<PAGE>

===============================================================================



                     SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C 20549

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

                                  FORM 10-K

[X]   Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
      Act of 1934 (FEE REQUIRED)

                          For the Fiscal Year Ended
                              December 31, 1997

                                      OR

[_]   Transition Report Pursuant to Section 13 or 15(d) of The Securities
      Exchange Act of 1934 (NO FEE REQUIRED)

         For the transition period from ______________ to ______________

                         Commission File No. 33-82624

                         Moran Transportation Company
            (Exact name of registrant as specified in its charter)

Delaware                                                    06-1399280
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

Two Greenwich Plaza, Greenwich, CT                           06830
(Address of principal executive offices)                     (Zip Code)

       Registrant's telephone number, including area code: (203) 625-7800

        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 [ ]

      Indicated 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]

      As of March 27, 1998, all of the registrant's 44,600 issued and
outstanding shares of Common Stock, par value $.01 per share, were held by
directors, officers and affiliates of the registrant.

===============================================================================

<PAGE>



                          MORAN TRANSPORTATION COMPANY
                          Index to Report on Form 10-K
                      For the Year Ended December 31, 1997



Item                                                                        Page

PART I......................................................................  1
         1.    Business.....................................................  1
         2.    Properties...................................................  7
         3.    Legal Proceedings............................................ 10
         4.    Submission of Matters to a Vote of Security Holders.......... 11

PART II..................................................................... 11
         5.    Market For Registrant's Common Equity and Related
               Stockholder Matters.......................................... 11
         6.    Selected Consolidated Financial Data......................... 12
         7.    Management's Discussion and Analysis of Financial
               Condition and Results of Operations.......................... 13
         8.    Financial Statements ........................................ 19
         9.    Changes In and Disagreements With Accountants on
               Accounting and Financial Disclosure.......................... 19

PART III.................................................................... 20
         10.   Executive Officers and Directors of the Registrant........... 20
         11.   Executive Compensation....................................... 22
         12.   Security Ownership of Certain Beneficial Owners
               and Management............................................... 26
         13.   Certain Relationships and Related Transactions............... 27

PART IV..................................................................... 28
         14.   Exhibits, Financial Statement Schedules and Reports
               on Form 8-K.................................................. 28
<PAGE>
                                     PART I

PART I

Item 1. Business

General

Moran Transportation Company was incorporated on June 2, 1994. Moran
Transportation Company was formed by Lakes Shipping Company, Inc. ("Lakes
Shipping") and its principals, Paul R. Tregurtha and James R. Barker (who
serve as Chairman and Vice Chairman, respectively), together with members of
Mr. Barker's immediate family, certain officers of Lakes Shipping
(collectively, the "Lakes Group"), and certain members of senior management
of Moran Towing Corporation (the "Predecessor"). Moran Transportation Company
acquired the Predecessor on July 11, 1994 (the "Acquisition"). Except as
otherwise indicated, or where the context otherwise requires, the "Company"
shall refer to Moran Transportation Company, the Predecessor and/or each of
its subsidiaries.

The Company is a leading provider of tug and marine transportation services
on the East and Gulf Coasts and in the U.S. coastwise trade (the "Jones Act"
trade). Operating a fleet of 53 tugs and 15 barges, the Company serves a
diverse customer base out of the ports of Portsmouth, New Hampshire; New
York, New York; Philadelphia, Pennsylvania; Baltimore, Maryland; Norfolk,
Virginia; Jacksonville, Florida; Miami, Florida; and Beaumont/Port Arthur,
Texas. The Company has relationships that span 30 or more years with many of
its major customers in the tug services and marine transportation businesses.

     Tug Services. The Company is a widely recognized leader in the tug services
     industry and believes it has the greatest number of tugboats performing
     ship docking and barge towing services along the East and Gulf Coasts of
     the United States. The Company provides ship docking and undocking services
     as well as harbor and coastwise towing for major domestic and international
     bulk and container cargo shipping companies, cruise lines, car carriers,
     barge transportation companies, oil companies, several municipalities, the
     U.S. Navy, and the Company's own barge fleet. The Company believes that it
     has a leading position in the ship docking business in each of its ports of
     operations, other than in Miami, Florida, where the Company began
     operations in February, 1993.

     Marine Transportation. The Company's barge fleet transports fuel oil and
     refined petroleum products, coal, grain and other bulk cargoes in the Jones
     Act and foreign trades. The Company's barges operate under term contracts
     with utilities and on both a contract and spot market basis with oil
     companies, refineries, commodity trading companies and other commercial
     shippers.

Sales and Marketing

     Tug Services. The general manager of each operating port has ongoing
     marketing responsibilities for his port. The general managers are assisted
     by sales personnel based in Greenwich, Connecticut and Baltimore, Maryland.
     The Company also has long-standing relationships with a network of
     independent foreign agents in many of the major shipping centers of the
     world.

     Marine Transportation. The Company has maintained long-term relationships
     with key participants in the utility, energy and agricultural sectors, and
     uses those contacts to develop business. New business opportunities for the
     marine transportation business are also generated by the general managers
     of the Company's operating subsidiaries or divisions. The Company has the
     ability to quickly assemble a multi-disciplinary team to analyze new
     business opportunities and prepare and submit proposals tailored to meet
     customers' needs.


                                       1

<PAGE>



Competition

     Tug Services. The tug services industry is highly competitive. The Company
     competes with numerous competitors in the ports which its serves. The
     Company competes with McAllister Brothers, Inc. in five of its ports and
     with Turecamo Maritime, Inc. in New York and Philadelphia. In addition, the
     Company also competes with other providers of tug services in most of the
     ports it serves. Because entry into most ports is unrestricted, additional
     competitors may enter the Company's current markets in the future.

     Management believes that participants in the tug services market compete on
     the basis of price, service (including vessel availability), relationships,
     reputation, quality of operations, the ability to meet stringent safety
     requirements and operational flexibility.

     Marine Transportation. The marine transportation industry is highly
     competitive. The industry has become increasingly concentrated in recent
     years as smaller and/or economically weaker companies have gone out of
     business or have been acquired by larger competitors. The Company has a
     number of competitors in each of its marine transportation markets which
     operate U.S. flag barges, tankers and bulkers. Certain of these competitors
     have substantially greater resources than the Company. However, the number
     of vessels eligible to engage in Jones Act trade has declined over the past
     several years.

     Management believes that participants in the tank and dry bulk barge
     business compete on the basis of price, service (including vessel
     availability), relationships, reputation, quality of operations, the
     ability to pass stringent safety audits and operational flexibility.
     Further, in light of the potential liability of oil companies and other
     shippers of petroleum products under the Oil Pollution Act of 1990 ("OPA
     90") and analogous state laws, management believes that some shippers
     select transporters in larger measure than in the past, on the basis of a
     demonstrated record of safe operations. Therefore, the Company has
     implemented a number of measures in order to maintain high quality
     operations and has continued to stress its long-standing commitment to safe
     transportation of petroleum products in its marketing efforts.

Customers and Contracts

     Tug Services. The Company offers tug services to vessel owners, operators
     and their agents. The Company prides itself on its long-standing customer
     relationships, which in some cases date back to before World War II. The
     majority of the Company's ship docking business is performed under
     one-year, renewable contracts, with the remainder being on a spot basis.
     The Company also has long and established relationships with many of its
     harbor and coastwise towing customers. The Company's harbor and coastwise
     towing business is performed both on a contract and on a spot market basis.

     No single tug services customer accounted for more than 7% of the Company's
     total consolidated revenues in 1997. Although many of the Company's tug
     services customers have been customers of the Company for periods in excess
     of 30 years and although most of the Company's tug services customers have
     had at least a five-year relationship with the Company, there can be no
     assurance that any individual contract or relationship will be renewed or
     continued.

     Marine Transportation. The Company's marine transportation business
     operates both on a term contract basis and on a spot market basis. The
     Company strives to maintain an appropriate mix of contract and spot
     business, based on current market conditions. No single marine
     transportation customer accounted for more than 8% of the Company's total
     revenues in 1997.


                                       2

<PAGE>

Insurance

The Company's operations are subject to the hazards associated with operating
vessels and carrying large volumes of cargo in a marine environment. These
hazards include the risk of loss of, or damage to, the Company's vessels,
damage to property of third parties (including customers), loss or
contamination of cargo, personal injury to employees or third parties, and
pollution and other environmental damages. The Company maintains insurance
coverage against these hazards. Risk of loss of, or damage to, the Company's
vessels is insured to amounts which the Company believes represents the fair
market values of such vessels, subject to certain deductibles. Vessel
operating liabilities, resulting from such things as collision, cargo and
environmental damage and personal injury, are insured at levels believed to
be adequate primarily through the Company's participation in a protection and
indemnity mutual insurance association. However, because of the mutual nature
of such insurance, the Company is exposed to funding requirements and
coverage shortfalls in the event claims by the Company or other members
exceed available funds and reinsurance. See "Regulatory Matters-Environmental
Matters - Oil Pollution Legislation."

The Company has entered into a Marine Insurance Additional Retention
Agreement (the "Insurance Agreement") with The Interlake Steamship Company,
Lakes Shipping and Mormac Marine Transport Inc. (collectively, the "Mormac
Group"). Messrs. Tregurtha, Barker and Langlois are officers, directors
and/or direct or indirect shareholders of some or all of the entities in the
Mormac Group. The Company and the Mormac Group entered into the Insurance
Agreement in an effort to reduce insurance expense by obtaining lower
premiums through group purchases of insurance and through higher deductibles.
The Insurance Agreement also provides for allocation among the parties of any
risk arising out of the increases in insurance deductibles. Pursuant to the
Insurance Agreement, the Company and Mormac Group agreed to share any
increased insurance claims expense required to be borne by a party as a
result of insurance claims which exceed historical deductibles but are less
than the new, increased deductibles. Allocations of any increased insurance
claims expense is based upon the historical claims experience (in excess of
historical deductibles) for each party to the agreement. In the current
policy year, 65% of any additional insurance claims expense attributable to
the higher deductibles will be borne by the Company and 35% of any such
additional insurance claims expense will be borne by the Mormac Group.
Amounts payable to the Company from members of the Mormac Group totaled
$222,000 at December 31, 1997. The Company believes that the terms of the
Insurance Agreement, which was prepared in consultation with an independent
insurance broker, are similar to those that would be obtained in an
arms'-length transaction.

Regulatory Matters

General. The Company's rates for transportation of bulk cargoes, which are
not published and are negotiated with its customers, are not subject to
government regulation. The operation of tugboats and barges is subject to
regulation under various federal laws and international conventions, as
interpreted and implemented by the United States Coast Guard, as well as
under certain state and local laws. Tugboats and barges are required to meet
operational and safety standards currently established by the United States
Coast Guard. In addition, most of the Company's tugboats and all of its
barges meet construction and repair standards established by the American
Bureau of Shipping, a private vessel inspection organization. The Company's
seagoing supervisory personnel are licensed by the United States Coast Guard.
Seamen and tankermen are certificated by the United States Coast Guard. See
also "Regulatory Matters-Occupational Health Regulations".

                                       3

<PAGE>



     Jones Act and Related Regulations. The Jones Act restricts marine
     transportation between United States ports to vessels built and registered
     in the United States and owned by United States citizens. The Jones Act
     also requires that all United States flag vessels be manned by United
     States citizens, which significantly increases the labor and certain other
     operating costs of United States flag vessel operations compared to
     foreign-flag vessel operations. In addition, the United States Coast Guard
     and American Bureau of Shipping maintain the most stringent regime of
     vessel inspection in the world, which tends to result in higher regulatory
     compliance costs for United States flag operators than for owners of
     vessels registered under foreign flags. Because the Company transports
     cargo between United States ports and engages in harbor work within United
     States ports, most of its business depends upon the Jones Act remaining in
     effect. Compliance with the requirements of the Jones Act is therefore very
     important to the operations of the Company and the loss of Jones Act status
     could have a significant adverse effect on the Company. In this regard,
     stockholder agreements prohibit the transfer of shares of the Company's
     capital stock to non-U.S. citizens. See "Certain Relationships and Related
     Transactions." The Company also monitors the citizenship of its employees
     and will take any remedial action necessary to insure compliance with Jones
     Act requirements. There have been various on-going unsuccessful attempts in
     the past by foreign governments and companies to gain access to the Jones
     Act trade. These efforts have been consistently defeated by large margins
     in the United States Congress. Management believes that continued efforts
     will be made to gain access to such trade and if such efforts are
     successful, there could be an adverse effect on the Company.

     Environmental Matters. The Company is subject to various legislation and
     regulations enacted to protect the environment. Under applicable law, an
     owner or operator of real property may be liable for the costs of removal
     or remediation of certain hazardous or toxic substances on or under such
     property, regardless whether the owner or operator knew of, or was
     responsible for, the presence of such materials. Moreover, persons who
     arrange for the disposal or treatment of wastes containing such substances
     at an off-site facility may also be liable for the costs of removal or
     remediation of such substances at the off-site facility, regardless whether
     the facility is owned or operated by such person. In this regard, the
     Company and its predecessors have conducted vessel repair and maintenance
     activities at certain owned or leased sites, and have disposed of wastes
     that may contain such substances at off-site waste management facilities.
     As discussed below under "Legal Proceedings", Jakobson Shipyard, Inc. a
     subsidiary of the Company ("Jakobson") has been named as a potentially
     responsible party for the cleanup of an off-site waste management facility
     in Syosset, New York. It is possible that the Company will in the future be
     subject to additional claims for, and incur costs in connection with,
     remediation of other real property. However, the extent of any such
     liability and the timing of any payments to be made by the Company, if any,
     are not determinable.

     The Company may also incur future costs and expenses in order to ensure
     compliance with existing or new requirements under applicable environmental
     laws. In many instances, the ultimate costs under such environmental laws
     and the time period during which such costs are likely to be incurred are
     not determinable: See "Management's Discussion and Analysis of Financial
     Condition and Results of Operations - Other Matters."

     Oil Pollution Legislation. As a transporter of petroleum products, the
     Company is subject to oil pollution legislation. OPA 90 substantially
     affects the liability exposure of owners and operators of vessels, oil
     terminals and pipelines. Under OPA 90, each responsible party for a vessel
     or facility from which oil is discharged will be jointly and severally
     liable for all oil spill containment and clean-up costs and certain other
     damages arising from the discharge. These other damages are defined broadly
     to include (i) natural resource damage (recoverable only by government
     entities), (ii) real and personal property damage, (iii) net loss of taxes,
     royalties, rents, fees and other lost revenues (recoverable only by
     government entities), (iv) lost profits or impairment of earning capacity
     due to property or natural resource damage, and (v) net cost of public
     services necessitated by a spill response, such as protection from fire,
     safety or health hazards.

     The owner or operator of a vessel from which oil is discharged will be
     liable under OPA 90 unless it can be demonstrated that the spill was caused
     solely by an act of God, an act of war, or the act or omission of a third
     party unrelated by contract to the responsible party. Even if the spill is
     caused solely by a third party, the owner or operator must pay all removal
     costs and damage claims and then seek reimbursement from the third party or
     the trust fund established under OPA 90.

     OPA 90 establishes a federal limit of liability of the greater of $1,200
     per gross ton or $10 million per tank vessel. A vessel owner's liability is
     not limited, however, if the spill results from a violation of federal
     safety, construction or operating regulations.

                                       4

<PAGE>



     OPA 90 requires all vessels to maintain a certificate of financial
     responsibility ("COFR") for oil pollution in an amount equal to the greater
     of $1,200 per gross ton per vessel, or $10 million per vessel, in
     compliance with regulations promulgated by the U.S. Coast Guard. Additional
     financial responsibility in the amount of $300 per gross ton is required
     under regulations promulgated by the U.S. Coast Guard under the
     Comprehensive Environmental Response Compensation and Liability Act
     ("CERCLA"), the federal Superfund law. Owners of more than one tank vessel,
     such as the Company, are only required to demonstrate financial
     responsibility in an amount sufficient to cover the vessel having the
     greatest maximum liability (approximately $17 million in the Company's
     case). The Company currently maintains COFRs in compliance with applicable
     Coast Guard rules.

