<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, 1998

                                       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 26, 1999, all of the registrant's 44,600 issued and
outstanding shares of Common Stock, par value $.01 per share, were held by Moran
Enterprises Corporation.

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


<PAGE>

                          MORAN TRANSPORTATION COMPANY
                          INDEX TO REPORT ON FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 1998


Item                                                                        Page
----                                                                        ----

PART I......................................................................   3
     1.    Business.........................................................   3
     2.    Properties.......................................................   9
     3.    Legal Proceedings................................................  12
     4.    Submission of Matters to a Vote of Security Holders..............  12

PART II.....................................................................  12
     5.    Market For Registrant's Common Equity and Related
           Stockholder Matters..............................................  12
     6.    Selected Consolidated Financial Data.............................  13
     7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations..............................  14
     8.    Financial Statements ............................................  21
     9.    Changes In and Disagreements With Accountants on
           Accounting and Financial Disclosure..............................  21

PART III....................................................................  22
     10.   Executive Officers and Directors of the Registrant...............  22
     11.   Executive Compensation...........................................  24
     12.   Security Ownership of Certain Beneficial Owners
           and Management...................................................  29
     13.   Certain Relationships and Related Transactions...................  29

PART IV.....................................................................  32
     14.   Exhibits, Financial Statement Schedules and Reports
           on Form 8-K......................................................  32


                                       2
<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 57 tugs and 19 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.

RECENT DEVELOPMENTS
On October 30, 1998, the Company completed a combination (the "Combination")
with Turecamo Maritime, Inc., a Delaware corporation, and certain of its
affiliated entities (the "Turecamo Entities"). The Turecamo Entities operate 33
tugboats and seven barges along the East Coast of the United States. Pursuant to
the relevant agreements, the existing equityholders of the Company contributed
all of their shares of capital stock of the Company to Moran Enterprises
Corporation ("Moran Enterprises") in exchange for (i) newly-issued shares of
common stock of Moran Enterprises which represent a substantial majority (but
less than 80%) of the common stock of Moran Enterprises and (ii) newly-issued
shares of Moran Enterprises preferred stock. Simultaneously, the existing
stockholders of the Turecamo Entities contributed all of their shares of capital
stock of each of the Turecamo Entities to Moran Enterprises in exchange for (i)
newly-issued shares of common stock of Moran Enterprises, including certain
shares which vest if certain financial criteria are met, which represent a
minority interest in the common stock of Moran Enterprises, and (ii) an
aggregate cash amount of $45.0 million. As a result, Moran Enterprises became
the new parent of both the Company and the Turecamo Entities. The Company's
11-3/4% First Preferred Ship Mortgage Notes due 2004 (the "Notes") are not
guaranteed by Moran Enterprises or the Turecamo Entities.


                                       3
<PAGE>

The Combination was financed through a $200 million syndicated Credit 
Agreement among Moran Enterprises, certain participating financial 
institutions and Fleet Bank, N.A., as administrative agent (the "New Senior 
Credit Facility"). A portion of the New Senior Credit Facility has been used 
(i) to finance the Combination and to pay related fees and expenses and (ii) 
to repay existing debt of the Turecamo Entities. In addition, the Company 
repaid a $3.5 million term loan from its cash reserves as part of the 
transaction. See "Management Discussion and Analysis of Financial Condition 
and Results of Operations - Liquidity and Capital Resources".

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. 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.

COMPETITION

     TUG SERVICES. The tug services industry is highly competitive. The Company
     competes with numerous competitors in the ports which its 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 that
     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,


                                       4
<PAGE>

     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 1998. 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 7% of the Company's total
     revenues in 1998.


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 that 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"). The Turecamo Entities joined the group for hull insurance, effective 
with the Combination. 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, the Mormac Group and now the 
Turecamo Entities for hull insurance, have 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, the Mormac Group and now the Turecamo 
Entities, have 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, 75% of any additional 
insurance claims expense attributable to the higher deductibles will be borne 
by the Company and 25% of any such additional insurance claims expense will 
be borne by the Mormac Group. The Company's broker is currently calculating 
the split between the Company, the Mormac entities and the Turecamo Entities. 
Amounts payable to the Company from members of the Mormac Group totaled 
$541,000 at December 31, 1998. 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.

                                       5
<PAGE>

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 documented by the United States Coast
     Guard. See also "Regulatory Matters-Occupational Health Regulations".

