also with respect to value-added services, including more convenient
and flexible scheduling, more timely information and different equipment. ACL
believes its vertical integration provides it with a competitive advantage. ACL
utilizes its boat and barge repair and vessel fleeting facilities, Jeffboat's
shipbuilding capabilities and the geographically broad-based terminals of ACT
and GMS to support its core barging business and to offer a combination of
competitive pricing and high quality service to its customer base.

     ACL considers Trinity Industries Inc. to be a significant competitor to
Jeffboat. ACL believes that in addition to Trinity, Jeffboat's other significant
competitors include Bollinger Machine Shop and Shipyard, Inc. and Galveston
Shipbuilding Company for barges and Friede Goldman Halter, Inc. and Quality
Shipyards, Inc. for towboats, all of which are located primarily on the Gulf of
Mexico. These other competitors do not currently manufacture barges, however,
should market conditions change they could quickly ready their shipyards to
construct inland barges and related equipment.

PROPERTIES

     ACL owns or operates numerous land-based facilities that support its
overall marine operations. These facilities include a major construction
shipyard, two terminal facilities for cargo transfer and handling throughout the
river system, 12 locations (which include 19 separate facilities and service
operations) for the staging, fleeting, interchange and repair of barges and
towboats and a corporate office complex in Jeffersonville, Indiana. An
additional 26 terminal facilities and service locations are operated by GMS.

     The significant ACL-owned facilities among these properties include:

     - The Jeffboat shipbuilding facility in Jeffersonville, Indiana is the
       largest single-site shipyard facility on the Inland Waterways. It is
       situated on 86 acres with 5,600 feet of frontage on the Ohio River across
       from Louisville, Kentucky. There are 38 buildings on the property
       comprising a total of 305,000 square feet under roof.

     - ACL's main office complex is located on 22 acres in Jeffersonville,
       Indiana. The main building has approximately 140,000 square feet, and
       five outlying buildings have a total of 25,000 square feet.

GOVERNMENT REGULATION

  GENERAL

     ACL's business is highly regulated and subject to government regulation in
the form of international treaties, conventions, national, state and local laws
and regulations, and laws and regulations of the flag nations of its vessels,
including laws relating to the discharge of materials into the environment.
Because such conventions, laws and regulations are regularly reviewed and
revised by the issuing governmental bodies, ACL is unable to predict the
ultimate costs or impacts of compliance. In addition, ACL is required by various
governmental and quasi-governmental agencies to obtain certain permits, licenses
and certificates with respect to its business operations. The kinds of permits,
licenses and certificates required depend upon such factors as the country of
registry, the commodity transported, the waters in which the vessel operates,
the nationality of the vessel's crew, the age of the vessel and the status of
ACL as owner, operator or charterer. ACL believes that it currently has all
permits, licenses and certificates necessary to permit its vessels to operate in
their current trades.

     ACL's domestic transportation operations are subject to regulation by the
U.S. Coast Guard, federal laws, state laws and certain international
conventions.

     ACL's inland tank barges are inspected by the U.S. Coast Guard and carry
certificates of inspection. ACL's towing vessels and dry cargo barges are not
subject to U.S. Coast Guard inspection requirements.

                                        10
<PAGE>

  JONES ACT

     The Jones Act is a federal cabotage law that restricts domestic marine
transportation in the United States to vessels built and registered in the
United States. Furthermore, the Jones Act requires that the vessels be manned by
U.S. citizens and owned by U.S. citizens. For a limited liability company to
qualify as a U.S. citizen for the purpose of domestic trade, 75% of the
company's beneficial stockholders must be U.S. citizens. ACL presently meets all
of the requirements of the Jones Act for its owned vessels.

     Compliance with U.S. ownership requirements of the Jones Act is very
important to the operations of ACL, and the loss of Jones Act status could have
a significant negative effect for ACL. ACL monitors the citizenship requirements
under the Jones Act of its employees and beneficial equity holders and will take
action as necessary to ensure compliance with the Jones Act requirements.

     During the past several years, the Jones Act cabotage laws have been
challenged by interests seeking to facilitate foreign flag competition for trade
reserved for U.S. flag vessels under the Jones Act. These efforts have been
consistently defeated by large margins in the U.S. Congress. ACL believes that
continued efforts may be made to modify or eliminate the cabotage provisions of
the Jones Act. If such efforts are successful so as to permit foreign
competition, such competition could have an adverse effect on ACL.

  USER FEES AND FUEL TAX

     Federal legislation requires that inland marine transportation companies
pay a user fee in the form of a tax assessed upon propulsion fuel used by
vessels engaged in trade along inland waterways that are maintained by the U.S.
Army Corps of Engineers. Such user fees are designed to help defray the costs
associated with replacing major components of the waterway system, including
dams and locks, and to build new projects. A significant portion of the Inland
Waterways on which ACL's vessels operate are maintained by the Corps of
Engineers.

     ACL presently pays a federal fuel tax of 24.4 cents per gallon of
propulsion fuel consumed by its towboats in certain geographic regions.
Legislation has been proposed to repeal a portion (4.3 cents per gallon) of the
federal fuel tax. In the future, existing user fees may be increased, and
additional user fees imposed, to defray the costs of inland waterways
infrastructure and navigation.

ENVIRONMENTAL MATTERS

     ACL's operations are subject to federal, state and local environmental laws
and regulations which, among other things, specify requirements for the
management of oil, hazardous wastes, and hazardous substances and impose
liability for releases of these materials into the environment. ACL devotes
resources toward achieving and maintaining compliance with environmental
requirements. ACL believes, except as otherwise set forth herein, that it is in
material compliance with environmental requirements. However, there can be no
assurance that ACL will be at all times in material compliance with all
environmental requirements.

     As is the case with others in the maritime industry, a release of oil,
hazardous waste, hazardous substances or other pollutants into the environment
at or by its properties or vessels, as a result of ACL's current or past
operations, or at a facility to which ACL has shipped wastes, or the existence
of historical contamination at any of its properties, could result in material
liability to ACL. ACL conducts loading and unloading of dry commodities, liquids
and scrap materials in and near waterways. Such operations present a potential
that some such materials might be spilled into a waterway thereby exposing ACL
to potential liability. While the amount of such liability could be material,
ACL endeavors to conduct its operations in a manner that it believes reduces
such risks.

     Federal, state and local governments could in the future enact laws or
regulations concerning environmental matters that affect ACL's operations or
facilities, increase its costs of operation, or adversely affect the demand for
ACL's services. ACL cannot predict the effect that such future laws or
regulations could have on its business. Nor can ACL predict what environmental
conditions may be found to exist at its current or past facilities or at other
properties where ACL or its predecessors have arranged for the disposal of
wastes and the extent of liability that may result from the discovery of such
conditions. It is possible that such future laws or

                                        11
<PAGE>

undiscovered conditions could have a material adverse effect on ACL's business,
financial condition and results of operations.

     ACL is involved as a potentially responsible party ("PRP") or interested
party with respect to the clean-up of hazardous waste disposal sites (Superfund
sites) identified under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), the federal Superfund clean-up statute,
and similar state laws. While CERCLA authorizes joint and several liability for
remediation costs at clean-up or remediation sites, as a practical matter, such
costs are typically allocated among the waste generators and other involved
parties.

     - Pursuant to the Recapitalization, ACL assumed liability under an order
       from the U.S. Environmental Protection Agency ("EPA") under CERCLA,
       regarding contamination at the former Dravo Mechling property in Seneca,
       Illinois. ACL has complied with the terms of the order, which requires
       performance of site sampling and certain remediation at the site. As a
       result of these remediation efforts, the site has been materially
       remediated. The EPA and the State of Illinois have issued "no further
       remediation" letters to ACL indicating that neither entity will require
       further remediation. In 2001, ACL sold the Seneca, Illinois property to a
       third party. ACL is aware of no ongoing environmental issues or exposure
       with respect to this property.

     - Jeffboat was named a PRP at the Third Site in Zionsville, Indiana.
       Jeffboat has also received notice of potential liability with regard to
       waste allegedly transshipped from the Third Site to the Four County
       Landfill in Rochester, Indiana. The EPA has conducted an environmental
       site assessment of this property and has approved a work plan to conclude
       remediation of the site. The expected cost of the remediation has been
       funded by the various PRPs, of which Jeffboat has funded its percentage
       share (3.6%). At this time, no further expense associated with the
       remediation of Third Site is expected.

     - A group of barge operators, including National Marine, had barges cleaned
       at the SBA Shipyard in Houma, Louisiana, which is now conducting
       voluntary environmental remediation. ACL assumed National Marine's
       liability in this matter pursuant to the Recapitalization. The SBA
       Shipyard owner who previously funded the cleanup effort has become
       insolvent and, as a result, the barge operators involved have formed a
       group to fund remediation. The barge operators have funded their
       currently expected remediation expenses, of which ACL has a 55% share.
       The barge operator group has removed all liquid waste capable of being
       pumped from the site and the EPA has preliminarily approved a work plan
       to remove the solid waste. Remediation of the solid waste has not
       commenced as of the date of this Report, but is expected to commence
       within the next year.

     - EPS, Inc., a wholly-owned subsidiary of Vectura, is the owner of Connex
       Pipe Systems' closed solid waste landfill located in Marietta, Ohio
       ("Connex"). Liability for the monitoring and potential clean-up of Connex
       was assumed by ACL (up to $30,000 per year) pursuant to the
       Recapitalization. In 1986 Connex was subject to an Ohio consent judgment
       ("Consent Judgment") whereby it agreed to remediate and monitor the
       closed landfill for a period of three years. Connex complied with the
       Consent Judgment and in 1994 the Ohio Environmental Protection Agency
       ("Ohio EPA") issued a letter confirming Connex's compliance. However, the
       Ohio EPA changed its monitoring requirements in 1997 to require longer
       periods of monitoring for closed sites and attempted to apply those new
       rules to Connex. Connex, and other similarly situated companies, objected
       to the new rule which retroactively changed monitoring requirements. On
       November 30, 1998, the Ohio EPA issued a finalized guidance rule ("Final
       Guidance") applicable to Connex. ACL believes that the Final Guidance
       confirmed Connex's position that it had fully complied with the
       applicable monitoring requirements and owed no further monitoring. ACL
       believes that it has no further monitoring obligations at Connex and
       written confirmation from the Ohio EPA has been requested to confirm that
       ACL's monitoring responsibilities have ceased.

     - ACBL has received notice from the EPA that it is a PRP at the State
       Marine of Port Arthur ("State Marine") and the Palmer Barge Line
       Superfund Sites in Port Arthur, Texas in regard to approximately 50
       barges that were cleaned by State Marine and five barges cleaned by
       Palmer Barge Line for ACBL in the early 1980s. The EPA has requested that
       ACBL, and other potentially responsible companies,

                                        12
<PAGE>

       enter into negotiations for the performance of a Remedial Investigation
       and Feasibility Study, however, there has been no further action to
       pursue any response costs from ACBL as a PRP.

     - On July 10, 2002, a lawsuit was filed in Clark Circuit Court against
       Jeffboat, ACBL, ACL and DHC by two Jeffersonville, Indiana residents
       purporting to represent a class of individuals affected by alleged
       fugitive emissions from Jeffboat painting activity. The named plaintiffs,
       seeking actual and punitive damages, claim that fugitive paint emissions
       have diminished the value of their automobiles and other property, and
       seek redress under a variety of theories, including negligence and
       trespass. ACBL, ACL and DHC moved for and received a dismissal with
       prejudice. Jeffboat intends to defend this litigation vigorously and to
       contest any potential class certification.

     - Jeffboat, ACBL, ACL and DHC have also received a "Notice of Citizens
       Suit" concerning the alleged fugitive emissions and alleging other
       misconduct with respect to water pollution. The notice was filed by the
       two named plaintiffs in the class action described above and seven other
       individuals. The notice seeks to have state and federal authorities, who
       have previously inspected Jeffboat and found no violations, to take
       additional regulatory action against Jeffboat, or if they do not take
       such action, the right to sue to ask a federal court to redress their
       allegations. A resulting suit would not entitle the citizens to damages,
       but could result in the imposition of penalties payable to the government
       and liability for the plaintiffs' attorneys' fees. To date, no such
       action has been filed. Jeffboat would defend vigorously any resulting
       lawsuit against it.

     Because CERCLA liability is retroactive, it is possible in the future that
ACL may be identified as a PRP with respect to other waste disposal sites, where
wastes generated by ACL have been transported and disposed.

     As of December 27, 2002, ACL had reserves of approximately $0.4 million for
environmental matters. ACL believes it has established reasonable and adequate
reserves to cover its known environmental liabilities. However, given the
uncertainties associated with such matters, there can be no assurance that
liabilities will not exceed reserves.

OCCUPATIONAL HEALTH AND SAFETY MATTERS

     ACL's domestic vessel operations are primarily regulated by the U.S. Coast
Guard for occupational health and safety standards. ACL's domestic shore
operations are subject to the U.S. Occupational Safety and Health Administration
regulations. While there can be no assurance that ACL is at all times in
complete compliance with all such regulations, ACL believes that it is in
material compliance with such regulations, and that any noncompliance is not
likely to have a material adverse effect on ACL. There can be no assurance,
however, that claims will not be made against ACL for work related illness or
injury, or that the further adoption of occupational health and safety
regulations in the United States or in foreign jurisdictions in which ACL
operates will not adversely affect its business, financial condition and results
of operations.

     ACL endeavors to reduce employee exposure to hazards incident to its
business through safety programs, training and preventive maintenance efforts.
ACL emphasizes safety performance in all of its operating divisions. ACL
believes that its safety performance consistently places it among the industry
leaders as evidenced by what it believes are lower injury frequency levels than
many of its competitors. ACL has been certified in the American Waterway
Operators Responsible Carrier Program which is oriented to enhancing safety in
vessel operations.

INTELLECTUAL PROPERTY

     ACL registers some of its material trademarks, tradenames and copyrights
and has acquired patent protection for some of its proprietary processes. ACL
has current trademark rights to conduct its business.

INSURANCE

     ACL maintains protection and indemnity insurance ("P&I") to cover
liabilities arising out of the ownership and operation of marine vessels. ACL
maintains hull and machinery insurance policies on each of

                                        13
<PAGE>

its vessels in amounts related to the value of each vessel. Each vessel is
insured at its current fair market value; however, damage claims are subject to
an annual aggregate deductible of $4 million. ACL maintains coverage for
shore-side properties, shipboard consumables and inventory, spare parts,
worker's compensation, and general liability risks. ACL maintains primary
insurance and third party guaranty agreements as to its statutory liabilities
for discharges of oil or hazardous substances under the federal Oil Pollution
Act of 1990. In the future, ACL may elect to self-insure such primary statutory
liability amounts; however, ACL currently maintains and expects to continue to
maintain excess coverage for pollution liability. All insurance policies have
been obtained and arranged through the Aon Insurance Brokerage Syndicate, other
brokers or direct placement with commercial insurers, and maintained with
underwriters in the United States, British and other markets.

     Insurance premiums for the coverages described above will vary from year to
year depending upon ACL's loss record and market conditions. In order to reduce
premiums, ACL maintains certain per occurrence deductible, annual aggregate
deductible and self-insured retention levels that it believes are prudent and
generally consistent with those maintained by other shipping companies.

EMPLOYEES

     As of December 27, 2002, on a consolidated basis, ACL employed 3,528
individuals. Of this total, 650 individuals were engaged in shore-side
management and administrative functions, 2,111 individuals were employed as boat
officers and crew members on its marine vessels, 745 individuals were engaged in
production and repair activities at ACL's shipyard facilities, and 22
individuals were employed in production and hourly work activities at ACL's
terminals. Six hundred of ACL's domestic shore-side employees are represented by
unions. Most of these unionized employees (approximately 578) are represented by
the International Brotherhood of Teamsters at ACL's Jeffboat shipyard facility,
where the contract with the union expires in April 2007. One hundred twelve of
ACL's South American employees are represented by unions.

RISK FACTORS

  RISKS ASSOCIATED WITH OUR BUSINESS

     The following risk factors could have a material adverse effect on ACL's
business, financial condition and results of operations.

BANKRUPTCY-SPECIFIC RISKS

  UNCERTAINTIES RELATING TO BANKRUPTCY PROCEEDINGS

     ACL's (references to ACL herein includes reference to ACL and the other
Debtors) future results are dependent upon successfully obtaining approval,
confirmation and implementation of a plan or plans of reorganization. ACL has
not yet submitted such plan or plans to the Bankruptcy Court for approval and
cannot make any assurance that it will be able to submit and obtain confirmation
of any such plan or plans in a timely manner. Failure to confirm a plan or plans
in a timely manner could adversely affect ACL's operating results, as ACL's
ability to obtain financing to fund its operations and its relations with its
customers may be harmed by protracted bankruptcy proceedings. Moreover, even
following confirmation, consummation and implementation of a plan or plans of
reorganization, ACL's operating results may be harmed by the possible reluctance
of prospective lenders and customers to do business with a company that recently
emerged from bankruptcy proceedings.

     Currently, it is not possible to predict with certainty the length of time
ACL will operate under the protection of Chapter 11, the outcome of the Chapter
11 proceedings in general, or the effect of the proceedings on the business of
ACL or on the interests of the various creditors and stakeholders. Under the
priority scheme established by the Bankruptcy Code, certain post-petition
liabilities and pre-petition liabilities need to be satisfied before equity
holders (DHC controls 100% of ACL's equity) can receive any distribution. The
ultimate recovery to equity holders, if any, will not be determined until
confirmation of a plan or plans of reorganization. There can be no assurance as
to what value, if any, will be ascribed to the membership

                                        14
<PAGE>

interests of ACL and the other Debtors in the bankruptcy proceedings, and the
value of the equity could be substantially diluted or cancelled.

     ACL may, under certain circumstances, file motions with the Bankruptcy
Court to assume or reject its executory contracts. An executory contract is one
in which the parties have mutual obligations to perform (e.g., contracts of
affreightment, charters, equipment leases and real property leases). Unless
otherwise agreed, the assumption of a contract will require ACL to cure all
prior defaults under the related contract, including all pre-petition
liabilities. Unless otherwise agreed, the rejection of a contract is deemed to
constitute a breach of the agreement as of the moment immediately preceding the
Chapter 11 filing, giving the other party to the contract a right to assert a
general unsecured claim for damages arising out of the breach. Additional
liabilities subject to the proceedings may arise in the future as a result of
the rejection of executory contracts, including leases, and from the
determination of the Bankruptcy Court (or agreement by parties in interest) of
allowed claims for contingencies and other disputed amounts. Conversely, the
assumption of executory contracts and unexpired leases may convert liabilities
shown as subject to compromise to post-petition liabilities. Due to the
uncertain nature of many of the potential claims, ACL is unable to project the
magnitude of such claims with any degree of certainty.

     The potential adverse publicity associated with the Chapter 11 filing and
the resulting uncertainty regarding ACL's future prospects may hinder ACL's
ongoing business activities and its ability to operate, fund and execute its
business plan by (i) impairing relations with existing and potential customers;
(ii) negatively impacting the ability of ACL to attract, retain and compensate
key executives and associates and to retain employees generally; (iii) limiting
ACL's ability to obtain trade credit; (iv) and impairing present and future
relationships with vendors and service providers.

     ACL has incurred and will continue to incur significant costs associated
with the reorganization. The amount of these costs, which are being expensed as
incurred, are expected to have a significant adverse affect on the results of
operations and cash flows.

     The unsecured creditors committee appointed in the bankruptcy proceedings
has the right to be heard on all matters that come before the Bankruptcy Court.
There can be no assurance that the unsecured creditors committee will support
ACL's positions in the bankruptcy proceeding or the plan(s) of reorganization
once proposed, and disagreements between ACL and the committee could protract
the bankruptcy proceedings, could negatively impact ACL's ability to operate
during bankruptcy and could delay ACL's emergence from bankruptcy.

     Certain additional risk factors associated with the reorganization include,
but are not limited to, the following: potential adverse developments with
respect to ACL's liquidity, results of operations or ability to continue as a
going concern; Bankruptcy Court approval of the motions filed by ACL from time
to time; the availability of exit financing to facilitate emergence from Chapter
11 pursuant to a plan of reorganization; risks associated with third parties
seeking and obtaining court approval (i) to terminate or shorten the exclusivity
period for ACL to propose and confirm one or more plans of reorganization, (ii)
for the appointment of a Chapter 11 trustee or (iii) to convert ACL's cases to
Chapter 7 cases for the liquidation of its businesses; and the ability of ACL to
execute on its business plans.

  POTENTIAL SALE OF ASSETS

     In connection with the development of alternative plans of reorganization,
ACL will evaluate any and all proposals to maximize the value of all ACL's
stakeholders, including the sale of certain of its remaining business lines.
There can be no assurance that ACL will be able to consummate such asset sales
or that any asset sales will be at or greater than the current net book value of
such assets.

  ACL'S LIQUIDITY IS DEPENDENT ON A NUMBER OF FACTORS

     ACL's liquidity generally depends on cash provided by operating activities
and access to the DIP Credit Facility. The ability of ACL to continue as a going
concern (including its ability to meet post-petition obligations) and the
continued appropriateness of using the going concern basis for its financial
statements are

                                        15
<PAGE>

dependent upon, among other things, (i) ACL's ability to comply with the
covenants of the DIP Credit Facility, (ii) the ability of ACL to maintain
adequate cash on hand, (iii) the ability of ACL to continue to generate cash
from operations, (iv) confirmation of a plan of reorganization under the
Bankruptcy Code and the terms of such plan, (v) ability of ACL to attract,
retain and compensate key executives and associates and to retain employees
generally and (vi) ACL's ability to achieve profitability following such
confirmation.

COMPANY-SPECIFIC RISKS

  RISKS OF ADVERSE WEATHER AND RIVER CONDITIONS

     ACL's barging operations are affected by weather and river conditions.
Varying weather patterns can affect river levels and cause ice in Northern
United States river areas. For example, the Upper Mississippi River closes
annually from approximately mid-December to mid-March and ice conditions can
hamper navigation on the upper reaches of the Illinois River during the winter
months. In addition, adverse river conditions affect towboat speed, tow size and
loading drafts and can delay barge movements. Lock outages due to lock
maintenance and/or other interruptions in normal lock operation can also delay
barge movements. Jeffboat's waterfront location is subject to occasional
flooding. Jeffboat's manufacturing operations that are conducted outdoors are
also subject to weather conditions, which may adversely impact production
schedules. Terminals may also experience operational interruptions as a result
of weather and river conditions. It is likely that ACL's operations will be
subject to adverse weather or river conditions in the future and there can be no
assurance that such weather or river conditions will not have a material adverse
effect on ACL's business, financial condition, results of operations and cash
flows.

  EXPOSURE TO GRAIN EXPORTS

     ACL's dry cargo barging business in North America is significantly affected
by the level of grain export volume handled through the Gulf of Mexico ports.
Grain exports can vary due to, among other things, crop harvest yield levels in
the United States and abroad. Overseas grain shortages can increase demand for
U.S. grain, while worldwide over-production can decrease the demand for U.S.
grain. This variable nature of grain exports can result in temporary barge
oversupply which can drive down freight rates. There can be no assurance that
historical levels of North American grain export volume will be maintained in
the future and, to the extent supply imbalances were to prevail for a
significant period of time, they could have a material adverse effect on ACL's
business, financial condition, results of operations and cash flows.

  SEASONALITY

     ACL's business is seasonal, and its quarterly revenues and profits
historically have been lower during the first and second fiscal quarters of the
year (January through June) and higher during the third and fourth fiscal
quarters (July through December) due to the North American grain harvest. In
addition, working capital requirements fluctuate throughout the year. Adverse
market or operating conditions during the last four months of the year could
have a greater effect on ACL's business, financial condition, results of
operations and cash flows than during other periods.

  VARIABILITY

     Freight transportation rates may fluctuate from season to season and year
to year, which could result in varying levels of cash flow. The level of dry and
liquid cargoes requiring transportation on the Inland Waterways will vary due to
numerous factors, including global economic conditions and business cycles,
domestic agricultural production/demand as well as international agricultural
production/demand and the value of the U.S. dollar relative to other currencies.
In addition, the number of barges and towboats in the overall industry fleet
available to transport these cargoes will vary from year to year as older
vessels are retired and scrapped and new vessels are constructed and placed into
service. The resulting relationship between available cargoes and available
vessels will vary with periods of low vessel availability and high cargo demand
causing higher freight rates and periods of high vessel availability and low
cargo demand causing lower freight rates. Significant periods of high vessel
availability and low cargo demand could have a material adverse effect on ACL's
business, financial condition, results of operations and cash flows.

                                        16
<PAGE>

     The foregoing factors can also affect market rates. As contracts expire and
terms are renegotiated at then current market rates, the level of revenue can
vary relative to prior years. This has become more evident as the industry has
shifted to shorter term contracts. The impact of these factors could be material
and there can be no assurance that the rates at which contracts are renewed will
not have a material adverse effect on ACL's business, financial condition,
results of operations or cash flows.

  COMPETITION

     The barge business is highly competitive and there are few significant
barriers to entry. Certain of ACL's principal competitors have greater financial
resources and/or are less leveraged than ACL and may be better able to withstand
and respond to adverse market conditions within the barging industry. There can
be no assurance that such competition will not have a material adverse effect on
ACL's business, financial condition, results of operations or cash flows or that
ACL will not encounter increased competition in the future, which also could
have a material adverse effect on its business, financial condition, results of
operations or cash flows.

  EXPOSURE TO INTERNATIONAL ECONOMIC AND POLITICAL FACTORS

     ACL's operations may be affected by actions of foreign governments and
global or regional economic developments. For example, global economic events
such as foreign import/export policy or currency fluctuations, could affect the
level of imports and exports. Foreign agricultural subsidies can also impact
demand for U.S. agricultural exports. In addition, foreign trade agreements and
each country's adherence to the terms of such agreements can raise or lower
demand for U.S. imports and exports. National and international boycotts and
embargoes of other countries' or U.S. imports and/or exports together with the
raising or lowering of tariff rates will affect the level of cargoes requiring
transportation on the Inland Waterways. Changes in the value of the U.S. dollar
relative to other currencies will raise or lower demand for U.S. exports as well
as U.S. demand for foreign produced raw materials and finished good imports.
Such actions or developments could have a material adverse effect on ACL's
business, financial condition, results of operations and cash flows.

  RISK OF PROVIDING SERVICES ABROAD

     Demand for ACL's services may be affected by economic and political
conditions in each of the countries in which ACL provides services. ACL's
foreign operations are also subject to other risks of doing business abroad,
including fluctuations in the value of currencies (which may affect demand for
products priced in U.S. dollars as well as local labor and supply costs), import
duties, changes to import and export regulations (including quotas), possible
restrictions on the repatriation of capital and earnings, labor or civil unrest,
long payment cycles, greater difficulty in collecting accounts receivable and
the burdens and cost of compliance with a variety of foreign laws, changes in
citizenship requirements for purposes of doing business and government
expropriation of operations and/or assets. There can be no assurance that
foreign governments will not adopt regulations or take other actions that would
have a direct or indirect adverse impact on the business or market opportunities
of ACL or that the political, cultural or economic climate outside the United
States will be favorable to ACL's operations and growth strategy. See Item 7A.,
"Foreign Currency and Exchange Rate Risks", for a further discussion of ACL's
exchange rate risks.

  EXPOSURE TO FUEL PRICES

     Fuel prices are subject to fluctuation as a result of domestic and
international events. There can be no assurance that ACL will not experience
increased fuel prices in the future, which could have a material adverse effect
on its business, financial condition, results of operations and cash flows.

  REPLACEMENT NEEDS

     Barge and towboat replacement represents a significant cost for ACL, and
ACL expects to replace approximately 50 barges in 2003 and approximately 200 per
year during the next four years. Due to the variable nature of the barging
industry and the freight transportation industry in general and the relatively
long

                                        17
<PAGE>

life of marine equipment, it is difficult for ACL and other barge companies to
accurately predict equipment requirements. Accordingly, no assurance can be
given that ACL will have sufficient equipment to satisfy market demand or that
the industry will not have an oversupply of equipment. An oversupply of
equipment could have a material adverse effect on ACL's business, financial
condition, results of operations and cash flows.

  COMBINED OPERATIONS

     Pursuant to its strategy to pursue synergistic acquisitions in its core
business lines, ACL may expend substantial management time and financial and
other resources for the acquisition and integration of other barging operations.
These acquisitions may pose risks with respect to operations, customer service
and customer acceptance. While ACL's management has successfully combined other
barging operations and it believes that it has sufficient financial and
management resources to accomplish the rationalization and integration of other
barging operations, there can be no assurance that such operations can be
integrated successfully or that ACL will not experience difficulties with
customers, personnel or others. In addition, although ACL believes that the
other barging operations will enhance the competitive position and business
prospects of ACL, there can be no assurance that such benefits will be fully
realized.

  DEPENDENCE ON KEY PERSONNEL

     ACL is dependent on the continued services of its senior management team.
The loss of such key personnel could have a material adverse effect on ACL's
business, financial condition, results of operations and cash flows.

  LABOR RELATIONS

     Although ACL believes that its relations with its employees and with the
recognized labor unions are generally good, there can be no assurance that ACL
will not be subject to work stoppages or other labor disruption and, if such
events were to occur, that there would not be a material adverse effect on ACL's
business, financial condition, results of operations and cash flows.

  ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS

     ACL's operations are subject to extensive federal, state and local
environmental laws and regulations which, among other things, specify
requirements for the management of oil, hazardous wastes, and hazardous
substances and impose liability for releases of these materials into the
environment. A release of oil, hazardous waste, hazardous substances or other
pollutants into the environment at or by ACL's properties or vessels, as a
result of ACL's current or past operations, or at a facility to which ACL has
shipped wastes, or the existence of historical contamination at any of its
properties, could result in material liability to ACL. ACL has been identified
as a potentially responsible party ("PRP") with respect to the cleanup of
certain waste disposal sites.

     Federal, state and local governments could in the future enact laws or
regulations concerning environmental matters that affect ACL's operations or
facilities, increase its costs of operation, or adversely affect the demand for
its services. ACL cannot predict the effect that such future laws or regulations
could have on ACL. Nor can ACL predict what environmental conditions may be
found to exist at its current or past facilities or at other properties where
ACL or its predecessors have arranged for the disposal of wastes and the extent
of liability that may result from the discovery of such conditions. It is
possible that such future laws or undiscovered conditions could have a material
adverse effect on ACL's business, financial condition, results of operations and
cash flows.

     ACL's domestic vessel operations are primarily regulated by the U.S. Coast
Guard for occupational health and safety standards. ACL's domestic shore
operations are subject to the U.S. Occupational Safety and Health Administration
regulations. There can be no assurance that claims will not be made against ACL
for work related illness or injury, or that the further adoption of occupational
health and safety regulations in the

                                        18
<PAGE>

United States or in foreign jurisdictions in which ACL operates will not
adversely affect its business, financial condition, results of operations and
cash flows.

  OTHER GOVERNMENT REGULATION

     ACL's barging operations are subject to various laws and regulations,
including international treaties, conventions, national, state and local laws
and regulations and the laws and regulations of the flag nations of ACL's
vessels, all of which are subject to amendment or changes in interpretation.
Further, ACL is required by various governmental and quasi-governmental agencies
to obtain and/or maintain certain permits, licenses and certificates respecting
its operations. ACL's domestic towboats are in certain circumstances subject to
a significant federal fuel use tax, which may be increased. Any significant
changes in laws or regulations affecting ACL's operations, or in the
interpretation thereof, could have a material adverse effect on ACL's business,
financial condition, results of operations and cash flows.

  Terrorist Attacks, War and the Risk of War

     The impact that terrorist attacks, such as those carried out on September
11, 2001, may have on the marine transportation industry in general, and on ACL
in particular, is not known at this time. Such attacks, and the uncertainty
surrounding them, may impact ACL's operations in unpredictable ways, including
disruptions of rail lines, highways and fuel supplies and the possibility that
ACL's facilities and vessels could be direct targets of, or indirect casualties
of, an act of terror. In addition, war or risk of war may also have an adverse
effect on the economy. A decline in economic activity could adversely affect
ACL's revenues or restrict ACL's future growth. Instability in the financial
markets as a result of terrorism or war could also affect ACL's ability to raise
capital. Such attacks may lead to increased volatility in fuel costs and
availability and could affect ACL's results of operations. In addition, the
insurance premiums charged for some or all of the coverages ACL currently
maintains could increase dramatically, or the coverages could be unavailable in
the future. Any such events could have a material adverse effect on ACL's
business, financial condition, results of operations and cash flows.

  Small Number of Customers Account for a Substantial Portion of ACL's Revenues

     In 2002, ACL's largest customer, Cargill, Inc., accounted for more than 10%
of ACL's revenues, while ACL's 25 largest customers accounted for approximately
54% of ACL's revenues.

RISKS RELATING TO ACL'S DEBT OBLIGATIONS

     ACL incurred significant debt in connection with the Recapitalization and
the Danielson Recapitalization. After the recapitalizations, ACL experienced
lower than expected revenues and earnings due in part to a deteriorating economy
and a general slow down in the barging industry. After failing to complete an
out-of-court financial restructuring alternative, ACL was unable to meet its
financial obligations as they became due. Consequently, ACL filed a petition
with the Bankruptcy Court in order to reorganize its capital and debt structure
under Chapter 11 of the Bankruptcy Code. As a result of the Chapter 11 filings,
certain events of default under the Senior Credit Facilities, Senior Notes, PIK
Notes and Old Senior Notes have occurred. However, under Chapter 11, actions by
creditors to collect claims on pre-petition debt are stayed or deferred unless
specifically ordered by the Bankruptcy Court. If and when ACL emerges from
bankruptcy it is likely that it will continue to be highly leveraged with
substantial debt service obligations. ACL's Senior Credit Facilities and other
indebtedness could be replaced by new credit facilities with substantial, and
possibly more restrictive, covenants. Thus, ACL's leveraged position could have
a material adverse effect on ACL's business, financial condition, results of
operations and cash flows. For example, ACL's substantial leverage position
after bankruptcy could:

     - limit ACL's ability to obtain additional financing to fund future working
       capital, capital expenditures and other general corporate requirements;

     - increase ACL's vulnerability to general adverse economic and industry
       conditions;

     - require ACL to dedicate a substantial portion of its cash flow from
       operations to the payment of principal of, and interest on, its
       indebtedness, thereby reducing the availability of such cash flow to fund
       working capital, capital expenditures or other general corporate
       requirements;

     - limit ACL's flexibility in planning for, or reacting to, changes in its
       business and the industry in which it competes; and

     - place ACL at a competitive disadvantage compared to its less leveraged
       competitors.

ITEM 2.  PROPERTIES

     The information with respect to ACL's properties appearing in this Report
at Item 1, Business -- Properties is incorporated herein by reference.

ITEM 3.  LEGAL PROCEEDINGS

     ACL is named as a defendant in various lawsuits that have arisen in the
ordinary course of its business. Claimants seek damages of various amounts for
personal injuries, property damage and other matters. ACL believes that all
material claims asserted under lawsuits of this description and nature are
covered by insurance policies. ACL is not aware of any litigation that would be
deemed material to the financial condition, results of operations or liquidity
of ACL that is not covered by insurance coverages and policies, other than the

                                        19
<PAGE>

environmental matters discussed in this Report at Item 1,
Business -- Environmental Matters which is incorporated herein by reference.

     The description of ACL's bankruptcy proceedings appearing in this Report at
Item 1, Business -- Bankruptcy Considerations and at Item 7, Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview and Significant Events -- Bankruptcy, is incorporated
herein by reference.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

     ACL's membership interests are not registered or traded on any public
trading market or stock exchange.

ITEM 6.  SELECTED FINANCIAL DATA

<Table>
<Caption>
                                                                            FISCAL YEARS ENDED
                               MAY 29, 2002    DEC. 29, 2001   ---------------------------------------------
                                    TO              TO         DEC. 28,    DEC. 29,    DEC. 31,    DEC. 25,
                               DEC. 27, 2002   MAY 28, 2002      2001        2000        1999        1998
                               -------------   -------------   ---------   ---------   ---------   ---------
                                                          (DOLLARS IN THOUSANDS)
<S>                            <C>             <C>             <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS
  DATA(1):
Operating revenue............    $ 428,047       $284,805      $ 788,501   $ 773,838   $ 739,136   $ 638,478
Operating expense............      414,054        303,195        723,140     717,530     664,544     575,729
Operating income.............       13,993        (18,390)        65,361      56,308      74,592      62,749
Other expense (income)(2)....        3,307            827          1,526      (7,409)     (3,048)        587
Interest expense.............       35,944         25,712         70,932      70,813      71,275      40,981
(Loss) earnings before income
  taxes, extraordinary items
  and cumulative effect of
  accounting changes.........      (25,258)       (44,929)        (7,097)     (7,096)      6,365      21,181
Income taxes (benefit).......          743           (919)           118       4,263       1,658     (64,263)
Extraordinary items(3).......           --             --         (1,885)        734          --          --
Cumulative effect of
  accounting changes(4)......           --             --            490          --       1,737          --
Net (loss) earnings..........      (26,001)       (44,010)        (5,820)    (12,093)      2,970      85,444
OTHER OPERATING DATA:
Towboats (at period end).....          193            193            193         206         204         201
Barges (at period end).......        4,710          5,005          5,083       5,103       4,397       4,372
Tonnage (thousands, for
  period ended)..............       45,205         29,401         75,546      71,224      71,903      68,749
OTHER FINANCIAL DATA:
Depreciation and
  amortization...............       37,407         21,824         55,497      56,014      51,222      46,337
Property additions...........        7,757          5,605         19,772      50,861      55,880      45,382
Net cash provided (used) by:
  Operating activities.......       26,578        (19,678)        24,588      30,782      94,602      78,665
  Investing activities.......       (7,326)        (7,476)         3,292     (24,192)    (59,156)    (62,572)
  Financing activities.......      (25,641)           786        (40,195)     22,137     (53,961)     26,338
</Table>

                                        20
<PAGE>

<Table>
<Caption>
                                                              DEC. 28,    DEC. 29,    DEC. 31,    DEC. 25,
                                              DEC. 27, 2002     2001        2000        1999        1998
                                              -------------   ---------   ---------   ---------   ---------
                                                          (DOLLARS IN THOUSANDS)
<S>                            <C>            <C>             <C>         <C>         <C>         <C>
STATEMENT OF FINANCIAL
  POSITION DATA:
Cash and cash equivalents....                   $ 14,496      $  47,253   $  59,568   $  30,841   $  49,356
Working capital
  (deficiency)...............                   (602,073)      (681,674)   (107,354)    (16,525)     37,687
Properties -- net............                    585,785        464,133     509,443     559,777     541,415
Total assets.................                    813,594        757,936     787,538     776,096     838,530
Long-term debt, including
  current portion............                    555,573        608,519     658,055     712,807     758,900
Member's equity (deficit)....                     44,022       (148,019)   (142,618)   (132,072)   (130,395)
</Table>

---------------

(1) ACL acquired the barging operations of National Marine, Inc. in 1998 and
    purchased Peavey in 2000. The results of operations and cash flows of these
    companies have been included from the date of the respective acquisitions.
    On May 29, 2002 Danielson Holding Company purchased ACL and elected
    push-down accounting which is reflected in the basis of ACL's properties and
    related depreciation.