     OPA 90 requires all newly constructed petroleum tank vessels engaged in
     marine transportation of oil and petroleum products in the U.S. to be
     double-hulled and all existing single-hulled vessels to be retrofitted with
     double hulls or phased out of the industry between January 1, 1995 and
     2015. Because of the age and size of the Company's individual barges, the
     first three of its barges will be required to be retired or retrofitted by
     2005. However, many of the vessels competing with the Company's barges are
     required to be retired or retrofitted between now and 2005.

     Since the double-hull requirements of OPA 90 do not begin to impact
     materially the seven single-hulled barges in the Company's current tank
     barge fleet until 2005, the Company has not yet determined how it will
     finance the conversion or replacement of these single-hulled barges.
     However, the Company expects that, where economically feasible, it will
     take steps to construct new, double-hulled barges when its single-hulled
     barges are phased out. At current construction costs, the Company estimates
     that it would cost approximately (a) $5 million to build a new 40,000
     barrel tank barge similar to the Connecticut and (b) $25 million to build a
     new barge to replace a 250,000 barrel tank barge such as the New York. The
     timing of the construction or conversion of such barges will depend in
     large measure on market conditions, particularly demand for double-hulled
     barges and the rates that petroleum shippers are willing to pay to use such
     barges. The Company expects to finance such construction or conversion from
     both internally generated funds and from outside sources, including the
     equity market, banks and insurance companies and U.S. Government-guaranteed
     ship financing programs, if available. There is no assurance that such
     financing will be available in the amounts and at interest rates that will
     allow the Company to replace its current single-hulled barge fleet. See
     "Properties-Vessels: Barge Fleet."

     OPA 90 directs the Coast Guard to develop interim measures for single
     hull-tank vessels of over 5,000 gross tons "that provide as substantial
     protection to the environment as is economically and technologically
     feasible". The Coast Guard has adopted, and is still adopting a series
     of operational measures that, while increasing current standards, has
     not, and is not expected to have an appreciable effect on the Company.

     OPA 90 further requires all tank vessel operators to submit for federal
     approval detailed vessel oil spill contingency plans setting forth their
     capacity to respond to a worst case spill situation. Several states have
     similar contingency or response plan requirements. Although the Company is
     currently in compliance, there can be no assurance that the Company will be
     able to remain in compliance with all the federal requirements or those of
     one or more states.

     OPA 90 is expected to have a continuing adverse effect on that segment of
     the marine transportation industry that transports petroleum products,
     including the Company. The effects on the industry could include, among
     others, (i) increased requirements for capital expenditures to fund the
     cost of double-hulled vessels, (ii) increased maintenance, training,
     insurance and other operating costs, (iii) civil penalties and liability,
     (iv) decreased operating revenues as a result of a further reduction of
     volume transported by vessels and (v) increased difficulty in obtaining
     sufficient insurance, particularly oil pollution coverage. These effects
     could adversely affect the profitability and liquidity of the Company's
     marine transportation line of business.

     Finally, OPA 90 does not preclude states from adopting their own
     liability laws. Many of the states in which the Company does business
     have enacted laws providing for strict, unlimited liability for vessel
     owners in the event of an oil spill. In addition, numerous states have
     enacted or are considering legislation or regulations involving at least
     some of the following provisions: tank-vessel-free zones, contingency
     planning, inspection of vessels, additional operating, maintenance and
     safety requirements, and financial responsibility requirements.
     Management believes that the liability provisions of OPA 90 and similar
     state laws have greatly expanded the Company's potential liability in
     the event of an oil spill, even where the Company is not at fault.

                                       5

<PAGE>

Other Regulations. The Company is also subject to regulations under the
Federal Water Pollution Control Act of 1972, as amended by the Clean Water
Act of 1977, and the Clean Air Act, as well as similar state statutory and
regulatory programs. To date, compliance with the applicable provisions of
these acts and regulations has not exposed the Company to material expense,
although the Company has found it increasingly expensive to manage the wastes
generated in its operations.

User Fees and Taxes. Federal legislation imposes user fees on vessel
operators such as the Company to help fund the United States Coast Guard's
regulatory activities. Other federal, state and local agencies or authorities
could also seek to impose additional user fees or taxes on vessel operators
or their vessels. Currently, the Coast Guard collects fees for vessel
inspection and documentation, licensing and tank vessel examinations. The
Company does not expect that these fees will be material to it. There can be
no assurance that additional user fees will not be imposed in the future.

Occupational Health Regulations. Certain of the Company's vessel operations
are subject to United States Occupational Safety and Health Administration
regulations. Similarly, the Coast Guard has promulgated regulations that
address the exposure to benzene vapors, which require the Company, as well as
other operators, to perform extensive monitoring, medical testing and record
keeping of seamen engaged in the handling of benzene transported aboard
vessels. It is expected that these regulations may serve as a prototype for
similar health regulations relating to the carriage of other cargoes.
Management believes that the Company is in compliance with the provisions of
the regulations that have been adopted.

Employees

The Company and its subsidiaries employed 586 persons as of December 31,
1997, of which 450 are crew members or other seagoing personnel. As of
December 31, 1997, 318 of such employees are represented by various unions.
Union contracts for certain marine employees of operating division or
subsidiaries of the Company expire between May 31, 1998 (72 employees) and
April 30, 2001 (28 employees). Management believes that its relationship with
employees is satisfactory.

                                       6
<PAGE>

Item 2.  Properties

Vessels: Tug Fleet

The tugboat fleet operated by subsidiaries of the Company is comprised of 53
tugboats with the following specifications and capacities:

                                                             Average
                                                 Number      Age in
      Class                                     in Class      Years
      -----                                     --------      -----

      Over 3,500 horsepower.....................   14          23.9
      3,000 to 3,500 horsepower.................   18          25.1
      Under 3,000 horsepower....................   17          41.2
      Mortrac(R)................................    4          24.5

Tugboats typically have long useful lives, generally exceeding 50 years.
Through its maintenance practices and periodic overhauls, the Company is able
to maximize the operational life of its tug fleet and minimize vessel
downtime. Management believes that the Company's tug fleet has a lower
average age and is better maintained than the fleets of many of the Company's
competitors.

During the past three years, the Company converted four of its single screw
tugs to MORTRAC(R) class tugs. The conversion consists of installing a
forward mounted, fully retractable 360-degree azimuthing thruster, a state of
the art wheelhouse, and new fendering systems. In addition, during the time
that the vessels were undergoing conversion, a thorough maintenance and
repair process was undertaken to ensure that the remaining vessel systems
were in top condition. The resulting MORTRAC(R) tugs are highly maneuverable
and have significantly greater horsepower than prior to conversion. Customer
reaction to the capabilities of the converted vessels has been favorable and
the four tugs now play key roles in the ports where they are located. The
MORTRAC(R) conversion has greatly enhanced the value and expected life of the
tugs in question. MORTRAC(R) is a registered trademark of the Company.

                                       7

<PAGE>



Vessels: Barge Fleet

         The Company operates 15 barges in the U.S. coastwise trade. Thirteen
     of the barges are owned by the Company and two are chartered to the
     Company. The specifications and capacities of each of such barges are
     set forth in the following table:

<TABLE>
<CAPTION>

                                                 OPA 90
                                       Year   Replacement                 Employment         Principal
Name                 Type              Built      Date        Capacity    At 12/31/97        Cargo
----                 ----              -----      ----        --------    -----------        -----
<S>                  <C>               <C>        <C>       <C>           <C>                <C>
Somerset             Ocean Dry Bulk    1990       N/A        13,211  dwt  Term Contract      Coal
Bridgeport           Ocean Dry Bulk    1986       N/A        12,780  dwt  Term Contract      Coal
Portsmouth (1)       Ocean Dry Bulk    1996       N/A        13,214  dwt  Spot Market        Coal
Virginia             Ocean Dry Bulk    1982       N/A        24,109  dwt  Time Charter       Coal
Maryland (2)         Inland Dry Bulk   1970       N/A        20,357  dwt  Inactive           Coal
Connecticut (3)      Ocean Tank        1994       N/A        41,454  bbl  Term Contract      No. 6 Oil
Texas                Ocean Tank        1981       2006      130,000  bbl  Term Contract      No. 6 Oil
Florida              Ocean Tank        1980       2005      130,000  bbl  Spot Market        No. 6 Oil
Pennsylvania         Ocean Tank        1971       2005       93,000  bbl  Term Contract      No. 6 Oil
New York (4)         Ocean Tank        1970       2005      250,000  bbl  Spot Market        Gasoline
Massachusetts (6)    Ocean Tank        1982       2007      145,000  bbl  Spot Market        No. 6 Oil
Maine                Inland Tank       1976       2014       64,000  bbl  Spot Market        No. 6 Oil
Rhode Island         Inland Tank       1972       2014       64,000  bbl  Spot Market        No. 6 Oil
Seahorse I (5)       Inland Tank       1966       2014       41,770  bbl  Spot Market        No. 6 Oil
New Jersey           Inland Tank       1969       2014       36,278  bbl  Bareboat Charter   Bunker Fuel
</TABLE>



(1)  The Company leases this barge under a 10-year bareboat charter.
(2)  The Maryland has in the past been employed in a number of alternative
     uses, but is primarily a coal barge. The barge has not been utilized since
     November 7, 1996 due to damage to the vessel. The Company is currently
     evaluating whether to repair the vessel.
(3)  This barge is the primary barge used in connection with a long-term
     contract with Connecticut Light and Power ("CL&P"). This contract provides,
     among other things that CL&P may exercise a purchase option on the
     Connecticut in certain circumstances. First, commencing with the fourth
     anniversary of the delivery of the Connecticut, CL&P may, on each
     anniversary date, purchase the barge for a purchase price equal to certain
     scheduled amounts. In addition, CL&P has the option to purchase the barge
     if the Company willfully refuses to perform and in certain other limited
     circumstances.
(4)  Owned by a partnership in which a subsidiary of the Company has a 50%
     interest.
(5)  100% owned by CL&P, and operated by a subsidiary of the Company pursuant to
     an evergreen bareboat charter. The Seahorse I is the primary back up barge
     for the Company's contract with CL&P, but is currently used in the spot
     market. The Seahorse I is double-hulled, but does not meet the OPA 90
     double hull requirements and therefore has an OPA 90 replacement date.
(6)  The Company purchased this barge in February, 1997.

     See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

                                       8

<PAGE>

Other Properties

      Set forth below is a list of all of the Company's offices and facilities
as of December 31, 1997.

<TABLE>
<CAPTION>

                                                        Approximate
                                                        Square Feet/             Lease
Location                     Description                Linear Feet (1)     Expiration Date
--------                     -----------                ---------------     ---------------
<S>                          <C>                           <C>              <C>
Greenwich, CT                Executive Office              17,526           2004
Portsmouth, NH               Office Space                  322              Owned Property
Portsmouth, NH               Pier Space                    126              Owned Property
Staten Island, NY            Office and Pier Space         113,756(2)       Owned Property
Philadelphia, PA             Pier and Office Space         52,500(2)        2007
Baltimore, MD                Office Space                  4,400            2002
Baltimore, MD                Pier Space                    415              2003
Norfolk, VA (2)              Pier Space                    115              Owned Property
Norfolk, VA                  Office Space                  2,610            Month to Month
Jacksonville, FL             Office and Pier Space         71,874(2)        2000
Miami, FL                    Office Space                  630              1998
Nederland, TX                Office Space                  1,402            1998
Port Arthur, TX              Pier Space                    275              1998
</TABLE>

(1)   Square footage is presented for office space; linear footage is presented
      for pier space.
(2)   Aggregate square footage for entire property.

Management believes that its existing properties are adequate for its current
needs and that additional facilities will be readily available if needed.


                                       9
<PAGE>

Item 3. Legal Proceedings

The Company is a party to routine, marine-related lawsuits arising in the
ordinary course of its business. The claims made in connection with the
Company's marine operations are covered by marine insurance, subject to
applicable policy deductibles. Management believes, based on its current
knowledge, that such lawsuits and claims, even if the outcomes were to be
adverse, would not have a material adverse effect on the Company's financial
condition and results of operations.

On January 31, 1990, Jakobson was notified by letter from the EPA that the EPA
had reason to believe that the subsidiary is a Potentially Responsible Party (a
"PRP") under CERCLA with respect to a landfill site at Syosset, New York. In
February 1994, the Town of Oyster Bay, New York, operator of the Syosset
landfill, filed suit in the United States District Court for the Eastern
District of New York against Jakobson and several other PRPs to recover costs
associated with clean up of the landfill. In its complaint, the Town alleges
that Jakobson disposed of various wastes at the landfill, which the Town
operated from approximately 1933 to 1975. Prior to filing the complaint, the
Town entered into an administrative consent order with the EPA to remediate the
site. The Town seeks to recover from the PRPs past and future costs associated
with the cleanup. According to the Town's complaint, as of February 1994, the
Town had expended approximately $2.75 million and anticipated additional costs
of $500,000 to evaluate remedial alternatives for the site. Clean-up costs were
estimated at $25 million. Jakobson believes that it has both a factual and legal
defense to liability. Although in theory liability under CERCLA is joint and
several without regard to fault, as a practical matter, liability is typically
apportioned among PRPs, usually on a volumetric basis. Jakobson believes that in
relation to the other defendants its volumetric contribution, if any, to the
site is de minimus. Jakobson is investigating the allegations of the EPA and the
Town and the existence of insurance coverage should the subsidiary be found to
have liability with respect to the landfill site. At this stage, management
believes that it is premature to attempt to predict the outcome of the suit.
Jakobson's insurers are providing a defense.

Subsidiaries of the Company are defendants, along with others, in certain
lawsuits filed in the U.S. District Courts for the Northern District of Ohio and
the Eastern District of Pennsylvania and in Virginia state court by an aggregate
of 308 individuals or their estates or personal representatives who have alleged
damages for workplace exposure to asbestos. Based on employment records, a
number of these individuals appear to have worked for subsidiaries of the
Company, or their predecessors, for less than one year, if at all, out of their
working careers. The Company is in the process of identifying the scope of its
insurance coverage for these claims. At least 79 of these individuals served on
vessels operated by a subsidiary of the Company on behalf of the United States
government for which a government indemnity is applicable. The United States has
agreed to indemnify and defend the Company with respect to approximately 68
cases. Management believes that the United States indemnity will extend to
additional cases. Although the Company believes that these claims are without
merit, it is impossible at this juncture to express a definitive opinion on the
final outcome of any such suit. Management believes that any liability under any
such suits would not have a material adverse effect on the Company's financial
condition and results of operation, regardless of the scope of available
insurance coverage.


                                       10
<PAGE>

Item 4.   Submission of Matters to a Vote of Security Holders

                  None

PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

There is currently no public trading market for the Company's issued and
outstanding common stock. All of the Company's outstanding common stock is held
by officers, directors and affiliates of the Company.