     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 Moran Enterprise'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 of 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 


                                       6
<PAGE>

     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
     cost 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.

     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


                                       7
<PAGE>

     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.

     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.


                                       8
<PAGE>

EMPLOYEES

The Company and its subsidiaries employed 655 persons as of December 31, 1998,
of which 522 are crew members or other seagoing personnel. As of December 31,
1998, 367 of such employees are represented by various unions. Union contracts
for certain marine employees of operating division or subsidiaries of the
Company expire between April 30, 2000 (29 employees) and March 1, 2004 (220
employees). The Company's New York labor contract ended in September 1998, but
was extended until a new one was completed effective March 1, 1999. Management
believes that its relationship with employees is satisfactory.


ITEM 2.  PROPERTIES

VESSELS: TUG FLEET

The tugboat fleet operated by subsidiaries of the Company is comprised of 57
tugboats with the following specifications and capacities:

<TABLE>
<CAPTION>

                                                                Average
                                                  Number         Age in
      Class                                      in Class        Years
      -----                                      --------        -----
<S>                                                <C>    <C>
      Over 3,500 horsepower.....................    14            24.9
      3,000 to 3,500 horsepower.................    18            26.1
      Under 3,000 horsepower....................    17            42.2
      Mortrac(R)................................     4     Rebuilt in 1997/98
      Push boats................................     4             -

</TABLE>

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.

In 1998, the Company built four inland push boats and four barges.


                                       9
<PAGE>

VESSELS: BARGE FLEET

         The Company operates 19 barges in the U.S. coastwise trade and inland
     waterways. Seventeen 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 12/31/98        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  Term Contract      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  Term Contract      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 (5)    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 (6)       Inland Tank       1966       2014        41,770 bbl  Term Contract      No. 6 Oil
New Jersey           Ocean Tank        1969       2014        36,278 bbl  Bareboat Charter   Bunker Fuel
JAX No. 1            Inland Tank       1998       N/A         19,128 bbl  Term Contract      No. 6 Oil
JAX No. 2            Inland Tank       1998       N/A         19,128 bbl  Term Contract      No. 6 Oil
JAX No. 3            Inland Tank       1998       N/A         19,128 bbl  Term Contract      No. 6 Oil
JAX No. 4            Inland Tank       1998       N/A         19,128 bbl  Term Contract      No. 6 Oil

</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)  The Company purchased this barge in February 1997.
(6)  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.

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


                                       10
<PAGE>

   OTHER PROPERTIES

  Set forth below is a list of all of the Company's offices and facilities as of
December 31, 1998.

<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                  Office and Pier Space         97,027(2)        Owned Property
Jacksonville, FL             Office and Pier Space         71,874(2)        2000
Miami, FL                    Office Space                  630              1999
Nederland, TX                Office Space                  1,402            2001
Port Arthur, TX              Pier Space                    275              1999

</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.


                                       11
<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. The Federal court hearing this matter has ruled that the
PRPs are liable in contribution only, not joint and severally. Jakobson believes
that in relation to the other defendants its 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 395 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 88 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 operations, regardless of the scope of available
insurance coverage.

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 Moran Enterprises Corporation.


                                       12
<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, 1998, 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, 1998. 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
                                                    Jan. 1, 1994  July 12, 1994
(Dollars in thousands)                                  thru           thru                      Year ended
                                                      July 11,       Dec. 31,                   December 31,
                                                                                ---------------------------------------------
INCOME STATEMENT DATA:                                  1994          1994        1995        1996        1997        1998
                                                      --------      ---------   ---------   ---------   ---------   ---------
<S>                                                  <C>           <C>         <C>         <C>         <C>         <C>
Operating revenue---------------------------          $ 41,694      $  37,482   $  77,343   $  91,458   $ 100,526   $ 107,448
 Operating expenses.------------------------            27,341         22,355      45,672      57,451      66,090      70,195
 Depreciation-------------------------------             3,119          3,217       7,412       7,719       7,769       8,108
 General and administrative expenses--------             7,559          5,962      14,221      14,283      13,755      14,914
 Provision for shipyard sale----------------               589             --          --          --          --          --
                                                      --------      ---------   ---------   ---------   ---------   ---------
       Operating income---------------------             3,086          5,948      10,038      12,005      12,912      14,231
Interest expense----------------------------              (975)        (4,810)    (10,192)    (10,132)    (10,026)    (10,266)
Interest income-----------------------------                28             74          51         146         346         437
Equity in loss from affiliates--------------              (622)            --          --          --          --          --
Equity in income/(loss) from joint venture--               220            106        (188)        (66)       (727)        176
Other income/(expense)----------------------               317            218         155         160        (273)        102
                                                      --------      ---------   ---------   ---------   ---------   ---------
Income/(loss) before provision for income taxes          2,054          1,536        (136)      2,113       2,232       4,680
Provision for income taxes------------------               785            630         200         808         613       1,965
                                                      --------      ---------   ---------   ---------   ---------   ---------
Net income/(loss)---------------------------          $  1,269      $     906   $    (336)  $   1,305   $   1,619   $   2,715
                                                      ========      =========   =========   =========   =========   =========
                                                                   