(2) Includes $11,418 gain from the sale of Waterways Communication System LLC
    ("Watercom") in 2000.

(3) ACL paid $734 for the early redemption premium on the Terminal Revenue bonds
    in 2000. ACL recorded extraordinary income of $1,885 in 2001 on the early
    retirement of $5,000 in Senior Notes.

(4) ACL adopted American Institute of Certified Public Accountants Statement of
    Position 97-3 in the first quarter 1999, with a cumulative effect adjustment
    of $1,737 in non-cash expense for workers' compensation second injury funds.
    ACL adopted Financial Accounting Standards Board Statement No. 133 in 2001
    with a cumulative effect adjustment of $490 in non-cash expense for an
    interest rate cap.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW AND SIGNIFICANT EVENTS

BANKRUPTCY

     As also discussed in this Report at Item 1, Business -- Bankruptcy
Considerations, during 2002 and the beginning of 2003, ACL experienced a decline
in barging rates, reduced shipping volumes and excess barging capacity during a
period of slow economic growth and a global economic recession. Due to these
factors, ACL's revenues and earnings did not meet expectations and ACL's
liquidity was significantly impaired and it was unable to comply with its
various debt covenants. As a result, ACL was unable to meet its financial
obligations as they became due. On January 31, 2003, ACL and the other Debtors
filed a petition with the Bankruptcy Court to reorganize under Chapter 11 of the
Bankruptcy Code. The Chapter 11 petitions do not cover any of ACL's foreign
subsidiaries or certain of its U.S. subsidiaries.

     ACL and the other Debtors are continuing to operate their businesses as
debtors-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court. As debtors-in-possession, the Debtors may not engage in
transactions outside of the ordinary course of business without approval, after
notice and hearing, of the Bankruptcy Court. As part of the Chapter 11 cases,
the Debtors intend to develop and propose for confirmation pursuant to Chapter
11 a plan of reorganization that will restructure the operations and liabilities
of the Debtors to the extent necessary to result in the continuing viability of
ACL. A filing date for such a plan has not been determined, however, ACL and the
other Debtors have the exclusive right to file a plan of reorganization during
the 120 day period following the Petition Date. If the exclusive period were to
expire without being extended, other parties, such as the creditors of ACL and
the other Debtors, would have the right to propose alternative plans for
reorganization.

     In connection with the Chapter 11 filings, ACL and the other Debtors
received approval from the Bankruptcy Court to pay or otherwise honor certain of
its pre-petition obligations, including but not limited to

                                        21
<PAGE>

employee wages and certain employee benefits, certain critical vendor payments,
certain insurance and claim obligations, and certain tax obligations, as a plan
of reorganization is developed.

     Furthermore, the Debtors entered into the DIP Credit Facility that provides
up to $75 million of financing. As of February 2003, participating bank
commitments under the DIP Credit Facility total $60 million, of which the
Debtors have drawn $50 million, which was used to retire the Pre-Petition
Receivables Facility (as hereinafter defined) and which continues to be used to
fund the Debtors' day-to-day cash needs. The DIP Credit Facility is secured by
the same and additional assets that collateralized the Senior Credit Facility
(as hereinafter defined) and the Pre-Petition Receivables Facility, and bears
interest, at ACL's option, at LIBOR plus four percent or an Alternate Base Rate
(as defined in the DIP Credit Facility) plus three percent. There are also
certain interest rates in the event of a default under the facility.

     The DIP Credit Facility also contains certain restrictive covenants that,
among other things, restrict the Debtors' ability to incur additional
indebtedness or guarantee the obligations of others. ACL is also required to
maintain minimum cumulative EBITDA, as defined in the DIP Credit Facility, and
limit its capital expenditures.

     As a result of the Chapter 11 filings, certain events of default under the
Senior Credit Facilities, Senior Notes, PIK Notes and Old Senior Notes have
occurred subsequent to December 27, 2002, the effects of which are stayed
pursuant to certain provisions of the Bankruptcy Code.

     Under Chapter 11, actions by creditors to collect claims in existence at
the filing date are stayed or deferred absent specific Bankruptcy Court
authorization to pay such pre-petition claims while the Debtors continue to
manage their businesses as debtors-in-possession and act to develop a plan of
reorganization for the purpose of emerging from these proceedings. A claims bar
date has not yet been established.

     The amount of the claims to be filed against the Debtors by their creditors
could be significantly different than the amount of the liabilities recorded by
the Debtors. The Debtors also have numerous executory contracts and other
agreements that could be assumed or rejected during the Chapter 11 proceedings.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the reorganization process. Under these Chapter 11
proceedings, the rights of and ultimate payments to pre-petition creditors,
rejection damage claimants and equity investors may be substantially altered.
This could result in claims being liquidated in the Chapter 11 proceedings at
less (possible substantially less) than 100% of their face value, and the
membership interests of ACL's equity investors being diluted or cancelled. The
Debtors have not yet proposed a plan of reorganization. The Debtors'
pre-petition creditors and ACL's equity investors will each have a vote in the
plan of reorganization.

     The United States Trustee has appointed an unsecured creditors committee.
The official committee and its legal representatives have a right to be heard on
all matters that come before the Bankruptcy Court.

     The Chapter 11 process presents inherent material uncertainty. It is not
possible to determine the additional amount of claims that may arise or
ultimately be filed, or predict (i) the length of time that the Debtors will
continue to operate under the protection of Chapter 11, (ii) the outcome of the
Chapter 11 proceedings in general, (iii) whether the Debtors will continue to
operate in their present organizational structure, or (iv) the effects of the
proceedings on the business of ACL, the other Debtors and its non-filing
subsidiaries and affiliates, or on the interests of the various creditors,
security holders and equity holders. The ultimate recovery, if any, by
creditors, security holders and equity holders will not be determined until
confirmation of a plan or plans of reorganization. No assurance can be given as
to what value will be ascribed in the bankruptcy proceedings to each of these
constituencies. Accordingly, ACL and the other Debtors urge that appropriate
caution be exercised with respect to existing and future investments in any of
these securities.

     The consolidated financial statements contained herein have been prepared
on a going concern basis, which assumes continuity of operations and realization
of assets and satisfaction of liabilities in the ordinary course of business.
The ability of ACL and the other Debtors to continue as a going concern is
predicated, among other things, on the confirmation of a reorganization plan,
compliance with the provisions of the DIP Credit Facility, the ability of ACL
and the other Debtors to generate the required cash flows from operations and,
where necessary, obtaining financing sources sufficient to satisfy future
obligations.

                                        22
<PAGE>

ACL'S BUSINESS

     ACL is an integrated marine transportation and service company, providing
barge transportation and ancillary services. ACL supports its barging operations
by providing marine vessel design and construction along with inter-modal cargo
transfer services to ACBL and third parties. ACBL is the leading provider of
river barge transportation throughout the Inland Waterways. In addition, since
expanding its barge transportation operations to South America in 1993, ACL
International has become the leading provider of barge transportation services
on the Orinoco River in Venezuela and, through UABL, on the Parana/Paraguay
River system serving Argentina, Brazil, Paraguay, Uruguay and Bolivia. ACL
International also provides transportation services on the Higuamo River in the
Dominican Republic.

     ACL derives its revenues primarily from the barge transportation of other
bulk/steel, grain, coal and liquids in the United States and South America.
While ACL's customer base has remained relatively stable and certain of its
operations provide steady rate levels and profit margins, its results of
operations can be impacted by a variety of external factors. These factors
include fluctuations in rates for shipping grain, which in turn affect rates for
shipping other dry cargoes, weather and river conditions and fluctuations in
fuel prices. Although revenues from ACL's international operations are typically
denominated in U.S. dollars, its results could be impacted by currency
fluctuations.

     ACL seeks to enter into multi-year contracts at fixed prices (with
inflation-indexed escalation and fuel adjustment clauses) with its customers. On
a revenue basis, 51% of contracts in effect as of December 27, 2002 were for
periods of greater than one year.

     ACBL's top 25 customers accounted for 54% of ACL's fiscal 2002 operating
revenue. One customer, Cargill, Inc., accounted for more than 10% of ACL's
fiscal 2002 consolidated operating revenue.

PRE-BANKRUPTCY FINANCIAL RESTRUCTURING OF ACL

     Through May 28, 2002, ACL was in default under its bank and bond debt, as
well as its receivables facility, due to nonpayment of interest on the debt as
well as other covenant violations. On December 31, 2001, and subsequent thereto,
ACL elected not to pay the interest due on its bank and bond debt due to ongoing
negotiations with its bankers and note holders regarding the restructuring of
the debt. ACL obtained forbearance agreements or waivers which enabled it to
complete the Danielson Recapitalization and the debt restructuring described
below and in Notes 1, 3 and 6 to consolidated financial statements.

     ACL's original secured debt was issued pursuant to a Credit Agreement,
dated June 30, 1998, with certain lenders and JPMorgan Chase Bank (formerly, The
Chase Manhattan Bank), as administrative agent (the "Senior Credit Facilities"),
consisting of a $200.0 million Tranche B Term Loan due June 2006, a $235.0
million Tranche C Term Loan due June 2007 and a revolving credit facility
providing for revolving loans and the issuance of letters of credit for the
account of ACL in an aggregate principal amount of up to $100.0 million due June
2005 (the "Revolving Credit Facility"). ACL also had outstanding $295.0 million
of unsecured 10.25% Senior Notes due June 2008 (the "Old Senior Notes").

     On March 15, 2002, ACL entered into a definitive recapitalization agreement
regarding the acquisition and recapitalization of ACL (the "Danielson
Recapitalization") by DHC and certain DHC subsidiaries (collectively with DHC,
"Danielson"). On April 15, 2002, ACL launched an exchange offer pursuant to
which ACL offered to exchange the Old Senior Notes for a new series of 11.25%
senior notes due January 1, 2008 (the "Senior Notes") and a new class of 12%
pay-in-kind senior subordinated notes due July 1, 2008 (the "PIK Notes").

     On April 11, 2002, ACL and certain lenders executed an amendment agreement
under which the Senior Credit Facilities would be amended and restated upon the
satisfaction of certain conditions set forth in the amendment agreement,
including the consummation of the Danielson Recapitalization.

                                        23
<PAGE>

     Effective May 29, 2002, the Danielson Recapitalization was consummated with
$58.5 million of the Old Senior Notes and interest thereon, if any, contributed
by Danielson to ACL Holdings; $230 million, plus accrued interest, of the
remaining $236.5 million in Old Senior Notes exchanged for new Senior Notes, and
new PIK Notes and the Senior Credit Facilities amended. As part of the Danielson
Recapitalization, DHC contributed $25.0 million in cash to ACL Holdings, which
was immediately used to reduce the outstanding term loan debt under the Senior
Credit Facilities. In addition, $50.0 million of the amount outstanding under
the Revolving Credit Facility was converted into a new term loan (the "Tranche A
Term Loan").

     Upon completion of the Danielson Restructuring, ACL became an indirect
wholly owned subsidiary of DHC. At that same time, SZ Investments, LLC increased
its equity ownership in DHC to approximately 18%. SZ Investments, LLC is an
affiliate of Samuel Zell, DHC's Chief Executive Officer. Another affiliate of
Mr. Zell, HY I Investments, LLC, is a holder of approximately 42% of ACL's
Senior Notes and PIK Notes.

     As of May 29, 2002, after the $25.0 million reduction in outstanding term
loans, and after the $50.0 million Revolving Credit conversion to a "Tranche A
Term Loan," ACL's secured debt issued under the amended Senior Credit Facilities
consisted of a $46.6 million Tranche A Term Loan due June 30, 2005, a $134.0
million Tranche B Term Loan due June 30, 2006, a $157.7 million Tranche C Term
Loan due June 30, 2007 (collectively the "Term Loans") and the Revolving Credit
Facility providing for revolving loans and the issuance of letters of credit for
the account of ACL in an aggregate principal amount of up to $50.0 million due
June 30, 2005. As of December 27, 2002, the outstanding balance under the Term
Loans was $313.3 million and the outstanding balance under the Revolving Credit
Facility was $41.0 million in cash borrowings and $9.0 million in letters of
credit. The Term Loans bear interest at a rate equal to LIBOR plus a margin
based on ACL's performance. The annual interest rates as of December 27, 2002
were: Tranche A - 6.00%; Tranche B - 6.25%; and Tranche C - 6.50%. ACL also had
outstanding principal of $137.1 million in new Senior Notes and $116.1 million
in new PIK Notes as of December 27, 2002. $6.5 million in principal of the Old
Senior Notes remain outstanding. The Senior Notes and PIK Notes are unsecured.

     Effective May 29, 2002, ACL's receivables facility, which was administered
by PNC Bank, N.A., was replaced with a Receivables Purchase Agreement also among
American Commercial Lines Funding Corporation, ACBL, Jupiter Securitization
Corporation and Bank One, NA (the "Pre-Petition Receivables Facility") having
substantially the same terms as the previous receivables facility. The
Pre-Petition Receivables Facility was retired on January 31, 2003 with funds
from the DIP Credit Facility.

PRE-BANKRUPTCY JEFFBOAT STRIKE

     On July 3, 2002, Jeffboat and its unionized employees represented by the
International Brotherhood of Teamsters, Local No. 89, agreed upon a new
collective bargaining agreement, ending a two month long strike. The previous
collective bargaining agreement had expired on April 29, 2002 and the unionized
employees chose to strike from April 30, 2002 until July 9, 2002, when they
returned to work pursuant to the terms of the new collective bargaining
agreement.

ADDITIONAL FINANCIAL RESTRUCTURING PRIOR TO BANKRUPTCY AND CHAPTER 11 FILING

     As discussed in this Report at Item 1, Business, in response to weak market
and poor economic conditions during the last half of 2002 and because of ACL's
highly leveraged financial position, ACL filed for protection under Chapter 11
of the Bankruptcy Code. Prior to the Chapter 11 filing, ACL had been pursuing
other financial restructuring alternatives, which are described below.

     ACL's Senior Credit Facilities and the indentures governing the Senior
Notes and the PIK Notes (the "Indentures") contain a number of covenants with
specified financial ratios and tests including, with respect to the Senior
Credit Facilities, maximum leverage ratios, rent adjusted maximum leverage
ratios and interest coverage ratios. Compliance with financial ratios is
measured at the end of each quarter. The Indentures also contain certain cross
default provisions. ACL's ability to meet the financial ratios is affected by
adverse weather conditions, seasonality and other risk factors inherent in its
business.

                                        24
<PAGE>

     The Senior Credit Facilities also contain provisions which require
mandatory prepayments of the Term Loans with net proceeds from certain asset
sales, equity issuances, incurrence of indebtedness and sale and leaseback
transactions, as well as certain excess cash flow.

     In late 2002, ACL received a notification from Bank One stating that ACL
was in violation of the cross-default provisions contained in the Pre-Petition
Receivables Facility, which provides that a failure to maintain the financial
ratios provided by the Credit Agreement, whether or not amended or waived,
constitutes a default under the Pre-Petition Receivables Facility. Subsequent to
the notice of default, Bank One and ACL agreed to an amendment to the
Receivables Facility which permitted ACL to continue utilizing the Receivables
Facility, although the loss reserve and certain facility fees were increased and
the termination date changed from May 29, 2003 to January 31, 2003.

     Subsequent to the notice of default from Bank One, ACL obtained an
amendment (the "Amendment") of certain covenants under the Senior Credit
Facilities, relating to third quarter and fourth quarter 2002 covenants and a
waiver of any past violations thereof. Absent the Amendment, ACL would not have
been in compliance with the leverage or interest coverage ratios contained in
its Senior Credit Facilities as of December 27, 2002. At the end of the first
quarter of 2003, the covenant ratios revert to levels in effect before the
Amendment.

     Although management had been working on operating and financial plans to
comply with its debt covenants in 2003 and thereafter, ACL was unable to
complete an out-of-court restructuring and management believed it was probable
that ACL would not be in compliance with Senior Credit Facility covenants at the
end of the first quarter 2003, absent another amendment to the Senior Credit
Facilities.

     On December 31, 2002, ACL elected to exercise its rights under the
Indentures to postpone the interest payments due on the Senior Notes and Old
Senior Notes for thirty days. This resulted in an event of default under the
Senior Credit Facilities and the Pre-Petition Receivables Facility.

     As a result of the factors discussed above, ACL was unable to meet its
financial obligations as they became due and ACL filed for Chapter 11 under the
Bankruptcy Code on January 31, 2003 and is currently operating as a
debtor-in-possession under the Bankruptcy Code. ACL is funding its operations
with normal cash flows from operations and with proceeds from and access to the
DIP Credit Facility.

ACL'S OVERALL STRATEGY

     Subject to the return of more favorable market and operating conditions and
the successful emergence from Chapter 11 reorganization, ACL intends to continue
to pursue a strategy of growth in its core business units. ACL's pursuit of
growth through strategic acquisitions has created value through synergies and
economies of scale that have enhanced ACL's long-term results of operations.
ACL's previous acquisitions have included:

     - SCNO Barge Lines, Inc. in 1988, Hines Incorporated in 1991, The Valley
       Line Company in 1992, Continental Grain's barging operations in 1996 and
       National Marine's barging operations in 1998;

     - On May 26, 2000 ACL entered into an agreement to purchase or lease
       substantially all of the long-term assets of Peavey. This added more than
       900 covered hopper barges to ACL's existing fleet of inland marine
       barges; and

     - On October 24, 2000, an ACL 80% owned subsidiary, ACBLH, entered into an
       agreement with Ultrapetrol to combine the inland river barge
       transportation divisions of ACBLH and Ultrapetrol which operate on the
       Parana/Paraguay River system in South America. ACBLH has a 50% ownership
       interest in the newly formed company, UABL. UABL operates 20 towboats and
       a combined fleet of 374 dry cargo and tank barges. UABL serves commodity
       shippers in Argentina, Bolivia, Brazil, Paraguay and Uruguay. UABL seeks
       to further consolidate its position in the Parana/Paraguay River system
       market through acquisitions, and intends to pursue this strategy in 2003.

                                        25
<PAGE>

     Focusing on its core business units, ACL has also divested certain assets
in the past several years, including:

     - On September 6, 2000, ACL sold its 100% membership interest in Waterway
       Communications System LLC ("Watercom") to Mobex Network Services Company
       ("Mobex"). The sale of Watercom will not significantly affect ACL's
       expected future operating income or cash flow from operating activities.

     - On May 25, 2001, ACL entered into an agreement to sell seven of ACT's ten
       terminals, other than its coal transfer facility at St. Louis, Missouri
       and its tank storage facility at Memphis, Tennessee to GMS. An additional
       terminal site in Omaha, Nebraska was transferred on June 29, 2001.
       Subsequent to June 29, 2001, additional proceeds were received from the
       condemnation of Omaha Terminal.

ACL'S FLEET

     The size of ACL's combined domestic and international fleet, including
owned and leased barges, over the past three years is as follows:

             DOMESTIC AND INTERNATIONAL FLEET PROFILE BY BARGE TYPE
                               (NUMBER OF BARGES)

<Table>
<Caption>
                                                         DECEMBER 27,    DECEMBER 28,   DECEMBER 29,
BARGE TYPES                                                  2002*           2001           2000
-----------                                              -------------   ------------   ------------
<S>                                                      <C>             <C>            <C>
Covered Hoppers........................................      3,551          3,865          3,965
Open Hoppers...........................................        728            772            673
Tank Barges............................................        424            439            458
Deck Barges............................................          7              7              7
                                                             -----          -----          -----
          Total........................................      4,710          5,083          5,103
                                                             =====          =====          =====
</Table>

---------------

* In addition ACL operates 318 covered hoppers, 15 open hoppers and 36 tank
  barges through its participation in UABL.

     The average age of ACL's domestic barge fleet is currently 19 years,
compared with an industry average of 17 years. These barges have an expected
life of approximately 25 to 30 years. In addition, at year end ACBL operated 187
towboats domestically, with an average age of 26 years. ACL International
operates 129 barges, with an average age of 18 years, six towboats and in
addition, through UABL, 369 barges with an average age of 17 years and 19
towboats.

TAXES

     ACL is a limited liability company and its operations are conducted mainly
through a series of limited liability company subsidiaries, and, as a result,
ACL will not itself generally be subject to U.S. federal or state income tax.
Taxable income will be allocated to the equity holders of the Parent and such
holders will be responsible for income taxes on such taxable income. ACL intends
to make distributions to the Parent which, in turn, will make distributions to
its equity holders to enable them to meet all or a portion of their tax
obligations with respect to taxable income allocated to them by ACL.

RESULTS OF OPERATIONS

     As a result of the acquisition of ACL by Danielson, ACL's assets and
liabilities were adjusted to estimated fair value under push down purchase
accounting. ACL's consolidated financial statements for the periods ended before
May 29, 2002 were prepared using ACL's historical basis of accounting. Although
a new basis of accounting began on May 29, 2002, management has summarized the
results for the year ended December 27, 2002 below by combining the periods
before and after May 29, 2002 together as ACL believes presentation of these
periods on a combined basis to be meaningful for comparison purposes. Except as
noted below, the impact on results of operations related to push down purchase
accounting has not materially affected the comparability of the periods.

                                        26
<PAGE>

  YEAR ENDED DECEMBER 27, 2002 COMPARED WITH YEAR ENDED DECEMBER 28, 2001

     ACL follows a 52/53 week fiscal year ending on the last Friday in December
of each year.

     Operating Revenue.  Operating revenue for the year ended December 27, 2002
decreased 9.6% to $712.9 million from $788.5 million for the year ended December
28, 2001. The revenue decrease was primarily due to lower domestic barging
freight rates and volumes, the strike at Jeffboat, lower sales at Jeffboat from
reduced customer orders and the loss of revenue associated with the sale of
terminals in 2001, partially offset by increased revenue from ACL's
international business units.

     Domestic barging revenue decreased $54.2 million to $581.8 million
primarily due to lower barging rates for grain, bulk, coal and liquid freight,
lower liquid freight volume, lower coal freight volume, lower demurrage revenue
and lower towing revenue, partially offset by increased grain freight volumes
primarily due to better operating conditions in the first half of the year and
increased bulk freight volume as a result of increased demand in the last six
months of the year.

     International barging revenue increased $2.3 million to $38.9 million
primarily due to increased revenue from ACL's Dominican Republic unit which
began operation in the third quarter of 2001, a new operation in Venezuela to
move bauxite tonnage during the low water navigation season and the sale of
logistics services to a third party barge operator in Venezuela to transport
equipment from the United States to Venezuela. The increase was partially offset
by the absence of payments for minimum contract tonnage in Venezuela.
International terminal revenue, included in the other revenue segment, increased
to $3.8 million from $3.1 million due to increased volume through the terminal
in Venezuela.

     Revenue at Jeffboat decreased $21.2 million to $81.7 million primarily due
to lower volume of hopper and tank barge sales as a result of the strike in the
second quarter and lower customer orders.

     Operating Expense.  Operating expense for the year ended December 27, 2002
decreased 0.8% to $717.2 million from $723.1 million for the year ended December
28, 2001. Domestic barging expenses increased $10.1 million to $592.9 million
primarily due to lower gains on property dispositions, higher consulting and
legal fees primarily associated with the Danielson Recapitalization and other
debt restructuring, higher depreciation and pension expense as a result of
purchase accounting adjustments and higher equipment repair expense, partially
offset by reduced fuel prices, lower barge freight volume, better operating
conditions in the first half of 2002 and lower boat depreciation expense due to
a change in the estimated useful life of towboats. Average fuel prices before
user tax decreased 11 cents per gallon to 71 cents per gallon in 2002 on a
volume of 105 million gallons. Operating expenses for 2002 include $14.1 million
in fees associated with the Danielson Recapitalization and other debt
restructuring, $6.3 million in higher depreciation due to purchase accounting
adjustments and $1.9 million in additional pension expense also associated with
purchase accounting adjustments. Operating expenses for 2001 include a $16.5
million gain on property dispositions primarily from the sale of towboats and
marine repair shipyard assets and $1.2 million in fees associated with debt
restructuring.

     International barging expenses increased $2.7 million to $34.0 million,
largely due to expenses associated with providing logistics services to a third
party barge operator in Venezuela, an increase in expenses from ACL's Dominican
Republic unit, which began operation in the third quarter of 2001 and additional
expenses associated with operations during low water periods in Venezuela.

     Jeffboat's expenses decreased $15.9 million to $82.2 million, due to lower
volume of hopper and tank barge construction as a result of the strike in the
second quarter of 2002 and a lower volume of hopper and oversized tank barge
construction during the last six months of 2002.

     Interest Expense.  Interest expense for 2002 decreased to $61.7 million
from $70.9 million for 2001. The decrease was due to lower LIBO Rates, which are
the basis for certain interest rate adjustments under ACL's Senior Credit
Facilities, lower outstanding balances of Senior Notes and a lower outstanding
balance under

                                        27
<PAGE>

the Senior Credit Facilities. The decrease was partially offset by higher
interest rates on the Senior Notes, the inclusion of Vessel Leasing LLC interest
expense in 2002 and higher amortization of debt discount in 2002 compared to
amortization of debt issuance cost in 2001.

     Income Tax (Benefit) Expense.  Income taxes for the year decreased to a
benefit of $0.2 million from $0.1 million in expense for 2001 due to the
reversal of foreign tax expense that was previously accrued related to a tax
matter in South America. ACL's domestic corporate subsidiaries, except ACL
Capital Corp., are limited liability companies. ACL passes its U.S. federal and
substantially all of its state taxable income to its Parent, whose equity
holders are responsible for those income taxes.

     Extraordinary Item -- Gain (Loss) on Early Extinguishment of Debt.  The
gain for 2001 is a result of ACL's purchase in the open market of $5.0 million
par value of a portion of ACL's Senior Notes for a discount.

     Cumulative Effect of Accounting Change.  The $0.5 million loss for 2001 was
due to recognition of a loss on the fair value of an interest rate cap as a
result of ACL's adoption of FASB Statement No. 133 as of December 30, 2000.

  YEAR ENDED DECEMBER 28, 2001 COMPARED WITH YEAR ENDED DECEMBER 29, 2000

     Operating Revenue.  Operating revenue for the year ended December 28, 2001
increased 2% to $788.5 million from $773.8 million for the year ended December
29, 2000. The revenue increase was due to higher barge freight volumes as a
result of the operation of the Peavey barges for the whole year 2001 as compared
to seven months in 2000 and higher freight rates on certain domestic barging
commodities largely due to the effect of contract, fuel price adjustment
clauses. The increase was partially offset by the impact of ice and flooding on
the domestic barging operation in the first half of the year, reduced volume at
Jeffboat and the sale of the ACT terminals.

     Domestic barging revenue increased $44.2 million to $636.0 million
primarily due to the addition of revenue from the Peavey barges, improved
barging freight rates for bulk and steel commodities and higher contract freight
rates from fuel price adjustment clauses. The increase was partially offset by
reduced loads per barge due to severe ice conditions on the Mississippi and
Illinois Rivers in the first quarter of 2001 and the closure of the upper
Mississippi River due to flooding during the second quarter of 2001.

     International barging and terminal revenues fell $0.3 million to $39.7
million primarily due to ACL's share of the net earnings from UABL being
reported, net of expenses, as an other income item in 2001 according to the
equity method, compared to the consolidating of revenue from the Argentine
operation during the first ten months of 2000. This decrease was partially
offset by increased revenue from equipment charters to the UABL venture.
Increased revenue from additional bauxite freight revenue in Venezuela,
additional revenue recognized in 2001 for settlement of minimum contract tonnage
in Venezuela, continuing revenue from a terminal operation in Venezuela that
began in the fourth quarter of 2000, and the start of barging operations in the
Dominican Republic in 2001 also contributed to offset the fall in revenue.

     Revenue at Jeffboat decreased $21.2 million to $102.9 million primarily due
to lower volume of hopper barge sales and an increase in the number of hoppers
completed for ACL's leasing program on which the profit on sales is deferred.
The profit on sales of equipment that was subsequently leased to ACL's barge
operating division, ACBL, has been deferred and will be recognized over the life
of the leases. An absence of towboat construction revenue in 2001 as compared to
revenue from the construction of one towboat in 2000 also contributed to the
decline. Tank barge construction volume at Jeffboat improved in 2001 as
increased revenue from large tank barge (30,000 barrel tank barges) sales was
partially offset by a reduction in the sales of smaller tank barges (10,000
barrel tank barges).

     Operating Expense.  Operating expense for the year ended December 28, 2001
rose 1% to $723.1 million from $717.5 million for the year ended December 29,
2000. Domestic barging expenses increased $34.4 million primarily due to
operating the Peavey barges for the full year 2001 and due to higher fuel prices
as a result of the timing of fuel price swap agreements. High proportions (75%)
of the Peavey barges were rented under operating leases, which were assumed by
ACL. The high proportion of Peavey-leased equipment has the

                                        28
<PAGE>

impact of disproportionately raising operating expense in relation to operating
revenue as compared to the fleet prior to the addition of Peavey. Although the
timing of fuel price swaps raised fuel prices, average fuel prices before user
tax on gallons of fuel consumed by vessels decreased 3 cents per gallon to 81
cents per gallon in 2001. Operating expenses for 2001 include a $16.5 million
gain on property dispositions primarily from the sale of towboats and marine
repair shipyard assets and a $1.1 million favorable adjustment due to a change
in accounting estimate of the depreciable lives of towboats. Operating expenses
for 2000 include a non-cash impairment loss on inactive barges of $3.8 million
and a $1.9 million gain on property dispositions primarily from the sale of
towboats.

     International barging and terminal expenses fell $5.2 million to $33.9
million, largely due to ACL's share of the net earnings from UABL being
reported, net of expenses, as an other income item in 2001 according to the
equity method, compared to the consolidating of expense from the Argentine
operation during the first ten months of 2000. The decrease was partially offset
by increased expense from the additional movement of bauxite in Venezuela, the
operation of the terminal in Venezuela and the start of barging operations in
the Dominican Republic.

     Jeffboat's expenses decreased $17.7 million to $98.1 million, due to the
lower hopper barge, small tank barge and towboat construction volumes, partially
offset by an increase in large tank barge construction volume. Lower steel
prices and improved productivity also contributed to the decline in expense at
Jeffboat.

     Interest Expense.  Interest expense for 2001 increased to $70.9 million
from $70.8 million for 2000. The increase is due to higher interest rate spreads
as a result of the amendment to the Senior Credit Facilities, a higher
outstanding balance on the revolver in 2001 as compared to 2000 and higher debt
amortization as a result of fees associated with the amendment to the Senior
Credit Facilities. The increase was offset by lower LIBO Rates, which are the
basis for certain interest rate adjustments under ACL's Senior Credit
Facilities, lower Term Loan balances and lower other debt balances.

     Gain on Sale of Watercom.  The gain on the sale of ACL's membership
interest in Watercom was $11.4 million in 2000.

     Income Taxes.  Income taxes for the year decreased to $0.1 million from
$4.3 million for 2000 due to lower withholding tax on foreign source income.
ACL's domestic corporate subsidiaries, except ACL Capital Corp., are limited
liability companies. ACL passes its U.S. federal and substantially all of its
state taxable income to its Parent, whose equity holders are responsible for
those income taxes.

     Extraordinary Item -- Gain (Loss) on Early Extinguishment of Debt.  The
gain on early extinguishment of debt was $1.9 million for 2001 compared to a
loss of $0.7 million for 2000. The gain for 2001 is a result of ACL's purchase
in the open market of $5.0 million par value of a portion of ACL's Senior Notes
for a discount. The loss for 2000 was due to the early redemption premium on
certain terminal revenue refunding bonds.

     Cumulative Effect of Accounting Change.  The cumulative effect of
accounting change was a loss of $0.5 million for 2001 due to recognition of a
loss on the fair value of an interest rate cap as a result of ACL's adoption of
FASB Statement No. 133 as of December 30, 2000.

OUTLOOK

     Domestic barging demand for bulk, steel and liquid commodities is expected
to remain at 2002 levels for the first half of 2003. The domestic barging demand
for grain freight is driven by the supply of and demand for corn and other
grains. The U.S. Department of Agriculture currently forecasts 2002/2003 crop
year corn exports of 1.75 billion bushels and Sparks Company Inc., a private
grain forecast service, predicts 2002/2003 crop year corn exports of 1.725
billion bushels as compared to actual exports of 1.89 billion bushels for the
2001/2002 crop year.

     In the first quarter of 2003, the average price of fuel consumed by ACBL
vessels is expected to increase $0.27 per gallon from the $.71 per gallon
average price for 2002. ACBL vessels will consume approximately 110 million
gallons annually and generally ratably throughout the year. ACBL has contract
price adjustment

                                        29
<PAGE>

clauses which provide protection for approximately 55% of gallons consumed.
Contract adjustments are deferred one quarter. In March 2003, ACL made a forward
fuel purchase and purchased an option to protect from fuel price increases on
substantially all of its expected fuel consumption during the second quarter of
2003.

     Management expects that normal cash flows from operations and access to the
DIP Credit Facility will be sufficient to meet planned working capital, capital
expenditures and other cash requirements until such time as it seeks to obtain
approval for a plan of reorganization. However, due to material uncertainties
associated with the outcome of the Chapter 11 proceedings in general, and the
effects of such proceedings on the business of ACL and its subsidiaries, there
can be no assurances that such plan will be approved or whether ACL will obtain
sufficient liquidity enabling it to continue to operate in its present
organizational structure.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") 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 for the same
period. Actual results could differ from those estimates.

     The consolidated financial statements have been prepared on a going concern
basis which assumes continuity of operations and realization of assets and
settlement of liabilities in the ordinary course of business. The financial
statements do not give effect to any adjustment to the carrying value of assets
or amounts and adjustments of liabilities that might be necessary as a result of
the ACL Chapter 11 filing. Critical accounting policies that affect the reported
amounts of assets and liabilities on a going concern basis include revenue
recognition; expense estimates for harbor and towing service charges, insurance
claim loss deductibles and employee benefit plans; impairment of long-lived
assets and asset capitalization policies.

     The primary source of ACL's revenue, barge transportation revenue, is
recognized on a percentage of completion basis. The proportion of barge
transportation revenue to be recognized is determined by applying a percentage
to the contractual charges for such services. The percentage is determined by
dividing the number of miles from the loading point to the position of the barge
as of the end of the accounting period by the total miles from the loading point
to the barge destination as specified in the customer's freight contract. The
position of the barge at accounting period end is determined by locating the
position of the boat with the barge in tow through use of a global positioning
system. The recognition of revenue based upon the percent of voyage completion
results in a better matching of revenue and expenses. Marine construction,
repair and harbor service revenue is recognized based upon the completed
contract method. Losses are accrued if construction costs are expected to exceed
construction contract revenue. Terminal revenue is recognized as services are
performed.

     Harbor and towing service charges are estimated as service incidents occur
based upon recent historical charges by vendor for the same type of service
event. Service events are recorded by vendor and location in ACL's barge
tracking system. Vendor charges are estimated for these events based on current
published vendor rates. Vendor charges can vary based upon the number of boat
hours required to complete the service, the grouping of barges in vendor tows
and the quantity of man hours and materials required. ACL management believes it
has recorded sufficient liabilities for these services. Changes to these
estimates could have a significant impact on ACL's financial results.

     Liabilities for insurance claim loss deductibles include accruals for the
uninsured portion of personal injury, property damage, cargo damage and accident
claims. These accruals are estimated based upon historical experience with
similar claim incidents. The estimates are recorded upon the first report of a
claim and are updated as new information is obtained. The amount of the
liability is based on the type and severity of the claim and an estimate of
future claim development based on current trends and historical data. ACL
management believes it has recorded sufficient liabilities for these claim
incidents. These claims are subject to significant uncertainty related to the
results of negotiated settlements and other developments. As claims

                                        30
<PAGE>

develop, ACL may have to change its estimates and these changes could have a
significant impact on ACL's consolidated financial statements.

     Assets and liabilities of ACL's defined benefit plans are determined on an
actuarial basis and are affected by the estimated market value of plan assets,
estimates of the expected return on plan assets, and discount rates. Actual
changes in the fair market value of plan assets and differences between the
actual return on plan assets and the expected return on plan assets will affect
the amount of pension expense ultimately recognized, impacting ACL's results of
operations. The liability for post-retirement medical benefits is also
determined on an actuarial basis and is affected by assumptions including the
discount rate and expected trends in health care costs. Changes in the discount
rate and differences between actual and expected health care costs will affect
the recorded amount of post-retirement benefits expense, impacting ACL's results
of operations.

     ACL is self-insured for the medical benefit plans covering most of its
employees. ACL estimates it's liability for claims incurred by applying a lag
factor to ACL's historical claims and administrative cost experience. The
validity of the lag factor is evaluated periodically and revised if necessary.
Although management believes the current estimated liabilities for medical
claims are reasonable, changes in the lag in reporting claims, changes in claims
experience, unusually large claims, and other factors could materially affect
the recorded liabilities and expense, impacting financial condition and results
of operations.

     ACL management periodically reviews long-lived assets for impairment. Cash
flows by operating unit are estimated based upon long-term historical trends,
management's knowledge of the relationship between the supply of barges and the
demand for barge transportation and construction services and management's
estimates of future trends regarding significant operating revenues and costs.
These estimates are subject to uncertainty. ACL's significant assets have been
preliminarily appraised in conjunction with the Danielson recapitalization.
Based on these preliminary appraisals and the estimates of future cash flows,
management believes that ACL's long-lived assets are not impaired.