                                       11
<PAGE>

Item 6.   Selected Consolidated Financial Data

The following table presents historical financial information concerning the
Predecessor and the Company. The historical financial information in the
five-year period ending December 31, 1997, is derived from the consolidated
financial statements of the Company. Such financial statements are included
elsewhere herein for the three-year period ended December 31, 1997. The
following financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

<TABLE>
<CAPTION>
                                                             Predecessor                         Company
                                                       -----------------------  -------------------------------------------------
                                                                      Period       Period
                                                          Year    Jan. 1, 1994  July 12, 1994              Year ended
(Dollars in thousands)                                   ended         thru         thru                   December 31,
                                                        Dec. 31,     July 11,     Dec. 31,    -----------------------------------
Income Statement Data:                                    1993         1994         1994         1995         1996         1997
                                                       ---------    ---------    ---------    ---------    ---------    ---------
<S>                                                    <C>          <C>          <C>          <C>          <C>          <C>
Operating revenue-----------------------------------   $  78,740    $  41,694    $  37,482    $  77,343    $  91,458    $ 100,526
   Operating expenses-------------------------------      48,134       27,341       22,355       45,672       57,451       66,090
   Depreciation-------------------------------------       6,784        3,119        3,217        7,412        7,719        7,769
   General and administrative expenses--------------      13,197        7,559        5,962       14,221       14,283       13,755
   Provision for shipyard sale----------------------         705          589           --           --           --           --
                                                       ---------    ---------    ---------    ---------    ---------    ---------
       Operating income-----------------------------       9,920        3,086        5,948       10,038       12,005       12,912
Interest expense------------------------------------      (2,083)        (975)      (4,810)     (10,192)     (10,132)     (10,026)
Interest income-------------------------------------          --           28           74           51          146          346
Equity in income/(loss) from affiliates-------------       1,149         (622)          --           --           --           --
Equity in income/(loss) from joint venture----------         614          220          106         (188)         (66)        (727)
Other income/(expense)------------------------------         164          317          218          155          160         (273)
                                                       ---------    ---------    ---------    ---------    ---------    ---------
Income/(loss) before provision for income taxes            9,764        2,054        1,536         (136)       2,113        2,232
Provision for income taxes--------------------------       3,342          785          630          200          808          613
                                                       ---------    ---------    ---------    ---------    ---------    ---------
Income/(loss) before cumulative effect of
     accounting changes-----------------------------       6,422        1,269          906         (336)       1,305        1,619
Cumulative effect of accounting change (1)----------         525           --           --           --           --           --
                                                       ---------    ---------    ---------    ---------    ---------    ---------
 Net income/(loss)----------------------------------   $   6,947    $   1,269    $     906    $    (336)   $   1,305    $   1,619
                                                       ---------    =========    =========    =========    =========    =========

Other Data:
EBITDA(2)-------------------------------------------   $  19,775    $   6,977    $   9,987    $  18,855    $  23,337    $  23,704
Net cash provided by operating activities-----------       8,334        3,939        6,527        5,491       11,427        8,929
Net cash (used for)/provided by investing activities      (3,594)         817      (73,555)      (5,832)      (5,110)      (8,063)
Net cash (used for)/provided by financing activities      (6,323)      (4,637)      68,842         (652)      (3,496)       3,252
Ratio of earnings to fixed charges (3)--------------         4.5x         2.7x         1.3x         1.0x         1.2x         1.2x

Balance Sheet Data (at end of period)
Total assets----------------------------------------   $  69,139    $  64,432    $ 170,108    $ 174,094    $ 172,717    $ 160,290
Total long-term debt--------------------------------      19,235       16,450       83,414       82,848       80,000       83,252
Mandatorily redeemable capital stock----------------          --           --        1,150        1,150        1,000        1,000
Total stockholders' equity--------------------------      20,132       19,701       10,906       10,570       12,025       13,644
</TABLE>

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

(1)   The Company adopted FAS No. 109, effective January 1, 1993.
(2)   EBITDA means income before provision for income taxes, interest expense
      (including amortization of debt discount of $349 and $106 for the year
      ended December 31, 1993 and the period ended July 11, 1994, respectively),
      depreciation and amortization and provision for shipyard sale, and is
      presented because the Company believes that it provides useful information
      regarding its ability to service and/or incur debt. EBITDA should not be
      considered in isolation or as a substitute for net income/(loss), cash
      flows from operating activities and other combined income or cash flow
      statement data prepared in accordance with generally accepted accounting
      principles or as a measure of the Company's profitability or liquidity.
(3)   For purposes of the computations, earnings before fixed charges consist of
      income/(loss) before income taxes adjusted for equity earnings/(loss), as
      appropriate, plus fixed charges. Fixed charges are defined as interest
      expense plus interest capitalized and that portion of rental expense which
      is deemed to be representative of the interest factor.


                                       12
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

This discussion and analysis of the Company's financial condition and historical
results of operations should be read in conjunction with the Company's and the
Predecessor's consolidated historical financial statements and the related notes
thereto included elsewhere in this report.

Overview Revenues

         Tug Services. Tug services revenues depend primarily upon tug
         utilization and the rates charged for tug services. Tug utilization is
         primarily a function of the volume of vessel traffic requiring docking
         or undocking or other ship assistance services, barge movements,
         coastwise contract towing and offshore rescue work. Rates charged for
         tug services are primarily set by reference to the Company's scheduled
         rates, subject to discounts as competitive conditions warrant. When tug
         services are not performed on a contract basis, rates are quoted at the
         time that such services are requested.

         Tug services revenues, in the aggregate, have remained relatively
         stable over recent years. Although the number of ships entering and
         exiting ports has gradually declined, the Company has offset the
         resulting revenue decline by maintaining market share through
         relationship management and increasing coastwise towing.

         Marine Transportation. Marine transportation services are provided by
         the Company's barge fleet on a term contract basis and on a spot market
         basis. Rates for such services are pre-established by contract or are
         quoted at the time that such services are requested, and are generally
         set based on the quantity of product to be transported and the distance
         to be traveled.

         The Company's marine transportation revenues are primarily attributable
         to the transport of petroleum products (particularly No. 6 oil), coal,
         scrap iron, and grain. Demand for the Company's marine transportation
         services is substantially dependent upon general demand for petroleum,
         petroleum products and coal in the geographic areas served by its
         vessels. In addition, weather, prevailing markets for fossil fuels and
         other sources of energy and economic factors can affect utility
         consumption of petroleum, petroleum products and coal and, as a result,
         the demand for a substantial portion of the Company's marine
         transportation services.

Operating Expenses. The Company's operating expenses are primarily a function of
fleet size and utilization levels and are comprised of wages and benefits, fuel,
repairs, insurance, insurance claims and charter hire of third party tugs to
satisfy vessel requirements. In addition, the Company incurs depreciation and
amortization expense. The crews of the Company's tugs and barges are primarily
paid on a daily wage basis. Wage and benefit levels vary among ports due to
labor market conditions. The Company capitalizes expenditures when a vessel is
improved or its useful life is extended. Drydocking and related costs are
capitalized when incurred and amortized over the period until the next
drydocking, usually 30 months. The timing of drydockings is generally governed
by American Bureau of Shipping requirements, which require two drydockings every
five years. All other repair expenditures are expensed as incurred. Insurance
costs consist primarily of premiums paid for (i) protection & indemnity
insurance ("P&I insurance") for the Company's marine liability risks, which are
insured by a mutual insurance association of which the Company is a member; (ii)
hull and machinery insurance and other marine-related insurance, which are
insured by commercial marine insurance markets; and (iii) general liability and
other traditional insurance, which are insured by commercial insurance carriers.
Insurance costs, particularly costs of marine insurance, are directly related to
amount of coverage, industry and individual loss records and overall insurance
market conditions, which vary from year-to-year. As discussed above under
"Business-Insurance," the Company and the Mormac Group have entered into the
Insurance Agreement, under which the Company's insurance expense will be
affected by both the Company's increased deductibles and the respective
insurance claims experience of the Company and the Mormac Group.


                                       13
<PAGE>

Results of Operations

     Year Ended December 31, 1997 compared to year ended December 31, 1996

                                                              Year Ended
                                                              December 31,
                                                       ------------------------
                                                         1996            1997
                                                       ---------      ---------
Operating revenue ................................     $  91,458      $ 100,526
Cost of operations
    Operating expenses ...........................        57,451         66,090
    Depreciation .................................         7,719          7,769
                                                       ---------      ---------
Total cost of operations .........................        65,170         73,859
                                                       ---------      ---------
Gross profit .....................................        26,288         26,667
General and administrative expenses ..............        14,283         13,755
                                                       ---------      ---------
Operating income .................................        12,005         12,912
Interest expense .................................       (10,132)       (10,026)
Interest income ..................................           146            346
Equity in loss from joint venture ................           (66)          (727)
Other income/(expense) ...........................           160           (273)
                                                       ---------      ---------
Income before provision for income taxes .........         2,113          2,232
Provision for income taxes .......................           808            613
                                                       ---------      ---------
Net income .......................................     $   1,305      $   1,619
                                                       =========      =========


Operating Revenues. Operating revenues increased by $9.1 million, or 9.9%, to
$100.5 million in 1997. Tug Services revenue remained effectively flat,
decreasing by $0.3 million or 0.6% to $57.1 million as lower offshore towing
revenues were offset by The New York City Department of Sanitation contract
which expires on June 30, 1998.

Marine Transportation revenues increased by $9.4 million, or 27.6%, to $43.4
million primarily due to increased movements of coal and petroleum products. The
Company also increased its transportation of other products, such as scrap and
fertilizer. The Company also had a full year of operation for the barge
Portsmouth, which began operations in November 1996 and the barge Massachusetts,
purchased in February 1997.

Operating Expenses. Operating expenses increased by $8.6 million, or 15.0%, to
$66.1 million. The $8.6 million increase in operating expenses is primarily due
to increases in labor, fuel, outside towing expense, repairs and drydocking
amortization. The $2.5 million increase in labor expense and the $1.4 million
increase in outside towing expenses were primarily due to the increased level of
activity discussed above. The $1.0 million fuel expense increase was also due to
the increased activity. Repair expense also increased in 1997, as did drydocking
amortization.

Depreciation. Depreciation expense increased by $0.1 million, or 1.3%. This
increase was due to the acquisition of new equipment and to improvements to
existing floating equipment, including the MORTRAC(R) conversions discussed
previously.

General & Administrative Expenses. General and administrative expenses decreased
by $0.5 million or 3.7% to $13.8 million in 1997, primarily due to lower medical
costs.

Operating Income. Operating income increased by $0.9 million, or 7.6%, to $12.9
million. The increase was primarily due to the increased revenues and lower
general and administrative expenses discussed above, partially offset by higher
operating expenses and depreciation.


                                       14
<PAGE>

Equity in Loss from Joint Venture. The Company equity loss in its 50% joint
venture was $0.7 million, compared the smaller loss of $0.1 million in 1996. The
$0.6 million variance is due to lower rates as well as a dry-docking of the
vessel, which began in the second quarter of 1997 and was completed mid-way
through the third quarter. In addition, market conditions in the clean petroleum
products market idled the barge New York for approximately half of the final six
months of 1997 and management believes that lower rates and lower utilization
could continue through 1998.

Taxes: Taxes were favorably impacted by the realization of a deferred tax asset.
The Company applied a capital loss carry forward to offset the tax gain
associated with the termination of the Jakobson Shipyard lease (see note 5 to
the financial statements). This tax asset previously had been valued at zero due
to the uncertainty associated with its utilization. The Company determined in
the third quarter that is was more likely than not that the asset could be
utilized.

Net Income. Net income increased by $0.3 million, or 24.1% to $1.6 million in
1997. The increase was primarily due to the factors discussed above.

                                       15
<PAGE>

Results of Operations

     Year Ended December 31, 1996 compared to year ended December 31, 1995


                                                               Year Ended
                                                               December 31,
                                                         ----------------------
                                                           1995            1996
                                                         --------      --------
Operating revenue ..................................     $ 77,343      $ 91,458
Cost of operations
    Operating expenses .............................       45,672        57,451
    Depreciation ...................................        7,412         7,719
                                                         --------      --------
Total cost of operations ...........................       53,084        65,170
                                                         --------      --------
Gross profit .......................................       24,259        26,288
General and administrative expenses ................       14,221        14,283
                                                         --------      --------
Operating income ...................................       10,038        12,005
Interest expense ...................................      (10,192)      (10,132)
Interest income ....................................           51           146
Equity in loss from joint venture ..................         (188)          (66)
Other income .......................................          155           160
                                                         --------      --------
(Loss)/income before provision for income taxes ....         (136)        2,113
Provision for income taxes .........................          200           808
                                                         --------      --------
Net (loss)/income ..................................     $   (336)     $  1,305
                                                         ========      ========

Operating Revenues. Operating revenues increased by $14.1 million, or 18.2%, to
$91.5 million in 1996. Tug Services increased by $9.4 million or 19.7%, to $57.5
million. All areas of the tug services business --- shipdocking, harbor towing
and coastwise towing -- showed increases in 1996 and included revenue related to
The New York City Department of Sanitation contract which began on July 1, 1996
and expires on June 30, 1998.

Marine Transportation revenues increased by $4.7 million, or 15.9%, to $34.0
million primarily due to increased movements of coal and petroleum products. The
Company also increased its transportation of other products, such as scrap and
fertilizer.

Operating Expenses. Operating expenses increased by $11.8 million, or 25.8%, to
$57.5 million. The $11.8 million increase in operating expenses is primarily due
to increases in labor, fuel, outside towing expense, claims and drydocking
amortization. The $2.6 million increase in labor expense and the $2.5 million
increase in outside towing expenses were primarily due to the increased level of
activity discussed above. The $2.6 million fuel expense increase was also due to
the increased activity but was also impacted by higher fuel prices, especially
in the second half of the year. Claims expense (claims under insurance
deductibles) also increased in 1996 as did drydocking amortization.

Depreciation. Depreciation expense increased by $0.3 million, or 4.1%. This
increase was due to additional improvements to floating equipment, including the
MORTRAC(R) conversions discussed previously.

General & Administrative Expenses. General and administrative expenses remained
essentially the same at $14.3 million, compared to $14.2 million in 1995.

Operating Income. Operating income increased by $2.0 million, or 19.6%, to $12.0
million. The increase was primarily due to the increased revenues discussed
above, partially offset by higher operating expenses and depreciation.

Equity in Loss from Joint Venture. Equity in loss from the Company's 50% joint
venture decreased by $0.1 million or 64.9% from a loss of $188,000 in 1995 to a
loss of $66,000 in 1996. The decrease is primarily due to increased revenues,
driven by higher rates and more operating days in 1996.

Net (Loss)/Income. Net income increased by $1.6 million, from a loss of $0.3
million in 1995 to a profit of $1.3 million in 1996. The increase was primarily
due to the higher operating profit discussed above.


                                       16
<PAGE>

Liquidity and Capital Resources

The Company is highly leveraged as a result of the debt incurred in connection
with the Acquisition. The Company has outstanding $80.0 million of 11.75% Series
B First Preferred Ship Mortgage Notes due July 15, 2004 (the "Notes"), the
issuance of which was registered under the federal securities laws. Interest on
the Notes is payable semi-annually on January 15 and July 15. The Notes are
redeemable, in cash, at the option of the Company, on or after July 15, 1999 at
specified redemption prices plus accrued and unpaid interest. All of the
Company's subsidiaries have guaranteed the Notes. The Notes rank pari passu with
all existing and future senior indebtedness of the Company and senior to all
subordinated indebtedness of the Company and are secured by substantially all of
the Company's floating equipment. The indenture covering the Notes contains
certain restrictions on incurrence of debt, liens, sales of assets, investments,
and capital expenditures, dividends and upstream payments. The Company must also
comply with certain other financial covenants.

The Company has a revolving line of credit of up to $10.0 million, up to $5.0
million of which may be utilized for letters of credit. Both facilities are
subject to borrowing base limitations. This Senior Credit Facility is secured by
a first priority lien on the trade accounts receivable and inventory of the
Company and bears interest at rates linked to the prime rate and/or a Eurodollar
rate, at the Company's option. The Senior Credit Facility expires in July 2000.
The Senior Credit Facility contains certain financial covenants and other
covenants. At December 31, 1997, outstanding letters of credit approximated
$472,000; no other borrowings were outstanding under the Senior Credit Facility.