OTHER DATA:---------------------------------                       
EBITDA(1)-----------------------------------          $  6,977      $   9,987   $  18,855   $  23,337   $  23,704   $  28,280
Net cash provided by operating activities---             3,939          6,527       5,491      11,427       8,929      16,997
Net cash provided by/(used for) investing activities       817        (73,555)     (5,832)     (5,110)     (8,063)    (18,170)
Net cash (used for)/provided by financing activities    (4,637)        68,842        (652)     (3,496)      3,252      (4,423)
Ratio of earnings to fixed charges (2)------               2.7x           1.3x        1.0x        1.2x        1.2x        1.4x
                                                                   
Balance Sheet Data (at end of period)                              
Total assets--------------------------------          $ 64,432      $ 170,108   $ 174,094   $ 172,717   $ 160,290   $ 161,534
Total long-term debt------------------------            16,450         83,414      82,848      80,000      83,252      78,997
Mandatorily redeemable capital stock--------                --          1,150       1,150       1,000       1,000          --
Total stockholders' equity------------------            19,701         10,906      10,570      12,025      13,644      17,359

</TABLE>

(1)  EBITDA means income before provision for income taxes, interest expense
     (including amortization of debt discount of $106 for the period ended July
     11, 1994), 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.
(2)  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.


                                       13
<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. The deregulation of the utility business could
         also have an impact on this segment, as power-generating facilities are
         unbundled from the other portions of the business.

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, and the Turecamo 
Entities for hull insurance, have entered into the Insurance Agreement, under 
which the Company's insurance expense will be 


                                       14
<PAGE>

affected by both the Company's increased deductibles and the respective
insurance claims experience of the Company, the Mormac Group and the Turecamo
Entities.



RESULTS OF OPERATIONS

     YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>

                                                                                        Year Ended
                                                                                       December 31,
                                                                                       ------------
                                                                                  1997              1998
                                                                                  ----              ----
<S>                                                                             <C>               <C>     
   Operating revenue..........................................                  $100,526          $107,448
   Cost of operations
       Operating expenses.....................................                    66,090            70,195
       Depreciation...........................................                     7,769             8,108
                                                                                --------          --------
   Total cost of operations...................................                    73,859            78,303
                                                                                --------          --------
   Gross profit...............................................                    26,667            29,145
   General and administrative expenses........................                    13,755            14,914
                                                                                --------          --------
   Operating income...........................................                    12,912            14,231
   Interest expense...........................................                   (10,026)          (10,266)
   Interest income............................................                       346               437
   Equity in (loss)/income from joint venture.................                      (727)              176
   Other (expense)/income.....................................                      (273)              102
                                                                                --------          --------
   Income before provision for income taxes...................                     2,232             4,680
   Provision for income taxes.................................                       613             1,965
                                                                                --------          --------
   Net income.................................................                   $ 1,619            $2,715
                                                                                ========          ========

</TABLE>

OPERATING REVENUES. Operating revenues increased by $6.9 million, or 6.9%, to
$107.4 million in 1998. Tug Service revenue increased by $7.8 million or 13.7%,
to $64.9 million. The increase reflects higher offshore towing revenue as well
as increased revenues from ship docking in all ports of operation.

Marine Transportation revenues decreased by $0.8 million, or 1.9%, to $42.5
million primarily due to lower movements of coal, which was partially replaced
by increased shipments of other drybulk products such as fertilizer. Petroleum
transportation stayed even as increased activity in the Northeast and the start
of a five-year contract for Florida Power & Light was offset by a long
drydocking for one of the Company's oil barges.