     Asset capitalization policies have been established by ACL management to
conform to generally accepted accounting principles. Repairs that extend the
original economic life of an asset or that enhance the original functionality of
an asset are capitalized and amortized over their estimated economic life.
Routine engine overhauls that occur on a one to three year cycle are expensed
when they are incurred. The costs of purchasing or developing software are
capitalized and amortized over the estimated economic life of the software.

     See Note 2 of the Notes to Consolidated Financial Statements for a further
discussion of significant accounting policies.

LIQUIDITY AND CAPITAL RESOURCES

     During 2002 and the beginning of 2003, the decline in barging rates,
reduced shipping volumes and excess barging capacity during a period of slow
economic growth and a global economic recession caused ACL's revenues and
earnings to fail to meet expectations and ACL's liquidity was significantly
impaired. As a result, ACL was unable to meet its financial obligations as they
became due and debt covenant violations occurred. On January 31, 2003, ACL and
the other Debtors filed a petition with the Bankruptcy Court to reorganize under
Chapter 11 of the Bankruptcy Code. The Chapter 11 petitions do not cover any of
ACL's foreign subsidiaries or certain of its U.S. subsidiaries.

     As a result of the foregoing and other events, ACL has classified all of
its long-term debt as current debt.

     ACL's ability to generate cash sufficient to fund its cash requirements for
the next twelve months, including capital expenditures for fleet maintenance,
working capital, interest payments and scheduled principal payments on the DIP
Credit Facility, is also dependent on:

     - the absence of unusually adverse weather conditions during 2003 which if
       adverse, could reduce or eliminate ACL's ability to navigate on certain
       river segments, adversely affect ACL's operational efficiencies and
       reduce overall volumes transported; and

                                        31
<PAGE>

     - the absence of a material adverse effect on ACL's business from the
       Chapter 11 proceedings and the other risks addressed in this Report in
       the section titled "Forward Looking and Cautionary Statements" and at
       Item 1, Risk Factors, the other securities filings referenced therein,
       including, but not limited to, changing market, labor, legal and
       regulatory conditions and trends in the barge and inland shipping
       industries and general economic and business conditions, including a
       prolonged or substantial recession in the United States or certain
       international commodity markets such as the market for grain exports,
       significant pricing competition, unanticipated additions to industry
       capacity, fuel costs and interest rates.

ACL INDEBTEDNESS

     Significant changes in ACL's credit facilities during 2002 are discussed
above in "Overview and Significant Events." As of December 27, 2002, ACL had
outstanding indebtedness of $614.3 million. This includes $313.3 million drawn
under the Term Loans, $41.0 million drawn under the Revolving Credit Facility,
$137.1 million aggregate principal amount of Senior Notes, $116.1 million of PIK
Notes, $6.5 million in Old Senior Notes and $0.3 million in other notes. The
debt included in ACL's financial statements also includes $39.7 million in
outstanding principal of bonds guaranteed by the U.S. Maritime Administration
that are obligations of Vessel Leasing. Since ACL is applying push down
accounting effective with Danielson's acquisition of ACL, ACL's debt was
adjusted to fair value at the acquisition date. The total amount of the
unamortized discount as of December 27, 2002 is $57.4 million. The difference
between the principal amount of the debt and its fair value is being accreted as
interest expense over the term of the debt under the effective interest method.
Accordingly, as of December 27, 2002, the carrying value of the new Senior Notes
is $128.5 million, the carrying value of the PIK Notes is $68.8 million and the
carrying value of the Old Senior Notes is $5.0 million.

     As of December 27, 2002, ACL also had $1.6 million in outstanding capital
lease obligations which are included in other current and long-term liabilities,
had securitized $39.3 million of the trade receivables of two subsidiaries
(which Pre-Petition Receivables Facility was paid off on January 31, 2003 with
proceeds from the DIP Credit Facility) and had an outstanding loan guarantee for
$2.9 million in borrowings of an entity in Venezuela in which ACL has an equity
investment.

     ACL had no available borrowings under the Revolving Credit Facility as of
December 27, 2002, as $9.0 million of letters of credit had been issued under
the facility and $41 million of revolving loans were outstanding. ACL had $14.5
million cash on deposit in bank accounts as of December 27, 2002.

     As of the date of this Report, ACL has also entered into the DIP Credit
Facility, under which it has drawn $50.0 million. Terms of the DIP Credit
Facility are discussed in this Report at Item 1, Business -- Bankruptcy
Considerations.

     The Senior Credit Facilities and the Indentures contain a number of
covenants with specified financial ratios and tests including, with respect to
the Senior Credit Facilities, maximum leverage ratios which could lead to an
event of default which could result in acceleration of the debt, higher interest
rates or other adverse consequences. The Indenture also contains certain cross
default provisions. Compliance with financial ratios is measured at the end of
each quarter. ACL's ability to meet the financial ratios is affected by adverse
weather conditions, seasonal market conditions and other risk factors inherent
in its business. Lender remedies for ACL's current defaults under the Senior
Credit Facilities and Indentures have been stayed during the pendency of the
Chapter 11 proceedings, however, ACL has ongoing compliance obligations with
respect to its DIP Credit Facility. These and other risk factors are discussed
in this Report at Item 1, Business -- Risk Factors and are also discussed in and
incorporated by reference from Exhibit 99.1, Risk Factors, appended to this
Report.

NET CASH, CAPITAL EXPENDITURES AND CASH FLOW

     Net cash provided by operating activities was $6.9 million, $24.6 million
and $30.8 million for fiscal 2002, 2001 and 2000, respectively. The decrease in
net cash from operating activities in 2002 compared with 2001 was primarily due
to lower operating results as a result of the reduced operating revenue
described above and

                                        32
<PAGE>

costs incurred for consulting and legal fees associated with the Danielson
Recapitalization, partially offset by reduced interest payments in 2002. The
decrease in net cash from operating activities in 2001 compared with 2000 was
primarily due to a small increase in inventories in 2001 compared to a large
inventory reduction in 2000 and due to two interest payments on the senior notes
being remitted in 2001 compared to one payment remitted in 2000, partially
offset by the timing of cash disbursements related to accounts payable. Net cash
from operating activities, as well as DHC's cash investment, were used primarily
for repayment of third-party debt and capital expenditures in 2002. Net cash
flows from operating activities and proceeds from sales of assets were used
primarily for capital expenditures in 2001 and 2000, as well as repayment of
third party debt in 2001.

     Capital expenditures were $13.4 million, $25.6 million and $57.0 million in
2002, 2001 and 2000, respectively. Expenditures in 2001 and 2000 include $5.8
million and $6.1 million, respectively, in expenditures associated with capital
leases. Cash expenditures included $1.9 million, $0.4 million and $48.0 million
for domestic marine equipment and $1.8 million, $3.4 million and $2.9 million
for foreign investments in 2002, 2001 and 2000, respectively. The remaining $9.7
million in domestic cash capital expenditures in 2002 was primarily for marine
equipment maintenance.

     Management expects capital expenditures in 2003 to be approximately $23
million and to be primarily for fleet maintenance. Additional operating lease
expense to provide fleet replacement equipment will be mostly offset by
reductions in existing barge charter rates.

     Other investing activities, consisting primarily of expenditures for the
purchase and development of computer software, were $3.8 million, $4.6 million
and $5.1 million in 2002, 2001 and 2000, respectively. Management expects these
expenditures to be approximately $3.2 million in 2003.

     At December 27, 2002 and December 28, 2001, ACL had $39.3 million and $51.0
million, respectively, outstanding under the Pre-Petition Receivables Facility,
its accounts receivable securitization facility discussed above, and had $27.6
million and $22.6 million, respectively, of net residual interest in the
securitized receivables which is included in "Accounts Receivable, Net" in ACL's
consolidated financial statements. The fair value of the net residual interest
is measured at the time of the sale and is based on the sale of similar assets.
In 2002, ACL received gross proceeds of $24.1 million from the sale of
receivables and made gross payments of $35.8 million under the Pre-Petition
Receivables Facility. The Pre-Petition Receivables Facility was paid off on
January 31, 2003 with proceeds from the DIP Credit Facility.

     Demand for freight moved by ACL barges is influenced by the economic demand
for the cargoes. A decrease in that demand could adversely affect ACL's
operating cash flows. Some cargoes are more highly dependent upon general
economic conditions, such as certain liquid and steel cargoes which have
experienced softening in demand over the past year.

     Cash flows from ACL's barging and manufacturing operations are also
affected by weather and river conditions. Extreme weather conditions can have a
materially adverse affect on ACL's operating cash flows.

     ACL has various environmental matters that could have an impact on its
financial condition, results of operations and cash flows. These environmental
matters are discussed in this Report at Item 3, Legal Proceedings.

     Management expects that normal cash flows from operations and access to the
DIP Credit Facility will be sufficient to meet planned working capital, capital
expenditures and other cash requirements until such time as it seeks to obtain
approval for a plan of reorganization. However, due to material uncertainties
associated with the outcome of the Chapter 11 proceedings in general, and the
effects of such proceedings on the business of ACL and its subsidiaries, there
can be no assurances that such plan will be approved or whether ACL will obtain
sufficient liquidity enabling it to continue to operate in its present
organizational structure.

                                        33
<PAGE>

CHANGES IN CREDIT RATINGS

     On January 2, 2003, the debt rating agency Standard & Poor's lowered its
rating on ACL's Senior Notes to 'D' from 'CCC-' and its rating on ACL's Senior
Subordinated Notes to 'CC' from 'CCC-'. Also on January 2, 2003 the rating on
ACL's Senior Credit Facilities was lowered to 'CCC+' from 'B-'. The bank loan
rating and subordinated debt rating remained on CreditWatch with negative
implications.

     On January 7, 2003, the debt rating agency Moody's Investors Services
lowered its rating on ACL's Senior Credit Facilities from 'B3' to 'Caa1', its
rating on ACL's Senior Notes to 'Caa3' from 'Caa2', and its rating on ACL's
Senior Subordinated Notes to 'Ca' from 'Caa3'.

     On January 31, 2003, the debt rating agency Standard & Poor's lowered its
rating on ACL's Senior Subordinated Notes to 'D' from 'CC' and its rating on
ACL's Senior Credit Facilities was lowered to 'D' from 'CCC+'. The Senior Note
debt rating, which had been lowered to 'D' on January 2, 2003, remained
unchanged. The bank loan and subordinated debt ratings were removed from
CreditWatch, where they had been placed November 14, 2002.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENT SUMMARY

     A summary of ACL's contractual commitments under debt and lease agreements
appears below. The table assumes that ACL's debt principal payments are not
accelerated.

                            CONTRACTUAL OBLIGATIONS

<Table>
<Caption>
                                                                PAYMENTS DUE BY YEAR
                                             ----------------------------------------------------------
                                                      LESS THAN     ONE TO       FOUR TO     AFTER FIVE
CONTRACTUAL OBLIGATIONS                      TOTAL    ONE YEAR    THREE YEARS   FIVE YEARS     YEARS
-----------------------                      ------   ---------   -----------   ----------   ----------
                                                               (DOLLARS IN MILLIONS)
<S>                                          <C>      <C>         <C>           <C>          <C>
Long-Term Debt.............................  $613.0     $ 3.2       $124.2        $200.7       $284.9
Revolving Credit Facility..................    41.0      41.0           --            --           --
Capital Lease Obligations..................     2.0       0.5          0.9           0.6           --
Operating Leases*..........................   215.8      38.4         57.7          39.8         79.9
Unconditional Purchase Obligations.........      --        --           --            --           --
Other Long-Term Obligations................      --        --           --            --           --
                                             ------     -----       ------        ------       ------
Total Contractual Cash Obligations.........  $871.8     $83.1       $182.8        $241.1       $364.8
                                             ======     =====       ======        ======       ======
</Table>

---------------

* Operating leases having initial or remaining non-cancelable lease terms longer
  than one year.

     A summary of ACL's other commercial commitments appears below.

                             COMMERCIAL COMMITMENTS

<Table>
<Caption>
                                                      AMOUNT OF COMMITMENT EXPIRATION PER YEAR
                                              ---------------------------------------------------------
                                                      LESS THAN     ONE TO       FOUR TO     AFTER FIVE
OTHER COMMERCIAL COMMITMENTS                  TOTAL   ONE YEAR    THREE YEARS   FIVE YEARS     YEARS
----------------------------                  -----   ---------   -----------   ----------   ----------
                                                                (DOLLARS IN MILLIONS)
<S>                                           <C>     <C>         <C>           <C>          <C>
Lines of Credit.............................  $  --     $ --         $ --         $  --         $ --
Standby Letters of Credit...................    9.0       --          5.0            --          4.0
Guarantees..................................    2.9      2.9           --            --           --
Standby Repurchase Obligations..............     --       --           --            --           --
Other Commercial Commitments................     --       --           --            --           --
                                              -----     ----         ----         -----         ----
Total Commercial Commitments................  $11.9     $2.9         $5.0         $  --         $4.0
                                              =====     ====         ====         =====         ====
</Table>

     Additional disclosures regarding these obligations and commitments can be
found in this Report at Item 8, Financial Statements, Notes 6 and 9 in the Notes
to Consolidated Financial Statements.

                                        34
<PAGE>

FUEL HEDGING AND INTEREST RATE CAP

     During 2002, ACL used forward purchases of diesel fuel to provide
protection against increases in prices of diesel fuel used to operate ACL's
vessels. The 2002 forward purchases were swap agreements whereby ACL locked into
a fixed future price at the time of purchase. Diesel fuel was not actually
delivered under these future purchases. Instead the swap was settled when due
and ACL paid or received a dollar amount based on the difference in the fixed
future price and the actual price index for the settlement month. Due to cash
collateral requirements imposed by ACL's broker as a result of increased
volatility in the fuel market, ACL settled its hedge position in January 2003.
In March 2003, ACL made a forward fuel purchase and purchased an option to
protect from fuel price increases on substantially all of its expected fuel
consumption during the second quarter of 2003.

     The fair value of the net swap is the difference between the future price
of the fuel index as of the date of valuation and the fixed future price
established at the time each individual contract is purchased, multiplied by the
number of gallons purchased. In 2002, ACL typically entered into one forward
contract each month for gallons associated with freight bookings that have fixed
price commitments with no contract fuel adjustment protection clauses. The fair
value of the contracts outstanding at December 27, 2002 was $0.19 million.

                     FAIR VALUE OF CONTRACTS AT PERIOD END

<Table>
<Caption>
                                                              (DOLLARS IN MILLIONS)
<S>                                                           <C>
Fair value of contracts outstanding at the beginning of
  2002......................................................         $(0.40)
Contracts realized or otherwise settled during 2002.........         $ 0.05
Fair value of new contracts when entered into during the
  period....................................................         $ 0.00
Changes in fair value attributable to changes in valuation
  techniques and assumptions................................         $ 0.00
Other changes in fair values................................         $ 0.19
Fair value of contracts outstanding at the end of the
  period....................................................         $ 0.19
</Table>

<Table>
<Caption>
                                                              MATURITY LESS
                                                                THAN ONE
SOURCE OF FAIR VALUE                                              YEAR        TOTAL
--------------------                                          -------------   -----
<S>                                                           <C>             <C>
Prices provided by other external sources...................      $0.19       $0.19
</Table>

     ACL also has an interest rate cap agreement on a notional amount of $202
million in debt. The agreement expires August 11, 2003 and has a fair value of
zero as of December 27, 2002. The fair value of the cap agreement has been
provided by an external source.

     For additional disclosures regarding non-exchange traded contracts, please
refer to this Report at Item 8, Financial Statements, Note 11 in the Notes to
Consolidated Financial Statements.

RELATED PARTY TRANSACTIONS

     ACL has transactions with various related parties, primarily affiliated
entities accounted for by the equity method. ACL believes that the terms and
conditions of those transactions are in the aggregate not materially more
favorable or unfavorable to ACL than would be obtained on an arm's-length basis
among unaffiliated parties.

     On July 24, 2002, the Board of Directors of DHC amended DHC's 1995 Stock
and Incentive Plan and granted stock options to management of ACL for 1,560,000
shares of DHC common stock. The options have an exercise price of $5.00 per
share and expire 10 years from the date of grant. One half of the options time
vest over a 4 year period in equal annual installments and one half of the
options vest over a 4 year period in equal annual installments contingent upon
the financial performance of ACL. ACL accounts for stock options under the
intrinsic value method based on APB 25, "Accounting for Stock Issued to
Employees". Because the market price of DHC common stock has been lower than the
exercise price of the options since the date of grant, no expense has been
recognized in the accompanying financial statements.

                                        35
<PAGE>

     On May 29, 2002, DHC issued 339,040 shares of restricted DHC common stock
to ACL management. These restricted shares have been valued at fair value at the
date of issuance and vest one third annually over a three year period. The full
value of these shares is recorded as other capital with an offset to unearned
compensation in member's equity. As employees render service over the vesting
period, compensation expense is recorded and unearned compensation is reduced.

     ACL recorded terminal service expense with GMS of $.3 million for the
period December 29, 2001 through May 28, 2002; $.6 million for the period May
29, 2002 through December 27, 2002; $.4 million for fiscal year 2001; and $.2
million for fiscal year 2000. In 2001, ACL received $12.0 million from GMS for
the sale of terminals and proceeds from the condemnation of a terminal. ACL
recognized a gain of $1.9 million from these transactions.

     ACL recorded charter income from UABL of $4.5 million for the period
December 29, 2001 through May 28, 2002, $5.9 million for the period May 29, 2002
through December 27, 2002, $11.1 million for the year 2001 and $2.1 million for
the year 2000. ACL also recorded administrative fee expenses to UABL of $3.2
million for the period December 29, 2001 through May 28, 2002, $4.3 million for
the period May 29, 2002 through December 27, 2002, $7.7 million for the year
2001 and $1.5 million for the year 2000. ACL sold used barges to UABL for $0.8
million in 2001. Charter rates are established at fair market value based upon
similar transactions. As of December 27, 2002, ACL has recorded $6.3 million in
accounts receivable from UABL. As of December 28, 2001, ACL has recorded $13.4
million in accounts receivable and $8.4 million in other current liabilities
with UABL.

     ACL recorded $1.5 million in revenue from the sale of terminal services to
GMS Venezuela CA ("GMSV") in 2002. As of December 27, 2002, ACL has recorded
$3.8 million in accounts receivable from loans and advances to GMSV. ACL also
guarantees a $2.9 million loan to GMSV from the International Finance
Corporation. The guarantee is due to expire in 2003.

     ACL consolidated Vessel Leasing beginning in May 2002. Before the
consolidation, ACL, through its subsidiary, Jeffboat, sold new barges for $47.8
million to Vessel Leasing in 2001. Jeffboat recognized the profit associated
with the sales of barges to Vessel Leasing over the life of the lease prior to
Vessel Leasing being consolidated. ACL recorded $3.9 million in capital leases
with Vessel Leasing in 2001. All of the other barges were leased by Vessel
Leasing to ACL as operating leases which resulted in ACL charter expense of $1.7
million in 2001. Charter rates and sales of barges are established at fair
market value based upon similar transactions.

     See also the information contained in this Report at Item 13, Certain
Relationships and Related Transactions -- Affiliate Agreements.

BACKLOG

     ACL's backlog represents firm orders for barge transportation and marine
equipment. The backlog for barge transportation was approximately $529 million
and $760 million at December 27, 2002 and December 28, 2001, respectively. This
backlog ranges from one to nine years with approximately 49% expected to be
filled in 2003. The backlog for marine equipment construction was approximately
$47 million and $69 million at December 27, 2002 and December 28, 2001,
respectively. The backlog for marine equipment is one year with 100% expected to
be filled in 2003.

SEASONALITY

     ACL's business is seasonal, and its quarterly revenues and profits
historically have been lower during the first and second fiscal quarters of the
year (January through June) and higher during the third and fourth fiscal
quarters (July through December) due to the North American grain harvest. In
addition, working capital requirements fluctuate throughout the year. Adverse
market or operating conditions during the last four months of the year could
have a greater effect on ACL's business, financial condition and results of
operations than during other periods.

                                        36
<PAGE>

CHANGES IN ACCOUNTING STANDARDS

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which establishes
the accounting for goodwill and other intangible assets following their
recognition. SFAS 142 applies to all goodwill and other intangible assets
whether acquired singly, as part of a group, or in a business combination. SFAS
142 provides that goodwill and intangible assets with indefinite lives should
not be amortized but should be tested for impairment annually using a fair-value
based approach. In addition, SFAS 142 provides that other intangible assets
should be amortized over their useful lives and reviewed for impairment in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of" ("SFAS 121"). SFAS 121 has been superceded by SFAS 144 which is described
below. The adoption of SFAS 142 on December 29, 2001 has not had a significant
effect on ACL's financial position or results of operations.

     In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting for
the impairment or disposal of long-lived assets and supercedes SFAS 121, and the
accounting and reporting provisions of Accounting Principles Board Opinion No.
30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", for the disposal of a segment of a business (as
previously defined in that Opinion). SFAS 144 also amends Accounting Research
Bulletin No. 51, "Consolidated Financial Statements", to eliminate the exception
to consolidation for a subsidiary for which control is likely to be temporary.
The objectives of SFAS 144 are to address significant issues relating to the
implementation of SFAS 121 and to develop a single accounting model, based on
the framework established in SFAS 121, for long-lived assets to be disposed of
by sale, whether previously held and used or newly acquired. ACL adopted SFAS
144 in the first quarter of 2002. The provisions of SFAS 144 did not have an
impact on ACL's financial statements during the year ended December 27, 2002.

     In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"), which addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs incurred in a Restructuring)"
("Issue 94-3"). The principal difference between SFAS 146 and Issue 94-3 relates
to SFAS 146's requirements for recognition of a liability for a cost associated
with an exit or disposal activity. SFAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under Issue 94-3, a liability for an exit cost as generally defined in
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
Severance pay under SFAS 146, in many cases, would be recognized over time
rather than up front. Additionally, under SFAS 146, if the benefit arrangement
requires employees to render future service beyond a "minimum retention period"
a liability should be recognized as employees render service over the future
service period even if the benefit formula used to calculate an employee's
termination benefit is based on length of service. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December
31, 2002, with early application encouraged. Management expects to adopt SFAS
146 in 2003.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     ACL is exposed to certain market risks which are inherent in its financial
instruments and which arise from transactions entered into in the normal course
of business. A discussion of ACL's primary market exposures in financial
instruments is presented below.

FUEL PRICE RISK

     At December 27, 2002, ACL had forward fuel purchase contracts outstanding
with an aggregate notional amount of approximately $4.4 million and a fair value
of approximately $0.19 million, which has been recorded in accounts receivable
with the offset to fuel expense. Under these agreements, ACL will paid fixed

                                        37
<PAGE>

prices for fuel ranging from $0.69 to $0.80 per gallon. There were 6.1 million
gallons remaining on the contracts at December 27, 2002. However, due to cash
collateral requirements imposed by ACL's broker as a result of increased
volatility in the fuel market, ACL settled its hedge position in January 2003.
In March 2003, ACL made a forward fuel purchase and purchased an option to
protect from fuel price increases on substantially all of its expected fuel
consumption during the second quarter of 2003.

     For the year ended December 27, 2002, the entire change in fair value
resulted in realized gains of $.05 million and an unrealized gain of $.19
million which are recorded in fuel expense in the consolidated statement of
operations. ACL estimates that at December 27, 2002, a 10% change in the price
per gallon of fuel would have changed the fair value of the existing fuel rate
swap contracts by $0.4 million.

     Fuel consumed in 2002 represented approximately 11% of ACL's operating
expenses. About half of ACL's long-term contracts contain clauses under which
increases in fuel costs are passed on to customers thereby reducing the fuel
price risk.

     Based on ACL's 2003 projected fuel consumption, a one cent change in the
average annual price per gallon of fuel would impact ACL's annual operating
income by approximately $0.3 million (compared to the 2001 projection of $0.3
million), after the effect of escalation clauses in long-term contracts and fuel
rate swap and cap agreements currently in place.

     See also the information contained in this Report at Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Fuel
Hedging and Interest Rate Cap.

INTEREST RATE AND OTHER RISKS

     At December 27, 2002, ACL had $354.3 million of floating rate debt
outstanding, which represented the outstanding balance of the Senior Credit
Facilities. A 1% change in interest rates would change interest expense by $3.5
million annually.

     On August 11, 2000, ACL entered into an interest rate cap agreement which
limits ACL's base LIBOR to 7.5% on a notional amount of $201.8 million,
corresponding to that amount of floating rate debt outstanding which is based on
LIBOR. The agreement is designed to hedge ACL's exposure to future increases in
market interest rates. As of December 27, 2002, the fair value of the interest
rate cap agreement was zero. ACL accounts for the interest rate cap as a cash
flow hedge whereby the fair value of the interest rate cap is reflected as an
asset or liability in the consolidated statement of financial position. The cap
rate (hedging instrument) is the same interest rate index as the base interest
rate for the floating rate debt (hedged item). When the interest rate index
exceeds the interest rate cap, a portion of the change in fair value of the
instrument represents a change in intrinsic value which is an effective hedge.
This portion of the change in value will be recorded as other comprehensive
income (loss). The remaining change in fair value is recorded as other expense
(income) in the consolidated statement of operations.

     At December 27, 2002, ACL had sold at a discount based upon commercial
paper rates, $39.3 million of the accounts receivable of two subsidiaries. ACL
has the right to repurchase these receivables. At this amount outstanding, a 1%
change in the commercial paper rates would change other expense by $0.4 million
annually.

     ACL also records in other assets or liabilities in the accompanying
condensed consolidated statement of financial position, with the offset recorded
as comprehensive income (loss), changes in the fair value of interest rate swap
agreements entered into by GMS, an entity in which ACL has a 50% ownership
interest accounted for by the equity method. GMS has four interest rate swaps
with a total notional amount of $31.5 million and a fair value of $2.7 million
(liability) as of December 27, 2002, through which GMS pays fixed rates of 4.5%
to 7.7% and receives LIBOR or a municipal bond swap index.

FOREIGN CURRENCY EXCHANGE RATE RISKS

     All of ACL's significant transportation contracts in South America are
currently denominated in U.S. dollars. However, many expenses incurred in the
performance of such contracts, such as crew wages and fuel, are, by necessity,
denominated in a foreign currency. Therefore, ACL is affected by fluctuations in
the

                                        38
<PAGE>

value of the U.S. dollar as compared to certain foreign currencies.
Additionally, ACL's investments in foreign affiliates subject it to foreign
currency exchange rate and equity price risks.

     The Venezuelan government promulgated new currency control laws in February
2003, which restrict the free convertibility of U.S. dollars and Venezuelan
bolivar currencies in Venezuela. Although ACL International's Venezuelan
subsidiary, ACBL de Venezuela, C.A. ("ACBLV"), has contracts denominated in U.S.
dollars, it pays certain expenses incurred in the performance of such contracts,
such as crew wages and fuel, in bolivars. The restrictions on ACBLV's ability to
convert U.S. dollars to bolivars for the payment of these expenses could have an
adverse impact on ACL. ACL is evaluating the overall effect of the new
Venezuelan currency control laws and waiting for the new rules to be promulgated
for a full assessment of the impact, if any.

                                        39
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         AMERICAN COMMERCIAL LINES LLC

                      CONSOLIDATED STATEMENT OF OPERATIONS

<Table>
<Caption>
                                                                                  FISCAL YEARS ENDED
                                                                              ---------------------------
                                       MAY 29, 2002 TO    DECEMBER 29, 2001   DECEMBER 28,   DECEMBER 29,
                                      DECEMBER 27, 2002    TO MAY 28, 2002        2001           2000
                                      -----------------   -----------------   ------------   ------------
                                                            (DOLLARS IN THOUSANDS)
<S>                                   <C>                 <C>                 <C>            <C>
OPERATING REVENUE
  Revenue...........................      $420,013            $279,807          $729,692       $771,749
  Revenue from related parties......         8,034               4,998            58,809          2,089
                                          --------            --------          --------       --------
                                           428,047             284,805           788,501        773,838
OPERATING EXPENSE
  Materials, Supplies and Other.....       184,332             138,092           341,606        334,872
  Restructuring Cost................           565              13,493                --             --
  Rent..............................        29,896              23,121            56,711         49,463
  Labor and Fringe Benefits.........        97,021              65,760           166,041        163,251
  Fuel..............................        49,348              30,434            93,560         88,094
  Depreciation and Amortization.....        37,407              21,824            55,497         56,014
  Gain on Property Dispositions,
     Net............................            --                (455)          (16,498)        (1,686)
  Taxes, Other Than Income Taxes....        15,485              10,926            26,223         27,522
                                          --------            --------          --------       --------
     Total Operating Expenses.......       414,054             303,195           723,140        717,530
                                          --------            --------          --------       --------
OPERATING INCOME (LOSS).............        13,993             (18,390)           65,361         56,308
OTHER EXPENSE (INCOME)
  Interest Expense..................        35,944              25,712            70,932         70,813
  Other, Net........................         3,307                 827             1,526          4,009
  Gain on Sale of Watercom..........            --                  --                --        (11,418)
                                          --------            --------          --------       --------
                                            39,251              26,539            72,458         63,404
                                          --------            --------          --------       --------
LOSS BEFORE INCOME TAXES,
  EXTRAORDINARY ITEM AND CUMULATIVE
  EFFECT OF ACCOUNTING CHANGE.......       (25,258)            (44,929)           (7,097)        (7,096)
INCOME TAXES (BENEFIT)..............           743                (919)              118          4,263
                                          --------            --------          --------       --------
LOSS BEFORE EXTRAORDINARY ITEM AND
  CUMULATIVE EFFECT OF ACCOUNTING
  CHANGE............................       (26,001)            (44,010)           (7,215)       (11,359)
EXTRAORDINARY ITEM -- GAIN (LOSS) ON
  EARLY EXTINGUISHMENT OF DEBT......            --                  --             1,885           (734)
CUMULATIVE EFFECT OF ACCOUNTING
  CHANGE............................            --                  --              (490)            --
                                          --------            --------          --------       --------
NET LOSS............................      $(26,001)           $(44,010)         $ (5,820)      $(12,093)
                                          ========            ========          ========       ========
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                        40
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

                  CONSOLIDATED STATEMENT OF FINANCIAL POSITION

<Table>
<Caption>
                                                              DECEMBER 27,   DECEMBER 28,
                                                                  2002           2001
                                                              ------------   ------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>
                                         ASSETS
CURRENT ASSETS
  Cash and Cash Equivalents.................................   $  14,496      $  47,253
  Cash, Restricted..........................................       6,328             --
  Accounts Receivable, Net..................................      41,113         41,383
  Accounts Receivable -- Related Parties....................      10,544         13,402
  Materials and Supplies....................................      34,384         31,335
  Other Current Assets......................................      25,580         29,633
                                                               ---------      ---------
     Total Current Assets...................................     132,445        163,006
PROPERTIES -- Net...........................................     585,785        464,133
PENSION ASSETS..............................................      20,806         26,067
INVESTMENTS IN EQUITY INVESTEES.............................      64,029         67,684
OTHER ASSETS................................................      10,529         37,046
                                                               ---------      ---------
          Total Assets......................................   $ 813,594      $ 757,936
                                                               =========      =========

                                       LIABILITIES
CURRENT LIABILITIES
  Accounts Payable..........................................   $  33,301      $  29,737
  Accrued Payroll and Fringe Benefits.......................      15,713         17,206
  Deferred Revenue..........................................      10,364         11,890
  Accrued Claims and Insurance Premiums.....................      26,547         24,200
  Accrued Interest..........................................      16,429         18,659
  Short-Term Debt...........................................      41,000         84,000
  Current Portion of Long-Term Debt.........................     555,573        608,519
  Other Current Liabilities.................................      35,423         42,072
  Other Current Liabilities -- Related Parties..............         168          8,397
                                                               ---------      ---------
          Total Current Liabilities.........................     734,518        844,680
LONG-TERM DEBT..............................................          --             --
PENSION LIABILITY...........................................      15,072         18,907
OTHER LONG-TERM LIABILITIES.................................      19,982         42,368
                                                               ---------      ---------
          Total Liabilities.................................     769,572        905,955
                                                               ---------      ---------

                                MEMBER'S EQUITY (DEFICIT)
Member's Interest...........................................      85,025        220,074
Other Capital...............................................       1,429        166,580
Unearned Compensation.......................................      (1,132)            --
Retained Deficit............................................     (26,001)      (532,816)
Accumulated Other Comprehensive Loss........................     (15,299)        (1,857)
                                                               ---------      ---------
          Total Member's Equity (Deficit)...................      44,022       (148,019)
                                                               ---------      ---------
          Total Liabilities and Member's Equity (Deficit)...   $ 813,594      $ 757,936
                                                               =========      =========
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                        41
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                                          FISCAL YEARS ENDED
                                                                                      ---------------------------
                                               MAY 29, 2002 TO    DECEMBER 29, 2001   DECEMBER 28,   DECEMBER 29,
                                              DECEMBER 27, 2002    TO MAY 28, 2002        2001           2000
                                              -----------------   -----------------   ------------   ------------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                           <C>                 <C>                 <C>            <C>
OPERATING ACTIVITIES
  Net Loss..................................      $(26,001)           $(44,010)         $ (5,820)      $(12,093)
  Adjustments to Reconcile Net Loss to Net
    Cash Provided by (Used in) Operating
    Activities:
    Depreciation and Amortization...........        37,407              21,824            55,497         56,014
    Interest Accretion and Debt Issuance
      Cost Amortization.....................         4,033               1,245             4,413          3,062
    Impairment of Barges....................            --                  --                --          3,865
    Gain on Property Dispositions...........            --                (455)          (16,498)        (1,686)
    Gain on Sale of Watercom................            --                  --                --        (11,418)
    Other Operating Activities..............         2,751              (5,422)           (1,735)        (3,621)
    Changes in Operating Assets and
      Liabilities:
      Accounts Receivable...................       (10,329)             (3,240)          (12,010)        (2,547)
      Materials and Supplies................         2,111              (5,160)           (1,384)        13,890
      Accrued Interest......................        15,407              10,332               413         10,557
      Other Current Assets..................         6,595              (3,149)           (4,998)        (3,715)
      Other Current Liabilities.............        (5,396)              8,357             6,710        (21,526)
                                                  --------            --------          --------       --------
      Net Cash Provided by (Used In)
         Operating Activities...............        26,578             (19,678)           24,588         30,782
INVESTING ACTIVITIES
  Property Additions........................        (7,757)             (5,605)          (19,772)       (30,554)
  Purchase of Barging Assets................            --                  --                --        (31,500)
  Investment in Vessel Leasing LLC..........            --                  --            (6,808)            --
  Proceeds from Property Dispositions.......         1,089                 988            23,918          4,089
  Net Change in Restricted Cash.............           236                  --                --             --
  Proceeds from Sale of Terminals...........            --                  --             7,818             --
  Proceeds from Property Condemnation.......            --                  --             2,730             --
  Proceeds from Sale of Watercom............            --                  --                --         13,600
  Proceeds from Sale of Restricted
    Investments.............................            --                  --                --         25,288
  Other Investing Activities................          (894)             (2,859)           (4,594)        (5,115)
                                                  --------            --------          --------       --------
      Net Cash (Used in) Provided by
         Investing Activities...............        (7,326)             (7,476)            3,292        (24,192)
FINANCING ACTIVITIES
  Danielson Holding Corporation
    Investment..............................            --              25,000                --             --
  Short-Term Borrowings.....................         7,000                  --            17,250         66,750
  Long-Term Debt Repaid.....................       (28,353)            (25,190)          (47,937)       (54,752)
  Bank Overdrafts...........................        (1,785)              1,149            (6,670)        10,075
  Debt Costs................................        (1,035)                 --            (3,463)            --
  Other Financing Activities................        (1,468)               (173)              625             64
                                                  --------            --------          --------       --------
      Net Cash (Used in) Provided by
         Financing Activities...............       (25,641)                786           (40,195)        22,137
                                                  --------            --------          --------       --------
Net (Decrease) Increase in Cash and Cash
  Equivalents...............................        (6,389)            (26,368)          (12,315)        28,727
Cash and Cash Equivalents at Beginning of
  Period....................................        20,885              47,253            59,568         30,841
                                                  --------            --------          --------       --------
      Cash and Cash Equivalents at End of
         Period.............................      $ 14,496            $ 20,885          $ 47,253       $ 59,568
                                                  ========            ========          ========       ========
Supplemental Cash Flow Information:
  Interest Paid.............................      $ 13,061            $ 36,595          $ 65,504       $ 57,107
  Income Taxes Paid.........................           306               1,104             1,175          5,685
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                        42
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

              CONSOLIDATED STATEMENT OF MEMBER'S EQUITY (DEFICIT)

<Table>
<Caption>
                                                                                            ACCUMULATED
                                                                               RETAINED        OTHER
                                        MEMBER'S      OTHER       UNEARNED     EARNINGS    COMPREHENSIVE
                                        INTEREST     CAPITAL    COMPENSATION   (DEFICIT)   INCOME (LOSS)     TOTAL
                                        ---------   ---------   ------------   ---------   -------------   ---------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                     <C>         <C>         <C>            <C>         <C>             <C>
Balance at December 31, 1999..........  $ 220,074   $ 162,105     $    --      $(513,914)    $   (337)     $(132,072)
Comprehensive Loss:
  Net loss............................         --          --          --        (12,093)          --        (12,093)
  Foreign currency translation........         --          --          --             --         (147)          (147)
                                        ---------   ---------     -------      ---------     --------      ---------
        Total Comprehensive Loss......         --          --          --        (12,093)        (147)       (12,240)
Contribution of capital by CSX........         --       1,694          --             --           --          1,694
                                        ---------   ---------     -------      ---------     --------      ---------
Balance at December 29, 2000..........    220,074     163,799          --       (526,007)        (484)      (142,618)
Cumulative Effect of Accounting Change
  as of December 30, 2000.............         --          --          --             --         (300)          (300)
Comprehensive Loss:
  Net loss............................         --          --          --         (5,820)          --         (5,820)
  Net loss on fuel swaps designated as
    cash flow hedging instruments.....         --          --          --             --         (271)          (271)
  Net loss on interest rate swaps
    designated as cash flow hedging
    instruments.......................         --          --          --             --         (747)          (747)
  Foreign currency translation........         --          --          --             --          (55)           (55)
                                        ---------   ---------     -------      ---------     --------      ---------
        Total Comprehensive Loss......         --          --          --         (5,820)      (1,073)        (6,893)
Contribution of capital by CSX........         --       2,781          --             --           --          2,781
Consolidation of ACL Funding Corp.....         --          --          --           (989)          --           (989)
                                        ---------   ---------     -------      ---------     --------      ---------
Balance at December 28, 2001..........    220,074     166,580          --       (532,816)      (1,857)      (148,019)
Comprehensive Loss:
  Net loss............................         --          --          --        (44,010)          --        (44,010)
  Net gain on fuel swaps designated as
    cash flow hedging instruments.....         --          --          --             --          174            174
  Net gain on interest rate swaps
    designated as cash flow hedging
    instruments.......................         --          --          --             --          228            228
  Foreign currency translation........         --          --          --             --         (219)          (219)
                                        ---------   ---------     -------      ---------     --------      ---------
        Total Comprehensive Loss......         --          --          --        (44,010)         183        (43,827)
Other.................................         --        (373)         --             --           --           (373)
                                        ---------   ---------     -------      ---------     --------      ---------
Balance at May 28, 2002...............    220,074     166,207          --       (576,826)      (1,674)      (192,219)
Elimination of historical equity......   (220,074)   (166,207)         --        576,826        1,674        192,219
Acquisition of ACL by Danielson
  Holding Corporation.................     82,256          --          --             --           --         82,256
Acquisition of Vessel Leasing.........      2,769          --          --             --           --          2,769
Issuance of restricted Parent Company
  common stock........................         --       1,695      (1,695)            --           --             --
Amortization of unearned
  compensation........................         --          --         297             --           --            297
Cancellation of restricted Parent
  Company common stock................         --        (266)        266             --           --             --
Comprehensive Loss:
  Net loss............................         --          --          --        (26,001)          --        (26,001)
  Net gain on fuel swaps designated as
    cash flow hedging instruments.....         --          --          --             --           68             68
  Net loss on interest rate swaps
    designated as cash flow hedging
    instruments.......................         --          --          --             --         (290)          (290)
  Foreign currency translation........         --          --          --             --          408            408
  Minimum pension liability
    adjustment........................         --          --          --             --      (15,485)       (15,485)
                                        ---------   ---------     -------      ---------     --------      ---------
        Total Comprehensive Loss......         --          --          --        (26,001)     (15,299)       (41,300)
                                        ---------   ---------     -------      ---------     --------      ---------
Balance at December 27, 2002..........  $  85,025   $   1,429     $(1,132)     $ (26,001)    $(15,299)     $  44,022
                                        =========   =========     =======      =========     ========      =========
</Table>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                        43
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

NOTE 1.  SIGNIFICANT ACCOUNTING POLICIES

  NATURE OF OPERATIONS

     The operations of American Commercial Lines LLC ("ACL") include barge
transportation together with related terminal, marine construction and repair
along inland waterways. Barge transportation services include the movement of
steel and other bulk products, grain, coal, and liquids in the United States and
South America and account for the majority of ACL's revenues. Marine
construction, repair and terminal services are provided to customers in marine
transportation and other related industries in the United States. ACL has long
term contracts with some customers.