On December 1, 1997, the Company purchased a tug, the April Moran, from an
affiliated company. As part of that transaction, the Company entered into a $3.4
million term loan which is payable in 24 quarterly installments through June 1,
2005. Interest is based upon LIBOR plus 1.75% but is fixed through June 1, 1999
at 8.1%. The loan is secured by the April Moran.

On November 8, 1996, a subsidiary of the Company entered into a bareboat charter
for the barge Portsmouth. The ten year charter contains an option to buy at
enumerated times during the lease period. Subsequently, the subsidiary was
merged into Moran Towing Corporation, which assumed the charter obligations. The
Company has guaranteed performance by its subsidiary under the charter.

The Company believes that cash flow from current levels of operations and, to a
lesser extent, the availability under the Senior Credit Facility, will be
adequate to make required payments of interest on the Company's indebtedness, as
well as to fund capital expenditures. In the event that the Company draws upon
the commitments under the Senior Credit Facility due to adverse business
conditions or to finance acquisitions or for other corporate purposes, the
Company's aggregate interest expense would correspondingly be increased.

The Company's belief that it will generate sufficient cash to make required
payments of interest on its indebtedness and lease obligations is based, among
other things, on the assumptions that (i) the Company's revenues and operating
expenses, as adjusted for inflation, will remain relatively constant; (ii) the
Company will retain working capital in accordance with prior practices; (iii)
the Company will not incur any material capital expenditures (excluding routine
drydocking costs) other than the possible purchase or construction of new
vessels or the acquisition of businesses which in turn are expected to produce
additional cash flow; and (iv) neither OPA 90 nor any other federal or state
environmental statutes or regulations will impose significant additional capital
expenditure requirements on the Company other than the mandated phase-out or
retrofitting of vessels described in "Business-Regulatory Matters." Currently,
the Company has no specific plans for funding the repayment of principal on the
Notes. If cash generated from operations is insufficient to pay any portion of
the principal on the Notes, it would be necessary to refinance the Notes.

Cash and cash equivalents for the year ended December 31, 1997 increased by $4.1
million compared to a $2.8 million decrease in the year ended December 31, 1996,
and a $1.0 million increase in the year ended December 31, 1995. The changes for
these periods were attributable to the factors discussed below: For the year
ended December 31, 1997, net cash provided by operations of $8.9 million,
together with net proceeds from a constructive total loss of $2.8 million, net
proceeds from the sale of a leasehold interest of $2.9 million and increased
borrowings of $3.3 million was used to fund capital expenditures of $12.7
million (including the purchase of the tug April Moran, barge Massachusetts, and
two additional MORTRAC(R) conversions) and to fund a $1.0 million capital
contribution to a joint venture, primarily to fund a dry-docking for the barge
New York.


                                       17
<PAGE>

For the year ended December 31, 1996, net cash provided by operations was $11.4
million. This cash, together with temporary borrowings of $2.3 million were used
to fund capital expenditures of $5.1 million (primarily the capitalization of
drydocking costs and the upgrading of the tug Harriet Moran to a MORTRAC(R) tug)
and to pay down debt of $5.7 million (including the indebtedness relating to the
acquisition of the tug Valentine Moran and the barge Pennsylvania.)

For the year ended December 31, 1995, net cash provided by operations was $5.5
million. This amount, together with $1.0 million is short-term borrowings, was
used to fund capital expenditures of $5.8 million (primarily the capitalization
of drydocking costs and including the upgrading of the tug Sewells Point to a
MORTRAC(R) tug), to pay debt of $1.5 million and to pay financing fees of $0.1
million.

Working capital was $17.6 million at December 31, 1997, $9.1 million at December
31, 1996 and $7.6 million at December 31, 1995.

A subsidiary of the Company has entered into a long-term contract to provide tug
and barge services to Florida Power & Light, a major Florida utility. The
five-year contract begins on October 1, 1998. Under the terms of the contract,
the subsidiary is building a number of tug and barge units over the next nine
months. The total capital associated with the project is expected to be $8 to
$10 million. The Company is exploring various financing alternatives.

Other Matters

In 1991, the Company discovered that the historical operations of its ship
repair subsidiary, Jakobson, had resulted in environmental contamination of its
leased shipyard property. During 1991, the Company decided to discontinue
Jakobson's ship repair business during 1992, and therefore reduced Jakobson's
assets to net realizable value. In 1992, Jakobson ceased operations and
commenced the clean up of the shipyard property. Environmental costs incurred to
ready the shipyard for sale were capitalized to the extent such costs are
reasonably expected to be recovered from the sale of the shipyard. At December
31, 1992, management established reserves for the expected future clean up of
the shipyard property. The clean up encompassed remediation of both the shipyard
property and sediments in the bay immediately adjacent to the shipyard.
Remediation of the shipyard property was substantially completed in 1993 and
remediation of bay sediments commenced and were substantially completed in 1994.
The remedial activities at the facility were concluded in 1995. The cost of this
project has been approximately $6.1 million. In late 1995, Jakobson received
written notification from the New York Department of Environmental Conservation
that the shipyard site had been deleted from the State Registry of Inactive
Hazardous Waste Disposal Sites. In 1995, the Company expended approximately $0.6
million in connection with the Jakobson property. Although such expenditures did
not affect the Company's results of operations because they were charged against
the provision for shipyard sale, such expenditures did reduce the Company's cash
flow. In the third quarter of 1997, the owner of the Jakobson Shipyard site sold
its property to the State of New York and the Town of Oyster Bay. At the same
time, Jakobson Shipyard, Inc., a subsidiary of the Company, terminated its
leasehold interest in the property and received $2.9 million. The loss related
to the lease termination was not material.

Recent Financial Accounting Pronouncements

FAS No. 128, "Earnings Per Share," issued in February 1997, changes the
calculation of earnings per share ("EPS") under generally accepted accounting
principles in the U.S. to be more consistent with international standards. Under
the new standard, companies replace the reporting of "primary" EPS with "basic"
EPS. Basic EPS is calculated by dividing the income or loss available to common
shareholders by the weighted average number of common shares outstanding for the
period, without consideration of common stock equivalents. "Fully diluted" EPS
is replaced by "diluted" EPS, which will be similar to fully diluted EPS as
previously computed. This statement was adopted by the Company in 1997.

FAS No. 130, "Reporting Comprehensive Income," issued in June 1997, will
require the Company to disclose in financial statement format, all non-owner
changes in equity. Such changes include, for example, cumulative foreign
currency translation adjustments, certain minimum pension liabilities and
unrealized gains and losses on securities available for sale. This statement is
effective for fiscal years beginning after December 15, 1997 and requires
presentation of prior period financial statements for comparability purposes.

FAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operation segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers.


                                       18
<PAGE>

Generally, financial information is required to be reported on the basis that is
used internally for evaluating segment performance and deciding how to allocate
resources to segments.

FAS No. 132, "Employer's Disclosure about Pension and Other Postretirement
Benefits," is effective for the year ended December 31, 1998. This statement
revises the disclosure requirements for employers' pension and other retiree
benefits.

The Company expects to adopt the above statements beginning with its 1998
financial statements, with the exception of FAS 128 which was adopted in 1997.

Inflation

In general, the Company's business is affected by inflation and the effects of
inflation may be experienced by the Company in future periods. Management
believes, however, that such effect has not been significant to the Company
during the past three years. In the event that significant inflationary trends
were to arise, management believes that the Company would generally be able to
offset the effects thereof by increasing rates, to the extent permitted by
competitive factors, and through operation of certain escalation clauses
contained in certain of the Company's marine transportation contracts. There can
be no assurance, however, that all such cost increases could be passed through
to customers.

Year 2000

The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. This could result in
system failures or miscalculations causing disruptions of operations, including,
among other, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.

The Company does not believe it has material exposure to the year 2000 issue
with respect to its own information systems.

Item 8. Financial Statements

See the financial statements which are listed in items 14(a)(1)-(2).


Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

There were no changes in, or disagreements with, accountants.


                                       19
<PAGE>

                                    PART III

Item 10. Executive Officers and Directors of the Registrant

       Set forth below is information concerning the directors and executive
officers of the Company.

<TABLE>
<CAPTION>
   Name                          Age           Position
   ----                          ---           --------
   <S>                            <C>          <C>
   Paul R. Tregurtha              62           Chairman of the Board and Director
   James R. Barker                62           Vice Chairman of the Board and Director
   Malcolm W. MacLeod             64           President, Chief Executive Office and Director
   Jeffrey J. McAulay             44           Vice President of Finance and Administration and Director
   William P. Muller              46           President of Moran Services Corporation
   Edmond J.  Moran, Jr.          53           President of Moran Mid-Atlantic Group and Director
   Alan L. Marchisotto            48           Vice President, General Counsel and Secretary
   Andrew P. Langlois             56           Director
   Mort Lowenthal                 67           Director
</TABLE>

Paul R. Tregurtha. Mr. Tregurtha has been a director and Chairman of the Board
of the Company since June 1994. In addition, he has been Chairman of each of
Mormac Marine Group, Inc. (the parent of Mormac) and Meridian Aggregates
Company, which owns and operates mines in the United States, since 1988 and
1991, respectively, and Vice Chairman of each of The Interlake Steamship Company
and Lakes Shipping Company, Inc. since 1988 and 1989, respectively. He served as
Chairman and Chief Executive Officer of Moore McCormack Resources during 1987
and 1988 and was President and Chief Operating Officer of Moore McCormack
Resources prior to that time. Mr. Tregurtha serves on the Board of Directors of
Brown & Sharpe Manufacturing Company, FPL Group, Inc. and Fleet Financial Group,
and is a trustee of TIAA/CREF.

James R. Barker. Mr. Barker has been a director and is Vice Chairman of the
Board of the Company since June 1994. In addition, he has been Chairman of
each of The Interlake Steamship Company and Lakes Shipping Company, Inc.
since 1987 and 1989, respectively, and Vice Chairman of Mormac Marine Group,
Inc. since 1988. From 1987 to 1988, he served as Chairman of Mormac Marine
Group, Inc. He served as Chairman and Chief Executive Officer of Moore
McCormack Resources from 1971 to 1987. Prior to joining Moore McCormack
Resources, Mr. Barker co-founded and was a principal of the management
consulting firm of Temple, Barker & Sloane, where he specialized in
consulting to the transportation industry. Mr. Barker is a member of the
Board of Directors of each of GTE Corporation and Pittston Corporation (where
he is non-executive chairman), is a trustee for Eastern Enterprises and is
the Chairman of the Committee of Managers of the Skuld Protection and
Indemnity Association.

Malcolm W. MacLeod. Mr. MacLeod has served as President, Chief Executive Officer
and director since the Acquisition. Mr. MacLeod served as President of the
Predecessor from June 1987 until the Acquisition and as Chief Executive Officer
from April 1991 until the Acquisition. In addition, Mr. MacLeod served as a
director of the Predecessor from 1984 until the Acquisition. Mr. MacLeod served
as President and Chief Executive Officer of Curtis Bay Towing Company, a Company
subsidiary, from 1979 until 1987 and as Vice President of Curtis Bay from 1978
to 1979. Prior to that, Mr. MacLeod started on Company tugs after his graduation
from the Massachusetts Maritime Academy in 1954 and has been with the Company
and its subsidiary companies in a variety of assignments since that time, with
the exception of two years' service in the United States Navy as a deck officer
on fleet tugs.

Jeffrey J. McAulay. Mr. McAulay has served as the Vice President of Finance and
Administration and a director of the Company since April 1996. Mr. McAulay
served as the Company's Controller from the Acquisition until April 1996 and
served as Controller of the Predecessor from February 1992 until the
Acquisition. From 1979 through 1992, Mr. McAulay was employed by W.R. Grace &
Co. He held various positions at Grace's Specialty Chemicals Group including
Manager of New Business Analysis (from 1988 to 1992), Assistant Controller and
briefly as Chief Financial Officer of Grace's Japan Chemicals Business. Mr.
McAulay began his career at the auditing firm of Arthur Andersen & Co.

William P. Muller. Mr. Muller was appointed President of Moran Services
Corporation and director of Moran Towing Corporation in July 1995. From 1989
until July, 1995, he was the Vice President, Operations of Moran Towing &
Transportation Co., Inc., the Company's New York operating subsidiary and Vice
President of Moran Services


                                       20
<PAGE>

Corporation. From 1981 through 1989, he was Vice President and General Manager
of Moran Towing of Florida Inc., the Company's Jacksonville operating
subsidiary. Mr. Muller joined Moran in 1977 as part of the sales department and
held a variety of positions before accepting the Florida position. Prior to
joining Moran, Mr. Muller served as a manager for Prudential Grace Line's South
American operations. He began his career with Continental Insurance (MOAC) in
the hull & underwriting department.

Edmond J. Moran, Jr. From 1987 until the present, Mr. Moran has served as
President of Moran Mid-Atlantic Corporation (which was reorganized as the Moran
Mid-Atlantic Group as of January 1, 1997). Since January 1, 1997, Mr. Moran has
also served as Vice President, Business Development of Moran Towing Corporation.
Mr. Moran is currently a director of the Company and served as a director of the
Predecessor from 1984 until the Acquisition. From 1984 until 1987, Mr. Moran
served as Vice President of Moran Towing & Transportation Co., Inc. and directed
all the activities of the Company's barge division. From 1981 until 1983, Mr.
Moran served as President of Moran's Texas subsidiary. From 1976 until 1981, he
served as Vice President and General Manager of Jacksonville operations. From
1971, when he joined the Company, until 1976, Mr. Moran served as a Sales
Representative in the Harbor Operations Department. Prior to that, following
active duty in the United States Navy, Mr. Moran joined the planning department
of States Marine Lines, Inc.

Alan L. Marchisotto. Effective January 1, 1998, Mr. Marchisotto was elected a
Vice President of the Company. He continues to be General Counsel and Secretary,
a position he has held since he joined the Company in 1982. From 1978 until
1982, he served as corporate and international counsel to Norlin Corporation, a
NYSE-listed company, where he directed the legal affairs of manufacturing and
sales subsidiaries in eleven countries and worked closely with senior management
in the negotiation and structuring of complex financing and business agreements.
Prior to that, he was engaged in private practice in New York City.

Andrew P. Langlois. Mr. Langlois has served as a director since the Acquisition.
Mr. Langlois has served as Vice President of Mormac Marine Group and Lakes
Shipping Company, Inc., since 1988 and 1989, respectively, and as Vice President
and Director of Meridian Aggregates Company since 1991. From 1980 to 1988, Mr.
Langlois was employed by Moore McCormack Resources and was an officer from 1983
to 1988. Prior to joining Moore McCormack in 1980, he was employed by the
Electric Boat Division of General Dynamics.

Mort Lowenthal. Mr. Lowenthal joined the Board of Directors in November,
1994. Mr. Lowenthal is a Senior Advisor - Schroder & Co. Inc., an
international investment bank. From 1980 to February 1995, Mr. Lowenthal was
a Managing Director at Schroder & Co. Inc.

Each director holds office until the next annual meeting of stockholders and
until his successor has been elected and has qualified. Officers are elected by
the Board of Directors and serve at its discretion.

Directors of the Company who are not employees of the Company or the Lakes Group
are reimbursed for their travel and other expenses incurred in connection with
their responsibilities, and are also paid $1,100 for every meeting attended.