OPERATING EXPENSES. Operating expenses increased by $4.1 million, or 6.2%, to
$70.2 million. The $4.1 million increase in operating expenses is primarily due
to increases in labor, outside towing expense, claims, repairs and drydocking
amortization. The $2.0 million increase in labor expense and the $1.7 million
increase in outside towing expenses were primarily due to the increased level of
activity discussed above. These increases were partially offset by lower fuel
costs. Repair expense also increased in 1998, as did drydocking amortization.

DEPRECIATION. Depreciation expense increased by $0.3 million, or 4.4%. This
increase was due to the acquisition of new equipment and to improvements to
existing floating equipment.

GENERAL & ADMINISTRATIVE EXPENSES. General and administrative expenses increased
by $1.2 million or 8.4% to $14.9 million in 1998, primarily due to reduced
medical costs in 1997, which were not repeated in 1998. In addition, the cost of
salaries, benefits and bad debt expense increased in 1998.


                                       15
<PAGE>

OPERATING INCOME. Operating income increased by $1.3 million, or 10.2%, to $14.2
million. The increase was primarily due to the increased revenues discussed
above, partially offset by higher operating expenses, depreciation and general
and administration expenses.

EQUITY IN (LOSS)/INCOME FROM JOINT VENTURE. The Company's equity income in its
50% joint venture increased by $0.9 million from a loss of $0.7 million in 1997
to an income of $0.2 million in 1998. In 1997 the vessel was drydocked beginning
in the second quarter 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. In the
current year, 1998, utilization of the barge NEW YORK increased, as did rates.

TAXES. In 1997, 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 13
to the financial statements). This tax asset previously had been valued at zero
due to the uncertainty associated with its utilization.

NET INCOME. Net income increased by $1.1 million, or 67.7% to $2.7 million in
1998. The increase was primarily due to the factors discussed above.

     YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>

                                                                                        Year Ended
                                                                                       December 31,
                                                                                       ------------
                                                                                  1996              1997
                                                                                  ----              ----
<S>                                                                            <C>               <C>
   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
                                                                                ========          ========

</TABLE>

OPERATING REVENUES. Operating revenues increased by $9.1 million, or 9.9%, to
$100.5 million in 1997. Tug Service 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 Sanitation Contract.

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, 


                                       16
<PAGE>

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.

EQUITY IN LOSS FROM JOINT VENTURE. The Company equity loss in its 50%-owned
joint venture was $0.7 million, compared to the smaller loss of $0.1 million in
1996. The $0.6 million variance is due to lower rates as well as a drydocking 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 13 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.


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 $78,997,000 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, commencing July 15, 1999, at
a redemption price equal to 108% of principal amount, with the redemption price
decreasing over time thereafter. The Company currently intends to redeem the
Notes on or about July 15, 1999 at 108% of their principal amount and has
arranged financing under the New Credit Facility to do so; however, no assurance
can be made that the Company will redeem the Notes at such time. 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 New Senior Credit Facility includes two $80 million term loan facilities,
one of which was used to finance the Combination and the other of which may be
drawn upon to redeem in full the Company's Notes when they become eligible for
redemption under the applicable indenture. The indenture permits redemption of
all such Notes commencing on July 15, 1999 at a redemption price equal to 108%
of principal amount, with the 


                                       17
<PAGE>

redemption price decreasing over time thereafter. Under the New Senior Credit
Facility, several conditions must be satisfied prior to drawing on the term loan
facility to redeem the Notes, including that no event of default shall have
occurred or be continuing, that certain representations and warranties are true
and correct, and that there shall have been no material adverse change in the
condition of the vessels owned by Moran Enterprises and its subsidiaries. The
New Senior Credit Facility also includes a $40 million revolving credit
facility. Until the Notes are redeemed and the applicable term loan facility is
drawn upon, however, the maximum amount that may be outstanding under the
revolving credit facility is $20 million, no more than $15 million of which may
be drawn upon for the benefit of the Company and its subsidiaries. The revolving
credit facility includes a letter of credit subfacility of a separate sublimit
which is available to the Company and its subsidiaries and which reduces the
available credit under the revolving credit facility by the amount of any
outstanding letter of credit and any unreimbursed drawings under letters of
credit. The New Senior Credit Facility bears interest at rates linked to the
prime rate and/or a Eurodollar rate, at Moran Enterprises's option. The term
loan facility, which may be drawn upon to redeem the Notes, matures on June 30,
2004; the other $80 million term loan facility matures on December 31, 2005. The
revolving credit facility has a term of six years.