     ACL was a wholly-owned subsidiary of CSX Corporation ("CSX") until June 30,
1998. On June 30, 1998 ACL's parent, American Commercial Lines Holdings LLC
("ACL Holdings") completed a recapitalization in a series of transactions in
which the barge business of Vectura Group, Inc. ("Vectura") and its subsidiaries
("NMI" or the "NMI Contribution") were combined with that of ACL.

     Through May 28, 2002, ACL was in default under its bank and bond debt, as
well as its receivables facility, due to nonpayment of interest on the debt as
well as other covenant violations. On December 31, 2001,and subsequent thereto,
ACL elected not to pay the interest due on its bank and bond debt due to ongoing
negotiations with its bankers and note holders regarding the restructuring of
the debt. ACL obtained forbearance agreements or waivers which enabled it to
complete the Danielson recapitalization described below and the debt
restructuring described in Note 6.

     On May 29, 2002, ACL Holdings and ACL completed a comprehensive
restructuring involving the acquisition and recapitalization of ACL Holdings and
ACL (the "Danielson Recapitalization") by Danielson Holding Corporation ("DHC")
and subsidiaries (collectively with DHC, "Danielson") and the restructuring of
ACL's outstanding debt obligations (see Note 6). Consulting fees and legal costs
incurred in connection with the Danielson Recapitalization are included in the
accompanying consolidated statement of operations as "Restructuring Cost."

     In connection with Danielson becoming the owner of 100% of the membership
interests in ACLines LLC ("ACLines"), which wholly owns ACL Holdings, Danielson
elected to push down its basis of accounting to the net assets of ACL. ACL's net
assets, liabilities and member's equity have been adjusted, as of the
acquisition date, following push down accounting (see Note 3). Accordingly,
effective May 29, 2002, ACL's accounts have been adjusted to a new basis to
reflect Danielson's basis in ACL's assets and liabilities based on the estimated
fair values of such assets and liabilities using the principles of Financial
Accounting Standards No. 141, "Business Combinations."

  BASIS OF PRESENTATION

     In response to weak market and poor economic conditions during the last
half of 2002 and because of ACL's highly leveraged position, on January 31,
2003, ACL filed for protection under Chapter 11 of the Bankruptcy Code as
discussed in Note 2. Prior to the Chapter 11 filing, ACL had been pursuing other
financial restructuring alternatives.

     The consolidated financial statements contained herein have been prepared
on a going concern basis, which assumes continuity of operations and realization
of assets and satisfaction of liabilities in the ordinary course of business.
The ability of ACL to continue as a going concern is predicated, among other
things, on the confirmation of a reorganization plan, compliance with the
provisions of the DIP Credit Facility (see Note 2), the ability of ACL to
generate the required cash flows from operations and, where necessary, obtaining
financing sources sufficient to satisfy future obligations.

                                        44
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     ACL's liquidity generally depends on cash provided by operating activities
and access to the DIP Credit Facility. The ability of ACL to continue as a going
concern (including its ability to meet post-petition obligations) and the
continued appropriateness of using the going concern basis for its financial
statements are dependent upon, among other things, (i) ACL's ability to comply
with the covenants of the DIP Credit Facility, (ii) the ability of ACL to
maintain adequate cash on hand, (iii) the ability of ACL to continue to generate
cash from operations, (iv) confirmation of a plan of reorganization under the
Bankruptcy Code and the terms of such plan, (v) ability of ACL to attract,
retain and compensate key executives and associates and to retain employees
generally and (vi) ACL's ability to achieve profitability following such
confirmation.

     Management expects that normal cash flows from operations and access to the
DIP Credit Facility will be sufficient to meet planned working capital, capital
expenditures and other cash requirements until such time as it seeks to obtain
approval for a plan of reorganization. However, due to material uncertainties
associated with the outcome of the Chapter 11 proceedings in general, and the
effects of such proceedings on the business of ACL and its subsidiaries, there
can be no assurances that such plan will be approved or whether ACL will obtain
sufficient liquidity enabling it to continue to operate in its present
organizational structure.

     The accompanying consolidated financial statements do not give effect to
any adjustment to the carrying value of assets or amounts and classifications of
liabilities that might be necessary as a result of resolving the bankruptcy. For
financial statement periods after the Petition Date, the Company's consolidated
financial statements will be presented in accordance with the AICPA Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." A plan of reorganization could materially change the amounts
recorded in the consolidated financial statements in future periods.

  PRINCIPLES OF CONSOLIDATION

     The Consolidated Financial Statements reflect the results of operations,
cash flows and financial position of ACL and its majority-owned subsidiaries as
a single entity. All significant intercompany accounts and transactions have
been eliminated. Investments in companies that are not majority-owned are
accounted for under the equity method, depending on the extent of control.

  FISCAL YEAR

     ACL follows an annual fiscal reporting period, which ends on the last
Friday in December.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include short-term investments with a maturity of
less than three months when purchased. ACL has from time to time, cash in banks
in excess of federally insured limits.

  RESTRICTED CASH

     As part of the Maritime Administration guaranteed financing, Vessel Leasing
LLC ("Vessel Leasing") is required to maintain a minimum cash balance on account
which amounted to $6,328 as of December 27, 2002.

                                        45
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  ACCOUNTS RECEIVABLE

     Accounts Receivable consist of the following:

<Table>
<Caption>
                                                               2002      2001
                                                              -------   -------
<S>                                                           <C>       <C>
Accounts Receivable.........................................  $42,976   $43,014
Allowance for Doubtful Accounts.............................   (1,863)   (1,631)
                                                              -------   -------
                                                              $41,113   $41,383
                                                              =======   =======
</Table>

     ACL maintains an allowance for doubtful accounts based upon the expected
collectibility of accounts receivable.

  MATERIALS AND SUPPLIES

     Materials and supplies are carried at the lower of cost (average) or market
and consist of the following:

<Table>
<Caption>
                                                               2002      2001
                                                              -------   -------
<S>                                                           <C>       <C>
Raw Materials...............................................  $ 3,818   $ 3,633
Work in Process.............................................   15,577    13,029
Parts and Supplies..........................................   14,989    14,673
                                                              -------   -------
                                                              $34,384   $31,335
                                                              =======   =======
</Table>

  PROPERTIES

     Properties consist of the following:

<Table>
<Caption>
                                                                 2002        2001
                                                              ----------   --------
<S>                                                           <C>          <C>
Land........................................................  $   11,050   $ 11,066
Buildings and Improvements..................................      36,522     36,130
Equipment...................................................     960,212    789,567
                                                              ----------   --------
                                                               1,007,784    836,763
Less Accumulated Depreciation...............................     421,999    372,630
                                                              ----------   --------
                                                              $  585,785   $464,133
                                                              ==========   ========
</Table>

     Properties are stated at cost less accumulated depreciation. At the
reorganization date, properties were fair valued in conjunction with the
purchase price allocation. Provisions for depreciation of properties are based
on the estimated useful service lives computed on the straight-line method.
Buildings and Improvements are depreciated from 15 to 45 years. Equipment is
depreciated from 5 to 42 years. Depreciation expense was $20,500 for the period
December 29, 2001 through May 28, 2002 and $35,737 for the period May 29, 2002
through December 27, 2002, $52,100 for fiscal year 2001 and $53,457 for fiscal
year 2000.

     In the fourth quarter of 2001, ACL changed the useful life of towboats from
30 years to 42 years, which reduced the loss before extraordinary items and net
loss by $1,142 for the year ended December 28, 2001. This change in accounting
estimate was based on additional information about the useful life of the
towboat fleet.

     Properties and other long-lived assets are reviewed for impairment whenever
events or business conditions indicate the carrying amount of such assets may
not be fully recoverable. Initial assessments of recoverability are based on
estimates of undiscounted future net cash flows associated with an asset or a
group of assets.

                                        46
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Where impairment is indicated, the assets are evaluated for sale or other
disposition, and their carrying amount is reduced to fair value based on
discounted net cash flows or other estimates of fair value. There were no
long-lived asset impairment losses in 2002 and 2001. A long-lived asset
impairment loss of $3,865 was recorded in 2000 in "Materials, Supplies and
Other" in the consolidated statement of operations. This loss affects the
barging segment.

  GLOBAL MATERIALS SERVICES LLC

     ACL's has a 50% ownership interest in Global Materials Services LLC ("GMS")
which is a joint venture between American Commercial Terminals LLC ("ACT"), a
wholly owned subsidiary of ACL, and Mid-South Terminal Company, L.P., an
unaffiliated third party. ACL accounts for this investment by the equity method.
ACL's investment in GMS at December 27, 2002 and December 28, 2001 is $13,070
and $10,208, respectively.

     Earnings related to ACL's investment in GMS were: $491 for the period
December 29, 2001 through May 28, 2002; $997 for the period May 29, 2002 through
December 27, 2002; $1,015 for fiscal year 2001; and $1,138 for fiscal year 2000.
Earnings are included in other income in the consolidated statement of
operations. In 2001, ACL contributed $1,200 in cash to GMS. Other comprehensive
income (loss) related to ACL's investment in GMS was $192 for the period
December 29, 2001 through May 28, 2002; $89 for the period May 29, 2002 through
December 27, 2002; ($1,131) for fiscal year 2001; and ($329) for fiscal year
2000, related to interest rate swaps and foreign currency translation.

  UABL LIMITED

     On October 24, 2000, ACL contributed certain assets to UABL Limited
("UABL"), an Argentine company. ACL accounts for it's 50% ownership in UABL by
the equity method. ACL's investment in UABL is $48,627 at December 27, 2002 and
$49,892 at December 28, 2001. ACL's share of UABL's losses were: $135 for the
period December 29, 2001 through May 28, 2002; $1,130 for the period May 29,
2002 through December 27, 2002; $3,700 for fiscal year 2001; and $1,800 for
fiscal year 2000. These losses are included in other income in the consolidated
statement of operations. In 2001, ACL made additional investments in UABL of
$4,069.

  VESSEL LEASING LLC

     In 2001, ACL and Vectura Group LLC invested in a new company, Vessel
Leasing LLC ("Vessel Leasing"). Prior to May 29, 2002, ACL accounted for its
investment in Vessel Leasing under the equity method. Equity earnings (loss) for
the period December 29, 2001 through May 28, 2002 and fiscal year 2001 were $119
and ($38), respectively. On May 29, 2002, Danielson acquired the remaining 50%
membership interest in Vessel Leasing for $2,769 in cash. As a result of
Danielson's election to push down the accounting of Vessel Leasing, ACL
consolidated the assets and liabilities of Vessel Leasing in the consolidated
statement of financial position beginning May 29, 2002. ACL has also included
the net income of Vessel Leasing in the consolidated statement of operations
from the Danielson purchase date. As of December 28, 2001, ACL's investment in
Vessel Leasing was $6.8 million.

  GLOBAL MATERIALS SERVICES VENEZUELA

     During 2002, GMS, ACL and minority owners organized new companies to unload
bauxite in Venezuela. The "GMSV" companies are Global Materials Services
Venezuela C.A., GMS Venezuela Terminal Partners LLC and GMS Venezuela Terminal
Holdings LLC. Since ACL does not have controlling voting rights, GMSV is not
consolidated with ACL. ACL accounts for its 42% direct share of GMSV by the
equity method. ACL contributed $1,417 in capital to GMSV during 2002 and its
investment in GMSV of $1,437 at

                                        47
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 27, 2002 is included in other assets on the consolidated statement of
financial position. ACL's share of 2002 earnings of $7 is included in other
income in the consolidated statement of operations.

  DEBT AMORTIZATION

     ACL amortizes debt costs over the term of the debt. Amortization expense
was $1,245 for the period December 29, 2001 through May 28, 2002; $1,150 for the
period May 29, 2002 through December 27, 2002; $4,413 for fiscal 2001; and
$2,801 for fiscal 2000 and is included in interest expense in the consolidated
statement of operations.

  DEBT DISCOUNT

     On May 29, 2002 ACL issued new debt (see Note 6) which was recorded at fair
value. The difference between the principle amount of the notes and the fair
value (discount) is being amortized using the interest method over the life of
the notes. The amortization of the discount was $2,882 for the period May 29,
2002 through December 27, 2002 and is included in interest expense in the
consolidated statement of operations.

  REVENUE RECOGNITION

     Barge transportation revenue is recognized proportionately as shipments
move from origin to destination. Terminal, repair and other revenue is
recognized as services are provided. Marine construction revenue and related
expense is primarily recognized on the completed-contract method, due to the
short-term nature of contracts. Revenue from sale/leaseback transactions, if
any, is deferred and recognized over the life of the lease.

  FOREIGN CURRENCY TRANSLATION

     Assets and liabilities relating to investments in foreign operations are
translated into U.S. dollars using current exchange rates; revenues and expenses
are translated into U.S. dollars using the average exchange rate during the
period. When the functional currency is the local currency, the translation
gains and losses are excluded from income and are recorded in the other
comprehensive income component of member's equity. If the functional currency is
the U.S. dollar, the translation gains and losses are recorded as other income
or expense in the consolidated statement of operations.

  RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform to the current
year presentation.

  RECENTLY ISSUED ACCOUNTING STANDARDS

     In July 2001, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which
establishes the accounting for goodwill and other intangible assets following
their recognition. SFAS 142 applies to all goodwill and other intangible assets
whether acquired singly, as part of a group, or in a business combination. SFAS
142 provides that goodwill and intangible assets with indefinite lives should
not be amortized but should be tested for impairment annually using a fair-value
based approach. In addition, SFAS 142 provides that other intangible assets
should be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 has
been superceded by SFAS 144 which is described below. The adoption of SFAS 142
on December 29, 2001 has not had a significant effect on ACL's financial
position or results of operations.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment or

                                        48
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

disposal of long-lived assets and supercedes SFAS 121, and the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business (as previously
defined in that Opinion). SFAS 144 also amends Accounting Research Bulletin No.
51, "Consolidated Financial Statements", to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. The
objectives of SFAS 144 are to address significant issues relating to the
implementation of SFAS 121 and to develop a single accounting model, based on
the framework established in SFAS 121, for long-lived The provisions of SFAS 144
did not have an impact on ACL's financial statements in 2002.

     In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"), which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs incurred in a Restructuring)" ("Issue 94-3"). The principal difference
between SFAS 146 and Issue 94-3 relates to SFAS 146's requirements for
recognition of a liability for a cost associated with an exit or disposal
activity. SFAS 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred. Under Issue
94-3, a liability for an exit cost as generally defined in Issue 94-3 was
recognized at the date of an entity's commitment to an exit plan. Severance pay
under SFAS 146, in many cases, would be recognized over time rather than up
front. Additionally, under SFAS 146, if the benefit arrangement requires
employees to render future service beyond a "minimum retention period," a
liability should be recognized as employees render service over the future
service period even if the benefit formula used to calculate an employee's
termination benefit is based on length of service. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December
31, 2002, with early application encouraged. ACL will adopt SFAS 146 in 2003.

NOTE 2.  CHAPTER 11 FILING

     During 2002 and the beginning of 2003, ACL experienced a decline in barging
rates, reduced shipping volumes and excess barging capacity during a period of
slow economic growth and a global economic recession. Due to these factors,
ACL's revenues and earnings did not meet expectations and ACL's liquidity was
significantly impaired and debt covenant violations occurred as discussed in
Note 6. As a result, ACL was unable to meet its financial obligations as they
became due. On January 31, 2003 (the "Petition Date"), ACL filed a petition with
the U.S. Bankruptcy Court for the Southern District of Indiana, New Albany
Division (the "Bankruptcy Court") to reorganize under Chapter 11 of the U.S.
Bankruptcy Code (the "Bankruptcy Code" or "Chapter 11") under case number
03-90305. Included in the filing are ACL, ACL Holdings, American Commercial
Barge Line LLC, Jeffboat LLC, Louisiana Dock Company LLC and ten other U.S.
subsidiaries of ACL (collectively with ACL, the "Debtors") under case numbers
03-90306 through 03-90319. These cases are jointly administered for procedural
purposes before the Bankruptcy Court under case number 03-90305. The Chapter 11
petitions do not cover any of ACL's foreign subsidiaries or certain of its U.S.
subsidiaries.

     ACL and the other Debtors are continuing to operate their businesses as
debtors-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of
the Bankruptcy Court. As debtors-in-possession, the Debtors may not engage in
transactions outside of the ordinary course of business without approval, after
hearing, of the Bankruptcy Court. As part of the Chapter 11 cases, the Debtors
intend to develop and propose for confirmation pursuant to Chapter 11 a plan of
reorganization that will restructure the operations and liabilities of the
Debtors to the extent necessary to result in the continuing viability of ACL. A
filing date for such a plan has not been determined; however, the Debtors have
the exclusive right to file a plan of reorganization at any time during the 120
day period

                                        49
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

following January 31, 2003. If the exclusive filing period were to expire, other
parties, such as ACL creditors, would have the right to propose alternative
plans of reorganization.

     The Debtors have entered into the Debtor In Possession Credit Facility (DIP
Credit Facility) that provides up to $75 million of financing. As of February
21, 2003, participating bank commitments under the DIP Credit Facility total $60
million, of which the Debtors have drawn $50 million, which was used to retire
ACL's Pre-Petition Receivables Facility (see Note 5) and which continues to be
used to fund the Debtors' day-to-day cash needs. The DIP Credit Facility is
secured by the same and additional assets that collateralized the Senior Credit
Facilities (see Note 6) and ACL's Pre-Petition Receivables Facility, and bears
interest, at ACL's option, at LIBOR plus four percent or an Alternate Base Rate
(as defined in the DIP Credit Facility) plus three percent. There are also
certain interest rates in the event of a default under the facility. The DIP
Credit Facility also contains certain restrictive covenants that, among other
things, restrict the Debtors' ability to incur additional indebtedness or
guarantee the obligations of others. ACL is also required to maintain minimum
cumulative EBITDA, as defined in the DIP Credit Facility, and limit its capital
expenditures.

     As a result of the Chapter 11 filings, certain events of default under the
Senior Credit Facilities, Senior Notes, PIK Notes and Old Senior Notes (see Note
6) have occurred subsequent to December 27, 2002, the effects of which are
stayed pursuant to certain provisions of the Bankruptcy Code.

     Under Chapter 11, actions by creditors to collect claims in existence at
the filing date are stayed or deferred absent specific Bankruptcy Court
authorization to pay such pre-petition claims while the Debtors continue to
manage their businesses as debtors-in-possession and act to develop a plan of
reorganization for the purpose of emerging from these proceedings. A claims bar
date has not yet been established. The Debtors have received approval from the
Bankruptcy Court to pay or otherwise honor certain of its pre-petition
obligations, including but not limited to employee wages and certain employee
benefits, certain critical vendor payments, certain insurance and claim
obligations and certain tax obligations as a plan of reorganization is
developed.

     The amount of the claims to be filed against the Debtors by their creditors
could be significantly different than the amount of the liabilities recorded by
the Debtors. The Debtors also have numerous executory contracts and other
agreements that could be assumed or rejected during the Chapter 11 proceedings.
Parties affected by these rejections may file claims with the Bankruptcy Court
in accordance with the reorganization process. Under these Chapter 11
proceedings, the rights of and ultimate payments to pre-petition creditors,
rejection damage claimants and ACL's equity investor may be substantially
altered. This could result in claims being liquidated in the Chapter 11
proceedings at less (possible substantially less) than 100% of their face value,
and the membership interests of ACL's equity investor being diluted or
cancelled. The Debtors have not yet proposed a plan of reorganization. The
Debtors' pre-petition creditors and ACL's equity investor will each have a vote
in the plan of reorganization.

     The United States Trustee has appointed an unsecured creditors' committee.
The official committee and its legal representatives have a right to be heard on
all matters that come before the Bankruptcy Court.

     The Chapter 11 process presents inherent material uncertainty; it is not
possible to determine the additional amount of claims that may arise or
ultimately be filed, or predict the length of time that the Debtors will
continue to operate under the protection of Chapter 11, the outcome of the
Chapter 11 proceedings in general, whether the Debtors will continue to operate
in their present organizational structure, or the effects of the proceedings on
the business of ACL, the other Debtors and its non-filing subsidiaries and
affiliates, or on the interests of the various creditors and equity holder. The
ultimate recovery, if any, by creditors and equity holder will not be determined
until confirmation of a plan or plans of reorganization. No assurance can be
given as to what value will be ascribed in the bankruptcy proceedings to each of
these constituencies.

                                        50
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 3.  DANIELSON ACQUISITION OF ACL

     Danielson's basis in ACL's net assets at the acquisition date of $85,025
includes $7,000 in cash paid for membership interests in ACL Holdings; $2,769 in
cash paid for a 50% membership interest in Vessel Leasing LLC ("Vessel
Leasing"), an entity in which ACL owns the other 50% membership interest; the
contribution of $25,000 in cash and ACL 10 1/4% senior notes due June 30, 2008
having an estimated fair value of $43,650; and costs incurred by Danielson
directly associated with the acquisition of $6,606.

     As a result of Danielson's acquisition of ACL and the push down purchase
accounting that resulted, ACL recorded several non-cash adjustments including
the following:

<Table>
<S>                                                           <C>
Properties..................................................  $120,787
Net Pension Asset...........................................    (5,426)
Other Assets................................................   (27,509)
                                                              --------
                                                              $ 87,852
                                                              ========
Accrued Interest............................................  $(21,977)
Other Current Liabilities...................................       219
Short-Term Debt.............................................   (50,000)
Long-Term Debt..............................................   (13,342)
Pension Liability...........................................   (18,264)
Other Long-Term Liabilities.................................   (19,177)
Contribution of 10 1/4% senior notes at par including
  accrued interest..........................................   (64,082)
Equity......................................................   274,475
                                                              --------
                                                              $ 87,852
                                                              ========
</Table>

     The above adjustments reflect the estimated fair value of assets and
liabilities acquired by Danielson as of the date of acquisition. Management
believes no significant intangibles were acquired in the Danielson
Recapitalization. The adjustments are subject to revision once appraisals and
other evaluations of the fair value of the assets acquired and liabilities
assumed are completed. Accordingly, actual push down accounting adjustments
could differ from the adjustments presented above.

     The pro forma unaudited results of operations for the years ended December
27, 2002 and December 28, 2001, assuming consummation of the acquisition as of
December 30, 2000, are as follows:

<Table>
<Caption>
                                                                2002       2001
                                                              --------   --------
<S>                                                           <C>        <C>
Revenue.....................................................  $712,686   $747,526
Loss from continuing operations before extraordinary item
  and cumulative effect of accounting change................   (76,039)    (9,935)
Net loss....................................................   (76,039)    (8,540)
</Table>

NOTE 4.  PURCHASES AND DISPOSITIONS

     In 2001, ACL sold five towboats, a shipyard in Harahan, Louisiana, a
cleaning facility in Baton Rouge, Louisiana and other assets. This resulted in a
gain of $16,762 which is included in the net gain on property dispositions in
the consolidated statement of operations.

     On May 25, 2001, ACL entered into an agreement to sell substantially all of
the terminals of ACT, other than its coal transfer facility at St. Louis,
Missouri and its tank storage facility at Memphis, Tennessee. The sale of seven
terminals was completed on May 25, 2001. An additional terminal site in Omaha,
Nebraska was

                                        51
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

transferred on June 29, 2001. Subsequent to June 29, 2001, additional proceeds
were received from the condemnation of Omaha Terminal. ACL recorded a gain from
these transactions of $1,886 in Other Income.

     On May 26, 2000, ACL purchased certain barging assets of the Peavey Barge
Line ("Peavey") from ConAgra, Inc. for $31,500 in cash. The purchase price was
financed with existing credit facilities and cash flows from operations. ACL
also assumed $3,800 in capital leases.

     ACL sold its 100% membership interest in Waterway Communications System LLC
("Watercom") on September 6, 2000 to Mobex Communications, Inc. ("Mobex") for
$13,600 in cash and $2,400 in Mobex preferred stock. The sale resulted in a gain
of $11,418.

NOTE 5.  ACCOUNTS RECEIVABLE SECURITIZATION

     ACL's receivables facility, which was administered by PNC Bank, N.A., was
replaced on May 29, 2002 with a Receivables Purchase Agreement among American
Commercial Lines Funding Corporation ("ACLF"), American Commercial Barge Line
LLC, Jupiter Securitization Corporation and Bank One, NA (the "Pre-Petition
Receivables Facility") having substantially the same terms as the old
receivables facility. As discussed in Note 2, the Pre-Petition Receivables
Facility was retired with proceeds from the DIP Credit Facility.

     At December 27, 2002 and December 28, 2001, ACL had $39,300 and $51,000,
respectively, outstanding under its accounts receivable securitization facility
agreement and had $27,590 and $22,603, respectively, of net residual interest in
the securitized receivables which is included in Accounts Receivable, Net on the
consolidated statement of financial position. The fair value of the net residual
interest is measured at the time of the sale and is based on the sale of similar
assets. From December 29, 2001 through May 28, 2002 ACL received gross proceeds
of $3,800 from the sale of receivables and made gross payments of $12,200 under
this Agreement. From May 29, 2002 through December 29, 2002 ACL received gross
proceeds of $20,300 and made gross payments of $23,600. In 2001, ACL received
gross proceeds of $30,800 from the sale of receivables and made gross payments
of $35,800. In 2000, ACL received gross proceeds of $20,000 from the sale of
receivables and made gross payments of $14,000.

     In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS
140"). The Statement is effective for transfers and servicing of financial
assets and extinguishments of liabilities occurring after March 31, 2001. ACL
adopted SFAS 140 on April 1, 2001. The adoption required the consolidation of
ACLF, a wholly-owned subsidiary, that was previously treated as a
non-consolidated Qualified Special Purpose Entity. The consolidation resulted in
a charge to Retained Earnings of $989 in the second quarter 2001.

                                        52
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6.  DEBT

<Table>
<Caption>
                                                              DECEMBER 27,   DECEMBER 28,
                                                                  2002           2001
                                                              ------------   ------------
<S>                                                           <C>            <C>
Revolving Credit Facility...................................    $ 41,000       $ 84,000
Tranche A Term Loan.........................................      43,119             --
Tranche B Term Loan.........................................     124,141        143,951
Tranche C Term Loan.........................................     146,069        169,378
Senior Notes (New)..........................................     128,491             --
Senior Subordinated Notes...................................      68,797             --
Senior Notes (Old)..........................................       4,946        295,000
Bonds guaranteed by the Maritime Administration.............      39,693             --
Other Notes.................................................         317            190
                                                                --------       --------
                                                                 596,573        692,519
Less short-term debt........................................      41,000         84,000
Less, current portion long-term debt........................     555,573        608,519
                                                                --------       --------
Long-term debt..............................................    $     --       $     --
                                                                ========       ========
</Table>

     As part of the Danielson recapitalization on May 29, 2002 of ACL Holdings,
ACL's debt was restructured. Danielson contributed to ACL Holdings $58,493
principal amount of ACL's 10 1/4% senior notes due June 30, 2008 ("Old Senior
Notes"), plus the interest obligations, if any, thereon.

     ACL's existing credit facilities were amended and restated as of April 11,
2002 (the amended and restated credit facilities are hereafter referred to as
the "Senior Credit Facilities") to, among other things, modify financial and
restrictive covenants thereunder, prepay $25,000 of term loans (the "Term
Loans") thereunder from the $25,000 in cash contributed by Danielson and convert
$50,000 of revolving credit loans (the "Revolving Credit Facility") thereunder
into a new tranche of term loans having an interest rate and other terms
substantially similar to the revolving credit loans under ACL's old senior
credit facilities. The amended and restated credit agreement with ACL's senior
secured lenders contains mandatory prepayments of the term loans with net
proceeds from certain asset sales, equity issuances, incurrence of indebtedness
and sale and leaseback transactions, as well as excess cash flow, as defined in
the credit agreement.

     ACL also completed an exchange offer (the "Exchange Offer") for the Old
Senior Notes, pursuant to which $284,500 or approximately 96.4%, of the
principal amount of ACL's Old Senior Notes were tendered, with the $58,493
principal amount of ACL's Old Senior Notes contributed by Danielson and its
subsidiaries to ACL Holdings being deemed tendered in the Exchange Offer.
Holders of Old Senior Notes who tendered their Old Senior Notes pursuant to the
Exchange Offer received approximately $134,700 aggregate principal amount of new
11.25% senior notes (the "Senior Notes") and approximately $112,900 aggregate
principal amount of 12% pay-in-kind senior subordinated notes (the "PIK Notes").
The debt exchange was not an extinguishment of debt for accounting purposes
since the terms of the new debt are not substantially different from the terms
of the Old Senior Notes exchanged.

     Following the consummation of the Exchange Offer, a holder of $4,000
aggregate principal amount of the Old Senior Notes exchanged such notes and
accrued interest for approximately $2,400 of Senior Notes and approximately
$2,000 of PIK Notes as permitted by the indentures governing the notes,
following which $6,500 of the Old Senior Notes remained outstanding.

     Since ACL is applying push down accounting effective with Danielson's
acquisition of ACL, ACL's debt was adjusted to fair value at the acquisition
date. The difference between the principal amount of the debt and its fair value
is being accreted as interest expense over the term of the debt under the
effective interest method.

                                        53
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Revolving Credit Facility, which provides for revolving loans and
letters of credit not to exceed the aggregate principal amount of $50,000,
($100,000 prior to the amendment and restatement of the credit facilities,)
matures June 30, 2005, but each loan must be repaid within one year. The
Revolving Credit Facility bears interest at a rate equal to London InterBank
Offered Rates ("LIBOR") plus a margin based on ACL's performance. The interest
rates as of December 27, 2002 ranged from 5.8125% to 6.0625%.

     Tranche A of the Term Loans matures June 30, 2005. Tranche B of the Term
Loans matures June 30, 2006. Tranche C of the Term Loans matures June 30, 2007.
The Term Loans bear interest at a rate equal to LIBOR plus a margin based on
ACL's performance. The annual interest rates as of December 27, 2002 were:
Tranche A - 6.0%, Tranche B - 6.25% and Tranche C - 6.5%.

     The new Senior Notes are due January 1, 2008 and bear interest at an annual
rate of 11.25%, payable semi-annually. The PIK Notes are due July 1, 2008 and
bear interest at an annual rate of 12%. ACL has the option of issuing new PIK
Notes in lieu of paying cash interest on such notes each June 30 and December 31
until maturity. After 2 years from issuance, interest accretes at 13.5% per
annum if ACL elects to not pay the interest due in cash. The interest rate
remains 12% if the interest is paid in cash. The Old Senior Notes are due June
30, 2008 and bear interest at an annual rate of 10.25%.

     In connection with the exchange offer, ACL completed a consent solicitation
of the holders of the Old Senior Notes, which resulted in the elimination or
amendment of substantially all the restrictive covenants contained in the
indenture governing the Old Senior Notes, the subordination of the subsidiary
guarantees of the Old Senior Notes to the subsidiary guarantees of ACL's Senior
Credit Facilities, the Senior Notes and the PIK Notes and the waiver of any and
all defaults under the indenture governing the Old Senior Notes through the
effective date of the exchange offer, May 29, 2002.

     As noted above, DHC purchased the 50% equity interests that Vectura Group
LLC owned in Vessel Leasing at the time Danielson acquired ACL. Vessel Leasing,
which was formerly accounted for under the equity method is now consolidated
with ACL. Accordingly, the bonds issued by Vessel Leasing that are guaranteed by
the U.S. Maritime Administration are included in ACL's debt balance.

     ACL has an outstanding loan guarantee of $2,850 in the borrowings of one of
its equity investees, GMS Venezuela C.A., from the International Finance
Corporation.

     The Senior Credit Facilities are secured by the assets of the guarantor
subsidiaries. The Senior Notes and the PIK Notes are unsecured.

     The Senior Credit Facilities and the indentures governing the Senior Notes
and the PIK Notes (the "Indentures") contain a number of covenants with
specified financial ratios and tests including, with respect to the Senior
Credit Facilities, maximum leverage ratios, rent adjusted maximum leverage
ratios and interest coverage ratios. Compliance with financial ratios is
measured at the end of each quarter. The Indentures also contain certain cross
default provisions. ACL's ability to meet the financial ratios is affected by
adverse weather conditions, seasonality and other risk factors inherent in its
business. The Senior Credit Facilities also contain provisions which require
mandatory prepayments of the Term Loans with net proceeds from certain asset
sales, equity issuances, incurrence of indebtedness and sale and leaseback
transactions, as well as certain excess cash flow.

     In late 2002, ACL received a notification from Bank One stating that ACL
was in violation of the cross-default provisions contained in the Pre-Petition
Receivables Facility, which provides that a failure to maintain the financial
ratios provided by the Credit Agreement, whether or not amended or waived,
constitutes a default under the Pre-Petition Receivables Facility. Subsequent to
the notice of default, Bank One and ACL agreed to an amendment to the
Pre-Petition Receivables Facility which permitted ACL to continue utilizing the
Receivables Facility, although the loss reserve and certain facility fees were
increased and the termination date changed from May 29, 2003 to January 31,
2003.

                                        54
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Subsequent to the notice of default from Bank One, ACL obtained an
amendment (the "Amendment") of certain covenants under the Senior Credit
Facilities, relating to third quarter and fourth quarter 2002 covenants and a
waiver of any past violations thereof. Absent the Amendment, ACL would not have
been in compliance with the leverage or interest coverage ratios contained in
its Senior Credit Facilities as of December 27, 2002. At the end of the first
quarter of 2003, the covenant ratios revert to levels in effect before the
Amendment. Although management had been working on operating and financial plans
to comply with its debt covenants in 2003 and thereafter, ACL was unable to
complete an out-of-court restructuring and management believes it is probable
that ACL will not be in compliance with Senior Credit Facility covenants at the
end of the first quarter 2003, absent another amendment to the Senior Credit
Facilities. Accordingly, ACL has classified all of its long-term debt as current
debt as of December 27, 2002.

     On December 31, 2002, ACL elected to exercise its rights under the
Indentures to postpone the interest payments due on the Senior Notes and Old
Senior Notes for thirty days. This resulted in an event of default under the
Senior Credit Facilities and the Pre-Petition Receivables Facility.

     Principal payments of long-term debt due during the next five fiscal years
and thereafter and unamortized debt discount according to the original terms of
the debt are as follows:

<Table>
<S>                                                           <C>
2003........................................................  $  3,204
2004........................................................    36,034
2005........................................................    88,134
2006........................................................    89,464
2007........................................................   111,245
Thereafter..................................................   284,929
                                                              --------
                                                               613,010
Unamortized debt discount...................................   (57,437)
                                                              --------
                                                              $555,573
                                                              ========
</Table>

NOTE 7.  INCOME TAXES

     ACL and its subsidiaries (except for ACL Capital Corp., American Commercial
Lines Funding Corporation and the foreign subsidiaries) are organized as limited
liability companies. As such, ACL passes through its U.S. federal and
substantially all of its state (but not foreign) taxable income to its members
who are responsible for income taxes on such taxable income.

     Components of income tax expense (benefit) follow:

<Table>
<Caption>
                                                MAY 29, 2002 TO    DECEMBER 29, 2001
                                               DECEMBER 27, 2002    TO MAY 28, 2002    2001    2000
                                               -----------------   -----------------   ----   ------
<S>                                            <C>                 <C>                 <C>    <C>
State........................................        $(12)               $   1         $ 24   $   37
Foreign......................................         750                 (920)          94    4,226
Federal......................................           5                   --           --       --
                                                     ----                -----         ----   ------
                                                     $743                $(919)        $118   $4,263
                                                     ====                =====         ====   ======
</Table>

NOTE 8.  EMPLOYEE BENEFIT PLANS

     ACL sponsors or participates in defined benefit plans covering both
salaried and hourly employees. The plans provide for eligible employees to
receive benefits based on years of service and either compensation rates near
retirement or at a predetermined multiplier factor. Contributions to the plans
are sufficient to meet the

                                        55
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

minimum funding standards set forth in the Employee Retirement Income Security
Act of 1974 ("ERISA"), as amended. Plan assets consist primarily of common
stocks, corporate bonds and cash and cash equivalents.