                                       21
<PAGE>

Item 11. Executive Compensation

The following table sets forth the annual and long-term compensation for the
five highest paid officers (named executive officers), as well as the total
compensation paid to, or earned by, each individual for the Company's fiscal
years ended December 31, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                               Annual
                                                            Compensation
                                          Fiscal                           All Other
      Name & Position                      Year    Salary      Bonus    Compensation (1)
      ---------------                      ----    ------      -----   ----------------
<S>                                        <C>    <C>        <C>          <C>
Paul R. Tregurtha                          1997   $315,952   $     --     $     --
Chairman of the Board                      1996    300,000         --           --
                                           1995    300,000         --           --

James R. Barker                            1997    315,952         --           --
Vice Chairman of the Board                 1996    300,000         --           --
                                           1995    300,000         --           --

Malcolm W. MacLeod                         1997    332,149     35,000       21,317
President and Chief Executive Officer      1996    319,374     32,000       20,067
                                           1995    298,340     29,000       16,317

Edmond J. Moran, Jr                        1997    174,535     10,000       21,317
President of Moran Mid-Atlantic Group      1996    168,635     10,000       20,067
                                           1995    163,723      7,500       16,317

William P. Muller                          1997    150,000     10,000       20,027
President of Moran Services Corporation    1996    137,980     10,000       18,550
                                           1995    121,462     10,000       13,463
</TABLE>

   (1)  Amounts for 1997 includes contribution of $20,000, $20,000 and $18,709
        made by the Company to the Company's Profit Sharing Plan on behalf of
        Messrs. MacLeod, Moran and Muller, respectively, in 1997. See "Company
        Plans-Profit Sharing Plan." Also includes premiums of $1,317 paid by the
        Company in respect of term life insurance policies insuring the lives of
        Messrs. MacLeod, Moran and Muller, respectively, in 1997.

Company Plans

In connection with the Acquisition, the Company provided benefits to the
Company's non-union employees on terms which are substantially similar to the
benefit plans of the Predecessor existing prior to the Acquisition. In addition,
as described below under "-1994 Stock Option Plan," the Company adopted a stock
option plan which became effective upon the consummation of the Acquisition.


                                       22
<PAGE>

 Defined Benefit Plans

The following table shows the estimated annual benefits on a combined basis for
employees who retire at age 65, without regard to statutory maximums, for
various combinations of final average compensation and lengths of service under
the Moran Towing Corporation Restated Pension Plan and the Moran Towing
Corporation Supplemental Employee Retirement Plan (collectively, the "Plans").
The Restated Pension Plan is intended to be a qualified plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
Supplemental Employee Retirement Plan is not intended to be so qualified.

<TABLE>
<CAPTION>
                               Projected Annual Benefits at Age 65
 Average Five                           Year of Service
  Year Base                    -----------------------------------
    Salary         15            20           25            30           35
    ------         --            --           --            --           --
  <S>            <C>          <C>           <C>          <C>           <C>
  $125,000       $27,450      $36,600       $45,750      $54,900       $64,050
   150,000        33,075       44,100        55,125       66,150        77,175
   175,000        38,700       51,600        64,500       77,400        90,300
   200,000        44,325       59,100        73,875       88,650       103,425
   225,000        49,950       66,600        83,250       99,900       116,550
   250,000        55,575       74,100        96,625      111,150       129,675
   275,000        61,200       81,600       102,000      122,400       142,800
   300,000        66,825       89,100       111,375      133,650       155,925
</TABLE>

Generally, the monthly pension benefit under the Plans for named executive
officers is equal to 1% of the first $750 of average monthly compensation plus
1.5% of the remainder of the executive officer's average monthly compensation,
multiplied by the executive's number of years of credited service. In the case
of service years prior to 1975, the executive's benefit for such years is equal
to 25% of the executive's average monthly compensation multiplied by a fraction
equal to the executive's number of years of credited service divided by 35 and
adjusted for the normal form of payment under the Plans as in effect at that
time. The benefit in respect of years prior to 1975 is not reflected in the
table. For purposes of the preceding computations, an executive's average
monthly compensation is equal to the highest average of the executive's base
compensation (on a monthly basis) for any five consecutive calendar years during
the final 10 calendar years before retirement. For 1995, the base compensation
for each of the named executive officers is the same as the salary shown in the
summary compensation table under "Management-Executive Compensation." After
three years of service, a participant becomes 20% vested and vesting continues
in 20% increments for each year of service. At seven years the participant is
100% vested. The estimated number of credited years of service for named
executive officers is as follows: Malcolm MacLeod, 43 years; Edmond Moran, Jr.,
27 years and William P. Muller, 20 years.

Profit Sharing Plan. As a retirement plan for substantially all shoreside
non-union employees, the Company established a tax-qualified defined
contribution plan (the "Profit Sharing Plan"). Contributions are made on an
annual basis in an amount determined at the sole discretion of the Board of
Directors of the Company, subject to certain maximum limitations set forth under
the Code. Contributions are based upon a percentage, generally 10% to 15%, of
each participant's compensation as defined in the Profit Sharing Plan.
Contributions are invested in various investment alternatives pursuant to
instructions received from each plan participant. After three years of service,
a participant becomes 20% vested and vesting continues in 20% increments for
each year of service. At seven years, the participant is 100% vested. Profit
Sharing Plan contributions are made on a fiscal year basis.

1994 Stock Option Plan. The Company's 1994 Stock Option Plan (the "1994 Plan")
was adopted by the Company's Board of Directors and stockholders on June 11,
1994, effective as of the consummation of the Acquisition, to provide an
incentive to select employees of the Company to remain in the employ of the
Company and to increase their personal interest in the success of the Company.
The 1994 Plan provides for the grant of options ("1994 Stock Options") to
purchase shares of the Company's Common Stock. The maximum number of shares of
the Company's Common Stock issueable under the 1994 Plan is 2,000. Participation
in the 1994 Plan is limited to employees of the Company designated by the Plan
Committee comprised of Messrs. Tregurtha and Barker, each of whom is ineligible
to receive awards under the 1994 plan. Non-employee directors of the Company are
not eligible to participate.


                                       23
<PAGE>

The table sets forth certain information concerning the number of shares covered
by stock options as of December 31, 1997. At December 31, 1997 the fair market
value is assumed to be equal to the exercise price. None of the named executive
officers exercised an option to purchase the Company's Common Stock in 1997.

                          Fiscal Year-End Option Values

<TABLE>
<CAPTION>
                                                                Number of
                                                         Securities Underlying         Value of Unexercised
                              Shares                         Unexercised               in-the-Money Options
                             Acquired                      Options at Fiscal         at Fiscal year End ($)
                                on         Value                Year-end                    (Exercisable/
      Name                   Exercise      Realized    (Exercisable/Unexercisable)         Unexercisable)
      ----                   --------      --------    ---------------------------         --------------
<S>                               <C>         <C>                 <C>                          <C>
Paul R. Tregurtha                 0           0                     0                            0

James R. Barker                   0           0                     0                            0

Malcolm W. MacLeod                0           0                   800/0                        $0/$0

Edmond J. Moran, Jr.              0           0                     0                            0

William P. Muller                 0           0                   168/0                         0/0
</TABLE>


                                       24
<PAGE>

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Company's Board of Directors is comprised of
Messrs. Tregurtha, Barker and MacLeod. Messrs. Tregurtha, Barker and MacLeod
have served in the positions described under "Executive Officers and Directors
of the Registrant". Generally such relationships can create an opportunity for
conflicts of interest in compensation decisions. Other than as set forth below,
none of the members of the Committee has any other relationship with other
entities that would require additional disclosure. Messrs. Tregurtha and Barker
serve in various capacities, including serving as directors, of Mormac Marine
Group, Inc., Meridian Aggregates Company and Lakes Shipping. Mr. Langlois, a
director of the Company, is an executive officer of Mormac Marine Group, Inc.,
Meridian Aggregates Company and Lakes Shipping. The boards of directors of such
entities perform the functions of compensation committees. In addition, the
Company provides ship docking and undocking services to Mormac, a company which
is owned by Messrs. Barker and Tregurtha and certain members of their families
and as to which Messrs. Barker and Tregurtha are principal executive officers.
Mormac operates three Coronado class oil tankers in the foreign trade and
manages tankers for others in the Jones Act. During 1997, Mormac paid $275,000
for ship docking services performed by the Company. All such services were
provided on arms'-length terms at customary rates. Management has been informed
that Mormac expects to continue to use the Company's tug services in each
instance where Mormac's tankers call on a harbor which the Company services. All
such services will be performed on arms'-length terms and conditions. All of the
members of the Compensation Committee are also parties to stockholder agreements
with the Company.

The Company has entered into the Insurance Agreement with the Mormac Group.
Messrs. Tregurtha, Barker and Langlois are officers, directors and/or direct or
indirect shareholders of some or all of the entities in the Mormac Group. The
Company and the Mormac Group entered into the Insurance Agreement in an effort
to reduce insurance expenses by obtaining lower premiums through group purchases
of insurance and through higher deductibles. The Insurance Agreement also
provides for allocation among the parties of any risk arising out of the
increases in insurance deductibles. Pursuant to the Insurance Agreement, the
Company and the Mormac Group agreed to share any increased insurance claims
expense required to be borne by a party as a result of insurance claims which
exceed historical deductibles but are less than the new, increased deductibles.
Allocations of any increased insurance claims expense is based upon the
historical claims experience (in excess of historical deductibles) for each
party to the agreement. In the current policy year, 65% of any additional
insurance claims expense attributable to the higher deductibles will be borne by
the Company and 35% of any such additional insurance claims expense will be
borne by the Mormac Group. Amounts payable to the Company from members of the
Mormac Group totaled $222,000 at December 31, 1997. The Company believes that
the terms of the Insurance Agreement which was prepared in consultation with an
independent insurance broker, are similar to those that would be obtained in an
arms'-length transaction.

In February 1997, the Company entered into a bareboat charter with Interlake
Transportation, Inc., a corporation which is indirectly owned by Messrs.
Tregurtha and Barker, and as to which Messrs. Tregurtha, Barker and Langlois
serve as executive officers and/or directors. Pursuant to the bareboat
charter, the Company bareboat chartered a tug until December, 1997, at an
aggregate cost of approximately $573,000. As part of a related transaction on
February 21, 1997, in which the Company purchased the barge Massachusetts
from a third party, the Company assigned its right to purchase such tug from
the same third party to Interlake Transportation, Inc., which purchased the
tug. The Company received no consideration for such assignment to Interlake
Transportation, Inc. In December 1997, the Company purchased the tug from
Interlake Transportation, Inc. at a price equal to the price paid to the
third party in February, 1997. Interlake Transportation, Inc. realized no
gain or loss on the sale.

                                       25
<PAGE>

Item 12.   Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain beneficial ownership information as of
March 27, 1998, concerning the Company's Common Stock with respect to (1) each
person known by the Company to be a beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock, (2) each director of the
Company, (3) each named executive officer of the Company, and (4) all directors
and executive officers of the Company as a group.

<TABLE>
<CAPTION>
                                                                   Number
     Directors, Named Officers and                                   of
     5% Beneficial Owners (1)                                     Shares (2)              Percentage
     ------------------------                                     ----------              ----------
     <S>                                                            <C>                      <C>
     Lakes Shipping Company, Inc.---------------------------        28,000                   61.5%
     Paul R. Tregurtha (3)----------------------------------        34,375                   75.4
     James R. Barker (4)------------------------------------        30,310                   66.5
     Malcolm W. MacLeod (5)---------------------------------         2,800                    6.1
     Edmond J. Moran, Jr.-----------------------------------         1,200                    2.6
     Andrew P. Langlois (6)---------------------------------           450                    1.0
     Alan Marchisotto---------------------------------------           800                    1.8
     Jeffrey J. McAulay (7)---------------------------------           100                    0.2
     William P. Muller (7)----------------------------------           168                    0.4
     Mort Lowenthal-----------------------------------------             -                     -
     Directors and executive officers as a group (9 persons)        42,097                   92.4
</TABLE>

(1)   Unless otherwise indicated, the business address of each beneficial owner
      of more than 5% of the Company's Common Stock is Three Landmark Square,
      Stamford, Connecticut 06901.
(2)   For purposes of computing the percentage of outstanding shares of the
      Company's Common Stock held by each person or entity, a person or entity
      is deemed to have "beneficial ownership" of any shares of the Company's
      Common Stock which such person or entity has the right to acquire within
      60 days after the date of the report. Any such shares are deemed to be
      outstanding for purposes of computing percentages of beneficial ownership.
      Unless otherwise indicated, shares of the Company's Common Stock are
      considered beneficially owned by a person or entity if such person or
      entity has or shares voting or investment power with respect to such
      shares. As a result, the same security may be beneficially owned by more
      than one child and entity and, accordingly, in some cases, the same shares
      are listed opposite more than one name in this table.
(3)   Mr. Tregurtha owns directly 6,375 shares of the Company's Common Stock. In
      addition, Mr. Tregurtha beneficially owns 44.6% of the capital stock of,
      and serves as Vice Chairman of, Lakes Shipping. Therefore, Mr. Tregurtha
      may be deemed to beneficially own the 28,000 shares beneficially owned by
      Lakes Shipping.
(4)   Mr. Barker owns directly 2,310 shares of the Company's Common Stock. In
      addition, Mr. Barker and certain members of his family beneficially own in
      the aggregate 44.6% of the capital stock of Lakes Shipping. Mr. Barker
      also serves as Chairman of Lakes Shipping. Therefore, Mr. Barker may be
      deemed to beneficially own the 28,000 shares beneficially owned by Lakes
      Shipping. Three of Mr. Barker's adult children own, in the aggregate,
      3,465 shares of Company's Common Stock, which shares are excluded from the
      number of shares of the Company's Common Stock shown as being owned by Mr.
      Barker. Mr. Barker disclaims beneficial ownership of all 3,465 shares
      which are owned by his children.
(5)   Mr. MacLeod's business address is Two Greenwich Plaza Greenwich,
      Connecticut 06830. Includes options to purchase 800 shares of the
      Company's Common Stock which were granted to Mr. MacLeod upon the
      consummation of the Acquisition.
(6)   Shares shown are held by an individual retirement account for the benefit
      of Mr. Langlois.
(7)   Includes presently exercisable options to purchase shares of the Company's
      Common Stock.


                                       26
<PAGE>

Item 13.  Certain Relationships and Related Transactions

As discussed under "Business," the Company was formed in June 1994 in order to
acquire all of the outstanding capital stock of the Predecessor from, among
others, Messrs. MacLeod and Moran. Messrs. MacLeod, Moran and Marchisotto
acquired shares of the common stock of the Company concurrently with the closing
of the Acquisition. In addition, as discussed in note 1 to the consolidated
financial statements attached to this report, the Predecessor transferred its
20% equity interest in four partnerships to entities formed by the stockholders
of the Predecessor. Finally, the agreement governing the Acquisition provides
for the payment of a contingent purchase price to the former stockholders of the
Predecessor upon the occurrence of certain events. Contingent purchase price of
$12.0 million was paid to the former stockholders on February 10, 1997. The
remaining $1.6 million of the contingent purchase price was released from escrow
during the third quarter of 1997 when a subsidiary of the Company terminated its
leasehold interest in Jakobson Shipyard. Part of the Jakobson escrow was paid to
the Company ($0.4 million), with the remainder ($1.2 million) paid to the
Stockholders of the Predecessor.

Certain members of management (the "Management Group") entered into stockholder
agreements (the "Stockholder Agreements") concurrently with the consummation of
the Acquisition. With the exception of Alan L. Marchisotto, who purchased shares
of the Company's Common Stock for cash, all members of the Management Group were
issued shares of the Company's Common Stock in exchange for a portion of their
shares of the capital stock of the Predecessor. The Stockholder Agreements place
the following restrictions upon the transfer of the Company's Common Stock by
each member of the Management Group: (i) the members of the Management Group may
not transfer the Company's Common Stock to any non-U.S. citizen, for purposes of
the Jones Act (a "Foreigner"), and (ii) the members of the Management Group may
not transfer shares of the Company's Common Stock to any other individuals or
entities except in certain limited situations, such as through obtaining the
consent of the Company to the transfer, the exercise of a "Put" (as defined
below) with respect to these shares or the transfer of these shares to
ancestors, descendants or a spouse. The Stockholder Agreements also provide that
each member of the Management Group has the right to require the Company to
purchase (a "Put") all of such member's shares of the Company's Common Stock
following such time as the member ceases to be an employee of any of the
Company, its Subsidiaries or its affiliates, with certain limitations. The
Company has the right to purchase (a "Call") the shares of the Company's Common
Stock of each member of the Management Group upon the occurrence of certain
events, including the death of such member, the making by such member of a
general assignment for the benefit of creditors, the filing of a voluntary or
involuntary petition for bankruptcy or the cessation of such member's employment
with the Company, its subsidiaries or affiliates. The Stockholder Agreements for
all members of the Management Group, provide that the purchase price of the
shares being either purchased or sold through such a Put or Call will be the
fair market value of such shares as determined by an investment banking firm of
national standing. The Stockholder Agreements also provide that if the Company
grants registration rights to any executive officer, it will at such time grant
proportionate registration rights to the members of the Management Group.