The New Senior Credit Facility is secured by substantially all of the personal
property of Moran Enterprises and the Turecamo Entities, including floating
equipment (i.e., vessels) and a pledge of all the capital stock of Moran
Enterprises, the Company and the Turecamo Entities. The Company and its domestic
subsidiaries have guaranteed the revolving credit facility to the extent that
funds are drawn for their benefit, and in that regard, have granted a first
priority lien on accounts receivable and inventory to secure the guaranty. If
and when the Notes are redeemed in full, the Company and its subsidiaries will
grant security interests in substantially all of their assets, including
floating equipment, to secure the New Senior Credit Facility. The Company's
floating equipment presently continues to secure its Notes.

The New Senior Credit Facility contains customary affirmative and negative
covenants, including compliance with law, maintenance of insurance, and
limitations on incurrence of debt, liens, investments, sales of assets and
mergers. The revolving credit facility thereunder may be used on an ongoing
basis to finance working capital and for general corporate purposes.

Concurrently with the closing of the Combination, the Company used available
cash to pay outstanding amounts due under a separate term loan facility of the
Company, totaling $3.4 million, inclusive of principal, interest and any fees.

Because the Combination could have been deemed to have been a "Change of 
Control" under the terms of the indenture governing the Notes, the Company 
was required to commence a tender offer to purchase for cash any and all of 
the outstanding Notes, which the Company commenced on November 25, 1998. The 
Company completed the tender offer on December 28, 1998, and as of such date, 
approximately $1,003,000 in aggregate principal of the Notes had been 
tendered, representing approximately 1.25% of the $80,000,000 Notes 
outstanding subject to the tender offer. Following the expiration of the 
offer, the Company accepted for payment all Notes validly tendered using 
available cash to make such a payment. The purchase price paid for the Notes 
was equal to 101% of their principal amount ($1,010 per $1,000 principal 
amount), plus accrued and unpaid interest.

The Company believes that cash flow from current levels of operations and, to a
lesser extent, the availability under the New 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 New 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 redeems the Notes at 108%
on or about July 15, 1999; (ii) the Company's revenues and operating expenses,
as adjusted for inflation, will remain relatively constant; (iii) the Company
will retain working capital in accordance with prior practices; (iv) the Company
will not incur any material capital expenditures (excluding 


                                       18
<PAGE>

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 (v) 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."

Cash and cash equivalents for the year ended December 31, 1998 decreased by $5.6
million compared to a $4.1 million increase in the year ended December 31, 1997,
and a $2.8 million increase in the year ended December 31, 1996. The changes for
these periods were attributable to the factors discussed below:

For the year ended December 31, 1998, net cash provided by operations of $17.0
million was used to fund capital expenditures of $18.2 million (including the
four new push boats and four new barges) and to repay debt of $4.4 million.

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 drydocking
for the bargE NEW YORK.

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.)

Working capital was $10.1 million at December 31, 1998, $17.6 million at
December 31, 1997 and $9.1 million at December 31, 1996.

In November 1998, a subsidiary of the Company entered into contract with the
Military Sealift Command to provide tug services to the U.S. Navy, beginning in
1999. As part of this contract, the Company is building six tractor tugs and
converting two of its existing vessels into tractor tugs. The capital
expenditures associated with this and other capital projects, including planned
drydockings, is expected to exceed $20.0 million in 1999. The Company is
exploring various financing alternatives, including internally generated cash
flow and financing under the New Credit Agreement.

RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS

FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was
issued in 1998. This statement establishes accounting and reporting standards
for derivative instruments. It requires an entity to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. The Company will adopt this new
standard as of January 1, 2000. Management does not expect the adoption to have
a material impact on the Company's results of operations, however, the impact on
the Company's financial statements is dependent upon the market values of the
Company's derivatives and related financial instruments at the date of adoption.