     As of January 31, 2000, the accrued benefit obligation under the American
Commercial Lines LLC Pension Plan was frozen. The past service benefit
obligation is complemented by a new prospective annual benefit obligation. This
change affected salaried employees covered by this plan and has resulted in cost
savings to ACL. The American Commercial Vessel and Terminal Employees' Pension
Plan was merged into the ACL Pension Plan on December 31, 2001.

     In addition to the defined benefit pension and related plans, ACL has a
defined benefit post-retirement plan covering most full-time employees. The plan
provides medical benefits and is contributory, with retiree contributions
adjusted annually, and contains other cost-sharing features such as deductibles
and coinsurance. The accounting for the health care plan anticipates future
cost-sharing changes to the written plan that are consistent with ACL's
expressed intent to increase the retiree contribution rate annually.

     ACL also sponsors certain contributory defined contribution plans covering
eligible employee groups. Contributions to such plans are based upon a
percentage of employee contributions and were $1,887, $1,471 and $1,456 in 2002,
2001 and 2000, respectively.

     Certain employees are covered by union-sponsored, collectively-bargained,
multi-employer defined benefit pension plans. Contributions to such plans, which
are based upon union contracts, were approximately $7, $74 and $84 in 2002, 2001
and 2000, respectively.

     A summary of the pension and post-retirement plan components follows:

<Table>
<Caption>
                                                                PENSION
                                          ----------------------------------------------------
                                          DECEMBER 27, 2002   MAY 29, 2002   DECEMBER 28, 2001
                                          -----------------   ------------   -----------------
<S>                                       <C>                 <C>            <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, beginning of
  period................................      $ (97,901)        $(92,936)        $(84,050)
Service cost............................         (2,451)          (1,605)          (3,818)
Interest cost...........................         (4,095)          (2,816)          (6,408)
Impact of plan changes..................         (1,983)              --               --
Liability gain..........................         (7,381)          (3,474)          (2,913)
Benefits paid...........................          3,098            2,930            4,253
                                              ---------         --------         --------
Benefit obligation, end of period.......      $(110,713)        $(97,901)        $(92,936)
                                              =========         ========         ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets, beginning of
  period................................      $ 117,992         $112,964         $118,305
Actual return on plan assets............        (10,139)           7,942           (1,100)
Employer contributions..................              9               16               12
Benefits paid...........................         (3,098)          (2,930)          (4,253)
                                              ---------         --------         --------
Fair value of plan assets, end of
  period................................      $ 104,764         $117,992         $112,964
                                              =========         ========         ========
FUNDED STATUS:
Funded status...........................      $  (5,949)        $ 20,091         $ 20,028
Unrecognized net actuarial loss.........         23,876               --            7,193
Unrecognized prior service cost
  (gain)................................          1,880               --          (21,094)
Net claims during 4th quarter...........              4                3                3
                                              ---------         --------         --------
Prepaid benefit cost....................      $  19,811         $ 20,094         $  6,130
                                              =========         ========         ========
</Table>

                                        56
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                PENSION
                                          ----------------------------------------------------
                                          DECEMBER 27, 2002   MAY 29, 2002   DECEMBER 28, 2001
                                          -----------------   ------------   -----------------
<S>                                       <C>                 <C>            <C>
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
  STATEMENT OF FINANCIAL POSITION
  CONSIST OF:
Prepaid benefit cost....................      $  20,806         $ 22,702         $ 26,067
Accrued benefit liability...............        (16,480)          (2,608)         (20,108)
Minimum pension liability...............         15,485               --               --
Other...................................             --               --              171
                                              ---------         --------         --------
Net amount recognized...................      $  19,811         $ 20,094         $  6,130
                                              =========         ========         ========
</Table>

     As of December 28, 2001, the American Commercial Vessel and Terminal
Employees' Pension Plan (the "ACV&T Plan") had an accumulated benefit obligation
of $10,181 and a fair value of assets of $9,277. With the merger of the ACV&T
Plan into the ACL Pension Plan on December 31, 2001, the fair value of the
assets of the combined plans exceeded the accumulated benefit obligations
related thereto.

<Table>
<Caption>
                                                                    POST-RETIREMENT
                                                  ----------------------------------------------------
                                                  DECEMBER 27, 2002   MAY 29, 2002   DECEMBER 28, 2001
                                                  -----------------   ------------   -----------------
<S>                                               <C>                 <C>            <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation, beginning of period.........      $(12,614)         $(12,412)        $(11,161)
Service cost....................................          (279)             (195)            (399)
Interest cost...................................          (524)             (372)            (826)
Plan participants' contributions................          (225)             (154)            (261)
Actuarial loss..................................        (3,069)             (185)          (1,176)
Benefits paid...................................         1,407               704            1,411
                                                      --------          --------         --------
Benefit obligation, end of period...............      $(15,304)         $(12,614)        $(12,412)
                                                      ========          ========         ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets, beginning of
  period........................................      $     --          $     --         $     --
Employer contributions..........................         1,182               550            1,150
Plan participants' contributions................           225               154              261
Benefits paid...................................        (1,407)             (704)          (1,411)
                                                      --------          --------         --------
Fair value of plan assets, end of period........      $     --          $     --         $     --
                                                      ========          ========         ========
FUNDED STATUS:
Funded status...................................      $(15,304)         $(12,614)        $(12,412)
Unrecognized net actuarial loss (gain)..........         2,991                --           (3,499)
Unrecognized prior service gain.................            --                --           (1,153)
Net claims during 4th quarter...................           366               427              407
                                                      --------          --------         --------
Accrued benefit cost............................      $(11,947)         $(12,187)        $(16,657)
                                                      ========          ========         ========
</Table>

                                        57
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  COMPONENTS OF NET PERIODIC BENEFIT COST:

<Table>
<Caption>
                                          MAY 29, 2002 TO    DECEMBER 29, 2001
                                         DECEMBER 27, 2002    TO MAY 28, 2002      2001       2000
                                         -----------------   -----------------   --------   --------
<S>                                      <C>                 <C>                 <C>        <C>
Pension:
  Service cost.........................       $ 2,451             $ 1,605        $  3,818   $  3,783
  Interest cost........................         4,095               2,816           6,408      6,092
  Expected return on plan assets.......        (6,347)             (4,848)        (11,937)   (11,169)
  Transition obligation amortization...            --                  --              --       (957)
  Amortization of prior service
     costs.............................           103                (854)         (2,015)    (1,875)
  Gain amortization....................            --                 (13)           (172)      (220)
                                              -------             -------        --------   --------
  Net periodic benefit cost (income)...       $   302             $(1,294)       $ (3,898)  $ (4,346)
                                              =======             =======        ========   ========
Post-retirement:
  Service cost.........................       $   279             $   195        $    399   $    380
  Interest cost........................           524                 372             826        807
  Amortization of prior service
     costs.............................            --                (120)           (288)      (288)
  Gain amortization....................            --                 (87)           (348)      (418)
                                              -------             -------        --------   --------
  Net periodic benefit cost............       $   803             $   360        $    589   $    481
                                              =======             =======        ========   ========
  WEIGHTED-AVERAGE ASSUMPTIONS:
Pension:
  Discount rate........................          6.75%               7.25%           7.50%      7.75%
  Expected return on plan assets.......          9.00%               9.50%          10.00%     10.00%
  Rate of compensation increase........          4.00%               4.00%           4.00%      4.00%
Post-retirement:
  Discount rate........................          7.25%               7.50%           7.75%      7.50%
</Table>

     The net post-retirement benefit obligation was determined using the
assumption that the health care cost trend rate for retirees was 10.0% for the
current year, decreasing gradually to a 5.0% trend rate by 2009 and remaining at
that level thereafter. A 1% increase in the assumed health care cost trend rate
would have increased the accumulated post-retirement benefit obligation as of
December 27, 2002 by $382 and the aggregate of the service and interest cost
components of net periodic post-retirement benefit expense for 2002 by $26.

NOTE 9.  LEASE OBLIGATIONS

     ACL leases buildings, data processing hardware and operating equipment
under various operating leases and charter agreements, which expire from 2002 to
2017 and which generally have renewal options at similar terms. Certain vessel
leases also contain purchase options at prices approximating fair value of the
leased vessels. Rental expense under continuing obligations was $23,121 for the
period December 29, 2001 through May 28, 2002; $29,896 for the period May 29,
2002 through December 27, 2002; $56,711 for fiscal year 2001; and $49,463 for
fiscal year 2000.

                                        58
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 27, 2002, obligations under ACL's operating leases with initial
or remaining noncancelable lease terms longer than one year and capital leases
were as follows:

<Table>
<Caption>
                                                                                          2008
                                       2003      2004      2005      2006      2007     AND AFTER
                                      -------   -------   -------   -------   -------   ---------
<S>                                   <C>       <C>       <C>       <C>       <C>       <C>
Operating Lease Obligations:
  Operating Leases..................  $37,515   $31,367   $24,611   $20,736   $19,105    $79,922
  Operating Leases -- Related
     Parties........................      840       840       840        70        --         --
                                      -------   -------   -------   -------   -------    -------
                                      $38,355   $32,207   $25,451   $20,806   $19,105    $79,922
                                      =======   =======   =======   =======   =======    =======

Future Capital Lease Obligations....  $   460   $   460   $   460   $   460   $   192    $    --
                                      =======   =======   =======   =======   =======    =======
</Table>

     The total future minimum lease payments under capital leases of $2,032 less
an interest amount of $395 results in a present value of net minimum lease
payments of $1,637 which is recorded in other current and long-term liabilities.

     ACL entered into capital leases of $3,924 in 2001 with Vessel Leasing , a
related party. Due to a change in the lease terms in 2002, the lease became an
operating lease. ACL incurred interest expense related to capital leases of $220
for the period December 29, 2001 through May 28, 2002; $101 for the period May
29, 2002 through December 27, 2002; and $235 for fiscal year 2001.

NOTE 10.  RELATED PARTY TRANSACTIONS

     On July 24, 2002, the Board of Directors of DHC amended DHC's 1995 Stock
and Incentive Plan and granted stock options to management of ACL for 1,560,000
shares of DHC common stock. The options have an exercise price of $5.00 per
share and expire 10 years from the date of grant. One half of the options time
vest over a 4 year period in equal annual installments and one half of the
options vest over a 4 year period in equal annual installments contingent upon
the financial performance of ACL. ACL accounts for stock options under the
intrinsic value method based on APB 25, "Accounting for Stock Issued to
Employees". Because the market price of DHC common stock has been lower than the
exercise price of the options since the date of grant, no expense has been
recognized in the accompanying financial statements.

     On May 29, 2002, DHC issued 339,040 shares of restricted DHC common stock
to ACL management. These restricted shares have been valued at fair value at the
date of issuance and vest one third annually over a three year period. The full
value of these shares is recorded as other capital with an offset to unearned
compensation in member's equity. As employees render service over the vesting
period, compensation expense is recorded and unearned compensation is reduced.

     ACL recorded terminal service expense with GMS of $330 for the period
December 29, 2001 through May 28, 2002; $579 for the period May 29, 2002 through
December 27, 2002; $400 for fiscal year 2001; and $166 for fiscal year 2000. In
2001, ACL received $11,969 from GMS for the sale of terminals and proceeds from
the condemnation of a terminal. ACL recognized a gain of $1,886 from these
transactions.

     ACL recorded charter income from UABL of $4,493 for the period December 29,
2001 through May 28, 2002; $5,936 for the period May 29, 2002 through December
27, 2002; $11,052 for fiscal year 2001; and $2,089 for fiscal year 2000. ACL
also recorded administrative fee expenses to UABL of $3,158 for the period
December 29, 2001 through May 28, 2002; $4,306 for the period May 29, 2002 to
December 27, 2002; $7,709 for fiscal year 2001; and $1,457 for fiscal year 2000.
ACL sold used barges to UABL for $790 in 2001. At December 27, 2002, ACL had
receivables of $6,341 from UABL. At December 28, 2001, ACL had receivables of
$13,402 and payables of $8,397 with UABL.

                                        59
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     ACL earned $1,527 in bauxite unloading revenue from GMSV in 2002. At
December 27, 2002, ACL had $3,787 in receivables from GSMV from revenue
transactions and equipment advances.

     In 2001, ACL and Vectura Group invested in Vessel Leasing. ACL accounted
for its 50% ownership in Vessel Leasing by the equity method until May 29, 2002
at which time ACL began consolidating Vessel Leasing as a result of the
Danielson acquisition of ACL. ACL's investment of $6,808 in Vessel Leasing as of
December 28, 2001 is included in other assets on the consolidated statement of
financial position. ACL's share of Vessel Leasing's net loss is $38 for fiscal
2001 and is included in other income in the consolidated statement of
operations.

     As of December 28, 2001, Vessel Leasing had total assets of $54,921 and
total liabilities of $45,571 including public long-term debt of $42,580
(including current portion) and $2,830 in unearned revenue from prepaid charter
payments made by ACL's domestic barging subsidiary. Vessel Leasing's long-term
debt is not guaranteed by ACL or any of ACL's subsidiaries. ACL's domestic barge
operating subsidiary had a long-term operating lease commitment to Vessel
Leasing, which was guaranteed by ACL.

     ACL sold new barges for $47,757 to Vessel Leasing in 2001. Profit on sales
of barges to Vessel Leasing was deferred by Jeffboat and was being recognized
over the life of the lease. Deferred profit was eliminated with purchase
accounting adjustments as a result of the Danielson recapitalization. All of
these barges, except for the capital leases of $3,924, were leased by Vessel
Leasing to ACL as operating leases which resulted in ACL charter expense of
$1,760 for the period December 29, 2001 through May 28, 2002 and $1,705 for
fiscal year 2001.

NOTE 11.  FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

     The carrying amounts (net of debt discount) and fair values of ACL's
financial instruments are as follows:

<Table>
<Caption>
                                                     2002                    2001
                                             ---------------------   ---------------------
                                             CARRYING                CARRYING
                                              AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                             --------   ----------   --------   ----------
<S>                                          <C>        <C>          <C>        <C>
ASSETS:
Interest Rate Cap..........................  $     --    $     --    $     37    $     37
Net unrealized gain on fuel hedge
  agreements...............................       194         194        (242)       (242)
LIABILITIES:
Revolving Credit Facility..................    41,000      41,000      84,000      84,000
Tranche A Term Loan........................    43,119      43,119          --          --
Tranche B Term Loan........................   124,141     124,141     143,951     143,951
Tranche C Term Loan........................   146,069     146,069     169,378     169,378
Senior Notes (New).........................   128,491      38,376          --          --
Senior Subordinated Notes..................    68,797       3,483          --          --
Senior Notes (Old).........................     4,946       1,820     295,000     147,500
Bonds guaranteed by the Maritime
  Administration...........................    39,693      39,693          --          --
Other Notes................................       317         315         190         187
</Table>

     The fair values of the Interest Rate Cap, new Senior Notes, Senior
Subordinated Notes and old Senior Notes payable are based on quoted market
values. The carrying values of the Term Loans, all of which bear interest at
floating rates, approximate their fair values. The Bonds guaranteed by the
Maritime Administration were recently issued and, accordingly, the carrying
values approximates fair values. The Other Notes have

                                        60
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

been estimated using discounted cash flow analyses based on ACL's current
incremental borrowing rates for similar types of borrowing arrangements.

  FUEL PRICE RISK MANAGEMENT

     ACL uses forward purchases to provide partial short-term protection against
a sharp increase in diesel fuel prices. These instruments generally cover a
portion of ACL's forecasted diesel fuel needs for towboat operations over the
next one to twelve months. ACL accounts for the forward fuel purchases as cash
flow hedges. In accordance with SFAS No. 133, such financial instruments are
marked-to-market and, if they qualify for hedge accounting, the offset is
recorded to other comprehensive income and then subsequently recognized as a
component of fuel expense when the underlying fuel being hedged is used. Should
the forward purchase not qualify for hedge accounting (correlation ratio is
outside of defined deviation), such changes in value would be recorded through
the statement of operations rather than other comprehensive income. ACL also has
barging customer contract rate provisions for changes in fuel prices for
approximately half of gallons consumed. The adjustments are deferred one
quarter.

     At December 27, 2002, ACL had forward fuel purchase contracts outstanding
with an aggregate notational value of approximately $4,428 and a fair value of
approximately $194, which has been recorded in other current assets on the
consolidated statement of financial position. Under these agreements, ACL will
pay fixed prices ranging from $0.69 to $0.80 per gallon. There were 6.1 million
gallons remaining on the contracts at December 27, 2002, terminating December
31, 2003, but subsequently settled in January 2003.

  INTEREST RATE RISK MANAGEMENT

     ACL entered into an interest rate cap agreement in the third quarter of
2000 to reduce the impact of potential rate increases on floating rate debt. The
interest rate cap has a notional amount of $201,800 and a fair value of zero as
of December 27, 2002 and is effective through August 11, 2003. The Company
accounts for the interest rate cap as a cash flow hedge whereby the fair value
of the interest rate cap is reflected as an asset or liability on the
accompanying consolidated statement of financial position. The cap rate (hedging
instrument) is the same interest rate index as the base interest rate for the
floating rate debt (hedged item). When the interest rate index exceeds the
interest rate cap, a portion of the change in fair value of the instrument
represents a change in intrinsic value which is an effective hedge. This portion
of the change in value is recorded as other comprehensive income (loss).

     ACL recognizes changes in the fair value of interest rate swap agreements
entered into by GMS. Such changes are recorded in other assets or liabilities on
the accompanying consolidated statement of financial position, with the offset
recorded as comprehensive income (loss) or other income (expense) depending on
whether the swap is an effective or ineffective hedge. ACL's share of the fair
value of the swap agreements amounted to ($290) at December 27, 2002 and
($1,076) at December 28, 2001.

NOTE 12.  CONTINGENCIES

     A number of legal actions are pending against ACL in which claims are made
in substantial amounts. While the ultimate results of pending litigation cannot
be predicted with certainty, management does not currently expect that
resolution of these matters will have a material adverse effect on ACL's
consolidated results of operations, financial position and cash flows.

NOTE 13.  BUSINESS SEGMENTS

     ACL has two reportable business segments -- barging and construction. ACL's
barging segment includes barge transportation operations in North and South
America and domestic fleeting facilities that provide fleeting, shifting,
cleaning and repair services at various locations along the inland waterways.
The construction segment constructs marine equipment for ACL's domestic and
international fleets, as well as external customers.

                                        61
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Management evaluates performance based on segment earnings, which is
defined as operating income before income taxes. The accounting policies of the
reportable segments are consistent with those described in the summary of
significant accounting policies. Intercompany sales are transferred at cost.

     Reportable segments are business units that offer different products or
services. The reportable segments are managed separately because they provide
distinct products and services to internal and external customers.

<Table>
<Caption>
                                               REPORTABLE SEGMENTS
                                             -----------------------    ALL OTHER
                                             BARGING    CONSTRUCTION   SEGMENTS(1)    TOTAL
                                             --------   ------------   -----------   --------
<S>                                          <C>        <C>            <C>           <C>
MAY 29, 2002 TO DECEMBER 27, 2002
Revenues from external customers...........  $377,498     $ 43,994       $ 6,555     $428,047
Intersegment revenues......................        --          720            --          720
Depreciation and amortization expense......    35,337        1,411           659       37,407
Segment earnings (loss)....................    14,896       (1,866)          963       13,993
Segment assets.............................   730,809       55,236        27,549      813,594
Property additions.........................     6,572          880           305        7,757

DECEMBER 29, 2001 TO MAY 28, 2002
Revenues from external customers...........  $243,202     $ 37,659       $ 3,944     $284,805
Intersegment revenues......................        --          560            20          580
Depreciation and amortization expense......    20,373          989           462       21,824
Segment (loss) earnings....................   (21,182)       1,287         1,505      (18,390)
Property additions.........................     5,067          481            57        5,605

YEAR ENDED DECEMBER 28, 2001
Revenues from external customers...........  $672,590     $102,862       $13,049     $788,501
Intersegment revenues......................        --        1,563             4        1,567
Depreciation and amortization expense......    51,890        2,203         1,404       55,497
Segment earnings...........................    58,436        4,713         2,212       65,361
Segment assets.............................   672,057       59,676        26,203      757,936
Property additions (excluding $5,811 in
  capital leases, and related
  expenditures)............................    16,879        2,094           799       19,772

YEAR ENDED DECEMBER 29, 2000
Revenues from external customers...........  $631,748     $124,068       $18,022     $773,838
Intersegment revenues......................        --        2,917         4,308        7,225
Depreciation and amortization expense......    51,253        2,107         2,654       56,014
Segment earnings...........................    44,243        8,318         3,747       56,308
Segment assets.............................   698,446       52,704        36,388      787,538
Property additions* (excluding $6,163 in
  capital leases)..........................    48,005        1,922           934       50,861
</Table>

---------------

  * Barging includes $20,307 of purchased Barging Assets.

(1) Financial data for segments below the reporting thresholds are attributable
    to two operating segments -- a segment operating terminals along the U.S.
    inland waterways and in Venezuela and a segment providing voice and data
    communications to marine companies operating on the U.S. inland waterways.
    The segment providing voice and data communications was sold in 2000.

                                        62
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following is a reconciliation of ACL's revenues from external customers
and segment earnings to ACL's consolidated totals.

<Table>
<Caption>
                                  MAY 29, 2002 TO    DECEMBER 29, 2001
                                 DECEMBER 27, 2002    TO MAY 28, 2002      2001       2000
                                 -----------------   -----------------   --------   --------
<S>                              <C>                 <C>                 <C>        <C>
REVENUES
Revenues from external
  customers....................      $428,047            $284,805        $788,501   $773,838
Intersegment revenues..........           720                 580           1,567      7,225
Elimination of intersegment
  revenues.....................          (720)               (580)         (1,567)    (7,225)
                                     --------            --------        --------   --------
Operating revenue..............      $428,047            $284,805        $788,501   $773,838
                                     ========            ========        ========   ========
EARNINGS
Total segment earnings
  (loss).......................      $ 13,993            $(18,390)       $ 65,361   $ 56,308
Unallocated amounts:
  Interest expense.............       (35,944)            (25,712)        (70,932)   (70,813)
  Other, net...................        (3,307)               (827)         (1,526)    (4,009)
  Gain on sale of Watercom.....            --                  --              --     11,418
                                     --------            --------        --------   --------
Loss before income taxes,
  extraordinary item and
  cumulative effect of
  accounting change............      $(25,258)           $(44,929)       $ (7,097)  $ (7,096)
                                     ========            ========        ========   ========
</Table>

  GEOGRAPHIC INFORMATION

<Table>
<Caption>
                                                REVENUES                                       PROPERTIES -- NET
                       -----------------------------------------------------------   -------------------------------------
                        MAY 29, 2002 TO    DECEMBER 29, 2001
                       DECEMBER 27, 2002    TO MAY 28, 2002      2001       2000     DECEMBER 27, 2002   DECEMBER 28, 2001
                       -----------------   -----------------   --------   --------   -----------------   -----------------
<S>                    <C>                 <C>                 <C>        <C>        <C>                 <C>
United States........      $397,603            $272,548        $748,837   $733,870       $548,327            $422,877
South America........        30,444              12,257          39,664     39,968         37,458              41,256
                           --------            --------        --------   --------       --------            --------
Total................      $428,047            $284,805        $788,501   $773,838       $585,785            $464,133
                           ========            ========        ========   ========       ========            ========
</Table>

     Revenues are attributed to countries based on the location of the service
provided. Properties represent the only long-lived assets of ACL.

  MAJOR CUSTOMER

     Revenues from one customer of the barging segment represented approximately
14% for the period December 29, 2001 through May 28, 2002; 16% for the period
May 29, 2002 through December 27, 2002; 15% for fiscal year 2001; and 14% for
fiscal year 2000 of ACL's consolidated revenues.

NOTE 14.  QUARTERLY DATA (UNAUDITED)

<Table>
<Caption>
                                                                  2002
                                          ----------------------------------------------------
                                            1ST        2ND*       3RD        4TH       TOTAL
                                          --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
Operating Revenue.......................  $170,868   $169,931   $179,657   $192,396   $712,852
Operating (Loss) Income.................    (2,815)   (14,249)     3,132      9,535     (4,397)
Net (Loss) Earnings.....................   (17,469)   (30,237)   (12,642)    (9,663)   (70,011)
</Table>

                                        63
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                  2001
                                          ----------------------------------------------------
                                            1ST        2ND        3RD        4TH       TOTAL
                                          --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
Operating Revenue.......................  $173,098   $192,884   $207,341   $215,178   $788,501
Operating (Loss) Income.................   (10,434)    17,194     24,164     34,437     65,361
(Loss) Earnings Before Extraordinary
  Item and Cumulative Effect of
  Accounting Change.....................   (29,922)      (147)     5,204     17,650     (7,215)
Net (Loss) Earnings.....................   (30,412)     1,738      5,204     17,650     (5,820)
</Table>

<Table>
<Caption>
                                                                  2000
                                          ----------------------------------------------------
                                            1ST        2ND        3RD        4TH       TOTAL
                                          --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
Operating Revenue.......................  $167,477   $193,458   $205,738   $207,165   $773,838
Operating Income........................     7,971     16,122     18,217     13,998     56,308
(Loss) Earnings Before Extraordinary
  Item..................................    (8,727)    (2,558)     7,780     (7,854)   (11,359)
Net (Loss) Earnings.....................    (8,727)    (3,292)     7,780     (7,854)   (12,093)
</Table>

---------------

* Combines the periods March 30 through May 28 and May 29 through June 28 for
  comparative purposes.

     ACL's business is seasonal, and its quarterly revenues and profits
historically are lower during the first and second fiscal quarters of the year
(January through June) and higher during the third and fourth fiscal quarters
(July through December) due to the North American grain harvest.

     Restructuring costs were charged to operations amounting to $3,421,
$10,072, $83 and $482 for the four respective quarters of 2002.

     A loss of $490 was recorded in the first quarter of 2001 as the cumulative
effect of adopting SFAS No. 133. An extraordinary gain of $1,885 was recorded in
the second quarter of 2001 relating to the retirement of Senior Notes. In the
fourth quarter of 2001, the estimated useful life of boats was changed from 30
to 42 years. This resulted in $1,142 less in depreciation expense for the
quarter.

     The year 2000 included a second quarter extraordinary item charge of $734
for the Terminal Bond redemption premium, the gain on the sale of Watercom of
$11,418 is included in the third quarter and an impairment loss of $3,865 is
included in the fourth quarter.

NOTE 15.  SUMMARIZED FINANCIAL INFORMATION

     The following is a summary of financial information for significant
unconsolidated equity investees:

<Table>
<Caption>
                                                              DECEMBER 27,   DECEMBER 31,
                                                                  2002           2001
                                                              ------------   ------------
<S>                                                           <C>            <C>
Current assets..............................................    $ 16,937       $ 36,931
Noncurrent assets...........................................     152,072        149,593
Current liabilities.........................................      34,538         43,400
Noncurrent liabilities......................................      49,421         55,593
</Table>

<Table>
<Caption>
                                                      MAY 29,      JANUARY 1,      YEARS ENDED
                                                      2002 TO       2002 TO        DECEMBER 31
                                                    DECEMBER 27,    MAY 28,     ------------------
                                                        2002          2002        2001      2000
                                                    ------------   ----------   --------   -------
<S>                                                 <C>            <C>          <C>        <C>
Revenue...........................................    $61,450       $35,671     $103,364   $52,430
Operating income..................................      2,272         2,982        3,117     3,830
Net (loss) earnings...............................        (62)          235       (4,990)   (1,173)
</Table>

                                        64
<PAGE>
                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16.  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     Accumulated other comprehensive income (loss) as of December 27, 2002 and
December 28, 2001 consists of the following:

<Table>
<Caption>
                                                                2002      2001
                                                              --------   -------
<S>                                                           <C>        <C>
Unrealized gain (loss) on cash flow hedging instruments:
  Fuel swaps................................................  $     68   $  (242)
  Interest rate swaps.......................................      (290)   (1,076)
Foreign currency translation................................       408      (539)
Minimum pension liability...................................   (15,485)       --
                                                              --------   -------
                                                              $(15,299)  $(1,857)
                                                              ========   =======
</Table>

NOTE 17.  GUARANTOR FINANCIAL STATEMENTS

     Debt issued by ACL amounting to $313,329 in outstanding term loans as of
December 27, 2002, $259,671 in outstanding notes under the Indentures as of
December 27, 2002 and the Revolving Credit Facility, which provides for
revolving loans and the issuance of letters of credit in an aggregate amount up
to $50,000, are guaranteed by ACL's wholly-owned domestic subsidiaries, other
than ACL Capital Corp. (which was formed in connection with the issuance of the
senior notes), any Accounts Receivable Subsidiary (as defined in the Indentures
with respect to such debt) and certain subsidiaries of ACL without substantial
assets or operations (collectively the "Guarantor Subsidiaries"). Such
guarantees are full, unconditional and joint and several.

     Separate financial statements of the Guarantor Subsidiaries are not
presented because management has determined that they would not be material to
investors. The following supplemental financial information sets forth on a
combined basis, combining statements of financial position, statements of
operations and statements of cash flows for the Guarantor Subsidiaries
(including ACL) and non-guarantor subsidiaries as of December 27, 2002 and
December 28, 2001 and the periods May 29, 2002 through December 27, 2002 and
December 29, 2001 thorough May 28, 2002, and for the fiscal years ended December
28, 2001 and December 29, 2000.

                                        65
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 COMBINING STATEMENT OF OPERATIONS FOR THE PERIOD MAY 29, 2002 THROUGH DECEMBER
                                    27, 2002

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
OPERATING REVENUE
  Revenue......................................    $395,108       $24,905        $    --      $420,013
  Revenue from related parties.................         666         7,368             --         8,034
                                                   --------       -------        -------      --------
                                                    395,774        32,273             --       428,047
OPERATING EXPENSE
  Materials, Supplies and Other................     171,647        12,685             --       184,332
  Restructuring Cost...........................         565            --             --           565
  Rent.........................................      29,080           816             --        29,896
  Labor and Fringe Benefits....................      94,055         2,966             --        97,021
  Fuel.........................................      48,888           460             --        49,348
  Depreciation and Amortization................      33,162         4,245             --        37,407
  Taxes, Other Than Income Taxes...............      15,408            77             --        15,485
                                                   --------       -------        -------      --------
                                                    392,805        21,249             --       414,054
                                                   --------       -------        -------      --------
OPERATING INCOME...............................       2,969        11,024             --        13,993

OTHER EXPENSE (INCOME)
  Interest Expense.............................      34,776         1,168             --        35,944
  Interest Expense, Affiliate -- Net...........          --         4,261         (4,261)           --
  Other, Net...................................      (5,375)        4,421          4,261         3,307
                                                   --------       -------        -------      --------
                                                     29,401         9,850             --        39,251
                                                   --------       -------        -------      --------
(LOSS) INCOME BEFORE INCOME TAXES..............     (26,432)        1,174             --       (25,258)
INCOME TAXES...................................         435           308             --           743
                                                   --------       -------        -------      --------
NET (LOSS) EARNINGS............................    $(26,867)      $   866        $    --      $(26,001)
                                                   ========       =======        =======      ========
</Table>

                                        66
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 COMBINING STATEMENT OF OPERATIONS FOR THE PERIOD DECEMBER 29, 2001 THROUGH MAY
                                    28, 2002

<Table>
<Caption>
                                                   GUARANTOR        OTHER                      COMBINED
                                                  SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                  ------------   ------------   ------------   --------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                               <C>            <C>            <C>            <C>
OPERATING REVENUE
  Revenue.......................................    $272,653       $ 7,154        $    --      $279,807
  Revenue from related parties..................         410         4,588             --         4,998
                                                    --------       -------        -------      --------
                                                     273,063        11,742             --       284,805

OPERATING EXPENSE
  Materials, Supplies and Other.................     128,363         9,729             --       138,092
  Restructuring Cost............................      13,493            --             --        13,493
  Rent..........................................      22,527           594             --        23,121
  Labor and Fringe Benefits.....................      64,172         1,588             --        65,760
  Fuel..........................................      30,316           118             --        30,434
  Depreciation and Amortization.................      19,413         2,411             --        21,824
  Gain on Property Dispositions, Net............        (452)           (3)            --          (455)
  Taxes, Other Than Income Taxes................      10,902            24             --        10,926
                                                    --------       -------        -------      --------
                                                     288,734        14,461             --       303,195
                                                    --------       -------        -------      --------
OPERATING LOSS..................................     (15,671)       (2,719)            --       (18,390)

OTHER EXPENSE (INCOME)
  Interest Expense..............................      25,691            21             --        25,712
  Interest Expense, Affiliate -- Net............         827         2,801         (2,801)          827
  Other, Net....................................      (2,299)         (502)         2,801            --
                                                    --------       -------        -------      --------
                                                      24,219         2,320             --        26,539
                                                    --------       -------        -------      --------
LOSS BEFORE INCOME TAXES........................     (39,890)       (5,039)            --       (44,929)
INCOME TAXES (BENEFIT)..........................        (976)           57             --          (919)
                                                    --------       -------        -------      --------
NET LOSS........................................    $(38,914)      $(5,096)       $    --      $(44,010)
                                                    ========       =======        =======      ========
</Table>

                                        67
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
     COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 2001

<Table>
<Caption>
                                                   GUARANTOR        OTHER                      COMBINED
                                                  SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                  ------------   ------------   ------------   --------
                                                            (DOLLARS IN THOUSANDS)
<S>                                               <C>            <C>            <C>            <C>
OPERATING REVENUE
  Revenue.......................................    $701,081       $28,611        $    --      $729,692
  Revenue from related parties..................      47,757        11,052             --        58,809
                                                    --------       -------        -------      --------
                                                     748,838        39,663             --       788,501

OPERATING EXPENSE
  Materials, Supplies and Other.................     319,093        22,513             --       341,606
  Rent..........................................      55,191         1,520             --        56,711
  Labor and Fringe Benefits.....................     161,606         4,435             --       166,041
  Fuel..........................................      92,991           569             --        93,560
  Depreciation and Amortization.................      50,364         5,133             --        55,497
  Gain on Property Dispositions, Net............     (16,498)           --             --       (16,498)
  Taxes, Other Than Income Taxes................      26,166            57             --        26,223
                                                    --------       -------        -------      --------
                                                     688,913        34,227             --       723,140
                                                    --------       -------        -------      --------
OPERATING INCOME................................      59,925         5,436             --        65,361

OTHER EXPENSE (INCOME)
  Interest Expense..............................      70,932            --             --        70,932
  Interest Expense, Affiliate -- Net............          --         6,364         (6,364)           --
  Other, Net....................................      (8,328)        3,490          6,364         1,526
                                                    --------       -------        -------      --------
                                                      62,604         9,854             --        72,458
                                                    --------       -------        -------      --------
LOSS BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND
  CUMULATIVE EFFECT OF ACCOUNTING CHANGE........      (2,679)       (4,418)            --        (7,097)
INCOME TAXES (BENEFIT)..........................         (21)          139             --           118
                                                    --------       -------        -------      --------
LOSS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
  EFFECT OF ACCOUNTING CHANGE...................      (2,658)       (4,557)            --        (7,215)
EXTRAORDINARY ITEM -- GAIN ON EARLY
  EXTINGUISHMENT OF DEBT........................       1,885            --             --         1,885
CUMULATIVE EFFECT OF ACCOUNTING CHANGE..........        (490)           --             --          (490)
                                                    --------       -------        -------      --------
NET LOSS........................................    $ (1,263)      $(4,557)       $    --      $ (5,820)
                                                    ========       =======        =======      ========
</Table>

                                        68
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
     COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 29, 2000

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
OPERATING REVENUE
  Revenue......................................    $733,870       $ 37,879       $    --      $771,749
  Revenue from related parties.................          --          2,089            --         2,089
                                                   --------       --------       -------      --------
                                                    733,870         39,968            --       773,838
OPERATING EXPENSE
  Materials, Supplies and Other................     315,275         19,597            --       334,872
  Rent.........................................      48,033          1,430            --        49,463
  Labor and Fringe Benefits....................     155,903          7,348            --       163,251
  Fuel.........................................      85,159          2,935            --        88,094
  Depreciation and Amortization................      49,104          6,910            --        56,014
  Gain on Property Dispositions, net...........      (1,686)            --            --        (1,686)
  Taxes, Other Than Income Taxes...............      26,425          1,097            --        27,522
                                                   --------       --------       -------      --------
                                                    678,213         39,317            --       717,530
                                                   --------       --------       -------      --------
OPERATING INCOME...............................      55,657            651            --        56,308
OTHER EXPENSE (INCOME)
  Interest Expense.............................      70,813             --            --        70,813
  Interest Expense, Affiliate -- Net...........          --          6,029        (6,029)           --
  Other, Net...................................      (4,745)         2,725         6,029         4,009
  Gain on Sale of Watercom.....................     (11,418)            --            --       (11,418)
                                                   --------       --------       -------      --------
                                                     54,650          8,754            --        63,404
                                                   --------       --------       -------      --------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
  EXTRAORDINARY ITEM...........................       1,007         (8,103)           --        (7,096)
INCOME TAXES...................................         176          4,087            --         4,263
                                                   --------       --------       -------      --------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM......         831        (12,190)           --       (11,359)
EXTRAORDINARY ITEM -- LOSS ON EARLY
  EXTINGUISHMENT OF DEBT.......................        (734)            --            --          (734)
                                                   --------       --------       -------      --------
NET EARNINGS (LOSS)............................    $     97       $(12,190)      $    --      $(12,093)
                                                   ========       ========       =======      ========
</Table>