The members of the Lakes Group entered into stockholder agreements with the
Company prohibiting the transfer of the Company's Common Stock to any foreigner.

                                       27

<PAGE>


                                       PART IV



ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)       Documents Filed as Part of the Report

          (1) Financial Statements - The Company

     The following Consolidated Financial Statements of the Company and its
     subsidiaries are included in this Report:

           Report of Independent Accountants  . . . . . . . . . . . .     F-1

           Consolidated Balance Sheets at December 31, 1996
           and December 31, 1997 . . . . . . . . . . . . . . . .   F-2 to F-3

           Consolidated Statements of Income for the Years Ended
           December 31, 1995, December 31, 1996 and December 31, 1997. .  F-4

           Consolidated Statements of Cash Flows for the Years Ended
           December 31, 1995, December 31, 1996 and December 31, 1997. .  F-5

           Consolidated Statement of Stockholders' Equity for  the
           Years Ended December 31, 1995, December 31, 1996 and
           December 31, 1997. . . . . . .. . . . . . . . . . . . . . .    F-6

           Notes to Consolidated Financial Statements . . . . . . F-7 to F-20



                                          28
<PAGE>


          (3)  Exhibits
     The following is a list of Exhibits to this Report. Exhibits 10.18 - 10.20
are management contracts or compensatory plans or arrangements
required to be filed as Exhibits to this report pursuant to Item 14(c) of this
report.

Exhibit No.    Description of Document

3.1*      Certificate of Incorporation of the Registrant

3.2*      By-Laws of the Registrant.

4.1*      Indenture, dated as of July 11, 1994, among the Registrant, the
          Guarantors named therein and Fleet National Bank (formerly Shawmut
          Bank Connecticut, National Association), as Trustee, relating to the
          Notes (including forms of Notes and Guarantees).

4.1(a)**  Supplemental Indenture No. 1, dated December 29, 1994.

4.1(b)***Supplemental Indenture No. 2, dated January 2, 1996.

4.1(c)    Supplemental Indenture No. 3, dated December 31, 1996 (filed as
          exhibit to the Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1996 and incorporated herein by
          reference).

4.1(d)    Supplemental Indenture No. 4, dated December 31, 1997.

4.2*      Form of Preferred Ship Mortgage, dated July 11, 1994, in favor of
          Fleet National Bank (formerly Shawmut Bank Connecticut, National
          Association), as Trustee.

4.3*      Form of Preferred Fleet Mortgage, dated July 11, 1994, in favor of
          Fleet National Bank (formerly Shawmut Bank Connecticut, National
          Association), as Trustee.

10.1***** Second Amendment of the Revolving Credit Agreement, dated as of
          July 11, 1994, among the Company, the Restricted Subsidiaries
          named therein and BankBoston, N.A. (formerly known as The First
          National Bank of Boston), individually and as agent.

10.2*     Revolving Credit Agreement, dated as of July 11, 1994, among the
          Registrant and the Restricted Subsidiaries named therein and The
          First National Bank of Boston, the other lenders that may become
          parties thereto, and The First National Bank of Boston, as agent.

10.2(a)** Instrument of Adherence dated December 29, 1994 by Barge Pennsylvania
          Corporation.

10.2(b)***Instrument of Adherence dated January 2, 1996, by Moran Bulk
          Corporation.

10.2(c)   Instrument of Adherence dated December 31, 1996 by Seaboard Barge
          Corporation, Petroleum Transport Corporation, and Moran Towing
          of Delaware, Inc. (filed as exhibit to the Registrant's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1996
          and incorporated herein by reference).

10.3*     Security Agreement, dated as of July 11, 1994 among the Registrant,
          its subsidiaries named therein and The First National Bank of
          Boston, individually and as agent (filed as exhibit to the
          Registrant's Annual Report on Form 10-K for the fiscal year ended
          December 31, 1996 and incorporated herein by reference).

10.3(a)   Security Agreement, dated December 31, 1996 among Seaboard barge
          Corporation, Petroleum Transport Corporation and Moran Towing of
          Delaware, Inc., and The First National Bank of Boston, individually
          and as agent (filed as exhibit to the Registrant's Annual Report on
          Form 10-K for the fiscal year ended December 31, 1996 and
          incorporated herein by reference).


                                          29
<PAGE>

10.4*     Note, dated July 11, 1994, of the Registrant and its subsidiaries
          named therein, payable to the order of The First National Bank of
          Boston in the principal amount of up to $10,000,000.

10.5(a)   Amended and Restated Term Loan Agreement, dated as of December 12,
          1997, among Moran Towing Corporation, the guarantors named therein,
          and BankBoston Leasing Inc., as lender and as agent.

10.5(b)   Amended and Restated Term Loan Agreement, dated as of December 12,
          1997, payable by Moran Towing Corporation, to BankBoston Leasing
          Inc.

10.5(c)   Guaranty in favor of BankBoston Leasing Inc., dated as of December 12,
          1997.

10.5(d)   First Preferred Fleet Mortgage, dated December 12, 1997, in favor
          of BankBoston Leasing Inc.

10.6      Agreement dated December 10, 1997, between Interlake
          Transportation, Inc. and Moran Towing Corporation.

10.7***** Licensed Agreement, effective June 10, 1995, between Seafarers
          International Union of North America, Atlantic, Gulf, Lakes and
          Inland Waters District, AFL - CIO, and Moran Towing of Texas
          Inc.

10.8***** Unlicensed Agreement, effective June 10, 1995, between Seafarers
          International Union of North America, Atlantic, Gulf, Lakes and
          Inland Waters District, AFL - CIO, and Moran Towing of Texas Inc.

10.9      Agreement, effective May 1, 1996, between Seafarers International
          Union of North America, Atlantic, Gulf, Lakes and Inland Waters
          District, AFL - CIO, and Moran Towing of Pennsylvania and Moran Towing
          of Maryland, divisions of Moran Towing Corporation.

10.10     Licensed Agreement, effective November 24, 1996, between American
          Maritime Officers and Moran Mid-Atlantic Corporation, Moran Towing
          of Pennsylvania Division.

10.11     Memorandum of Agreement between Local 333, United Marine Division,
          International Longshoremans Association, AFL-CIO, and Moran Towing
          & Transportation Co., Inc.

10.12     Agreement, effective May 1, 1997, between International
          Organization of Masters, Mates & Pilots and Moran Towing of
          Florida, Inc.

10.14*    Stockholder Agreement, dated as of July 11, 1994, between the
          Registrant and Malcolm W. MacLeod.

10.15*    Stockholder Agreement, dated as of July 11, 1994, between the
          Registrant and Edmond J. Moran, Jr.

10.16*    Stockholder Agreement, dated as of July 11, 1994, between the
          Registrant and Alan L. Marchisotto.

10.17*    Form of Stockholder Agreement, dated as of July 11, 1994, between
          the Registrant and each of Lakes Shipping Company, Inc., Paul R.
          Tregurtha, James R. Barker, Andrew P. Langlois, James A. Barker,
          Mark W. Barker and Karen E. Barker.

10.18*    1994 Stock Option Plan of the Registrant.

10.19*    Form of 1994 Stock Option Agreement.

10.20*    Moran Towing Corporation and Subsidiaries Supplemental Employee
          Retirement Plan.

10.21**** Marine Insurance Additional Retention Agreement between Global
          Marine Enterprises Ltd., Interlake Steamship Company, Lakes
          Shipping  Company, Inc., Moran Towing Corporation and Mormac Marine
          Transport, Inc..

12.1      Statement regarding computation of ratio of earnings to fixed
          charges.

21.1       List of Subsidiaries.


                                          30
<PAGE>


27.1      Financial Data Schedule - Fiscal year end 1997

27.2      Financial Data Schedule - Fiscal year ends 1995, 1996 and
          Quarters 1, 2, 3 of 1996

27.3      Financial Data Schedule - Quarter 1, 2, and 3 of 1997

    *     Filed as an Exhibit to the Registrant's Registration Statement on
          Form S-1 (No. 33 - 82624) and incorporated herein by reference.

   **     Filed as an Exhibit to the Registrant's Form 10-K for the year
          ended December 31, 1994 and incorporated herein by reference.

  ***     Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
          period ended March 31, 1996 and incorporated herein by reference.

 ****     Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
          period ended September 30, 1995 and incorporated herein by reference.

*****     Filed as an Exhibit to the Registrant's Form 10-K for the year
          ended December 31, 1995 and incorporated herein by reference.

******    Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
          period ended June 30, 1997, and incorporated herein by reference.

(b)       Reports on Form 8-K.  No reports on Form 8-K were filed during
          the last quarter of the year covered by this report.


                                      31
<PAGE>

                        Report of Independent Accountants


To the Board of Directors and Stockholders of
Moran Transportation Company


In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, of cash flows and of changes in stockholders'
equity present fairly, in all material respects, the financial position of Moran
Transportation Company and its subsidiaries (the "Company") at December 31, 1997
and 1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards 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 provide a reasonable basis for the opinion expressed above.






Price Waterhouse LLP

Stamford, Connecticut
February 20, 1998


                                      F-1
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                          December 31,
                                                                      -------------------
                                                                        1996       1997
                                                                      --------   --------
<S>                                                                   <C>        <C>
                      ASSETS

Current assets
  Cash and cash equivalents .......................................   $  5,827   $  9,945
  Accounts receivable, less allowance for doubtful accounts of $323
  and $288 at December 31, 1996 and 1997, respectively ............     12,744     14,319
  Inventory (note 4) ..............................................      4,395      4,161
  Unexpired insurance and other prepaid expenses ..................      2,065      2,487
  Restricted funds held for contingent consideration (note 1) .....     12,000         --
                                                                      --------   --------
     Total current assets .........................................     37,031     30,912

Investment in joint venture (note 6) ..............................      2,892      3,164
Insurance claims receivable .......................................      2,346      2,563
Fixed assets, net (note 3) ........................................    121,325    119,920
Shipyard assets held for sale (note 13) ...........................      3,036         --
Restricted funds held for contingent consideration (note 1) .......      1,600         --
Other assets ......................................................      4,487      3,731
                                                                      --------   --------

Total assets ......................................................   $172,717   $160,290
                                                                      ========   ========
</TABLE>



  See accompanying notes to consolidated financial statements


                                      F-2
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                           December 31,
                                                                       -------------------
                                                                         1996       1997
                                                                       --------   --------
<S>                                                                    <C>        <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Trade accounts payable ...........................................   $  4,486   $  3,602
  Current portion of long-term debt (note 8) .......................         --        168
  Accounts payable to joint venture ................................      1,066        477
  Accrued interest payable .........................................      4,308      4,331
  Other accrued liabilities ........................................      4,227      3,936
  Backpay liability ................................................        885        837
  Income taxes payable (note 9) ....................................        926         --
  Liability for contingent consideration (note 1) ..................     12,000         --
                                                                       --------   --------
     Total current liabilities .....................................     27,898     13,351

Long-term debt (note 8) ............................................     80,000     83,252
Insurance claims reserves ..........................................      5,989      7,227
Deferred income taxes (note 9) .....................................     34,150     32,450
Postretirement benefits other than pensions (note 10) ..............      3,995      4,321
Liability for contingent consideration (note 1) ....................      1,600         --
Other liabilities ..................................................      6,060      5,045
                                                                       --------   --------
     Total liabilities .............................................    159,692    145,646

Commitments and contingencies (notes 11 and 12)

Mandatorily redeemable capital stock 4,000 shares outstanding ......      1,000      1,000

Stockholders' Equity
   Common stock, par value $0.01 per share authorized-100,000 shares
   issued and outstanding 40,600 shares ............................          1          1

   Capital surplus .................................................     10,149     10,149
   Retained earnings ...............................................      1,875      3,494
                                                                       --------   --------
   Total stockholders' equity ......................................     12,025     13,644
                                                                       --------   --------

   Total liabilities and stockholders' equity ......................   $172,717   $160,290
                                                                       ========   ========
</TABLE>


  See accompanying notes to consolidated financial statements


                                      F-3
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

                        Consolidated Statements of Income
                 (Dollars in thousands, except per share amount)

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                               -----------------------------------
                                                                 1995          1996        1997
                                                               ---------    ---------    ---------
<S>                                                            <C>          <C>          <C>
Operating revenue ..........................................   $  77,343    $  91,458    $ 100,526
Cost of operations
   Operating expenses ......................................      45,672       57,451       66,090
   Depreciation ............................................       7,412        7,719        7,769
                                                               ---------    ---------    ---------
    Total cost of operations ...............................      53,084       65,170       73,859
                                                               ---------    ---------    ---------
Gross profit ...............................................      24,259       26,288       26,667
General and administrative expenses ........................      14,221       14,283       13,755
                                                               ---------    ---------    ---------
Operating income ...........................................      10,038       12,005       12,912
Interest expense ...........................................     (10,192)     (10,132)     (10,026)
Interest income ............................................          51          146          346
Equity in loss from joint venture (note 6) .................        (188)         (66)        (727)
Other income/(expense), net ................................         155          160         (273)
                                                               ---------    ---------    ---------
(Loss)/income before provision for income taxes ............        (136)       2,113        2,232
Provision for income taxes (note 9) ........................         200          808          613
                                                               ---------    ---------    ---------
   Net (loss)/income .......................................   $    (336)   $   1,305    $   1,619
                                                               =========    =========    =========

(Loss)/earnings per share
   Basic ...................................................       (7.53)       29.26        36.30
                                                               =========    =========    =========
   Diluted .................................................       (7.53)       28.56        35.20
                                                               =========    =========    =========

Weighted average number of shares outstanding (in thousands)
   Basic ...................................................        44.6         44.6         44.6
                                                               =========    =========    =========
   Diluted .................................................        44.6         45.7         46.0
                                                               =========    =========    =========
</TABLE>


  See accompanying notes to consolidated financial statements


                                      F-4
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                                       --------------------------------
                                                         1995        1996        1997
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>
Cash flows from operating activities
     Net (loss)/income .............................   $   (336)   $  1,305    $  1,619

Adjustments to reconcile net (loss)/income to net
cash provided by operating activities:
     Depreciation and amortization .................      9,472      11,092      11,666
     Deferred income taxes .........................        267      (1,898)     (1,661)
     Equity in loss from joint venture .............        188          66         727
     Loss on disposal of floating equipment ........         --         128          90
Changes in operation assets and liabilities:
     Accounts receivable ...........................     (1,500)       (697)     (1,575)
     Other current assets ..........................       (425)       (182)        219
     Accounts payable and accrued expenses .........     (2,528)      2,811      (1,740)
     Income taxes payable ..........................        151         (69)       (926)
     Insurance claims receivable ...................       (823)       (629)       (217)
     Insurance claims reserve ......................        530       1,658       1,238
     Other assets and liabilities ..................        495      (2,158)       (679)
                                                       --------    --------    --------
Net cash provided by operating activities ..........      5,491      11,427       8,761
                                                       --------    --------    --------

Cash flows from investing activities
     Capital expenditures ..........................     (5,832)     (5,110)    (12,713)
     Capital contribution to joint venture .........         --          --      (1,000)
     Net proceeds from constructive total loss .....         --          --       2,800
     Proceeds from sale of leasehold interest ......         --          --       2,850
                                                       --------    --------    --------
Net cash used for investing activities .............     (5,832)     (5,110)     (8,063)
                                                       --------    --------    --------