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 


                                       19
<PAGE>

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 UPDATE

Moran has been aware of the Year 2000 problem for some time. Over the past year
Moran has increased the resources dedicated to evaluating Year 2000 exposure and
to developing solutions to any potential Year 2000 problems. A Year 2000
Compliance Committee has been established, chaired by the Vice President,
Finance and Administration. This committee, which provides regular reports to
the Board of Directors, is responsible for coordinating all Year 2000 compliance
efforts and ensuring that Year 2000 and related date problems will not impact
Moran's operations or the services that Moran provides to customers. Moran
believes that it is taking all reasonable steps to address the Year 2000
problem, but offers no assurances that the problem will be avoided in every
instance.

MORAN HAS INITIATED THE FOLLOWING MULTI-STEP PROGRAM (THE "YEAR 2000 PROGRAM")
TO ENSURE YEAR 2000 COMPLIANCE:

1.   Develop a comprehensive catalog of all systems (both at sea and ashore)
     that directly or indirectly utilize a date function;
2.   Request statements of compliance or suggested methods of achieving
     compliance from all vendors of date dependent systems;
3.   Repair, replace, or correct non-compliant systems as applicable;
4.   Actively unit test all hardware and software components individually to
     ensure compliance;
5.   Perform integrated testing of systems as applicable;
6.   Correct or replace any systems as required;

The Company's goal is to complete Moran's Year 2000 readiness program by June
30, 1999. Moran will continue to monitor new systems, vendors, and customers as
the Year 2000 approaches. Management believes that implementation of the Year
2000 Program is approximately 80-85% complete, as of March 10, 1999. The
original schedule had targeted March 31, 1999, but the Combination has delayed
the schedule somewhat. The estimated total cost of the Year 2000 Program is not
expected to exceed $100,000.

Management does not believe that the Company's normal business activities and
operations materially rely on information technology or electronic data
interchange with third parties. Nevertheless, applicable requirements of the
Securities and Exchange Commission require that the Company disclose a "most
reasonably likely worst case scenario" for Year 2000 problems. Applying this
requirement, management believes that the area of business operations that could
most reasonably be expected to be affected by a Year 2000 problem is the
Company's accounting system. However, if any such problem were to arise,
management believes that the accounting currently being electronically processed
could be completed manually. Management has not formulated any specific
contingency plans because management believes the Company's Year 2000 Program
will be completed by June 1999.

The information contained herein regarding the Company's efforts to deal with
the Year 2000 problem are intended as Year 2000 Statements and Year 2000
Readiness Disclosures and are subject to the year 2000 Information Readiness
Disclosure Act.

CAUTIONARY STATEMENT. The Company is including the following cautionary
statement to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statement made
by, or on behalf of, the Company. The factors identified in this cautionary
statement are important factors (but not necessarily all important factors) that
could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company. Where any such
forward-looking statement 


                                       20
<PAGE>

includes a statement of the assumptions or bases underlying such forward-looking
statement, the Company cautions that, while it believes such assumptions or
bases to be reasonable and makes them in good faith, assumed facts or bases
almost always vary from actual results, and the differences between assumed
facts or bases and actual results can be material, depending on the
circumstances. Where, in any forward-looking statement, the Company, or its
management, expresses an expectation or belief as to future results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result, or be achieved or accomplished. Taking into
account the foregoing, the following is identified as an important risk factor
that could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company:

The status of the Year 2000 Program and the dates on which the Company believes
the Year 2000 Program will be completed are based on management's best
estimates, which were derived utilizing numerous assumptions of future events;
however, there can be no guarantee that these estimates will be achieved, or
that there will not be a delay in, or increased costs associated with, the
implementation of the Year 2000 Program. Specific factors that might cause
differences between the estimates and actual results include, but are not
limited to, the availability and cost of personnel trained in these areas, the
ability to locate and correct all relevant computer code, timely responses to
and corrections by third-parties and suppliers, the ability to implement
interfaces between any new systems and any systems not being replaced, and
similar uncertainties. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third-parties and the interconnection of global businesses, the Company cannot
ensure its ability to timely and cost-effectively resolve problems associated
with the Year 2000 issue that may affect its operations and business, or expose
it to third-party liability.


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.