                                        69
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 27, 2002

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
                                                ASSETS
CURRENT ASSETS
  Cash and Cash Equivalents....................    $ 11,518       $  2,978      $      --     $ 14,496
  Cash, Restricted.............................          --          6,328             --        6,328
  Accounts Receivable -- Net...................      24,506         37,759        (21,152)      41,113
  Accounts Receivable -- Related Parties.......       4,129          6,415             --       10,544
  Materials and Supplies.......................      33,370          1,014             --       34,384
  Other Current Assets.........................      38,427        (12,847)            --       25,580
                                                   --------       --------      ---------     --------
          Total Current Assets.................     111,950         41,647        (21,152)     132,445
PROPERTIES -- NET..............................     502,856         82,929             --      585,785
NET PENSION ASSET..............................      20,806             --             --       20,806
INVESTMENTS IN EQUITY INVESTEES................      14,792         49,237             --       64,029
OTHER ASSETS...................................     100,041          3,010        (92,522)      10,529
                                                   --------       --------      ---------     --------
          Total Assets.........................    $750,445       $176,823      $(113,674)    $813,594
                                                   ========       ========      =========     ========
                                             LIABILITIES
CURRENT LIABILITIES
  Accounts Payable.............................    $ 31,804       $  1,497      $      --     $ 33,301
  Accrued Payroll and Fringe Benefits..........      15,713             --             --       15,713
  Deferred Revenue.............................       7,407          2,957             --       10,364
  Accrued Claims and Insurance Premiums........      26,547             --             --       26,547
  Accrued Interest.............................      16,283            146             --       16,429
  Short-term Debt..............................      41,000             --             --       41,000
  Current Portion of Long-Term Debt............     515,879         39,694             --      555,573
  Other Current Liabilities....................      33,181          2,242             --       35,423
  Other Current Liabilities -- Related
     Parties...................................         168         21,152        (21,152)         168
                                                   --------       --------      ---------     --------
          Total Current Liabilities............     687,982         67,688        (21,152)     734,518
LONG-TERM NOTE PAYABLE TO AFFILIATE............          --         92,569        (92,569)          --
LONG-TERM DEBT.................................          --             --             --           --
PENSION LIABILITY..............................      15,072             --             --       15,072
OTHER LONG-TERM LIABILITIES....................      13,500          6,482             --       19,982
                                                   --------       --------      ---------     --------
          Total Liabilities....................     716,554        166,739       (113,721)     769,572
                                                   --------       --------      ---------     --------
                                           MEMBER'S EQUITY
Member's Interest..............................      74,894         10,131             --       85,025
Other Capital..................................       1,429         57,374        (57,374)       1,429
Unearned Compensation..........................      (1,132)            --             --       (1,132)
Retained Deficit...............................     (26,001)       (57,421)        57,421      (26,001)
Accumulated Other Comprehensive Loss...........     (15,299)            --             --      (15,299)
                                                   --------       --------      ---------     --------
          Total Member's Equity................      33,891         10,084             47       44,022
                                                   --------       --------      ---------     --------
          Total Liabilities and Member's
            Equity.............................    $750,445       $176,823      $(113,674)    $813,594
                                                   ========       ========      =========     ========
</Table>

                                        70
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
         COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 28, 2001

<Table>
<Caption>
                                                 GUARANTOR        OTHER                      COMBINED
                                                SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                ------------   ------------   ------------   ---------
                                                                (DOLLARS IN THOUSANDS)
<S>                                             <C>            <C>            <C>            <C>
                                                ASSETS
CURRENT ASSETS
  Cash and Cash Equivalents...................   $  45,912       $  1,341      $      --     $  47,253
  Accounts Receivable -- Net..................      25,612         29,752        (13,981)       41,383
  Accounts Receivable -- Related Parties......          --         13,402             --        13,402
  Materials and Supplies......................      30,180          1,155             --        31,335
  Other Current Assets........................      41,019        (11,386)            --        29,633
                                                 ---------       --------      ---------     ---------
          Total Current Assets................     142,723         34,264        (13,981)      163,006
PROPERTIES -- NET.............................     422,877         41,256             --       464,133
NET PENSION ASSET.............................      26,067             --             --        26,067
INVESTMENTS IN EQUITY INVESTEES...............      17,792         49,892             --        67,684
OTHER ASSETS..................................     130,409          2,760        (96,123)       37,046
                                                 ---------       --------      ---------     ---------
          Total Assets........................   $ 739,868       $128,172      $(110,104)    $ 757,936
                                                 =========       ========      =========     =========

                                             LIABILITIES
CURRENT LIABILITIES
  Accounts Payable............................   $  28,094       $  1,643      $      --     $  29,737
  Accrued Payroll and Fringe Benefits.........      17,206             --             --        17,206
  Deferred Revenue............................      11,890             --             --        11,890
  Accrued Claims and Insurance Premiums.......      24,200             --             --        24,200
  Accrued Interest............................      18,659             --             --        18,659
  Short-Term Debt.............................      84,000             --             --        84,000
  Current Portion of Long-Term Debt...........     608,519             --             --       608,519
  Other Current Liabilities...................      40,249         15,804        (13,981)       42,072
  Other Current Liabilities -- Related
     Parties..................................          --          8,397             --         8,397
                                                 ---------       --------      ---------     ---------
          Total Current Liabilities...........     832,817         25,844        (13,981)      844,680
LONG-TERM NOTE PAYABLE TO AFFILIATE...........          --         86,700        (86,700)           --
PENSION LIABILITY.............................      18,907             --             --        18,907
OTHER LONG-TERM LIABILITIES...................      36,163          6,205             --        42,368
                                                 ---------       --------      ---------     ---------
          Total Liabilities...................     887,887        118,749       (100,681)      905,955
                                                 ---------       --------      ---------     ---------

                                           MEMBER'S DEFICIT
Member's Interest.............................     220,074             --             --       220,074
Other Capital.................................     166,580         57,374        (57,374)      166,580
Retained Deficit..............................    (532,816)       (47,951)        47,951      (532,816)
Other Comprehensive Loss......................      (1,857)            --             --        (1,857)
                                                 ---------       --------      ---------     ---------
          Total Member's Deficit..............    (148,019)         9,423         (9,423)     (148,019)
                                                 ---------       --------      ---------     ---------
          Total Liabilities and Member's
            Deficit...........................   $ 739,868       $128,172      $(110,104)    $ 757,936
                                                 =========       ========      =========     =========
</Table>

                                        71
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 COMBINING STATEMENT OF CASH FLOWS FOR THE PERIOD MAY 29, 2002 THROUGH DECEMBER
                                    27, 2002

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
  Net (Loss) Income............................    $(26,867)      $    866       $    --      $(26,001)
  Adjustments to Reconcile Net (Loss) Income to
     Net Cash Provided by Operating Activities:
     Depreciation and Amortization.............      33,162          4,245            --        37,407
     Interest Accretion and Debt Issuance Cost
       Amortization............................       3,962             71            --         4,033
     Other Operating Activities................       4,305          4,646        (6,200)        2,751
     Changes in Operating Assets and
       Liabilities:
       Accounts Receivable.....................        (737)       (18,377)        8,785       (10,329)
       Materials and Supplies..................       1,949            162            --         2,111
       Accrued Interest........................      16,046           (639)           --        15,407
       Other Current Assets....................  1,151.....          5,444            --         6,595
       Other Current Liabilities...............      (9,723)        13,112        (8,785)       (5,396)
                                                   --------       --------       -------      --------
       Net Cash Provided by Operating
          Activities...........................      23,248          9,530        (6,200)       26,578
INVESTING ACTIVITIES
  Property Additions...........................      (7,639)          (118)           --        (7,757)
  Proceeds from Property Dispositions..........       1,089             --            --         1,089
  Net Change in Restricted Cash................          --            236            --           236
  Other Investing Activities...................        (906)            12            --          (894)
                                                   --------       --------       -------      --------
       Net Cash (Used in) Provided by Investing
          Activities...........................      (7,456)           130            --        (7,326)
FINANCING ACTIVITIES
  Short-Term Borrowings........................       7,000             --            --         7,000
  Long-Term Debt Repaid........................     (25,713)        (2,640)           --       (28,353)
  Cash Dividends Paid..........................          --         (6,200)        6,200            --
  Bank Overdrafts..............................      (1,785)            --            --        (1,785)
  Debt Costs...................................      (1,035)            --            --        (1,035)
  Other Financing..............................      (1,468)            --            --        (1,468)
                                                   --------       --------       -------      --------
       Net Cash Used in Financing Activities...     (23,001)        (8,840)        6,200       (25,641)
                                                   --------       --------       -------      --------
Net (Decrease) Increase in Cash and Cash
  Equivalents..................................      (7,209)           820            --        (6,389)
Cash and Cash Equivalents at Beginning of
  Period.......................................      18,727          2,158            --        20,885
                                                   --------       --------       -------      --------
       Cash and Cash Equivalents at End of
          Period...............................    $ 11,518       $  2,978       $    --      $ 14,496
                                                   ========       ========       =======      ========
</Table>

                                        72
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 COMBINING STATEMENT OF CASH FLOWS FOR THE PERIOD DECEMBER 29, 2001 THROUGH MAY
                                    28, 2002

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
  Net Loss.....................................    $(38,914)      $(5,096)       $     --     $(44,010)
  Adjustments to Reconcile Net Loss to Net Cash
     (Used in) Provided by Operating
     Activities:
     Depreciation and Amortization.............      19,413         2,411              --       21,824
     Interest Accretion and Debt Issuance Cost
       Amortization............................       1,235            10              --        1,245
     Gain on Property Dispositions.............        (452)           (3)             --         (455)
     Other Operating Activities................      (4,637)         (785)             --       (5,422)
     Changes in Operating Assets and
       Liabilities:
       Accounts Receivable.....................     (18,565)        2,958          12,367       (3,240)
       Materials and Supplies..................      (5,139)          (21)             --       (5,160)
       Accrued Interest........................      10,331             1              --       10,332
       Other Current Assets....................      (4,427)        1,278              --       (3,149)
       Other Current Liabilities...............      20,029           695         (12,367)       8,357
                                                   --------       -------        --------     --------
       Net Cash (Used in) Provided by Operating
          Activities...........................     (21,126)        1,448              --      (19,678)
INVESTING ACTIVITIES
  Property Additions...........................      (5,554)          (51)             --       (5,605)
  Proceeds from Property Dispositions..........         985             3              --          988
  Other Investing Activities...................      (2,276)            5            (588)      (2,859)
                                                   --------       -------        --------     --------
       Net Cash Used in Investing Activities...      (6,845)          (43)           (588)      (7,476)
FINANCING ACTIVITIES
  Danielson Holding Corporation Investment.....      25,000            --              --       25,000
  Cash Dividends Paid..........................          --          (588)            588           --
  Long-Term Debt Repaid........................     (25,190)           --              --      (25,190)
  Bank Overdrafts..............................       1,149            --              --        1,149
  Other Financing Activities...................        (173)           --              --         (173)
                                                   --------       -------        --------     --------
       Net Cash Provided by (Used in) Financing
          Activities...........................         786          (588)            588          786
                                                   --------       -------        --------     --------
Net (Decrease) Increase in Cash and Cash
  Equivalents..................................     (27,185)          817              --      (26,368)
Cash and Cash Equivalents at Beginning of
  Period.......................................      45,912         1,341              --       47,253
                                                   --------       -------        --------     --------
       Cash and Cash Equivalents at End of
          Period...............................    $ 18,727       $ 2,158        $     --     $ 20,885
                                                   ========       =======        ========     ========
</Table>

                                        73
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
     COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 28, 2001

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
  Net Loss.....................................    $ (1,263)      $ (4,557)      $    --      $ (5,820)
  Adjustments to Reconcile Net Loss to Net Cash
     Provided by Operating Activities:
     Depreciation and Amortization.............      50,364          5,133            --        55,497
     Interest Accretion and Debt Issuance Cost
       Amortization............................       4,413             --            --         4,413
     Gain on Property Dispositions.............     (16,498)            --            --       (16,498)
     Other Operating Activities................      (6,753)         5,018            --        (1,735)
     Changes in Operating Assets and
       Liabilities:
       Accounts Receivable.....................       6,349        (32,340)       13,981       (12,010)
       Materials and Supplies..................      (1,119)          (265)           --        (1,384)
       Accrued Interest........................         413             --            --           413
       Other Current Assets....................     (14,648)         9,650            --        (4,998)
       Other Current Liabilities...............     (11,859)        18,569            --         6,710
                                                   --------       --------       -------      --------
       Net Cash Provided by Operating
          Activities...........................       9,399          1,208        13,981        24,588
INVESTING ACTIVITIES
  Property Additions...........................     (13,165)        (6,607)           --       (19,772)
  Investment in Vessel Leasing LLC.............      (6,808)            --            --        (6,808)
  Proceeds from Property Dispositions..........      23,918             --            --        23,918
  Proceeds from Sale of Terminals..............       7,818             --            --         7,818
  Proceeds from Property Condemnation..........       2,730             --            --         2,730
  Other Investing Activities...................      (9,055)         1,846         2,615        (4,594)
                                                   --------       --------       -------      --------
       Net Cash Provided by (Used in) Investing
          Activities...........................       5,438         (4,761)        2,615         3,292
FINANCING ACTIVITIES
  Short-Term Borrowings........................      17,250             --            --        17,250
  Long-Term Debt Repaid........................     (47,937)            --            --       (47,937)
  Borrowing from Affiliates....................          --            567          (567)           --
  Affiliate Debt Repaid........................          --           (567)          567            --
  Bank Overdrafts..............................      (6,670)            --            --        (6,670)
  Debt Costs...................................      (3,463)            --            --        (3,463)
  Cash Dividends Paid..........................          --         (1,000)        1,000            --
  Other Financing..............................         625          3,615        (3,615)          625
                                                   --------       --------       -------      --------
       Net Cash (Used in) Provided by Financing
          Activities...........................     (40,195)         2,615        (2,615)      (40,195)
                                                   --------       --------       -------      --------
Net Decrease in Cash and Cash Equivalents......     (25,358)          (938)       13,981       (12,315)
Cash and Cash Equivalents at Beginning of
  Year.........................................      57,289          2,279            --        59,568
                                                   --------       --------       -------      --------
       Cash and Cash Equivalents at End of
          Year.................................    $ 31,931       $  1,341       $13,981      $ 47,253
                                                   ========       ========       =======      ========
</Table>

                                        74
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
     COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 29, 2000

<Table>
<Caption>
                                                  GUARANTOR        OTHER                      COMBINED
                                                 SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    TOTALS
                                                 ------------   ------------   ------------   --------
                                                                (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
  Net Earnings (Loss)..........................    $     97       $(12,190)      $     --     $(12,093)
  Adjustments to Reconcile Net Earnings (Loss)
     to Net Cash Provided by (Used in)
     Operating Activities:
     Depreciation and Amortization.............      49,105          6,909             --       56,014
     Interest Accretion and Debt Issuance Cost
       Amortization............................       3,062             --             --        3,062
     Impairment of Barges......................       3,865             --             --        3,865
     Gain on Property Dispositions.............      (1,686)            --             --       (1,686)
     Gain on Sale of Watercom..................     (11,418)            --             --      (11,418)
     Other Operating Activities................      (4,320)           699             --       (3,621)
     Changes in Operating Assets and
       Liabilities:
       Accounts Receivable.....................       4,925         (7,472)            --       (2,547)
       Materials and Supplies..................      14,155           (265)            --       13,890
       Accrued Interest........................      10,557             --             --       10,557
       Other Current Assets....................      (6,939)         3,224             --       (3,715)
       Other Current Liabilities...............     (23,612)         2,086             --      (21,526)
                                                   --------       --------       --------     --------
       Net Cash Provided by (Used in) Operating
          Activities...........................      37,791         (7,009)            --       30,782
INVESTING ACTIVITIES
  Property Additions...........................     (27,817)        (2,737)            --      (30,554)
  Purchase of Barging Assets...................     (31,500)            --             --      (31,500)
  Proceeds from Property Dispositions..........       4,089             --             --        4,089
  Proceeds from Sale of Watercom...............      13,600             --             --       13,600
  Proceeds from Sale of Restricted
     Investments...............................      25,288             --             --       25,288
  Other Investing Activities...................     (15,537)        (1,536)        11,958       (5,115)
                                                   --------       --------       --------     --------
       Net Cash Used in Investing Activities...     (31,877)        (4,273)        11,958      (24,192)
FINANCING ACTIVITIES
  Short-Term Borrowings........................      66,750             --             --       66,750
  Short-Term Debt Repaid.......................     (54,752)            --             --      (54,752)
  Affiliate Debt Repaid........................          --        (12,560)        12,560           --
  Cash Dividends Paid..........................          --         (3,160)         3,160           --
  Other Financing..............................      10,139          1,694         (1,694)      10,139
  Borrowing from Affiliates....................          --         25,984        (25,984)          --
                                                   --------       --------       --------     --------
       Net Cash Provided by Financing
          Activities...........................      22,137         11,958        (11,958)      22,137
                                                   --------       --------       --------     --------
Net Increase in Cash and Cash Equivalents......      28,051            676             --       28,727
Cash and Cash Equivalents at Beginning of
  Year.........................................      29,238          1,603             --       30,841
                                                   --------       --------       --------     --------
       Cash and Cash Equivalents at End of
          Year.................................    $ 57,289       $  2,279       $     --     $ 59,568
                                                   ========       ========       ========     ========
</Table>

                                        75
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Managers
American Commercial Lines LLC

We have audited the accompanying consolidated statement of financial position of
American Commercial Lines LLC as of December 27, 2002, and the related
consolidated statements of operations, member's equity, and cash flows for the
periods from December 29, 2001 to May 28, 2002 and May 29, 2002 to December 27,
2002. Our audit also included the financial statement schedule listed in the
index at Item 15(a) for the periods from December 29, 2001 to May 28, 2002 and
May 29, 2002 to December 27, 2002. These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides 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 American
Commercial Lines LLC at December 27, 2002, and the consolidated results of its
operations and its cash flows for the periods from December 29, 2001 to May 28,
2002 and May 29, 2002 to December 27, 2002, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule for the periods from December 29, 2001 to
May 28, 2002 and May 29, 2002 to December 27, 2002, when considered in relation
to the 2002 basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note 1, the accompanying consolidated financial statements have
been prepared assuming that American Commercial Lines LLC will continue as a
going concern. American Commercial Lines LLC has incurred recurring operating
losses, has a working capital deficiency, and has not complied with certain
covenants of its loan agreements. As more fully described in Note 2, on January
31, 2003, the Company and its immediate direct parent, American Commercial Lines
Holdings LLC, as well as certain subsidiaries of the Company, filed a petition
with the U.S. Bankruptcy Court to reorganize under Chapter 11 of the U.S.
Bankruptcy Code. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The 2002 consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

                                          /s/ ERNST & YOUNG LLP

Louisville, Kentucky
February 21, 2003

                                        76
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Managers
American Commercial Lines LLC

In our opinion, based on our audits and the report of other auditors who have
ceased operations, the consolidated financial statements listed in the Index
appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of American Commercial Lines LLC (ACL) at December 28, 2001,
and the results of their operations and their cash flows for each of the two
fiscal years in the period ended December 28, 2001, in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, based on our audits and the reports of other auditors
who have ceased operations, the financial statement schedule listed in the Index
appearing under Item 15(a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and the financial
statement schedule are the responsibility of ACL's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the financial
statements of UABL Limited (UABL), a 50% owned subsidiary, for 2001, which
statements reflect 7% of consolidated total assets as of December 28, 2001, and
27% of consolidated net loss for the fiscal year ended December 28, 2001. Those
statements were audited by other auditors who have ceased operations and whose
report thereon dated March 26, 2002 has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for UABL is
based solely on the report of the other auditors who have ceased operations. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors who have ceased
operations provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, during the
fourth quarter of 2001 the Company prospectively increased its estimate of the
useful lives of towboats, which reduced the loss before extraordinary items and
the net loss by $1.1 million for the fiscal year ended December 28, 2001.
Additionally, the consolidated financial statements reflect the restatement
described in Note 12 to the December 28, 2001 consolidated financial statements
(which Note is not presented separately herein).

The accompanying consolidated financial statements have been prepared assuming
that ACL will continue as a going concern. ACL incurred a substantial loss
during 2001. As discussed in Note 4 to the December 28, 2001 consolidated
financial statements (which Note is not presented separately herein), subsequent
to December 28, 2001 ACL also defaulted on its Senior Notes and Senior Credit
Facilities and has determined that it is not likely that it will be able to meet
the covenant requirements included in the Senior Credit Facilities agreement for
2002. Accordingly, ACL's outstanding debt has been classified as current in its
consolidated balance sheet at December 28, 2001. The above facts raise
substantial doubt that ACL's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 4 to
the December 28, 2001 consolidated financial statements (which Note is not
presented separately herein). The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP

Louisville, Kentucky
March 26, 2002, except for the restatement described above, as to which the date
is August 13, 2002.

                                        77
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

                             (DOLLARS IN THOUSANDS)

<Table>
<Caption>
                                         BALANCE AT
                                        BEGINNING OF   CHARGES TO                            BALANCE AT END
                                           PERIOD       EXPENSE      OTHER       WRITEOFFS     OF PERIOD
                                        ------------   ----------   -------      ---------   --------------
<S>                                     <C>            <C>          <C>          <C>         <C>
2002:
Allowance for uncollectible
  accounts............................     $1,631        $  975          --       $  (743)       $1,863

2001:
Allowance for uncollectible
  accounts............................     $1,157        $1,176          --       $  (702)       $1,631

2000:
Allowance for uncollectible
  accounts............................     $2,290        $  194          --       $(1,327)       $1,157
Valuation allowance for foreign net
  operating loss carryforwards........     $6,605            --     $(6,605)(1)        --            --
</Table>

---------------

(1) Contribution of assets to UABL.

                                        78
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     There were no disagreements with accountants in 2001 or 2002. See the
Current Report on Form 8-K filed by ACL on August 1, 2002 with respect to a
change in principal accounting firms which occurred on July 25, 2002, which such
Current Report is incorporated herein by reference.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                                   MANAGEMENT

                               EXECUTIVE OFFICERS

<Table>
<Caption>
NAME                                     AGE   POSITION
----                                     ---   --------
<S>                                      <C>   <C>
Michael C. Hagan.......................  56    President and Chief Executive Officer
James F. Farley........................  51    Senior Vice President, Transportation Services of ACBL
                                               and LDC
Lisa L. Fleming........................  41    General Counsel and Secretary
Robert P. Herre........................  50    President of Jeffboat
Peter L. Kazunas.......................  40    Senior Vice President, Marketing Services
Martin K. Pepper.......................  49    Senior Vice President, International Business
                                               Development of ACL International
R. Barry Uber..........................  57    President and Chief Operating Officer of ACBL and LDC
William N. Whitlock....................  61    Senior Vice President, Logistic Services
James J. Wolff.........................  45    Senior Vice President, Finance and Chief Financial
                                               Officer
Stephen R. Wood........................  60    Senior Vice President and Chief Administrative Officer
</Table>

                               BOARD OF MANAGERS

<Table>
<Caption>
NAME                                     AGE   POSITION                 MEMBER SINCE
----                                     ---   --------                 ------------
<S>                                      <C>   <C>                      <C>
Michael C. Hagan.......................  56    Chairman                    1998
James J. Wolff.........................  45    Member                      1998
L. Stephens Baird......................  36    Member                      2003
</Table>

     Michael C. Hagan is Chairman of the ACL Board of Managers and serves as its
President and Chief Executive Officer. Mr. Hagan has served as President and
Chief Executive Officer of ACL and its subsidiaries since 1991. Prior to that,
he held a series of positions of increasing responsibility within ACL, which he
joined in 1970, and with CSX.

     L. Stephens Baird is a Member of the ACL Board of Managers and has served
as Vice President and Treasurer of ACL since March 2000. From July 1996 to March
2000, Mr. Baird was Manager, Financial Analysis for CSX. Prior to joining CSX,
Mr. Baird held positions with Stern Stewart & Company (from March 1995 -- July
1996) and PricewaterhouseCoopers LLP (September 1992 -- March 1995) performing
financial advisory services.

     James F. Farley was named Senior Vice President, Transportation Services of
ACBL and LDC in June 2002 after serving as Senior Vice President, Marketing
Services of ACBL since March 2000. Mr. Farley was Vice President, Liquid Sales
of ACBL from 1998 to 2000. Mr. Farley joined ACBL in 1992 and served in various
management positions, including Vice President, Distribution Services. Prior to
joining ACL Mr. Farley was Vice President, Operations with The Valley
Line -- Sequa Corporation.

     Lisa L. Fleming was named General Counsel and Secretary of ACL on January
20, 2003. From 1983 to 1995, Ms. Fleming worked for ACL in various capacities
including Associate General Counsel and Director of

                                        79
<PAGE>

Strategic Planning. From 1996 to 2002, Ms. Fleming served Midland Enterprises
Inc. and The Ohio River Company as Associate General Counsel and Assistant
Secretary, where she managed legal, insurance and risk management functions.

     Robert P. Herre was appointed President of Jeffboat in September 2001. Mr.
Herre began his career with ACL in 1990 and has served in various managerial
roles, most recently as Vice President, Vessel Management for ACBL.

     Peter L. Kazunas was named Senior Vice President, Marketing Services of
ACBL and LDC in June 2002. From 1998 to 2002, Mr. Kazunas was Assistant Vice
President, Logistic Services. He served in many other managerial roles at ACL in
the preceding twenty years.

     Martin K. Pepper was appointed Senior Vice President, International
Business Development for ACL International in August 1998. Prior to joining ACL
in 1997 as Vice President for Fleet Maintenance, he served for sixteen years as
an operations officer with Canal Barge Line and served in sales and marketing
for Tidewater Barge Line from 1990 to 1997.

     R. Barry Uber was appointed President and Chief Operating Officer of ACBL
and LDC in July 2001. From March 1998 to December 2000, Mr. Uber was President
and Chief Executive Officer of North American Van Lines prior to joining ACBL.
Prior to that, Mr. Uber spent twenty-nine years with the Ingersoll-Rand Company,
ending his career there as President, Construction and Mining.

     William N. Whitlock was named Senior Vice President, Logistic Services for
ACBL and LDC in March 2000. He had served as Senior Vice President,
Transportation Services of ACBL and LDC from 1982 through March 2000. Prior to
joining ACL in 1979 Mr. Whitlock devoted fifteen years of his career to the U.S.
Army Corps of Engineers in positions of increasing authority.

     James J. Wolff is a Member of the ACL Board of Managers and serves as
Senior Vice President, Finance and Chief Financial Officer of ACL and its
subsidiaries. Mr. Wolff was with Texas Gas Exploration, a former CSX subsidiary,
from 1979 to 1986. In 1986, he joined CSX and transferred to ACL in 1992 as
Senior Vice President -- Finance. He was appointed Senior Vice
President -- International Business Development for ACL International in 1996
and returned to the position of Chief Financial Officer of ACL in August 1998.

     Stephen R. Wood was named Senior Vice President and Chief Administrative
Officer of ACL on February 1, 2003. Mr. Wood oversees the ACL Human Resources,
Sourcing, Risk Management, Information Technology and Building Services
departments. From 2000 to February 2003, Mr. Wood was President of Centaur
Energy Development, LLC. From 1997 to 2000, Mr. Wood served as President of
Louisville Gas & Electric Company and President, Distribution Services of LG&E
Energy Corp. From 1989 to 1997, Mr. Wood was Chief Administrative Officer for
LG&E Energy Corp.

ITEM 11.  EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

     The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to ACL, or its subsidiary
companies or their predecessors for 2000 through 2002 of those

                                        80
<PAGE>

persons who served as (i) the chief executive officer during 2002 and (ii) the
other four most highly compensated executive officers for 2002 (collectively,
the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<Table>
<Caption>
                                                                         LONG-TERM COMPENSATION
                                                                                 AWARDS
                                                                         -----------------------
                             ANNUAL COMPENSATION                         RESTRICTED   SECURITIES
NAME AND                  --------------------------    OTHER ANNUAL       STOCK      UNDERLYING      ALL OTHER
PRINCIPAL POSITION        YEAR    SALARY    BONUS(1)   COMPENSATION(2)   AWARDS(3)     OPTIONS     COMPENSATION(4)
------------------        ----   --------   --------   ---------------   ----------   ----------   ---------------
<S>                       <C>    <C>        <C>        <C>               <C>          <C>          <C>
Michael C. Hagan........  2002   $315,000   $     --       $ 9,240        $556,205     210,000         $52,007
  President and CEO       2001    315,000         --         9,240              --          --          27,983
  ACL                     2000    315,000         --         9,240              --          --          30,918
R. Barry Uber...........  2002   $275,000   $ 50,000       $41,240              --     140,000         $ 5,330
  President and COO       2001    126,042    150,000         4,235              --          --          15,188
  ACBL and LDC                                                                  --          --
  (appointed 7/2001)
Robert P. Herre.........  2002   $150,000   $ 75,000       $ 9,240              --          --         $ 9,043
  President Jeffboat
  (appointed 9/2001)
James F. Farley.........  2002   $169,000   $ 10,000       $ 9,240        $ 92,702      95,000         $ 6,565
  Sr. Vice President --   2001    166,125         --         9,240              --          --           2,030
  Marketing Services      2000    156,250     40,000         8,140              --          --             824
  ACBL and LDC
William N. Whitlock.....  2002   $169,000   $     --       $ 9,240        $222,481      95,000         $25,392
  Sr. Vice President --   2001    167,000         --         9,240              --          --          10,275
  Logistic Services       2000    161,000         --         9,240              --          --          10,577
  ACBL and LDC
</Table>

---------------

(1) In 2002 Messrs. Uber and Herre were paid bonuses pursuant to employment
    agreements in the amounts of $50,000 and $75,000, respectively. Mr. Farley
    received an incentive award of $10,000 in 2002. In 2001, Mr. Uber received a
    $150,000 bonus pursuant to an employment agreement. In 2000, Mr. Farley
    received an incentive award of $40,000.

(2) Consists of automobile payments only in 2000, 2001 and 2002, except that Mr.
    Uber received a $30,000 living allowance and a $2,000 phone allowance in
    2002.

(3) Consists of the dollar value of restricted stock awards (calculated by
    multiplying the number of shares awarded by the closing market price of
    DHC's common stock on the date of the grant - which was $6.16 as of the May
    29, 2002 grant date) made in restricted DHC common stock as part of the
    Danielson Recapitalization whereby each of the respective Named Executive
    Officers holding preferred membership units in ACL Holdings at the time of
    Danielson Recapitalization abandoned those units to ACL Holdings for no
    consideration and received certain amounts of restricted DHC common stock
    from DHC for their continued employment with ACL. ACL management received a
    total of 339,039 shares of restricted stock, of which Messrs. Hagan,
    Whitlock and Farley received 90,293, 36,117 and 15,049 shares, respectively.
    At December 27, 2002, the aggregate value of Messrs. Hagan, Whitlock and
    Farley's restricted DHC common stock was $203,701 (141,459 shares multiplied
    by $1.44, the closing price of DHC common stock on December 27, 2002).

(4) Amounts shown include the above-market portion of earnings on a CSX deferred
    compensation program available to Mr. Hagan and Mr. Whitlock. For 2002,
    those amounts were $29,621 for Mr. Hagan and $8,242 for Mr. Whitlock. For
    2001, those amounts were $25,535 for Mr. Hagan and $7,105 for Mr. Whitlock.
    For 2000, those amounts were $22,013 for Mr. Hagan and $6,124 for Mr.
    Whitlock. Amounts shown also include life insurance premium payments made on
    behalf of the Named Executive Officers in the following amounts for 2002:
    for Mr. Hagan, $5,433, for Mr. Uber, $2,580, for Mr. Herre, $510, for Mr.
    Whitlock, $4,289, and for Mr. Farley, $1,495; for 2001 for Mr. Hagan,
    $2,913, for Mr. Uber, $1,075, for Mr. Whitlock, $3,102, and for Mr. Farley,
    $1,016; and for 2000 for Mr. Hagan, $2,798, for Mr. Whitlock, $2,546, and
    for Mr. Farley, $824. Amounts shown also include matching

                                        81
<PAGE>

    contributions made by ACL in conjunction with deferral of salary or bonus to
    a supplementary savings plan on behalf of Mr. Hagan in the amounts of $9,450
    for 2002 and $4,200 for 2000 and 2001; $4,500 for Mr. Herre in 2002; and
    $5,070 for Mr. Whitlock in 2002. Amounts shown also include payment for the
    provision of tax services for Messrs. Hagan, Herre and Whitlock in the
    amount of $1,991, $2,721 and $2,721, respectively, in 2002; $1,893 each for
    Messrs. Hagan and Whitlock in 2001 and $1,907 each for Messrs. Hagan and
    Whitlock in 2000. Amounts for 2002 also include matching contributions made
    by ACL to the Named Executive Officers pursuant to the ACL 401(k) plan
    available to all employees in the following amounts: $5,512 for Mr. Hagan,
    $2,750 for Mr. Uber, $1,312 for Mr. Herre, $5,070 for Mr. Farley and $5,070
    for Mr. Whitlock.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

     No Named Executive Officer received an option or SAR grant from ACL in
2002. Messrs. Hagan, Uber, Whitlock and Farley received option grants from DHC
in the form of DHC stock options in 2002. Those options are discussed in the
table below. These options were granted under DHC's 1995 Stock and Incentive
Plan.

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<Table>
<Caption>
                                INDIVIDUAL GRANTS
                           ---------------------------                                  POTENTIAL REALIZABLE
                                           PERCENT OF                                     VALUE AT ASSUMED
                            NUMBER OF        TOTAL                                      ANNUAL RATES OF STOCK
                            SECURITIES    OPTIONS/SARS                                   PRICE APPRECIATION
                            UNDERLYING     GRANTED TO                                      FOR OPTION TERM
                           OPTIONS/SARS   EMPLOYEES IN   EXERCISE OR                    ---------------------
NAME                         GRANTED      FISCAL YEAR    BASE PRICE    EXPIRATION DATE     5%         10%
----                       ------------   ------------   -----------   ---------------  --------   ----------
<S>                        <C>            <C>            <C>           <C>              <C>        <C>
Michael C. Hagan.........    210,000          13.5%         $5.00       July 24, 2012   $407,400   $1,270,500
R. Barry Uber............    140,000           9.0           5.00       July 24, 2012    271,600      847,000
Robert P. Herre..........     95,000           6.1           5.00       July 24, 2012    184,300      574,750
James F. Farley..........     95,000           6.1           5.00       July 24, 2012    184,300      574,750
William N. Whitlock......     95,000           6.1           5.00       July 24, 2012    184,300      574,750
</Table>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

     The following table sets forth information with respect to the exercise of
options to acquire DHC common stock by the Named Executive Officers during 2002
and the number of securities underlying unexercised options held by each of the
Named Executive Officers and the value of such options at the end of fiscal
2002:

   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
                                     VALUES

<Table>
<Caption>
                                                                  NUMBER OF
                                                            SECURITIES UNDERLYING       VALUE OF UNEXERCISED
                                                             UNEXERCISED OPTIONS       IN-THE-MONEY OPTIONS AT
                             SHARES ACQUIRED    VALUE        AT FISCAL YEAR-END            FISCAL YEAR-END
NAME                           ON EXERCISE     REALIZED   EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
----                         ---------------   --------   -------------------------   -------------------------
<S>                          <C>               <C>        <C>                         <C>
Michael C. Hagan...........        N/A           N/A              0/210,000                  $0/115,500
R. Barry Uber..............        N/A           N/A              0/140,000                    0/77,000
Robert P. Herre............        N/A           N/A               0/95,000                    0/52,250
James F. Farley............        N/A           N/A               0/95,000                    0/52,250
William N. Whitlock........        N/A           N/A               0/95,000                    0/52,250
</Table>

---------------

(1) Represents options to purchase DHC common stock granted pursuant to the DHC
    1995 Stock and Incentive Plan.

(2) Value of unexercised options at fiscal year-end represents the difference
    between the exercise price of any outstanding in-the-money options and
    $1.44, the mean value of DHC common stock on December 27, 2002.

                                        82
<PAGE>

PENSION PLANS

 Salary Continuation Plan and Special Retirement Plan

     ACL has a salary continuation plan (the "Salary Continuation Plan") whereby
supplemental retirement benefits are paid as a function of final pay, some of
which are paid in lieu of a former life insurance benefit.

     Prior to the Recapitalization, the Named Executive Officers, and other
eligible employees, were beneficiaries of certain benefit plans established by
CSX. ACL intends to continue these benefit plans, which consist of (i) a special
retirement plan (the "Special Retirement Plan") whereby certain employees have
certain additional compensation covered, and can obtain past or extra service
credits for purposes of the qualified pension plan described below in the
"Pension Plan Table;" and (ii) a supplementary savings plan (the "Supplementary
Savings Plan") which permits deferrals of a portion of salary and bonus payments
and matching contributions for those deferrals to negate the effect of Internal
Revenue Code limits on qualified plan contributions.

 Salaried Employee Pension Plans

     The pension plan table provided below sets forth estimated annual benefits
payable, before offset for the Social Security annuity, by ACL to any officer or
salaried employee upon retirement at the normal retirement age after selected
periods of service and in specified compensation groups.

                               PENSION PLAN TABLE

<Table>
<Caption>
                                                            YEARS OF SERVICE
FIVE CONSECUTIVE YEAR                     ----------------------------------------------------
AVERAGE COMPENSATION                         15         20         25         30         35
---------------------                     --------   --------   --------   --------   --------
<S>                                       <C>        <C>        <C>        <C>        <C>
$125,000................................  $ 26,146   $ 35,521   $ 44,896   $ 54,271   $ 63,646
 150,000................................    31,375     42,625     53,875     65,125     76,375
 175,000................................    36,604     49,729     62,854     75,979     89,104
 200,000................................    41,833     56,833     71,833     86,833    101,833
 225,000................................    47,063     63,938     80,813     97,688    114,563
 250,000................................    52,292     71,042     89,792    108,542    127,292
 275,000................................    57,521     78,146     98,771    119,396    140,021
 300,000................................    62,750     85,250    107,750    130,250    152,750
 325,000................................    67,979     92,354    116,729    141,104    165,479
 350,000................................    73,208     99,458    125,708    151,958    178,208
 375,000................................    78,438    106,563    134,688    162,813    190,938
 400,000................................    83,667    113,667    143,667    173,667    203,667
 425,000................................    88,896    120,771    152,646    184,521    216,396
 450,000................................    94,125    127,875    161,625    195,375    229,125
 475,000................................    99,354    134,979    170,604    206,229    241,854
 500,000................................   104,583    142,083    179,583    217,083    254,583
</Table>

---------------

(1) Retirement benefits from ACL's funded and unfunded non-contributory Pension
    Plans are based on both length of service and compensation. The compensation
    covered by the Pension Plans is compensation paid by ACL to a participant on
    a regular monthly or annual salary basis, including bonuses or similar
    awards for personal services rendered in a position that is not under the
    scope of a labor agreement prior to 2000. Compensation items listed in the
    Summary Compensation Table covered by the Pension Plans are Base Salary and
    Bonus. Benefits earned before February 1, 2000 are computed at the time of
    retirement under a defined benefit formula based on years of service and
    average salary and bonus for the highest 60 consecutive months of service,
    computed without regard to additional payments in stock. Benefits earned
    after February 1, 2000 are computed based on career-average base salary
    only. The

                                        83
<PAGE>

    Pension Plans provide for normal retirement at age 65 and, subject to
    certain eligibility requirements, early retirement beginning at age 55 is
    permitted with reduced pension payments.