Cash flows from financing activities
     Proceeds from borrowings ......................      1,000       2,250       3,420
     Repayment of debt .............................     (1,512)     (5,664)         --
     Debt issuance costs ...........................       (140)        (82)         --
                                                       --------    --------    --------
Net cash (used for)/provided by financing activities       (652)     (3,496)      3,420
                                                       --------    --------    --------
Net (decrease)/increase in cash and cash equivalents       (993)      2,821       4,118
Cash and cash equivalents at beginning of period ...      3,999       3,006       5,827
                                                       --------    --------    --------

Cash and cash equivalents at end of period .........   $  3,006    $  5,827    $  9,945
                                                       ========    ========    ========

Cash paid during period for
     Interest ......................................   $  9,743    $  9,816    $  9,579
                                                       ========    ========    ========
     Income taxes ..................................   $    469    $  2,742    $  3,656
                                                       ========    ========    ========
</TABLE>

 See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Equity
                             (Dollars in thousands)



<TABLE>
<CAPTION>
                                                        Common    Capital    Retained
                                                        Stock     Surplus    Earnings      Total
                                                       --------   --------   --------    --------
<S>                                                    <C>        <C>        <C>         <C>
Balance at December 31, 1994 .......................   $      1   $  9,999   $    906    $ 10,906

Net loss ...........................................         --         --       (336)       (336)
                                                       --------   --------   --------    --------

Balance at December 31, 1995 .......................   $      1   $  9,999   $    570    $ 10,570

Transfer of mandatorily redeemable capital stock....         --        150         --         150

Net income .........................................         --         --      1,305       1,305
                                                       --------   --------   --------    --------

Balance at December 31, 1996 .......................   $      1   $ 10,149   $  1,875    $ 12,025

Net income .........................................         --         --      1,619       1,619
                                                       --------   --------   --------    --------

Balance at December 31, 1997 .......................   $      1   $ 10,149   $  3,494    $ 13,644
                                                       ========   ========   ========    ========
</TABLE>


                                      F-6
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997


(1) Moran Transportation Company

Moran Transportation Company ("Moran" or the "Company") is a Delaware
corporation, incorporated on June 2, 1994. Moran was organized to acquire
(the "Acquisition") all of the outstanding common stock of Moran Towing
Corporation (the "Predecessor"), a company which provided tug services and
marine transportation services, primarily on the East and Gulf coasts of the
United States. The Company is a majority owned subsidiary of Lakes Shipping
Company, Inc. On July 11, 1994, the Acquisition was consummated and was
accounted for as a purchase. In connection with the Acquisition, the
Predecessor transferred its 20% equity interest in four partnerships to
entities formed by the stockholders of the Predecessor. When the Company
acquired the Predecessor, certain contingent liabilities of the Predecessor,
primarily related to certain limited and defined guarantees given by the
Predecessor, were assumed. These liabilities were fully reserved and funded
by placing $13.6 million in escrow. In February 1997, $12.0 million of the
escrow amount was released to the former shareholders upon the release of the
Company from the partnership guarantees. There was no impact on the Company,
other than assets and liabilities being reduced. The Company released the
remaining $1.6 million escrow during the third quarter when a subsidiary of
the Company terminated its leasehold interest in Jakobson Shipyard. The loss
related to the lease termination was not material.

(2) Summary of Accounting Policies

    Principles of Consolidation

The consolidated financial statements include the accounts of Moran
Transportation Company and its subsidiaries. The financial statements also
include a 50% owned joint venture in a marine tank barge operation which is
accounted for under the equity method of accounting. All material intercompany
items and transactions are eliminated in consolidation.

    Reclassifications

Certain reclassifications have been made to the prior periods' consolidated
financial statements to conform with the December 31, 1997 presentation.

    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 disclosures, at the
date of the financial statements. Similarly, estimates and assumptions are
required for the reporting of revenues and expenses. Actual results could differ
from the estimates that were used.


                                      F-7
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997


    Change in Accounting Principles

In October 1995, Financial Accounting Standard No. 123 (FAS 123) - "Accounting
for Stock-Based Compensation" was issued and is effective for the Company on
January 1, 1996. FAS 123 permits, but does not require, a fair value based
method of accounting for employee stock option plans which results in
compensation expense being recognized in the results of operations when stock
options are granted. The Company plans to continue to use the current intrinsic
value based method of accounting for its plan.

In 1997, Financial Accounting Standards No. 128 (FAS 128) - "Earnings Per Share"
was issued and is effective for the Company on January 1, 1997. FAS 128 changes
the calculation of earnings per share ("EPS") under generally accepted
accounting principles in the U.S. to be more consistent with international
standards. Under the new standards, companies replace the reporting of "primary"
EPS with "basic" EPS. Basic EPS is calculated by dividing the income or loss
available to common shareholders by the weighted average number of common shares
outstanding for the period, without consideration of common stock equivalents.
"Fully diluted" EPS is replaced by "diluted" EPS, which will be similar to fully
diluted EPS as previously computed.

    Revenue Recognition

Tug and barge revenue is recognized as services are performed.

    Drydocking Expenses

Drydocking and related costs are capitalized when incurred and amortized over
the period until the next drydocking, usually 30 months.

    Fixed Assets/Depreciation

Fixed assets include the cost of land, building, floating equipment, capitalized
drydocking costs, construction work-in-progress, improvements to leaseholds and
equipment. Interest incurred during the construction of floating equipment is
capitalized. Depreciation is provided on the straight-line method over the
estimated useful lives of the assets which range from three to twenty-five
years. Major renewals and betterments are capitalized, while replacements,
maintenance and repairs which do not improve or extend the life of the assets
are expensed.

    Income Taxes

The Company and its wholly owned domestic subsidiaries file a consolidated
Federal income tax return. The Company accounts for deferred income taxes using
the asset and liability method as prescribed under Financial Accounting Standard
No. 109, "Accounting for Income Taxes" (FAS 109). The Company provides a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax asset will not be realized.


                                      F-8
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997


    Cash and Cash Equivalents

The Company considers all highly liquid investments having original maturities
of three months or less to be cash equivalents.

    Inventory

Inventories are valued at the lower of cost (first-in, first-out basis) or
market and include fuel, replacement parts, supplies and repair materials.

    Deferred Financing Costs

Expenses incurred in connection with debt issuance have been deferred and are
being amortized using the interest method over the terms of the related debt
agreements.

    Environmental Expenditures

Environmental expenditures are expensed or capitalized, as appropriate.
Expenditures that result from the remediation of an existing condition caused by
past operations, that are not attributable to current or future revenues, are
expensed. Liabilities are recognized for remedial activities when the cleanup is
probable and the cost can be reasonably estimated, generally coinciding with the
Company's commitment to a formal plan of action.

    Earnings Per Share

Effective December 31, 1997, earnings per share were calculated in accordance
with FAS 128, accordingly prior years earning per share have been restated.

Basic earnings per share is determined by dividing net income/(loss) by the
weighted average number of common shares outstanding during the period, without
consideration of common stock equivalents. Diluted earnings per share is
determined by dividing net income/(loss) by the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period.

(3) Fixed Assets

Fixed assets consist of the following:

                                                           Dec. 31,     Dec. 31,
                                                             1996         1997
                                                           --------     --------
Floating equipment ...................................     $133,828     $135,550
Capitalized drydocking costs .........................        7,875       10,123
Construction in progress .............................          125        2,425
Shipyard and pier improvements .......................           70          171
Furniture, fixtures and leasehold improvements .......          641          903
Equipment ............................................          147          199
Land .................................................          663          663
                                                           --------     --------

Less: Accumulated depreciation and amortization ......       22,024       30,114
                                                           --------     --------
Total ................................................     $121,325     $119,920
                                                           ========     ========


                                      F-9
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997


(4) Inventories of Fuel, Supplies and Repair Materials

The components of inventory are as follows:

                                                           Dec. 31,     Dec. 31,
                                                             1996         1997
                                                            ------       ------
Fuel .................................................      $1,103       $  916
Diesel parts .........................................       1,564        1,583
Propeller wheels and shafts ..........................       1,230        1,221
Rope, fenders, supplies and miscellaneous ............         498          441
                                                            ------       ------
Total ................................................      $4,395       $4,161
                                                            ======       ======

(5) Investment in affiliated partnerships

Subsidiaries of the Predecessor had a 20% interest in each of four partnerships
with subsidiaries of Overseas Shipholding Group, Inc., each of which partnership
is the bareboat charterer of one U.S. flag tanker. These interests were
transferred to the stockholders of the Predecessor as part of the Acquisition.

The Predecessor had provided certain financial guarantees in connection with the
acquisition of the affiliated partnerships. These undertakings were limited to
$12,000 in the aggregate and among others, guaranteed (i) payment of the equity
portion of charter hire to the owner of the affiliated partnership's tankers,
(ii) certain indemnity obligations arising under the bareboat charters,
including tax obligations, and (iii) the obligation of the partnerships to
maintain and insure the tankers. These guarantees survived the Acquisition and
remained the obligation of the Company. To secure these guarantees, $12,000 of
the purchase price was put into escrow to be released when the guarantees
expired in 2003, to the extent not called upon. These funds were included in
restricted funds held for contingent consideration. In February 1997, the
Company was released from these obligations and the $12,000 escrow related to
these guarantees was distributed to the former shareholders.

(6) Investment in Joint Venture

The Company has invested in a 50% owned joint venture which owns and operates an
ocean going petroleum barge. The Company accounts for the joint venture under
the equity method.

Partner's capital in the Company's 50% investment in the joint venture was $794,
$968, and $1,480 at December 31, 1995, 1996 and 1997 respectively. The Company
received no cash dividends in the three years ended December 31, 1997 and made a
partnership contribution of $1,000 in 1997 to cover dry-docking related costs.


                                      F-10

<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997

The Company's 50% interest in the assets, liabilities, revenues, expenses and
income of the joint venture is summarized as follows:

                                                            As of December 31,
                                                            ------------------
                                                            1996         1997
                                                            ----         ----
  Total assets......................                       $1,483       $1,858
                                                           ======       ======
  Total liabilities.................                         $516         $378
                                                             ====         ====

                                           For the years ended December 31,
                                           --------------------------------
                                        1995                1996           1997
                                        ----                ----           ----
  Total revenues....................   $1,939              $2,528        $1,460
                                       ======              ======        ======
  Total expenses....................   $1,887              $2,354        $1,947
                                       ======              ======        ======
  Equity in income/(loss)...........      $52                $174         $(487)
                                          ===                ====         =====

In connection with the Acquisition, the Company increased the carrying value of
its investment by $2,519 to fair market value. The Company is amortizing the
increase over ten years, representing the remaining useful life of the joint
venture's barge. Amortization was $240 per year for the three years ending
December 31, 1997.

(7) Insurance Subsidiary

The consolidated financial statements include the accounts of the Company's
wholly-owned insurance subsidiary whose fiscal year end is March 31. Summarized
unaudited financial information based on the Company's reporting periods is as
follows:

                                                           As of December 31,
                                                           ------------------
                                                           1996         1997
                                                           ----         ----
  Total assets......................                      $2,122       $2,188
                                                          ======       ======
  Total liabilities.................                        $387         $384
                                                            ====         ====

                                          For the years ended December 31,
                                          --------------------------------
                                       1995              1996           1997
                                       ----              ----           ----
  Total income (a)..................    $10              $118            $70
                                        ===              ====            ===

(a)  Total income includes interest income of $23, $156 and $91 for the years
     ended December 31, 1995, 1996 and 1997, respectively.


                                      F-11
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997


(8) Long-term Debt

Long-term debt at December 31 was as follows:

<TABLE>
<CAPTION>
                                                                         1996      1997
                                                                         ----      ----

<S>                                                                     <C>       <C>
11.75% Series B First Preferred Ship Mortgage Notes due July 15, 2004   $80,000   $80,000
 8.1% Term Loan due June 1, 2005 ....................................        --     3,420
                                                                        -------   -------
                                                                         80,000    83,420

     Less: Current maturities .......................................        --       168
                                                                        -------   -------
     Long-term portion ..............................................   $80,000   $83,252
                                                                        =======   =======
</TABLE>

As part of the Acquisition, the Company issued $80,000 of 11.75% First Preferred
Ship Mortgage Notes due July 15, 2004. In November 1994, pursuant to an Exchange
and Registration Rights Agreement, the Company exchanged all of such Notes for
its 11.75% Series B First Preferred Ship Mortgage Notes, the issuance of which
had been registered under the federal securities laws. Interest on the notes is
payable semi-annually on January 15 and July 15. The Notes are redeemable, in
cash, at the option of the Company, in whole or in part in amounts of $1,000 or
an integral multiple of $1,000 on or after July 15, 1999 at the redemption
prices set forth below, plus accrued and unpaid interest if redeemed during the
12-month period commencing on July 15 of the year indicated below:

                       1999                       108%
                       2000                       106
                       2001                       104
                       2002                       102
                       2003 and thereafter        100

All of the Company's subsidiaries (the "Guarantors") have guaranteed the $80,000
of Series B First Preferred Ship Mortgage Notes. Accordingly, the financial
statements of the Guarantors have not been included, individually or on a
combined basis, because the guarantors have fully and unconditionally guaranteed
such Notes on a joint and several basis, and because the aggregate net assets,
earnings and equity of the Guarantors are substantially equivalent to the net
assets, earnings and equity of the Company on a consolidated basis and,
therefore, separate financial statements concerning the Guarantors are not
deemed material to investors.

The Notes rank pari passu with all existing and future senior indebtedness of
the Company and senior to all subordinated indebtedness of the Company and are
secured by substantially all of the Company's floating equipment. The indenture
contains certain restrictions on incurrence of debt, liens, sales of assets,
investments, capital expenditures, and dividend and upstream payments. The
Company must also comply with certain other financial covenants.


                                      F-12
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997


On December 1, 1997, the Company purchased a tug from an affiliated company. As
part of that transaction, the Company entered into a $3.4 million term loan
which is payable in 24 quarterly installments through June 1, 2005, with a
balloon payment equal to 50% of the original loan value. Interest is based upon
LIBOR plus 1.75% but is fixed through June 1, 1999 at 8.1%. The loan is secured
by the tug April Moran.

The Company has a Senior Credit Facility, which consists of a revolving line of
credit (the "Revolving Credit Facility") of up to $10,000, including a letter of
credit facility (the "Letter of Credit Facility") of up to $5,000. Any amounts
outstanding under the letter of Credit Facility reduce the available credit
under the Revolving Credit Facility. The accounts receivable and inventory of
the Company primarily secure the Revolving Credit Facility. At December 31, 1996
and 1997, letters of credit outstanding were $472 and $472, respectively. At
year-end, the Company had no borrowings outstanding under the Revolving Credit
Facility which expires on July 11, 2000.

The Company has deferred debt placement costs incurred in connection with the
$80,000 of First Preferred Ship Mortgage Notes. The unamortized balance of such
fees was $2,854 and $2,415 at December 31, 1996 and 1997, respectively.

(9) Income Taxes

In accordance with FAS 109, the deferred tax provision was determined under the
asset and liability approach. Deferred tax assets and liabilities were
recognized on differences between the book and tax basis of assets and
liabilities using current tax rates. The provision for income taxes is the sum
of the amount of income tax paid or payable for the year as determined by
applying current tax laws to the taxable income for the current year and the net
change in the Company's deferred tax assets and liabilities during the year.

The components of the provision for income taxes are as follows:

                                       For the years ended December 31,
                                       --------------------------------
                                       1995         1996          1997
                                       ----         ----          ----

        Current......................  $776        $2,680        $2,274
        Deferred.....................  (576)       (1,872)       (1,661)
                                       ----        ------        ------
                                       $200          $808          $613
                                       ====        ======        ======

This provision includes state tax expense for the years ended December 31, 1995,
1996 and 1997 of $279, $34 and $182, respectively.