                                       21
<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           63       Chairman of the Board and Director
   James R. Barker             63       Vice Chairman of the Board and Director
   Malcolm W. MacLeod          65       President, Chief Executive Office and Director
   Jeffrey J. McAulay          45       Vice President of Finance and Administration and Director
   William P. Muller           47       Senior Vice President of Moran Towing Corporation
   Edmond J.  Moran, Jr.       54       Senior Vice President of Moran Towing Corporation and Director
   Alan L. Marchisotto         49       Vice President, General Counsel and Secretary
   Andrew P. Langlois          57       Director
   Mort Lowenthal              68       Director

</TABLE>

Paul R. Tregurtha. Mr. Tregurtha has been a director and Chairman of the Board
of the Company since June 1994 and a director and Chairman of the Board of Moran
Enterprises Corporation since the Combination. In addition, he has been Chairman
of Mormac Marine Group, Inc. since 1988 and of Meridian Aggregates Company,
which owns and operates mines in the United States, since 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. Mr. Tregurtha is also a director and Chairman of the Board
of Moran Enterprises.

James R. Barker. Mr. Barker has been a director and is Vice Chairman of the 
Board of the Company since June 1994 and a director and Vice Chairman of the 
Board of Moran Enterprises since the Combination. 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, 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 and as a director and President, 
Chief Executive Officer of Moran Enterprises since the Combination. 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.


                                       22
<PAGE>

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 is also the Vice President of Finance and Administration and a 
director of Moran Enterprises. 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. In 1998, Mr. Muller was appointed Senior Vice President of
Moran Towing Corporation where he has been a director since 1995. Mr. Muller has
also been President of Moran Services Corporation since 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 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. In 1998, Mr. Moran was appointed Senior Vice President 
of Moran Towing Corporation, where he is also a director. Mr. Moran is also a 
director of Moran Enterprises. From 1987 to 1998, Mr. Moran served as 
President of Moran Mid-Atlantic Corporation (which was reorganized as the 
Moran Mid-Atlantic Group as of January 1, 1997). From 1997 until 1998, Mr. 
Moran 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. Mr.
Marchisotto has also served a Vice President, General Counsel and Secretary of
Moran Enterprises Corporation since the Combination.

Andrew P. Langlois. Mr. Langlois has served as a director since the 
Acquisition. Mr. Langlois has also served as a director of Moran Enterprises 
since the Combination. Since January 1, 1999, Mr. Langlois was appointed 
President of Mormac Marine Group, Inc. and from 1988 to 1998 was Vice 
President of Mormac Marine Group. He is also a Vice President of Lakes 
Shipping Company, (since 1989) and a 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 has also served as a director of Moran Enterprises 
Corporation since the Combination. Mr. Lowenthal is a Senior Advisor at 
Schroder & Co., Inc., an international investment bank. From 1980 to February 
1995, Mr. Lowenthal was a Managing Director at Schroder & Co., Inc.


                                       23
<PAGE>

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.


                                       24
<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, 1998, 1997 and 1996:

<TABLE>
<CAPTION>

                                                               ANNUAL
                                                            COMPENSATION
                                                  FISCAL                                   ALL OTHER
      NAME & POSITION                              YEAR        SALARY         BONUS      COMPENSATION (1)
      ---------------                              ----        ------         -----      ----------------
<S>                                               <C>        <C>            <C>              <C>
  Paul R. Tregurtha                                1998       $319,750       $  ---           $  ---
  Chairman of the Board                            1997        315,952          ---              ---
                                                   1996        300,000          ---              ---

  James R. Barker                                  1998        319,750          ---              ---
  Vice Chairman of the Board                       1997        315,982          ---              ---
                                                   1996        300,000          ---              ---

  Malcolm W. MacLeod                               1998        348,756        65,000           22,913
  President and Chief Executive Officer            1997        332,149        35,000           21,317
                                                   1996        319,374        32,000           20,067

  Edmond J. Moran, Jr.                             1998        180,640        15,000           22,913
  President of Moran Mid-Atlantic Group            1997        174,535        10,000           21,317
                                                   1996        168,635        10,000           20,067

  William P. Muller                                1998        160,000        12,000           22,913
  President of Moran Services Corporation          1997        150,000        10,000           20,027
                                                   1996        137,980        10,000           18,550

</TABLE>

(1)  Amounts for 1998 includes contribution of $21,600, $21,600 and $21,600 made
     by the Company to the Company's Profit Sharing Plan on behalf of Messrs.
     MacLeod, Moran and Muller, respectively, in 1998. 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 1998.

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.


                                       25
<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>

          AVERAGE FIVE                             PROJECTED ANNUAL BENEFITS AT AGE 65
           YEAR BASE                                        YEAR OF SERVICE
            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, 44 years; Edmond Moran, Jr.,
28 years and William P. Muller, 21 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.