     The above table sets forth the estimated annual benefits payable, before
offset for the Social Security annuity, by ACL to any officer or salaried
employee upon retirement at the normal retirement age after selected periods of
service and in specified compensation groups. The normal form of the benefit is
a straight-life annuity. As of April 1, 2003, the individuals named in the
Summary Compensation Table will have the following years of credited service:
Mr. Hagan, 32.64 years; Mr. Uber, less than 2 years; Mr. Whitlock, 23.88 years;
Mr. Farley, 10.86 years.

     The Internal Revenue Code imposes certain limitations on compensation and
benefits payable from tax-qualified pension plans. Pension amounts in excess of
such limitations are payable from the non-qualified Pension Plan, which is not
funded.

BENEFIT PLANS

     ACL maintains various qualified and non-qualified benefit plans for its
employees. All salaried, full time employees are covered or will be covered by
an ERISA qualified defined benefit retirement plan and are eligible to
participate in a 401(k) savings plan that includes a partial company match
feature. Hourly employees with certain of ACL's subsidiaries have separate ERISA
qualified defined benefit plans and are eligible to participate in separate
401(k) savings plans.

     ACL maintains a self-insured general welfare health plan for employees. The
plan has appropriate levels of employee deductible, and maximum benefit levels.
Employees may elect to participate in certain approved HMO plans in lieu of ACL
sponsored plan.

     ACL has provided to certain members of management various non-qualified
benefit and deferred compensation plans. These plans include deferred salary
plans, deferred bonus plans, salary continuation with whole life plans and,
prior to the Recapitalization, participation in certain CSX stock bonus plans,
stock option plans and stock purchase/loan plans.

     ACL reserves the right to add, amend, change, tie off and/or terminate any
or all qualified or non-qualified benefit plans at any time and to alter, amend,
add to and/or restrict employee participation to the extent permitted by
applicable federal or state law or regulation.

COMPENSATION OF BOARD OF MANAGERS

     Members of the ACL Board of Managers do not receive any fees for those
services. ACL will reimburse members of the Board of Managers for any
out-of-pocket expenses incurred by them in connection with services provided in
such capacity.

ITEM 12.  SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP

     No Named Executive Officer, Member of the ACL Board of Managers or other
executive officer of ACL owns any membership interests in ACL. Of the Named
Executive Officers of ACL, Messrs. Hagan (90,293 shares), Whitlock (36,117
shares) and Farley (15,049 shares) own restricted common stock in ACL's parent
company, DHC. Other executive officers of ACL also own restricted DHC common
stock.

                                        84
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AFFILIATE AGREEMENTS

     ACL has also entered into an arrangement with Vessel Leasing (in which ACL
owns 50% and DHC owns 50% of the outstanding equity interests), whereby ACL's
wholly owned subsidiary, Jeffboat, sells barges to Vessel Leasing which charters
those barges to ACBL. ACL guarantees the charters between ACBL and Vessel
Leasing. As a result of the DHC ownership of Vessel Leasing and the control DHC
has on ACL, Vessel Leasing is consolidated with ACL for purposes of ACL's
financial statements but not its debt covenants.

     On July 25, 2002, ACL entered into a three year charter agreement with
ACLines, an affiliated entity, for the leasing of one towboat and four tank
barges that ACLines previously purchased from an existing charter ACL had in
place with a third-party financial institution. The terms and conditions of the
charter with ACLines were on an arm's-length basis and were at least as
favorable as ACL could have obtained from an unrelated third party. These
vessels were subsequently purchased by a non-affiliated third-party financial
institution on December 30, 2002 and were again leased to ACBL on substantially
the same terms and conditions.

     ACL and DHC are parties to a non-material corporate services agreement
whereby ACL performs certain corporate services for DHC on a blended monthly
fee/hourly basis. ACL also has entered into certain non-material agreements with
GMS (in which an ACL subsidiary owns 50% of the outstanding equity interests and
DHC owns 5.4% of the outstanding equity interests) for the provision of
corporate services by ACL's wholly owned subsidiary, ACT, to GMS. ACL has also
entered into certain non-material agreements with certain affiliates of UABL for
ship management and chartering arrangements, which relate to the UABL merger
described in Item 1, Business -- General.

     ACL's arrangements described above are each on terms and conditions that
ACL believes are in the aggregate not materially more burdensome to ACL than
would be obtained on an arm's-length basis among unaffiliated parties.

ITEM 14.  CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this Report, ACL carried out an
evaluation, under supervision and with the participation of ACL's management,
including ACL's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of ACL's disclosure controls and
procedures as defined in Exchange Act Rules 13a-14(c) and 15d-14(c). Based upon
and as of the date of that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that ACL's disclosure controls and procedures were
effective, in all material respects, to ensure that information required to be
disclosed in this Report and ACL's other periodic filings is recorded,
processed, summarized and reported as and when required.

     There have been no significant changes in ACL's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date ACL completed its evaluation. Therefore, no corrective actions were
taken.

                                    PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report:

    (1) Consolidated Financial Statements:

     Included in Part II of this Report:

        Consolidated Statement of Operations, for the years ended December 27,
        2002, December 28, 2001 and December 29, 2000.

                                        85
<PAGE>

        Consolidated Statement of Financial Position as of December 27, 2002 and
        December 28, 2001.

        Consolidated Statement of Cash Flows, for the years ended December 27,
        2002, December 28, 2001 and December 29, 2000.

        Consolidated Statement of Member's Equity (Deficit), for the years ended
        December 27, 2002, December 28, 2001 and December 29, 2000.

        Notes to Consolidated Financial Statements, for the years ended December
        27, 2002, December 28, 2001 and December 29, 2000.

        Report of Ernst & Young LLP, Independent Auditors, on the consolidated
        financial statements of American Commercial Lines LLC at December 27,
        2002 and for the year then ended.

        Report of PricewaterhouseCoopers LLP, Independent Accountants, on the
        consolidated financial statements of American Commercial Lines LLC at
        December 28, 2001 and for the years ended December 28, 2001 and December
        29, 2000.

     Included in Item 15(d) of this Report:

        Consolidated Balance Sheets of UABL Limited as of December 31, 2002 and
        2001

        Consolidated Statements of Operations of UABL Limited for the years
        ended December 31, 2002 and 2001 and for the period of October 24
        (inception date) through December 31, 2000.

        Consolidated Statement of Shareholders' Equity of UABL Limited for the
        years ended December 31, 2002 and 2001 and for the period of October 24
        (inception date) through December 31, 2000.

        Consolidated Statements of Cash Flows of UABL Limited for the years
        ended December 31, 2002 and 2001 and for the period October 24
        (inception date) through December 31, 2000.

        Report of Pistrelli, Diaz Y Asociados S.R.L., Members of Ernst & Young
        Global, Independent Auditors, on the consolidated financial statements
        of UABL Limited as of and for the year ended December 31, 2002.

        Report of Pistrelli, Diaz Y Asociados, Member of Andersen, Independent
        Public Accountants, on the consolidated financial statements of UABL
        Limited as of December 31, 2001 and for the year then ended and for the
        period of October 24 (inception date) to December 31, 2000.

(2) Financial Statement Schedule

     Included in Part II of this report:

          Schedule II -- Valuation and Qualifying Accounts

          All other schedules are omitted because they are not applicable, not
     significant or not required, or because the required information is
     included in the financial statement notes thereto.

(3) Exhibits

<Table>
<Caption>
EXHIBIT
  NO.                             DESCRIPTION
-------                           -----------
<S>       <C>
  +2.1    Recapitalization Agreement dated as of April 17, 1998 by and
          among CSX, Vectura, the Parent, ACL and National Marine
          (incorporated by reference to Exhibit 2.1 of the
          registrant's Registration Statement on Form S-4, as amended
          (Registration No. 333-62227)).
  +2.2    Recapitalization Agreement dated as of March 15, 2002 by and
          among DHC, the Parent, ACL, the Preferred Unitholders (as
          defined therein) party thereto and the Management
          Unitholders (as defined therein) party thereto (incorporated
          by reference to Exhibit 10.23 of the registrant's Current
          Report on Form 8-K dated March 15, 2002 and filed with the
          Commission on March 27, 2002).
</Table>

                                        86
<PAGE>

<Table>
<Caption>
EXHIBIT
  NO.                             DESCRIPTION
-------                           -----------
<S>       <C>
  +2.3    First Amendment to Recapitalization Agreement dated as of
          May 29, 2002 by and among DHC, ACLH Acquisition LLC, the
          Parent, ACL, the Preferred Unitholders (as defined therein)
          party thereto, the Management Unitholders (as defined
          therein) party thereto and the Consenting Common Unitholders
          (as defined therein) party thereto (incorporated by
          reference to Exhibit 10.23 of the registrant's Current
          Report on Form 8-K dated May 29, 2002 and filed with the
          Commission on June 10, 2002).
  +3.1    Certificate of Formation of the Parent (incorporated by
          reference to Exhibit 3.1 of the registrant's Registration
          Statement on Form S-4, as amended (Registration No.
          333-62227)).
  +3.2    Form of Certificate of Formation of ACL and the Subsidiary
          Guarantors (incorporated by reference to Exhibit 3.2 of the
          registrant's Registration Statement on Form S-4, as amended
          (Registration No. 333-62227)).
  +3.3    Form of Limited Liability Company Agreement for the
          Subsidiary Guarantors (incorporated by reference to Exhibit
          3.3 of the registrant's Registration Statement on Form S-4,
          as amended (Registration No. 333-62227)).
   3.4    Amended and Restated Limited Liability Company Agreement of
          the Parent dated as of January 22, 2003 by and between the
          Parent and ACLines LLC.
   3.5    Amended and Restated Limited Liability Company Agreement of
          ACL dated as of January 22, 2003 by and between the Parent
          and ACL.
  +3.6    Certificate of Incorporation of ACL Capital (incorporated by
          reference to Exhibit 3.6 of the registrant's Registration
          Statement on Form S-4, as amended (Registration No.
          333-62227)).
  +3.7    By-laws of ACL Capital (incorporated by reference to Exhibit
          3.7 of the registrant's Registration Statement on Form S-4,
          as amended (Registration No. 333-62227)).
  +4.1    Indenture dated as of June 30, 1998 by and among ACL, ACL
          Capital and the Subsidiary Guarantors and the United States
          Trust Company of New York, as trustee (incorporated by
          reference to Exhibit 4.1 of the registrant's Registration
          Statement on Form S-4, as amended (Registration No.
          333-62227)).
  +4.2    Purchase Agreement dated as of June 23, 1998 among ACL, ACL
          Capital and the Subsidiary Guarantors, Wasserstein Perella
          Securities, Inc. and Chase Securities Inc. (incorporated by
          reference to Exhibit 4.2 of the registrant's Registration
          Statement on Form S-4, as amended (Registration No.
          333-62227)).
  +4.3    Registration Rights Agreement dated as of June 23, 1998 by
          and among ACL, ACL Capital and the Subsidiary Guarantors,
          Wasserstein Perella Securities, Inc. and Chase Securities
          Inc. (incorporated by reference to Exhibit 4.3 of the
          registrant's Registration Statement on Form S-4, as amended
          (Registration No. 333-62227)).
  +4.4    Registration Rights Agreement dated as of June 30, 1998 by
          and among ACL, Vectura, National Marine, CSX Brown, Stuart
          Agranoff and Steven Anderson and each Person whose name is
          set forth on Schedule I therein (incorporated by reference
          to Exhibit 4.4 of the registrant's Registration Statement on
          Form S-4, as amended (Registration No. 333-62227)).
  +4.5    Supplemental Indenture dated as of May 29, 2002 by and among
          ACL, ACL Capital Corp. and The Bank of New York (as
          successor trustee to United States Trust Company of New
          York) as Trustee (incorporated by reference to Exhibit 4.1
          of the registrant's Quarterly Report on Form 10-Q for period
          ending June 28, 2002 filed with the Commission on August 14,
          2002).
  +4.6    Indenture dated May 29, 2002 for 11 1/4% Senior Notes due
          2008 by and among ACL, ACL Capital Corp., the Subsidiary
          Guarantors (defined therein) party thereto and The Bank of
          New York, as Trustee (incorporated by reference to Exhibit
          T3C filed with Amendment No. 1 to the registrant's
          Application for Qualification of Indenture Under the Trust
          Indenture Act of 1939 on Form T-3, filed with the Commission
          on May 29, 2002 (File No. 022-28597)).
  +4.7    Indenture dated May 29, 2002 for 12% Pay-In-Kind Senior
          Subordinated Notes due 2008 by and among ACL, ACL Capital
          Corp., the Subsidiary Guarantors (defined therein) party
          thereto and The Bank of New York, as Trustee (incorporated
          by reference to Exhibit T3C filed with Amendment No. 1 to
          the registrant's Application for Qualification of Indenture
          Under the Trust Indenture Act of 1939 on Form T-3, filed
          with the Commission on May 29, 2002 (File No. 022-28598)).
</Table>

                                        87
<PAGE>

<Table>
<Caption>
EXHIBIT
  NO.                             DESCRIPTION
-------                           -----------
<S>       <C>
  +4.8    Credit Agreement dated as of June 30, 1998 among ACL, the
          Parent, the Lenders (as defined therein) and The Chase
          Manhattan Bank, as issuing bank, as administrative agent, as
          security trustee and as collateral agent ("Credit
          Agreement") (incorporated by reference to Exhibit 10.1 of
          the registrant's Registration Statement on Form S-4, as
          amended (Registration No. 333-62227)).
  +4.9    Amendment No. 1, Waiver and Agreement dated as of January
          29, 1999 to Credit Agreement (incorporated by reference to
          Exhibit 10.14 of the registrant's 2000 Annual Report on Form
          10-K filed with the Commission on March 29, 2001).
  +4.10   Amendment and Waiver No. 2 dated as of December 13, 1999 to
          Credit Agreement (incorporated by reference to Exhibit 10.15
          of the registrant's 2000 Annual Report on Form 10-K filed
          with the Commission on March 29, 2001).
  +4.11   Consent and Waiver No. 3 dated as of June 1, 2000 to Credit
          Agreement (incorporated by reference to Exhibit 10.16 of the
          registrant's 2000 Annual Report on Form 10-K filed with the
          Commission on March 29, 2001).
  +4.12   Amendment No. 4, Consent and Waiver dated as of October 13,
          2000 to Credit Agreement (incorporated by reference to
          Exhibit 10.17 of the registrant's 2000 Annual Report on Form
          10-K filed with the Commission on March 29, 2001).
  +4.13   Amendment No. 5, Waiver and Agreement dated as of December
          29, 2000 to Credit Agreement (incorporated by reference to
          Exhibit 10.18 of the registrant's 2000 Annual Report on Form
          10-K filed with the Commission on March 29, 2001).
  +4.14   Forbearance Agreement dated as of February 22, 2002 among
          the Parent, ACL, the ACL subsidiary guarantors, the Lenders
          (as defined therein), and The JPMorgan Chase Bank, as
          administrative agent (incorporated by reference to Exhibit
          10.20 of the registrant's 2001 Annual Report on Form 10-K
          filed with the Commission on March 28, 2002).
  +4.15   Amendment Agreement dated as of April 11, 2002 among ACL,
          the Parent, the Lenders (as defined therein) party thereto
          and The JPMorgan Chase Bank, as issuing bank, as
          administrative agent, as security trustee and as collateral
          agent (incorporated by reference to Exhibit 10.1 of the
          registrant's Quarterly Report on Form 10-Q for the period
          ended June 28, 2002 filed with the Commission on August 14,
          2002).
  +4.16   Credit Agreement dated as of June 30, 1998, as Amended and
          Restated as of April 11, 2002, among ACL, the Parent, the
          Lenders (as defined therein) party thereto and The JPMorgan
          Chase Bank, as issuing bank, as administrative agent, as
          security trustee and as collateral agent (incorporated by
          reference to Exhibit 10.2 of the registrant's Quarterly
          Report on Form 10-Q for the period ended June 28, 2002 filed
          with the Commission on August 14, 2002).
  +4.18   Amendment No. 1 and Agreement dated as of September 27, 2002
          to the Amended and Restated Credit Agreement dated as of
          April 11, 2002 among ACL, the Parent, the Lenders (as
          defined therein) party thereto and The JPMorgan Chase Bank,
          as issuing bank, as administrative agent, as security
          trustee, and as collateral agent (incorporated by reference
          to Exhibit 10.1 of the registrant's Quarterly Report on Form
          10-Q for the period ended September 27, 2002 filed with the
          Commission on November 12, 2002).
*+10.1    Employment Agreement between ACL and Daniel J. Marquitz
          dated October 19, 1998 (incorporated by reference to Exhibit
          10.2 of the registrant's Registration Statement on Form S-4,
          as amended (Registration No. 333-62227)).
*+10.2    Employment Agreement between CSX and Michael C. Hagan dated
          February 1, 1995 (incorporated by reference to Exhibit 10.3
          of the registrant's 1998 Annual report on Form 10-K filed
          with the Commission on March 25, 1999).
*+10.3    Stock Purchase and Loan Plan, as amended (incorporated by
          reference to Exhibit 10.14 of CSX's 1998 Annual Report on
          Form 10-K filed with the Commission on March 3, 1999).
*+10.4    1987 Long-Term Performance Stock Plan, as amended
          (incorporated by reference to Exhibit 10.15 of CSX's 1998
          Annual Report on Form 10-K filed with the Commission on
          March 3, 1999).
*+10.5    1985 Deferred Compensation Program for Executives of CSX
          Corporation and Affiliated Companies, as amended
          (incorporated by reference to Exhibit 10.16 of CSX's 1997
          Annual Report on Form 10-K filed with the Commission on
          March 3, 1999).
</Table>

                                        88
<PAGE>

<Table>
<Caption>
EXHIBIT
  NO.                             DESCRIPTION
-------                           -----------
<S>       <C>
*+10.6    Supplementary Savings Plan and Incentive Award Deferral Plan
          for Eligible Executives of CSX Corporation and Affiliated
          Companies, as amended (incorporated by reference to Exhibit
          10.17 of CSX's 1998 Annual Report on Form 10-K filed with
          the Commission on March 3, 1999).
*+10.7    Special Retirement Plan of CSX Corporation and Affiliated
          Companies, as amended (incorporated by reference to Exhibit
          10.18 of CSX's 1997 Annual Report on Form 10-K filed with
          the Commission on March 3, 1999).
*+10.8    Supplemental Retirement Plan of CSX Corporation and
          Affiliated Companies, as amended (incorporated herein by
          reference to Exhibit 10.19 of CSX's 1997 Annual Report on
          Form 10-K filed with the Commission on March 3, 1998).
*+10.9    American Commercial Lines, Inc. Severance Pay Plan
          (incorporated by reference to Exhibit 10.10 of the
          registrant's 1998 Annual Report on Form 10-K filed with the
          Commission on March 25, 1999).
*+10.10   American Commercial Barge Line Company Salary Continuation
          Plan, as amended (incorporated by reference to Exhibit 10.11
          of the registrant's 1998 Annual Report on Form 10-K filed
          with the Commission on March 25, 1999).
*+10.11   Employment Agreement between ACL and David Wagstaff III
          dated June 25,1999 (incorporated by reference to Exhibit
          10.1 of the registrant's Quarterly Report on Form 10-Q for
          the period ending July 2, 1999 filed with the Commission on
          August 10, 1999).
*+10.12   Consulting Agreement between ACL and David Wagstaff III
          dated October 1, 1999 (incorporated by reference to Exhibit
          10.13 of the registrant's 1999 Annual Report on Form 10-K
          filed with the Commission on March 30, 2000).
 +10.13   Receivables Purchase Agreement between American Commercial
          Lines Funding Corporation, as Seller, American Commercial
          Barge Line LLC, as Servicer, Jupiter Securitization
          Corporation, as a Purchaser, The Financial Institutions from
          time to time party thereto, as Purchasers and Bank One, NA
          (Main Office Chicago), as Agent, dated as of May 24, 2002
          (incorporated by reference to Exhibit 10.3 of the
          registrant's Quarterly Report on Form 10-Q for the period
          ended June 28, 2002 filed with the Commission on August 14,
          2002).
 +10.14   First Amendment to Receivables Purchase Agreement dated as
          of November 11, 2002 between American Commercial Lines
          Funding Corporation, as Seller, American Commercial Barge
          Line LLC, as Servicer, the financial institutions from time
          to time party to the Receivables Purchase Agreement, as bank
          inventors, Jupiter Securitization Corporation (together with
          the bank investors, the Purchaser) and Bank One, NA (Main
          Office Chicago), as agent (incorporated by reference to
          Exhibit 10.2 of the registrant's Quarterly Report on Form
          10-Q for the period ended September 27, 2002 filed with the
          Commission on November 12, 2002).
 +10.15   Receivables Sales Agreement between American Commercial
          Barge Line LLC, as an Originator, American Commercial
          Terminals LLC, as an Originator, and American Commercial
          Lines Funding Corporation, as Buyer, dated as of May 24,
          2002 (incorporated by reference to Exhibit 10.4 of the
          registrant's Quarterly Report on Form 10-Q for the period
          ended June 28, 2002 filed with the Commission on August 14,
          2002).
*+10.16   Management Agreement between ACL and Michael C. Hagan dated
          May 29, 2002 (incorporated by reference to Exhibit 10.5 of
          the registrant's Quarterly Report on Form 10-Q for the
          period ended June 28, 2002 filed with the Commission on
          August 14, 2002).
*+10.17   Management Agreement between ACL and James J. Wolff dated
          May 29, 2002 (incorporated by reference to Exhibit 10.6 of
          the registrant's Quarterly Report on Form 10-Q for the
          period ended June 28, 2002 filed with the Commission on
          August 14, 2002).
*+10.18   Amendment of the Special Retirement Plan of ACL dated May
          22, 2002 (incorporated by reference to Exhibit 10.7 of the
          registrant's Quarterly Report on Form 10-Q for the period
          ended June 28, 2002 filed with the Commission on August 14,
          2002).
*+10.19   Amendment of the Supplemental Savings Plan of Eligible
          Executives of ACL dated May 22, 2002 (incorporated by
          reference to Exhibit 10.8 of the registrant's Quarterly
          Report on Form 10-Q for the period ended June 28, 2002 filed
          with the Commission on August 14, 2002).
</Table>

                                        89
<PAGE>

<Table>
<Caption>
EXHIBIT
  NO.                             DESCRIPTION
-------                           -----------
<S>       <C>
*+10.20   Release and Waiver of Employment and Termination of
          Employment Claims between American Commercial Barge Line LLC
          and Michael A. Khouri dated August 22, 2002 (incorporated by
          reference to Exhibit 10.3 of the registrant's Quarterly
          Report on Form 10-Q for the period ended September 27, 2002
          filed with the Commission on November 12, 2002).
*+10.21   Employment Agreement between American Commercial Barge Line
          LLC and R. Barry Uber dated July 11, 2001 (incorporated by
          reference to Exhibit 10.19 of the registrant's 2001 Annual
          Report on Form 10-K filed with the Commission on March 28,
          2002).
 *10.22   Employment Agreement between ACL and Robert P. Herre dated
          August 11, 2000.
  21.1    Subsidiaries of ACL.
  99.1    Risk Factors.
  99.2    Certification pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
          from Michael C. Hagan, Chief Executive Officer of ACL.
  99.3    Certification pursuant to 18 U.S.C. Section 1350, as adopted
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
          from James J. Wolff, Chief Financial Officer of ACL.
</Table>

---------------

 +  Not filed herewith. In accordance with Rule 12b-32 of the General Rules and
    Regulations under the Securities and Exchange Act of 1934, reference is made
    to the document previously filed with the Commission.

 *  Management Contract or Compensatory Plan or Arrangement.

(b) Reports on Form 8-K: Concurrently with the filing of ACL's Quarterly Report
    on Form 10-Q for the quarterly period ended September 27, 2002, ACL filed a
    Current Report on Form 8-K on November 12, 2002, which contained the
    Sarbanes-Oxley Act of 2002, Section 906 Certifications from Michael C.
    Hagan, Chief Executive Officer of ACL, and James J. Wolff, Chief Financial
    Officer of ACL.

(c) Exhibits: See Index to Exhibits.

(d) All financial statements and schedules except those items listed under Item
    15(a)(1) and (2) above are omitted because they are not applicable, or are
    not required, or because the required information is included in the
    financial statements or notes thereto.

                                        90
<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.

                                          American Commercial Lines LLC
                                          (Registrant)

                                          By:     /s/ MICHAEL C. HAGAN
                                            ------------------------------------
                                                      Michael C. Hagan
                                               President and Chief Executive
                                                           Officer

March 27, 2003

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 27, 2003.

<Table>
<Caption>
NAME                                                                     TITLE
----                                                                     -----
<C>                                                <S>
              /s/ MICHAEL C. HAGAN                 President, Chief Executive Officer
------------------------------------------------   Chairman of ACL Board of Managers
                Michael C. Hagan                   (Principal Executive Officer)

               /s/ JAMES J. WOLFF                  Senior Vice President, Chief Financial Officer
------------------------------------------------   and Member of ACL Board of Managers
                 James J. Wolff                    (Principal Financial and Accounting Officer)

             /s/ L. STEPHENS BAIRD                 Vice President, Treasurer and Member of
------------------------------------------------   ACL Board of Managers
               L. Stephens Baird
</Table>

                                        91
<PAGE>

                                 CERTIFICATIONS

I, Michael C. Hagan, Chief Executive Officer of American Commercial Lines LLC
("ACL"), the registrant, certify that:

     1.  I have reviewed this annual report on Form 10-K of ACL;

     2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4.  The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6.  The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                          /s/ MICHAEL C. HAGAN
                                          --------------------------------------
                                          Michael C. Hagan
                                          Chief Executive Officer/
                                          Principal Executive Officer
                                          (Signature and Title)

Date: March 27, 2003

                                        92
<PAGE>

I, James J. Wolff, Chief Financial Officer of American Commercial Lines LLC
("ACL"), the registrant, certify that:

     1.  I have reviewed this annual report on Form 10-K of ACL;

     2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

     3.  Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4.  The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6.  The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                          /s/ JAMES J. WOLFF
                                          --------------------------------------
                                          James J. Wolff
                                          Chief Financial Officer/
                                          Principal Financial Officer
                                          (Signature and Title)

Date: March 27, 2003

                                        93
<PAGE>

                                  UABL LIMITED

                       CONSOLIDATED FINANCIAL STATEMENTS
                FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND
      FOR THE PERIOD OCTOBER 24 (INCEPTION DATE) THROUGH DECEMBER 31, 2000
                      WITH REPORT OF INDEPENDENT AUDITORS

                                        94
<PAGE>

                                  UABL LIMITED

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE YEARS ENDED DECEMBER 31, 2002, 2001, AND
        FOR THE PERIOD OCTOBER 24 (INCEPTION DATE) TO DECEMBER 31, 2000

<Table>
<Caption>
                             CONTENTS
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Auditors (for 2002)...................   96
Report of Independent Auditors (for 2001 and 2000)..........   97
Financial statements
  Consolidated balance sheets as of December 31, 2002 and
     2001...................................................   98
  Consolidated statements of operations for the years ended
     December 31, 2002, 2001 and for the period October 24
     (Inception date) through December 31, 2000.............   99
  Consolidated statements of changes in shareholders' equity
     for the years ended December 31, 2002, 2001 and for the
     period October 24 (Inception date) through December 31,
     2000...................................................  100
  Consolidated statements of cash flows for the years ended
     December 31, 2002, 2001 and for the period October 24
     (Inception date) through December 31, 2000.............  101
  Notes to consolidated financial statements for the years
     ended December 31, 2002, 2001 and for the period
     October 24 (Inception date) through December 31,
     2000...................................................  102
</Table>

                                        95
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of
UABL LIMITED:

     We have audited the consolidated balance sheet of UABL LIMITED as of
December 31, 2002, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended. These statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
consolidated financial statements of UABL LIMITED as of December 31, 2001 and
for the year ended December 31, 2001 and for the period of October 24 (Inception
date) to December 31, 2000, were audited by other auditors who have ceased
operations as a foreign associated firm of the Securities and Exchange
Commission Practice Section of the American Institute of Certified Public
Accountants and whose reported dated March 26, 2002, expressed an unqualified
opinion on those statements.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides 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 UABL LIMITED as
of December 31, 2002, and the consolidated results of its operations and its
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.

                                            PISTRELLI, DIAZ Y ASOCIADOS S.R.L.
                                             Member of Ernst and Young Global

                                                      MARIANA FILAS
                                                         Partner

Buenos Aires, Argentina
February 28, 2003

                                        96
<PAGE>

     The following is a copy of the audit report previously issued by PISTRELLI,
DIAZ Y ASOCIADOS (member of Andersen) in connection with UABL LIMITED's December
31, 2001 and 2000 financial statements. This audit report has not been reissued
by PISTRELLI, DIAZ Y ASOCIADOS in connection with this filing on Form 10-K.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
UABL LIMITED:

     We have audited the accompanying consolidated balance sheets of UABL
LIMITED and its subsidiaries, a company incorporated under Bahamas legislation
(the Company), as of December 31, 2001 and 2000, and the related consolidated
statements of income (loss), changes in stockholders' equity and cash flows for
the year ended December 31, 2001 and for the period of October 24 (Inception
date) to December 31, 2000. These 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 auditing generally accepted
standards in the United States of America. 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 provides a
reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of UABL LIMITED as of December
31, 2001 and 2000, and the results of its operations and its cash flows for the
year ended December 31, 2001 and for the period of October 24 (Inception date)
to December 31, 2000, in accordance with generally accepted accounting
principles in the United States.

                                               PISTRELLI, DIAZ Y ASOCIADOS
                                                    Member of Andersen

                                                      MARIANA FILAS
                                                         Partner

Buenos Aires, Argentina
March 26, 2002

                                        97
<PAGE>

                                  UABL LIMITED

                          CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2002 AND 2001

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2002        2001
                                                              ---------   ---------
                                                              (STATED IN THOUSANDS
                                                                OF U.S. DOLLARS)
<S>                                                           <C>         <C>
                                      ASSETS
Current Assets
  Cash and cash equivalents.................................       321         106
  Investments...............................................        86          --
  Accounts receivable, net of allowance for doubtful
     accounts of 265 and 312 in 2002 and 2001,
     respectively...........................................     2,386       3,691
  Due from affiliates.......................................       353      17,295
  Inventories...............................................     1,052       1,465
  Prepaid expenses..........................................       645       1,772
  Other receivables.........................................     1,450       2,631
  Deferred tax asset........................................       595          --
                                                               -------     -------
          Total current assets..............................     6,888      26,960
                                                               -------     -------
Noncurrent Assets
  Other receivables.........................................        96          --
  Investments...............................................       100          --
  Due from affiliates.......................................     2,229          --
  Investment in affiliates..................................        --       3,809
  Property and equipment, net...............................    80,915      77,883
                                                               -------     -------
          Total noncurrent assets...........................    83,340      81,692
                                                               -------     -------
          Total Assets......................................    90,228     108,652
                                                               =======     =======

                       LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Accounts payable and accrued expenses.....................     1,781       3,040
  Due to affiliates.........................................    15,496      28,449
  Other payables............................................       928         809
  Current portion of long-term debt and capital lease
     obligations............................................     2,722       1,366
                                                               -------     -------
          Total current liabilities.........................    20,927      33,664
                                                               -------     -------
Noncurrent Liabilities
  Long-term debt, less current portion......................     6,678       8,464
  Capital lease obligations, less current portion...........     1,527          --
                                                               -------     -------
          Total noncurrent liabilities......................     8,205       8,464
                                                               -------     -------
          Total Liabilities.................................    29,132      42,128
                                                               -------     -------
Shareholders' Equity
  Common stock, $1 par value, 10,000 shares authorized,
     issued and outstanding.................................        10          10
  Additional paid-in capital................................    74,549      77,514
  Accumulated deficit.......................................   (13,463)    (11,000)
                                                               -------     -------
          Total shareholders' equity........................    61,096      66,524
                                                               -------     -------
          Total Liabilities and Shareholders' Equity........    90,228     108,652
                                                               =======     =======
</Table>

                            See accompanying notes.
                                        98
<PAGE>

                                  UABL LIMITED

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
      FOR THE PERIOD OCTOBER 24 (INCEPTION DATE) THROUGH DECEMBER 31, 2000

<Table>
<Caption>
                                                                 YEAR / PERIOD ENDED DECEMBER 31,
                                                              --------------------------------------
                                                                 2002          2001          2000
                                                              (365 DAYS)    (365 DAYS)    (69 DAYS)
                                                              -----------   -----------   ----------
                                                              (STATED IN THOUSANDS OF U.S. DOLLARS)
<S>                                                           <C>           <C>           <C>
Revenue
     Revenues...............................................     31,440        35,933        3,993
     Revenues from related parties..........................        895         4,027          640
     Management fee from related parties....................     13,784        15,055        1,947
     Other revenues.........................................        941         1,566           --
                                                                -------       -------       ------
            Total revenue...................................     47,060        56,581        6,580
                                                                -------       -------       ------
Operating Expenses(1)
     Port expenses..........................................     (3,902)       (5,671)      (1,260)
     Boat costs.............................................    (13,163)      (18,968)      (3,347)
     Barge costs............................................     (4,257)       (4,597)      (1,116)
     Charter hire from related parties......................    (19,755)      (22,399)      (2,944)
     Depreciation of property and equipment.................     (4,070)       (3,259)        (688)
     Administrative expenses................................     (3,565)       (5,219)        (643)
                                                                -------       -------       ------
            Total operating expenses........................    (48,712)      (60,113)      (9,998)
                                                                -------       -------       ------
  Operating loss............................................     (1,652)       (3,532)      (3,418)
                                                                -------       -------       ------
Other Income (Expenses), Net
     Investment in affiliates...............................        (99)          (83)         (86)
     Interest expense.......................................       (997)         (282)          --
     Foreign exchange gains.................................         83           513           --
                                                                -------       -------       ------
            Total other income (expenses), net..............     (1,013)          148          (86)
                                                                -------       -------       ------
  Loss before tax on minimum presumed income and income tax
     for the year...........................................     (2,665)       (3,384)      (3,504)
     Tax on minimum presumed income for the year............       (200)         (725)         (95)
     Income taxes...........................................        402            --           --
     Settlement of tax contingency..........................         --        (3,292)          --
                                                                -------       -------       ------
  Net loss..................................................     (2,463)       (7,401)      (3,599)
                                                                =======       =======       ======
</Table>

---------------

(1) In addition to charter hires from related parties, operating expenses
    included 1,206 and 3,226 in 2002 and 2001, respectively, related to charges
    from related parties.

                            See accompanying notes.
                                        99
<PAGE>

                                  UABL LIMITED

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
      FOR THE PERIOD OCTOBER 24 (INCEPTION DATE) THROUGH DECEMBER 31, 2000

<Table>
<Caption>
                                                                ADDITIONAL
                                                       COMMON    PAID-IN     ACCUMULATED
BALANCE                                                STOCK     CAPITAL       DEFICIT     TOTAL
-------                                                ------   ----------   -----------   ------
                                                         (STATED IN THOUSANDS OF U.S. DOLLARS)
<S>                                                    <C>      <C>          <C>           <C>
October 24, 2000.....................................    10       74,395            --     74,405
Net loss for the period (69 days)....................    --           --        (3,599)    (3,599)
                                                         --       ------       -------     ------
December 31, 2000....................................    10       74,395        (3,599)    70,806
Additional paid-in capital...........................    --        3,119            --      3,119
Net loss for the year................................    --           --        (7,401)    (7,401)
                                                         --       ------       -------     ------
December 31, 2001....................................    10       77,514       (11,000)    66,524
Spin off approved by the shareholders on August 15,
  2002...............................................    --       (2,965)           --     (2,965)
Net loss for the year................................    --           --        (2,463)    (2,463)
                                                         --       ------       -------     ------
December 31, 2002....................................    10       74,549       (13,463)    61,096
                                                         ==       ======       =======     ======
</Table>

                            See accompanying notes.
                                       100
<PAGE>

                                  UABL LIMITED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 AND
      FOR THE PERIOD OCTOBER 24 (INCEPTION DATE) THROUGH DECEMBER 31, 2000

<Table>
<Caption>
                                                                  YEAR/PERIOD ENDED DECEMBER 31,
                                                              --------------------------------------
                                                                 2002          2001          2000
                                                              (365 DAYS)    (365 DAYS)    (69 DAYS)
                                                              -----------   -----------   ----------
                                                              (STATED IN THOUSANDS OF U.S. DOLLARS)
<S>                                                           <C>           <C>           <C>
Cash Flows from Operating Activities
  Net loss..................................................     (2,463)       (7,401)      (3,599)
  Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
     Depreciation of property and equipment.................      4,070         3,259          688
     Loss from investment in affiliates.....................         99            83           86
     Income from sales of property and equipment............         --            (2)          --
  Changes in assets and liabilities, net:
     (Increase) decrease in assets:
       Accounts receivable..................................      1,305         2,029       (3,150)
       Due from affiliates..................................     16,871       (16,811)        (484)
       Inventories..........................................        413            96       (1,561)
       Prepaid expenses.....................................      1,127        (1,157)        (615)
       Other receivables....................................      1,235         1,260        2,349
     Increase (decrease) in liabilities:
       Accounts payable and accrued expenses................     (1,259)       (4,055)       4,365
       Due to affiliates....................................    (12,498)       27,436        1,013
       Other payables.......................................        119          (530)         (95)
                                                                -------       -------       ------
          Net cash provided by (used in) operating
            activities......................................      9,019         4,207       (1,003)
                                                                -------       -------       ------
Cash Flows from Investing Activities
  Proceeds from property and equipment......................        597            53
  Loans granted to related parties..........................     (2,158)           --           --
  Investment in certificate of deposit......................       (186)          607         (607)
  Purchases of property and equipment.......................     (7,699)      (17,145)          --
  Investment in affiliate...................................         --        (2,461)          --
                                                                -------       -------       ------
          Net cash used in investing activities.............     (9,446)      (18,946)        (607)
                                                                -------       -------       ------
Cash Flows from Financing Activities
  Proceeds from issuance of long-term debt..................      5,594        10,100           --
  Repayment of long-term debt...............................     (4,497)         (270)          --
  Repayment of loans due to related parties.................       (455)           --           --
  Capital contribution......................................         --         3,119           --
                                                                -------       -------       ------
          Net cash provided by financing activities.........        642        12,949           --
                                                                -------       -------       ------
          Net increase (decrease) in cash and cash
            equivalents.....................................        215        (1,790)      (1,610)
          Cash and cash equivalents at beginning of year....        106         1,896        3,506
                                                                -------       -------       ------
          Cash and cash equivalents at end of year..........        321           106        1,896
                                                                =======       =======       ======
Supplemental cash flow information:
  Interest paid.............................................        715            57            1
  Income taxes paid.........................................        100           569           82
</Table>

                            See accompanying notes.
                                       101
<PAGE>

                                  UABL LIMITED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

1.  CORPORATE ORGANIZATION AND NATURE OF OPERATIONS

  ORGANIZATION

     ACBL Hidrovias Ltd. ("ACBLH"), a subsidiary of American Commercial Lines
LLC ("ACL"), and UP River (Holdings) Ltd. ("UP River"), a Bahamian corporation
and wholly-owned subsidiary of Ultrapetrol (Bahamas) Limited ("Ultrapetrol"),
individually and through their subsidiaries, owned certain vessels, land-based
assets, permits and contracts of affreightment, which they used to operate a
river transportation business on the Parana, Paraguay and Uruguay Rivers in
Argentina, Bolivia, Brazil, Paraguay and Uruguay.