                                      F-13
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997

The reconciliation of the Company's effective income tax rate and the statutory
income tax rate are as follows:

                                                For the years ended December 31,
                                                --------------------------------
                                                 1995          1996        1997
                                                 ----          ----        ----
         Statutory income tax rate............. (34.0)%        35.0%       35.0%
         Increases (decreases) due to:

              State taxes...................... 135.8           6.4         5.3
              Meals and entertainment..........  40.7           2.0         1.9
              Rate differential................   -            (2.6)        1.8
              Release of valuation allowance...   -             -         (17.3)
              Other-net........................   4.8          (2.6)        0.8
                                                -----          ----        ----
         Effective income tax rate............. 147.3%         38.2%       27.5%
                                                =====          ====        ====

Under FAS 109, temporary differences which give rise to a significant portion of
net deferred tax liabilities were as follows:

                                                          Dec. 31,     Dec. 31,
                                                            1996         1997
                                                          --------     --------
Deferred tax assets
   State and local taxes .............................    $    816     $    749
   Insurance claims reserves .........................         746          623
   Post retirement benefits other than pensions ......       1,358        1,469
   Capital loss carry forward ........................         386           --
   Additional compensation ...........................         234          268
   Hull insurance aggregate reserves .................         759        1,179
   P & I insurance aggregates reserve ................         373          373
   Backpay liability .................................       1,782        1,403
   Other items-net ...................................         445         (109)
                                                          --------     --------
   Total deferred tax assets .........................       6,899        5,955
                                                          --------     --------
Deferred tax liabilities
   Depreciation and amortization .....................     (36,307)     (34,411)
   Pension benefits ..................................        (466)        (368)
   Capitalized drydocking costs ......................      (1,606)      (2,263)
   Land valuation ....................................        (197)        (197)
   Fuel inventory costs ..............................        (374)        (311)
   Capitalized environmental remediation costs .......        (820)          --
                                                          --------     --------
   Total deferred tax liabilities ....................     (39,770)     (37,550)

   Valuation allowance ...............................        (721)        (335)
                                                          --------     --------
   Net deferred tax liabilities ......................    $(33,592)    ($31,930)
                                                          ========     ========

The current portion of net deferred income taxes of $558 and $520 at December
31, 1996 and 1997, respectively, is included in other prepaid expenses.


                                      F-14
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997

(10) Pension, Postretirement Benefit and Profit Sharing Plans

      Pension

The net periodic pension expense for the Company's defined benefit pension plan
is comprised of the following:

                                                For the years ended December 31,
                                                --------------------------------
                                                    1995       1996       1997
                                                  -------    -------    -------
Service cost-benefits earned during the period    $   286    $   327    $   305
Interest cost projected benefit obligation ....       557        559        532
Actual return on plan assets ..................      (988)      (757)    (1,043)
Net amortization and deferral .................       425        117        438
                                                  -------    -------    -------
Net periodic pension expense ..................   $   280    $   246    $   232
                                                  =======    =======    =======

The following table sets forth the defined benefit pension plan's funded status
and amounts recognized in the Company's financial statements at December 31,
1996 and December 31, 1997:

                                                             Dec. 31,   Dec. 31,
                                                               1996       1997
                                                              ------     ------
Actuarial present value of benefit obligation:
Vested benefits obligation ...............................    $5,176     $5,847
                                                              ======     ======

Accumulated benefit obligation ...........................    $5,383     $6,044
                                                              ======     ======

Projected benefit obligation .............................    $7,099     $7,878
Fair value of plan assets ................................     7,775      8,338
                                                              ------     ------
Plan assets in excess of projected benefit obligation ....       676        460
Unamortized loss .........................................       691        675
                                                              ------     ------

Prepaid pension costs ....................................    $1,367     $1,135

                                                             Dec. 31,   Dec. 31,
                                                               1996       1997
                                                              ------     ------
The actuarial assumptions are:
Discount rate ............................................      7.50%      7.25%
Rate of increase in compensation levels ..................       4.0%       4.0%
Expected long-term rate of return on assets ..............       8.0%       8.0%

The Company has a defined benefit pension plan covering substantially all
shoreside non-union employees. The plan generally provides benefit payments
using a formula that is based on an employee's compensation and length of
service. The Company's policy is to fund current service costs. The plan's
assets are primarily invested in a managed bond portfolio with a portion
invested in a managed equity portfolio. In 1996, a $69 contribution was made for
the 1995 plan year. Since the plan is fully funded, no contribution is required
for the 1997 plan year. In addition, the Company has an unfunded supplemental


                                      F-15
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

                    Three-year period ended December 31, 1997

employee retirement plan ("SERP") for certain executives. The Company's
pension SERP liability was $575 and $651 at December 31, 1996 and 1997
respectively.

In accordance with contractual agreements, the Company makes contributions to
union-sponsored pension and welfare plans. Such contributions were $956, $1,965
and $2,287 for years December 31, 1995, 1996 and 1997, respectively. In
addition, the Company has a defined contribution pension plan for non-union
fleet employees. The Company made contributions of $182, $201 and $333 for the
years ended December 31, 1995, 1996 and 1997, respectively.

Profit Sharing Plan

The Company has a non-contributory profit-sharing plan covering substantially
all shoreside non-union employees. Company contributions are at the discretion
of the Board of Directors. The Company made contributions of $556, $674 and $681
for the years ended December 31, 1995, 1996 and 1997, respectively. In addition,
the Company has an unfunded profit sharing SERP for certain executives. The
Company's profit sharing SERP liability was $114 and $137 at December 31, 1996
and 1997, respectively.

Post Retirement Benefits

The Company provides certain health care and life insurance benefits to all
employees who retire from the Company and satisfy certain service and age
requirements.

Generally, the medical coverage pays a stated percentage of most medical
expenses reduced for any deductible and payments made by Medicare or other group
coverage. Benefits are administered through an insurance carrier paid by the
Company. The cost of providing these benefits is shared with retirees. The cost
sharing provisions vary depending on the retirement date. The plan is unfunded.
The premium cost of providing these benefits was $281, $265 and $271 for the
years ended December 31, 1995, 1996 and 1997, respectively.

The Company accounts for retiree health care costs in accordance with Financial
Accounting Standard No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." This statement requires the accrual of the cost of
providing postretirement benefits, including medical and life insurance
coverage, during the active service period of the employee.


                                      F-16
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997

The following table sets forth the Company's accrued postretirement benefit
liability recognized in the Company's Consolidated Balance Sheets at December
31, 1996 and 1997 and related postretirement cost for the years ended December
31, 1996 and 1997.

                                                                   December 31,
                                                                 ---------------
                                                                  1996     1997
                                                                 ------   ------
Actuarial present value of postretirement benefit obligation:
  Retirees ...................................................   $2,955   $3,590
  Fully eligible active participants .........................      890      842
  Other active participants ..................................      801      984
                                                                 ------   ------
Accumulated postretirement benefit obligation ................    4,646    5,416
Unrecognized net loss ........................................      663    1,107
                                                                 ------   ------
Accrued postretirement benefit liability .....................   $3,983   $4,309
                                                                 ======   ======

Net periodic postretirement benefit cost for periods ended December 31, 1996 and
December 31, 1997 included the following components:

                                                                     1996   1997
                                                                     ----   ----
Service cost of benefits earned ..................................   $161   $176
Interest cost on accumulated postretirement benefits obligation ..    318    366
Amortization of unrecognized loss ................................     32     49
                                                                     ----   ----
Net periodic postretirement benefit cost .........................   $511   $591
                                                                     ====   ====

The discount rate used in determining the APBO was 7.5% in fiscal 1996 and 7.25%
in 1997. The assumed health care cost trend rate used for measuring the APBO was
divided into two categories:

                                                                    1996   1997
                                                                    ----   ----
Under age 65 participants .......................................   11.9%  10.8%
Over age 65 participants ........................................   14.5%  12.8%

Over 17 years, rates were assumed to remain unchanged at 6.1% for the under age
65 participants and 6.3% for the over age 65 participants, for 1996 and for
1997.

If the health care cost trend rate was increased 1 percent, the APBO as of
December 31, 1996, would have increased 11.6%. The effect of this change on the
aggregate of service and interest cost for period ended December 31, 1996 would
be an increase of 15.2%. As of December 31, 1997, the effect on the APBO would
be an increase of 11.6% and for period service and interest an increase of
14.3%.


                                      F-17
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997

(11) Commitments

On November 8, 1996, a subsidiary of the Company entered into a 10 year bareboat
charter for the barge Portsmouth. The Company has an option to purchase the
barge at the end of the seventh year and at the end of the lease term. The
annual charterhire for this vessel is $1.0 million over the term of the lease.

Minimum annual rental commitments at December 31, 1997, under non-cancelable
operating leases, including the bareboat charter for the Portsmouth, are as
follows:

              1998........................................    $1,888
              1999........................................     1,840
              2000........................................     1,842
              2001........................................     1,789
              2002........................................     1,713
              2003 and beyond.............................     4,786

Total gross rent expense was $1,054, $1,160 and $1,896 for the years ended
December 31, 1995, 1996 and 1997, respectively.

(12) Contingent Liabilities

In February 1994, a lawsuit was filed in United States District Court for the
Eastern District of New York by the Town of Oyster Bay (the "Town"), New York,
against the Company and several other potentially responsible parties ("PRP").
The Town is seeking indemnification for remediation and investigation costs that
have been or will be incurred for a Federal Superfund site in Syosset, New York,
which served as a Town owned and operated landfill between 1933 and 1975. In a
Record of Decision issued on or about September 27, 1990, the EPA set forth a
remedial design plan, the cost of which was estimated at $25,000 and is
reflected in the Town's lawsuit. In an Administrative Consent Decree entered
into between the EPA and the Town on December 6, 1990, the Town agreed to
undertake remediation at the site.

While the current state of law imposes joint and several liability upon PRPs, as
a practical matter costs of these sites are typically shared with other PRPs.
The Company believes that its portion of the hazardous materials disposed of at
the site, if any, is insignificant when compared to that of the other PRPs.
While management is unable to estimate the Company's future liability, if any,
it does not believe such liability would have a material adverse effect on the
Company's financial position or results of operations.

(13) Shipyard Assets Held for Sale

In the third quarter of 1997, the owner of the Jakobson Shipyard site sold its
property to the State of New York and the Town of Oyster Bay. At the same time,
Jakobson Shipyard, Inc., a subsidiary of the Company, terminated its leasehold
interest in the property and received $2.9 million. The loss related to the
lease termination was not material.


                                      F-18
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997

(14) Financial Instruments

The following disclosure of the estimated fair value of financial instruments at
December 31, 1996 and 1997 is made in accordance with the requirements of FAS
No 107, "Disclosure about Fair Market of Financial Instruments". The estimated
fair value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.

The Company's financial instruments consist of cash, short-term trade
receivables and payables, and short and long-term debt. With the exception of
long-term debt, the carrying amounts of these financial instruments approximate
their fair value.

Based upon the average of the bid and asked price for the 11.75% Series B First
Preferred Ship Mortgage Notes at their respective year ends, the fair value of
the Company's Notes as of December 31, 1996 and 1997 is approximately $86,700
and $88,800 respectively. The Company's other long-term debt is considered to be
at fair value.

Financial instruments which potentially subject the Company to concentration of
credit risk consist solely of trade receivables. The Company grants credit terms
in the normal course of business to its customers. The Company has a diverse
customer base and as part of its on-going procedures the Company monitors the
credit worthiness of its customers. Bad debt write-offs have historically been
minimal.

The fair value information presented herein is based on pertinent information
available to management as of December 31, 1996 and 1997. Although management is
not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these consolidated financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.

(15) Related Party Transactions

In 1995, the Company and certain related parties (the "Group") negotiated
insurance coverage with third party providers in order to obtain lower premiums.
In connection with the new coverage, the Group entered into a risk sharing
agreement whereby the Company would bear a portion of certain claims expense of
the Group in proportion to its past experience. This percentage is reset each
year. The Company believes its agreement is at arms length. The amount due from
related parties at December 31, 1997 was $222.


                                      F-19
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   Notes to Consolidated Financial Statements
                             (Dollars in thousands)

                    Three-year period ended December 31, 1997

(16) Mandatorily Redeemable Capital Stock

Mandatorily Redeemable Capital Stock is the same as the Company's Common Stock
in terms of voting rights, dividends and other attributes except that under
certain circumstances it is redeemable at the option of stockholders or the
Company at fair market value. As of December 31, 1996 and 1997, the fair market
value of the shares was $250 per share. The Company's Common Stock contains no
redemption features. During 1996, 600 shares of mandatorily redeemable stock
were transferred into 600 shares of common stock and are no longer subject to
any put rights or mandatorily redeemable features.

(17) Stock Option Plan

On July 11, 1994 the Company adopted a Stock Option Plan (the "1994 Plan") which
became effective on the date of the Acquisition to provide an incentive to
certain employees of the Company to remain in the employ of the Company and to
increase their personal interest in the success of the Company. The maximum
number of shares of the Company's Common Stock issuable under the 1994 Plan is
2,000, of which 1,640 were granted in the period ended December 31, 1994 at a
price equal to the fair market value of the Company's Common Stock at the date
of the grant. None of the options granted were exercised in the period ended
December 31, 1996. Participation in the 1994 Plan is limited to employees of the
Company designated by the Plan Committee. Non-employee directors of the Company
are not eligible to participate. A total of 350 options were granted in 1996. No
options were granted in 1997.

The Company applies APB Opinion 25 and related Interpretations in accounting for
the 1994 Plan. Accordingly, no compensation cost has been recognized for its
fixed stock options plan. Had the compensation cost for the stock based
compensation plan been determined in accordance with FAS 123, the Company's net
income and earnings per share would not have been materially different.

                                      F-20
<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.



                                                MORAN TRANSPORTATION COMPANY
                                                    (Registrant)


March 30, 1998                                  /s/ Jeffrey J. McAulay
                                                ----------------------
                                                Jeffrey J. McAulay
                                                Vice President of
                                                Finance and Administration
                                                (Principal Financial Officer)
                                                and Director

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 and on the dates indicated.


March 30, 1998                                  /s/ Paul R. Tregurtha
                                                ----------------------
                                                Paul R. Tregurtha
                                                Chairman of the Board
                                                and Director


March 30, 1998                                  /s/ James R. Barker
                                                --------------------
                                                James R. Barker
                                                Vice-Chairman of the Board
                                                and Director


March 30, 1998                                  /s/ Malcolm W. MacLeod
                                                -----------------------
                                                Malcolm W. MacLeod
                                                President, Chief Executive
                                                Officer and Director
<PAGE>

                                   SIGNATURES


March 30, 1998                                  /s/ Edmond J. Moran, Jr.
                                                -------------------------
                                                Edmond J. Moran, Jr.
                                                Director


March 30, 1998                                  /s/ Robert J. Patten
                                                ---------------------
                                                Robert J. Patten
                                                Controller (Principal
                                                Accounting Officer)


March 30, 1998                                  /s/ Andrew P. Langlois
                                                -----------------------
                                                Andrew P. Langlois
                                                Director


March 30, 1998                                   /s/ Mort Lowenthal
                                                 -------------------
                                                 Mort Lowenthal
                                                 Director


                    SUPPLEMENTAL INFORMATION TO BE FURNISHED
                 WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF
                THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
                  SECURITIES PURSUANT TO SECTION 12 OF THE ACT

The registrant has not sent, and does not at present intend to send, to its
security holders either: (1) An annual report to security-holders covering the
registrant's last fiscal year; or (2) A proxy statement, form of proxy or other
proxy soliciting material with respect to any annual or other meeting of
security-holders.