     The respective Boards of Directors of ACBLH and UP (collectively, the
"Parties") decided to combine the businesses of ACBLH and UP into a new business
entity, UABL Limited ("the Company" or "UABL Limited"), and for that purpose
executed a Consolidation Agreement ("the Consolidation Agreement") on October
18, 2000 (the "Closing Date"). As a result of the business combination, the
Company was organized and registered as a Bahamian corporation on October 18,
2000. The Company has an authorized capital stock of 10,000 shares, with a par
value of $1 per share and is owned equally by UP and ACBLH and its affiliates.
These contributions were recorded at the historical cost basis of the related
entities or assets.

     On the Closing Date and in accordance with the Consolidation Agreement,
UABL S.A. ("UABL SA"; formerly ACBL Hidrovias S.A.), under Argentinean
legislation and UP River, under Bahamian legislation, were contributed to the
Company by ACBLH and UP River, respectively. Additionally, the parties
contributed equipment, cash and certain time charter contracts involving certain
vessels to the Company on the Closing Date.

     Lonehort S.A. ("Lonehort") a ship management company serving the boats,
barges and other marine equipment of the Company was created in October 2000.
UABL Limited is its sole shareholder (100% interest).

     As of December 31, 2002, 2001 and 2000 the consolidated financial
statements include the accounts of the Company and its subsidiaries described as
follows:

<Table>
<Caption>
COMPANY                                                  ORIGIN      2002   2001   2000
-------                                                -----------   ----   ----   ----
<S>                                                    <C>           <C>    <C>    <C>
Thurston Shipping Inc. ("Thurston")..................   Panamanian   100%   100%   100%
UABL International S.A. ("UABL International").......   Panamanian   100%   100%   100%
UABL S.A.............................................  Argentinian   100%   100%   100%
Sernova S.A. ("Sernova").............................  Argentinian   100%   100%   100%
UABL Paraguay S.A. ("UABL Paraguay").................   Paraguayan   100%   100%   100%
Riverpar S.A. ("Riverpar")...........................   Paraguayan   100%   100%    --
Yataiti S.A. ("Yataiti").............................   Paraguayan   100%   100%    --
ACBL del Paraguay S.A. ("ACBL del Paraguay").........   Paraguayan   100%   100%    --
Lonehort S.A. ("Lonehort")...........................   Panamanian   100%   100%   100%
UABL Barges (Panama) Inc. ("UABL Barges")............   Panamanian   100%    --     --
</Table>

  RECENT DEVELOPMENTS

  Argentina

     Approximately 17% of the Company's revenues are generated from its
Argentine subsidiaries which also hold approximately 44% of the consolidated
assets of the Company. Argentina has undergone major economic, political and
social changes in the last several years, including significant economic changes
in December 2001 and throughout 2002. Most importantly, in January 2002 the
government eliminated the prior convertibility

                                       102
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

law which had been in place since 1991 through which the Argentine peso was
traded at one peso per U.S. dollar. Beginning in February 2002 the government
established a single market for all foreign exchange transactions at a single
free-floating exchange rate. Subsequent to this change the Argentine peso
devalued significantly and as of December 31, 2002 the peso was trading on one
peso per 3.32 U.S. dollars.

     In addition to the above changes the government also converted all debts
denominated in U.S. dollars or other foreign currencies in the financial system
to pesos at the exchange rate of one peso per US$1.00. There were also various
other banking and foreign payment restrictions which were substantially lifted
in 2002.

     The majority of the Argentine subsidiary's revenues are denominated and
collected in U.S. dollars. In addition, the Company does not have financial
loans denominated in pesos in Argentina. Accordingly, the above economic changes
in Argentina did not significantly adversely affect the Company. The most
significant impact related to the reduction of the U.S. dollar equivalent value
of the Company's peso denominated operating expenses.

     Notwithstanding the above, the Argentine government continues to make
changes in the country which could affect the Company's Argentine operations.

  Paraguay

     Approximately 31% of the Company's revenues are generated from its
Paraguayan subsidiaries which also hold approximately 25% of the consolidated
assets of the Company. Paraguay has undergone certain economic, political and
social changes in the last several years, including an approximate 50%
devaluation of the Guaranii (monetary unit in Paraguay) in 2002.

     The majority of the Paraguayan subsidiaries' revenues are denominated and
collected in U.S. dollars. In addition, the Company does not have financial
loans denominated in guarani in Paraguay. Accordingly, the above economic
changes in Paraguay did not significantly adversely affect the Company. The most
significant impact related to the reduction of the U.S. dollar equivalent value
of the Company's guarani denominated operating expenses.

     Notwithstanding the above, future economic changes in Paraguay could affect
the Company's subsidiaries and operations in this country.

2.  SIGNIFICANT ACCOUNTING POLICIES

  A) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP").

     The consolidated financial statements include the accounts of the Company
and its subsidiaries all of which are wholly-owned. Significant intercompany
accounts and transactions have been eliminated in consolidation.

     Certain reclassifications have been made to December 31, 2001 and 2000
amounts to conform with December 31, 2002 presentation.

  B) FOREIGN-CURRENCY REMEASUREMENT

     The Company uses the US dollar as its functional currency. The majority of
the Company's sales are billed and collected in U.S. dollars and all financing
is in U.S. dollars.

                                       103
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

     All monetary assets and liabilities not denominated in US dollars have been
remeasured into US dollars using the exchange rates in effect at the balance
sheet date. Operations statement amounts have been translated using the average
exchange rate for each month. Gains or losses resulting from foreign currency
measurements are included in the operations statement for the same year.

  C) INVESTMENTS

     As of December 31, 2002, this account includes a certificate of deposit in
Citibank N.A., Paraguay.

  D) OTHER RECEIVABLES

     This account mainly includes claims receivables, tax credits for VAT and
income tax witholdings as of December 31, 2002 and 2001.

  E) INVENTORIES

     This account includes fuel, lubricants and spare parts, which were
accounted for at the lower of cost or market. The amounts for each item were as
follows:

<Table>
<Caption>
                                                              2002    2001
                                                              -----   -----
<S>                                                           <C>     <C>
Spare parts.................................................    696     995
Fuel........................................................    356     470
                                                              -----   -----
          Total.............................................  1,052   1,465
                                                              =====   =====
</Table>

  F) PREPAID EXPENSES

     This account includes prepaid insurance, charter expenses and advances to
suppliers.

  G) PROPERTY AND EQUIPMENT

     Property and equipment, which is principally comprised of river barges,
tugboats and river equipment is stated on the basis of cost. This cost includes
the purchase price and all directly attributable costs for the asset to be in
working condition. Maintenance and repair costs are expensed as incurred.

     The barges and tugboats are considered to have useful lives of 35 years
from the date on which they were built. The depreciation amount is calculated
net from the scrap value of the barges and tugboats (5% of the acquisition
cost). River equipment is considered to have a useful life of 15 years.
Depreciation for all property and equipment is recorded by the straight-line
method over the estimated useful lives of the related assets.

     Long-lived assets are reviewed for impairment in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets", whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is less
than the carrying amount of the asset, a loss is recognized for the difference
between the fair value and carrying value of the asset. There was no impairment
in 2002.

  H) INVESTMENT IN AFFILIATES

     This account included the Company's 50% interest in Obras Terminales y
Servicios S.A. ("OTS"), and 50% in Puertos del Sur S.A., through UABL Paraguay.

     These investments were accounted for by the equity method.

                                       104
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

     During the year the Company contributed its equity share of these companies
to UABL Terminals. Refer to Note 4.

  I) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     This account mainly includes payables to agents and suppliers.

  J) OTHER PAYABLES

     This account mainly includes salaries, social security payables, taxes
payable and accruals.

  K) REVENUE RECOGNITION

     Barge transportation revenues are recognized daily as earned from charters
over the period of the respective agreements.

  L) USE OF ESTIMATES

     The preparation of the consolidated financial statements in accordance with
US GAAP requires management to make estimates and assumptions that affect
reported amounts in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimated.

  M) COMPREHENSIVE INCOME

     According to SFAS No. 130, the Company is required to disclose separately
the changes in shareholders' equity, other than net income (loss) and
transactions with shareholders, defined as other comprehensive income. The
Company has no items of other comprehensive income to report. The comprehensive
income only includes the net income (loss) for the year.

  N) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The fair value of the Company's financial instruments, which include cash
and cash equivalents, investments, accounts receivable and accounts payable and
long and short-term debt, approximates carrying value.

  O) CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include highly-liquid, temporary cash investments
with original maturities of three months or less when purchased.

                                       105
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

  P) ALLOWANCE FOR DOUBTFUL ACCOUNTS

     Changes in allowance for doubtful accounts for the years ended December 31,
2002 and 2001 are as follows:

<Table>
<Caption>
                                                              DECEMBER 31,
                                                              -------------
                                                              2002    2001
                                                              -----   -----
<S>                                                           <C>     <C>
Balance at January 1,.......................................   312     355
Provision...................................................   108     312
Amounts written off.........................................  (110)   (355)
Amounts recovered...........................................   (45)     --
                                                              ----    ----
Balance at December 31,.....................................   265     312
                                                              ====    ====
</Table>

     Changes in allowance for doubtful accounts for the period October 24, 2000
to December 31, 2000 are as follows:

<Table>
<S>                                                            <C>
Balance at October 24, 2000.................................    --
Provision...................................................   355
                                                               ---
Balance at December 31, 2000................................   355
                                                               ===
</Table>

3.  PROPERTY AND EQUIPMENT

     The capitalized cost of property and equipment and the related accumulated
depreciation as of December 31, 2002 and 2001 is as follows:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2002      2001
                                                              -------   -------
<S>                                                           <C>       <C>
Boats and tug boats.........................................    7,978     5,185
Barges......................................................   77,731    74,994
Improvements in third's parties assets......................    2,691        --
Vehicles....................................................       89        82
Equipment...................................................    3,443     3,346
Furniture & fixtures........................................      981       964
Land & operating base.......................................    2,730     2,622
Work in progress............................................      126     1,787
Prepayment to suppliers.....................................      281        --
                                                              -------   -------
                                                               96,050    88,980
Less accumulated depreciation...............................  (15,135)  (11,097)
                                                              -------   -------
          Total.............................................   80,915    77,883
                                                              =======   =======
</Table>

4.  SPIN-OFF OF EQUITY INVESTMENT

     In 2002 the shareholders of UABL Limited decided to spin-off their equity
interest in OTS SA and Puertos del Sur SA to UABL Terminals. UABL Terminals is
owned by the same ultimate shareholders as UABL Limited. Accordingly, since the
transaction was between entities under common ownership, the transaction was
accounted for at historical cost and no gain or loss was recognized.

                                       106
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

5.  COMMITMENTS AND CONTINGENCIES

  a) CONSOLIDATION AGREEMENT

     According to the provisions of the Consolidation Agreement, UABL Limited
shall not be obligated or become liable for any obligation or liability, known
or unknown, fixed, contingent or otherwise of UP, UP River or the Subsidiaries
of UP and ACBLH, UABL SA, arising prior to October 24, 2000 in connection with
any vessel, or any vessel chartered to UABL Limited, in connection with or
arising out of or resulting events occurring prior to that date, without
limitation, any liability arising in connection with any environmental
liabilities, legal violations, litigation, employee claims, loan agreements or
other indebtedness, any tax, or any other liabilities, obligations, or exception
to any representation or warranty. UABL Limited shall not assume, and UP and
ACBLH shall severally indemnify UABL Limited against such liabilities.

     In addition, pursuant to the mentioned Consolidation Agreement, all claims,
severance benefits, costs, and other expenses, social security taxes, charges
and contributions and other costs incurred by UABL SA or UP River, or subsidiary
of UP River, in connection with an employee employed by the Company and
subsequently terminated by the Company shall be paid by the Company to, or on
behalf of ACBLH or UP, as the case may be; provided, that the maximum amount
that the Company shall be required to pay to or on behalf of parent companies in
respect of any of the mentioned costs in the aggregate, shall be 1,800. ACBLH
and UP agreed to fully indemnify the Company against such liabilities over the
mentioned amount.

     During 2000 the Argentine tax authority served a notice to UABL SA with the
purpose of verifying the latter's compliance with transfer pricing regulations
for transactions with related companies for the period prior to the organization
of UABL Limited, i.e. during 1996, 1997, 1998 and 1999, among other things.

     In light of the above, the Company amended its income tax returns for the
above-mentioned years charging a loss of 3,292 to UABL SA's income statement
(consisting of a tax loss of 2,270, interest expense for 1,487 and a gain on the
sale of government bonds of 465). In compliance with the contract provision
described above, ACBLH compensated UABL Limited in the amount of 3,119 causing a
net decrease of 173, in the shareholders equity.

     According to US GAAP, this compensation was accounted for as additional
paid-in capital and was not offset against the loss generated by the tax
liability.

  b) TEMPORARY IMPORT OF GOODS

     As of December 31, 2002, the Company had fixed assets imported temporarily
into Argentina for 4,773.

     In accordance with the prevailing tax legislation in Argentina, the
deadline and time limit for paying the applicable import duties definitively
expires three years after goods, including marine equipment, are brought into
the country. The Company obtained an extension from the Argentinean tax
authorities for the assets imported in 1996, 1997 and 1998, which had expired
during 2002. The Company reexported those assets during January 2003.

                                       107
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

  c) LEASES

     The Company leases a boat and sixteen barges under capital leases until
2006.

     Property and equipment includes the following amounts for leases that have
been capitalized at December 31, 2002:

<Table>
<S>                                                           <C>
Boat........................................................  1,543
Barges......................................................  2,518
                                                              -----
                                                              4,061
Less accumulated depreciation...............................   (168)
                                                              -----
                                                              3,893
                                                              =====
</Table>

     The Company recorded depreciation expense in the amount of 168 on assets
recorded under capital leases for the year ended December 31, 2002.

     Under the charter agreements entered into by the parties, both UP and ACBLH
lease certain vessels which were not contributed to the Company through the
Consolidation Agreement. These operating leases expire in 2008.

     The Company recorded charter hire expenses to related parties of 19,755,
22,399 and 2,944 for 2002, 2001 and 2000, respectively.

     Future minimum payments under capital leases and noncancelable operating
leases with initial terms of one year or more consisted of the following as of
December 31, 2002:

<Table>
<Caption>
                                                                               OPERATING
                                                                               LEASES --
                                                                 CAPITAL        RELATED
                                                                  LEASES        PARTIES
                                                              --------------   ---------
<S>                                                           <C>              <C>
2003........................................................        732          20,068
2004........................................................        732          20,068
2005........................................................        732          20,068
2006........................................................        183          20,068
2007........................................................         --          20,068
2008........................................................         --           4,947
                                                                  -----         -------
Total minimum lease payments................................      2,379         105,287
                                                                                =======
Amount representing interest................................       (241)
                                                                  -----
Present value of net minimum lease payments (including
  current portion of 611)...................................      2,138
                                                                  =====
</Table>

  D) OTHER

     10% of the Company's employees are covered by a collective bargaining
agreement.

  E) CONTINGENCIES

     The Company is subject to legal proceedings, claims and contingencies
arising in the ordinary course of business. When such amounts can be estimated
and are probable, management accrues the corresponding

                                       108
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

liability. While the ultimate outcome of lawsuits or other proceedings against
the Company cannot be predicted with certainty, management does not believe the
costs of such actions will have a material effect on the Company's consolidated
financial position or results of operations.

6.  INCOME TAXES

     As the earnings from shipping operations of UABL International and Thurston
are derived from sources outside of Panama, such earnings are not subject to
Panamanian taxes.

     UABL Paraguay, ACBL del Paraguay, Yataiti and Riverpar are subject to
Paraguayan corporate income taxes. UABL SA and Sernova are subject to Argentine
corporate income taxes.

     In Argentina the tax on minimum presumed income ("TOMPI") supplements
income tax since it applies a minimum tax on the potential income from certain
income generating-assets at a 1% tax rate. The Company's tax obligation in any
given year will be the higher of these two tax amounts. However, if in any given
tax year tax on minimum presumed income exceeds income tax, such excess may be
computed as payment on account of any excess of income tax over TOMPI that may
arise in any of the ten following years.

     The Company accounts for income taxes under the liability method in
accordance with SFAS No. 109 "Accounting for Income Taxes".

     Under this method, deferred tax assets and liabilities are established for
temporary differences between the financial reporting basis and the tax basis of
the Company's assets and liabilities at each year end. Deferred tax assets are
recognized for all temporary items and an offsetting valuation allowance is
recorded to the extent that it is not more likely than not that the asset will
be realized.

     UABL Limited's pre-tax income for 2002, 2001 and 2000 was taxed in foreign
jurisdictions (Argentina and Paraguay).

     The (benefit) provision for income taxes (which includes TOMPI) is
comprised of:

<Table>
<Caption>
                                                               FOR THE YEAR/PERIOD
                                                               ENDED DECEMBER 31,
                                                              ---------------------
                                                              2002    2001    2000
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Current
  Argentina.................................................   211     725     95
  Paraguay..................................................   182      --     --
                                                              ----     ---     --
          Total current.....................................   393     725     95
                                                              ----     ---     --
Deferred
  Argentina.................................................  (464)     --     --
  Paraguay..................................................  (131)     --     --
                                                              ----     ---     --
          Total deferred....................................  (595)     --     --
                                                              ----     ---     --
          Total.............................................  (202)    725     95
                                                              ====     ===     ==
</Table>

                                       109
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

     Reconciliation of the tax (benefit) provision to taxes calculated based on
the statutory tax rates is as follows:

<Table>
<Caption>
                                                              FOR THE YEAR ENDED/PERIOD
                                                                    DECEMBER 31,
                                                             ---------------------------
                                                              2002      2001      2000
                                                             -------   -------   -------
<S>                                                          <C>       <C>       <C>
Pre-tax (loss).............................................  (2,665)   (3,384)   (3,504)
Sources not subject to income tax..........................   4,576     3,598    (5,303)
Items derived from permanent differences...................     200    (1,857)        7
                                                             ------    ------    ------
                                                              2,111    (1,643)   (8,800)
Statutory tax rate.........................................      35%       35%       35%
                                                             ------    ------    ------
Tax provision (benefit)....................................     739      (575)   (3,080)
Increase (decrease) in valuation allowances................  (2,966)      575     3,080
Effects of foreign exchange changes........................   1,825        --        --
Tax on minimum presumed income.............................     200       725        95
                                                             ------    ------    ------
Income tax (benefit) provision.............................    (202)      725        95
                                                             ======    ======    ======
</Table>

     As of December 31, 2002 UABL SA had accumulated net operating loss
carryforwards ("NOLs") totaling 3,543 that expire in 2005. The use of the NOLs
will depend upon future taxable income in UABL SA in Argentina. For financial
reporting purposes, the corresponding deferred tax asset of 1,240 has a
valuation allowance of 776 to offset the deferred tax asset related to this NOL.

     As of December 31, 2002, UABL SA had a credit related to TOMPI of 464 which
expires 143 in 2010, 135 in 2011 and 186 in 2012. This tax credit is fully
reserved.

     In addition, ACBL del Paraguay had NOLs of 1,077, that expire in 2005.
These NOL's are fully reserved. UABL Paraguay has NOL's of 507. The use of these
NOLs will depend upon future taxable income in UABL Paraguay. For financial
reporting purposes, the corresponding deferred tax asset of 152 has a valuation
allowance of 52 to offset the deferred tax asset related to this NOL.

                                       110
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

<Table>
<Caption>
                                                               2002     2001
                                                              ------   ------
<S>                                                           <C>      <C>
Deferred tax assets
  NOLs......................................................   1,663    3,310
  Due to affiliate..........................................     116    1,681
  TOMPI credit..............................................     162       97
  Other, net................................................      95       77
                                                              ------   ------
          Total deferred assets.............................   2,036    5,165
                                                              ------   ------
Deferred tax liabilities
  Property and equipment....................................     257      264
  Other receivables.........................................      --      593
  Account receivable, net...................................      --      230
  Other, net................................................      --       17
                                                              ------   ------
          Total deferred liabilities........................     257    1,104
                                                              ------   ------
          Valuation allowance...............................  (1,095)  (4,061)
                                                              ------   ------
          Net deferred tax assets...........................     595       --
                                                              ======   ======
</Table>

7.  RELATED-PARTY TRANSACTIONS

     As of December 31, 2002 and 2001 the balances from related parties were as
follows:

<Table>
<Caption>
                                                              2002    2001
                                                              ----   ------
<S>                                                           <C>    <C>
ACCOUNTS RECEIVABLE FROM RELATED PARTIES
CURRENT:
  Ultrapetrol SA............................................   10       134
  Ultrapetrol (Bahamas) Ltd.................................   --     1,087
  Parfina SA................................................   61        14
  Oceanmarine...............................................  194       331
  ACBLH(1)..................................................   10     9,207
  Oceanpar..................................................   18         2
  Princely International Finance Corp. and its wholly-owned
     subsidiaries...........................................   --     6,449
  UABL Terminals Ltd........................................   60        --
                                                              ---    ------
                                                              353    17,224
LOANS DUE FROM RELATED PARTIES -- OTS S.A...................   --        71
                                                              ---    ------
                                                              353    17,295
                                                              ===    ======
</Table>

---------------

(1) This entity is a subsidiary of ACL who is a 50% shareholder of the Company.
    See note 13 related to significant events at ACL.

                                       111
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

<Table>
<Caption>
                                                               2002     2001
                                                              ------   ------
<S>                                                           <C>      <C>
NONCURRENT:
LOANS DUE FROM RELATED PARTIES(1)
  OTS SA....................................................     173       --
  Puertos del Sur SA........................................   2,056       --
                                                              ------   ------
                                                               2,229       --
                                                              ======   ======
ACCOUNTS PAYABLE TO RELATED PARTIES
  Mansan SA.................................................     201    1,518
  Ultrapetrol SA............................................     678       57
  Majestic Maritime Ltd.....................................     185       --
  Princely International Finance Corp. and its wholly-owned
     subsidiaries...........................................   3,497    9,729
  ACBLH(2)..................................................   5,372   13,150
  Oceanpar SA...............................................   1,777       --
  Oceanmarine...............................................      63       --
  Parfina...................................................     555      569
  Louisiana Dock Company LLC................................     552      355
                                                              ------   ------
                                                              12,880   25,378
                                                              ------   ------
LOANS DUE TO RELATED PARTIES(1)
  ACBLH(2)..................................................   1,375    1,350
  Ultrapetrol (Bahamas) Ltd. ...............................   1,101    1,721
  Ultrapetrol SA............................................     140       --
                                                              ------   ------
                                                               2,616    3,071
                                                              ------   ------
                                                              15,496   28,449
                                                              ======   ======
</Table>

---------------

(1) These loans accrue no interest and have no maturity date.

    For the years ended December 31, 2002 and 2001 and for the period October,
    24 through December 31, 2000, the transactions with related parties were as
    follows:

<Table>
<Caption>
                                                  2002         2001        2000
                                               (365 DAYS)   (365 DAYS)   (69 DAYS)
                                               ----------   ----------   ---------
<S>                                            <C>          <C>          <C>
REVENUES FROM RELATED PARTIES
  Parfina SA.................................     424         1,777         266
  Oceanpar SA................................     411         1,470         199
  Ultrapetrol SA.............................      --           449          30
  ACBLH(2)...................................      --            --         145
  Oceanmarine................................      60           331          --
                                                  ---         -----         ---
          Total..............................     895         4,027         640
                                                  ---         -----         ---
</Table>

(2) This entity is a subsidiary of ACL who is a 50% shareholder of the Company.
    See note 13 related to significant events at ACL.

                                       112
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

<Table>
<Caption>
                                                          2002         2001        2000
                                                       (365 DAYS)   (365 DAYS)   (69 DAYS)
                                                       ----------   ----------   ---------
<S>                                                    <C>          <C>          <C>
MANAGEMENT FEE REVENUE
  ACBLH(1)...........................................     7,185        7,709       1,457
  Ultrapetrol (Bahamas) Ltd..........................       912          913         173
  Princely International Finance Corp. and its
     wholly-owned subsidiaries.......................     5,687        6,433          --
  Ultrapetrol SA.....................................        --           --         317
                                                         ------       ------       -----
          Total......................................    13,784       15,055       1,947
                                                         ------       ------       -----
          Total revenues from related parties........    14,679       19,082       2,587
                                                         ======       ======       =====
OPERATING EXPENSES
  ACBLH(1)...........................................    10,097       11,539       2,089
  Oceanpar SA........................................     1,537          107         329
  Mansan SA..........................................     1,205        1,432         224
  Majestic Maritime Ltd..............................       348           --          --
  Ultrapetrol SA.....................................       621          154         134
  Parfina SA.........................................       543          800         168
  Lousiana Dock Company LLC..........................        --          355          --
  Oceanmarine SA.....................................        13          318          --
  Princely International France Corp. and its
     wholly-owned subsidiaries.......................     6,597       10,920          --
                                                         ------       ------       -----
          Total......................................    20,961(2)    25,625(2)    2,944
                                                         ======       ======       =====
CASH RECEIVED FROM (PAID TO) RELATED PARTIES RELATED
TO LOANS DUE TO RELATED PARTIES, NET
  Ultrapetrol SA.....................................       140           --          --
  Ultrapetrol (Bahamas) Ltd..........................     (620)        1,721          --
  ACBLH(1)...........................................        25        1,950          --
                                                         ------       ------       -----
          Total......................................     (455)        3,671          --
                                                         ======       ======       =====
CASH PAID TO RELATED PARTIES RELATED TO LOANS DUE
FROM RELATED PARTIES
  OTS SA.............................................       102           71          --
  Puertos del Sur SA.................................     2,056           --          --
                                                         ------       ------       -----
          Total......................................     2,158           71          --
                                                         ======       ======       =====
PROPERTY, SPARE PARTS AND EQUIPMENT ACQUISITIONS FROM
RELATED PARTIES
  Oceanmarine SA.....................................        50           --          --
  Louisiana Dock Company(1)..........................       721          790          --
                                                         ------       ------       -----
          Total......................................       771          790          --
                                                         ======       ======       =====
</Table>

---------------
(1) These entities are subsidiaries of ACL who is a 50% shareholder of the
    Company. See note 13 related to significant events at ACL.

(2) Includes 19,755 and 22,399 as of December 31, 2002 and 2001, respectively,
    related to the hire of certain vessels according to the Charter Party
    Agreement dated as of October 24, 2000 and 1,206 and 3,226 related to
    expense recovery and administrative service fees.

                                       113
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

MANAGEMENT FEE REVENUE

     Management fee relates to compensation for crew, maintenance and operation
of certain vessels related to Ship Management Agreements dated as of October 24,
2000, between Lonehort S.A., ACBLH and Ultrapetrol Bahamas Ltd.

     These agreements have a period of three years and can be extended at the
option of ACBLH and Ultrapetrol Bahamas Ltd. for an additional three years and
afterwards, an additional two years. The Management fees are stipulated in the
related contracts for each specific vessel.

CHARTER PARTY AGREEMENTS

     The Company and its subsidiaries entered into Charter Party Agreements with
ACBLH and Ultrapetrol Bahamas Ltd. and its subsidiaries. These agreements have a
period of three years, which are renewable at the owners' option for all or part
of the vessels included in the agreements for a further three years after which
the owner has a further option to renew for two more years.

     Under these agreements the Company and its subsidiaries pay a daily rate
which is specific to stated vessels.

EXPENSES RECOVERY AND ADMINISTRATIVE SERVICE FEES

     The Company's shareholders charged the Company certain expenses in 2002 and
2001 related to cost-sharing functions for legal, insurance and administrative
areas. There is no formal written agreement related to these charges.

8.  BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION

     The Company's operations include only one business segment river
transportation services in South America. For such reason, as of December 31,
2002, 2001 and 2000, no additional business or geographic segment information is
disclosed.

9.  PURCHASE OF BARGES AND PLEDGED ASSETS

     In November 2001, ACBL del Paraguay acquired from Transamerica Ltd.
twenty-four dry-cargo barges under a Paraguayan flag with a gross tonnage of
1,500 tons each. The barges were built in 1998 and 1999. Together with the
barges the Company also acquired a tugboat. The tugboat has a Paraguayan flag
and was built in 1999.

     The transaction was closed in the total amount of 11,100 payable as
follows: a down payment of 3,100 and a 8,000 Transamerica Ltd loan repayable in
60 monthly installments of 161, which include interest at a 7.94% annual rate.
As of December 31, 2002 this debt totaled 6,364 (including the current portion
of 1,479) and is due in the following years succeeding December 31, 2002: 1,479
in 2003, 1,601 in 2004, 1,732 in 2005 and 1,552 in 2006.

     The transaction was secured with a mortgage in favor of Transamerica Ltd.
covering the full value of the assets acquired. As of December 31, 2002 the net
book value of these assets was 10,734.

     ACBL del Paraguay and UABL Limited committed, among other things, to
preserve its corporate existence, to respect all the laws and applicable
regulations, to maintain and preserve all its properties, not to enter into any
merger transaction, consolidation of liquidation, not to change the terms and
conditions of vessels management, not to dispose of a significant part of its
assets or business, not to assume any debt,

                                       114
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

excluding those related with the ordinary course of business, to be responsible
for the management and operation of vessels and to limit the distribution of
dividends in the event of default.

     In December 2001, UABL Paraguay acquired from Citibank N.A. Paraguay seven
dry-cargo barges with Paraguayan flag with a gross tonnage of 1,500 tons each.
The barges were built in 1997 and 1998.

     The transaction was closed in the total amount of 2,100 payable in 17
semiannual installments. The first installment was paid in December 2002.
Interest accrues at LIBOR (London interbank offered rate) plus 275 bp. As of
December 31, 2002 the debt totaled 1,976 (including the current portion of 247)
and the maturities for the years subsequent to December 31, 2002 are 247 in each
year for the years 2003 through 2007 and 741 thereafter.

     This transaction was secured with a mortgage in favor of Citibank N.A.
Paraguay on the assets acquired and on other barges owned by UABL Paraguay as a
credit enhancement. As of December 31, 2002 the net book value of these assets
is 2,269.

     As of December 31, 2002 UABL Limited had additional long-term and
short-term debt totaling 64 and 385, respectively.

10.  MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

  a) MAJOR CUSTOMERS

     For the year ended December 31, 2002 revenues from four Company customers
represented 9,807, 7,494, 6,599, and 4,101 of UABL's consolidated revenues.

     For the year ended December 31, 2001 revenues from three Company customers
represented approximately 6,433, 7,709 and 10,304 of UABL's consolidated
revenues.

  b) CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, investment, accounts
receivable and other receivables.

     The financial institutions are located in Argentina, Paraguay and the
United States and the Company's cash management policy is designed to limit
exposure to any one institution. As of December 31, 2002 the Company's
investment in certificates of deposit was 186.

     Concentrations of credit risk with respect to accounts receivable are
limited due to the large number of entities comprising the Company's customer
base and their credit rating.

     As of December 31, 2002 the Company's receivables from OTS SA and Puerto
del Sur SA amounted to 2,229. The Company does not require collateral for these
receivables.

11.  CLAIMS AGAINST INSURANCE COMPANIES

     As of December 31, 2002 and 2001, the "Other receivables" account includes
814 and 1,515 in claims against insurance companies. Claims for 2,172 have been
made by UABL Limited against the insurance companies regarding the repair
expenses incurred to date for damage to some boats in 2002 and 2001. The "Other
revenues" account for the year ended December 31, 2002, includes 500 in
compensation received from insurers in connection with an accident including the
Pueblo Esther tugboat during the year. As December 31, 2002 this amount was
fully collected.

                                       115
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

     In addition, the "Other revenues" account for the year ended December 31,
2001 includes 687 related to claims for loss of income (business interruption)
corresponding to the Alianza Rosario and San Pedro tugboats.

12.  NEW AGREEMENTS SIGNED BY THE COMPANY AND ITS SUBSIDIARIES

     On December 17, 2002, UABL Barges signed a loan agreement with the
International Financial Corporation (IFC) amounting to 20,000.

     This loan is divided into two tranches:

     - Tranche A, amounting to 15,000, is payable in 14 semiannual installments
       of 1,071 each, beginning on June 15, 2005 and ending on December 15,
       2011. This loan shall accrue interest at LIBOR plus 3.75% per year.

     - Tranche B, amounting to 5,000, is payable in 10 semiannual installments
       of 500 each, beginning on June 15, 2005 and ending on December 15, 2009.
       This loan shall accrue interest at LIBOR plus 3.50% per year.

     As of December 31, 2002 the Company had not received any funds related to
this loan.

In addition, on February 27, 2003, UABL Barges signed a loan agreement with
Kreditanstalt fur Wiederaufbau (KFW) amounting to 10,000.

     This loan shall be payable in 10 semiannual installments of 1,000 each,
beginning on June 15, 2005 and ending on December 15, 2009. This loan shall
accrue interest at LIBOR plus 3.50% per year.

     The funds must be disbursed before May 31, 2005, while the first
disbursements shall be made before March 31, 2003.

     These loans are guaranteed by UABL Limited and its subsidiaries and secured
by a mortgage taken on existing on to be acquired barges and tugboats belonging
to UABL Limited and its subsidiaries.

     The funds deriving from such loans shall be used as follows: (i) 15,000 to
acquire barges and tugboats by UABL Barges, the Company or any subsidiary
thereof, (ii) 3,000 to grant a loan to the Company or any subsidiary thereof to
acquire or build inland transportation terminals and (iii) 12,000 to grant a
loan to the Company to refinance barges, tugboats and other related assets
acquired by the Company or any subsidiary thereof during 2001 and 2002.

     UABL Barges has agreed to keep a debt coverage ratio not lower than 1, and
not to take other loans, change its business nature, pay dividends and sell,
transfer or somehow dispose of a significant portion of its assets, among
others.

     In addition, UABL Limited has agreed to keep a debt coverage ratio not
lower than 1.25 until June 15, 2005, not lower than 1.50 from such date onwards
and a consolidated debt ratio lower than 1. It further agreed to keep the market
value of mortgaged assets at 130% of the remaining loan debt, and not to pay
dividends under certain circumstances, change its business nature, take other
loans and sell, transfer or somehow dispose of a significant portion of its
assets, among others.

13.  SUBSEQUENT EVENTS -- SIGNIFICANT EVENTS AT ACL

     On January 31, 2003 ACL announced that it had filed a petition with the
U.S. Bankruptcy Court for the Southern District of Indiana, New Albany Division,
to reorganize under Chapter 11 of the U.S. Bankruptcy Code. ACL said that it
filed to reorganize its capital and debt structure in an orderly fashion while
continuing normal business operations. Included in the filing are ACL, ACL's
parent American Commercial Lines
                                       116
<PAGE>
                                  UABL LIMITED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                     (STATED IN THOUSANDS OF U.S. DOLLARS)

Holdings LLC, American Commercial Barge Line LLC, Jeffboat LLC, Lousiana Dock
Company LLC and ten other U.S. subsidiaries of ACL.

     The Company does not believe that this event will affect the financial
needs of the Company or its ability to continue operations. As noted in Note 7,
the Company's primary transaction with ACL and its subsidiaries include the hire
of certain vessels according to the Charter Party Agreement dated as of October
24, 2000 and the management fee received by Lonehort S.A. related to the
management compensation for crew, maintenance and operations of such vessels. In
addition, in December 2002 the Company obtained financing from outside sources
to finance the acquisition of new barges and tugboats for 15,000 and the
refinancing of 12,000 related to short-term debt due to affiliates at December
31,2002.

                                       117
<PAGE>

                         AMERICAN COMMERCIAL LINES LLC

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                        BALANCE AT    CHARGES
                                       BEGINNING OF     TO                               BALANCE AT END
                                          PERIOD      EXPENSE    OTHER       WRITEOFFS     OF PERIOD
                                       ------------   -------   -------      ---------   --------------
<S>                                    <C>            <C>       <C>          <C>         <C>
2002:
Allowance for Uncollectible
  accounts...........................     $1,655      $  975         --       $  (767)       $1,863
Valuation allowance for Foreign net
  operating Loss carryforwards.......         --          --         --            --            --

2001:
Allowance for Uncollectible
  accounts...........................     $1,157      $1,176         --       $  (678)       $1,655
Valuation allowance for Foreign net
  operating Loss carryforwards.......         --          --         --            --            --

2000:
Allowance for Uncollectible
  accounts...........................     $2,290      $  194         --       $(1,327)       $1,157
Valuation allowance for Foreign net
  operating Loss carryforwards.......     $6,605          --    $(6,605)(1)        --            --
</Table>

---------------

(1) Contribution of assets to UABL.

                                       118