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
provided for the grant of options 


                                       26
<PAGE>

("1994 Stock Options") to purchase shares of the Company's Common Stock.
Effective as of October 30, 1998, the effective date of the Combination, 1994
Stock Options held by employees were exchanged for options ("1998 Stock
Options") to purchase units of capital stock of Moran Enterprises pursuant to
the Moran Enterprises Corporation 1998 Stock Option Plan (the "1998 Plan").
Each unit represents the right to purchase approximately one share of common
stock of Moran Enterprises and approximately 74 shares of preferred stock of
Moran Enterprises. Participation in the 1998 Plan is limited to employees of
Moran Enterprises and its subsidiaries (including the Company) designated by a
committee comprised of Messrs. Tregurtha and Barker, each of whom is ineligible
to receive awards under the 1998 Plan. Non-employee directors of the Company are
not eligible to participate.

The table sets forth certain information concerning the number of units covered
by stock options under the 1998 Plan as of December 31, 1998. At December 31,
1998 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 1998.

<TABLE>
<CAPTION>

                                      Fiscal Year-End Option Values

                                                              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(1)        (1)           (1)                    0                             0

Edmond J. Moran, Jr.          0             0                     0                             0

William P. Muller             0             0                     463/0                         0/0

</TABLE>

(1)  Mr. MacLeod's options to purchase 1,322 units of Moran Enterprises' capital
     stock were redeemed by Moran Enterprises in November, 1998. See "Certain
     Relationships and Related Transactions".


                                       27
<PAGE>

OPTION GRANTS IN FISCAL YEAR 1998

         The following table sets forth certain information concerning grants of
stock options under the 1998 Plan to each of the Company's named executive
officers during the fiscal year ended December 31, 1998. All of the options
shown in the following table were acquired upon exchange of 1994 Stock Options
for 1998 Stock Options.

<TABLE>
<CAPTION>

                                                                  INDIVIDUAL GRANTS(1)
                                   -----------------------------------------------------------------------------

                                                  % OF TOTAL                               POTENTIAL REALIZABLE
                                    NUMBER OF       OPTIONS                                VALUE AT ANNUAL RATES
                                      UNITS        GRANTED TO     EXERCISE                    OF STOCK PRICE
                                   UNDERLYING     EMPLOYEES IN    OR BASE                    APPRECIATION FOR
                                     OPTIONS         FISCAL        PRICE      EXPIRATION      OPTION TERM (2)
         NAME                      GRANTED (#)        YEAR        PER UNIT       DATE            5%         10%
<S>                                   <C>           <C>           <C>          <C>          <C>          <C>
Paul R. Tregurtha                      --              -              -           --            -            -

James R. Barker                        --              --            --           --           --           --

Malcolm W. MacLeod(3)                1,322           40.2%         $151.29      7/11/99        (3)          (3)

Edmond J. Moran, Jr.                   --              --            --           --           --           --

William P. Muller                      463           14.1%         $151.19      7/12/99      $192.96      $243.49

</TABLE>

(1)  Each of these options was granted pursuant to the 1998 Plan and is subject
     to the terms of such plan. These options were granted at an exercise price
     equivalent to the exercise price of the 1994 Stock Options held by such
     employee.

(2)  In accordance with the rules of the Securities and Exchange Commission,
     shown are the hypothetical gains or "option spreads" that would exist for
     the respective options. These gains are based on assumed rates of annual
     compounded stock price appreciation of 5% and 10% from the date the option
     was granted over the full option term. The 5% and 10% assumed rates of
     appreciation are mandated by the rules of the Commission and do not
     represent the Company's estimate or projection of future increases in the
     price of such stock.

(3)  Mr. MacLeod's options to purchase 1,322 units of Moran Enterprises' capital
     stock were redeemed by Moran Enterprises in November, 1998. See "Certain
     Relationships and Related Transactions".


                                       28
<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 Moran
Enterprises and of Mormac Marine Group, Inc., Meridian Aggregates Company and
Lakes Shipping, and in the case of Mr. Tregurtha, each of the Turecamo Entities.
Mr. Langlois, a director of the Company and of Moran Enterprises, is an
executive officer of Mormac Marine Group, Inc., Meridian Aggregates Company and
Lakes Shipping. Mr. MacLeod serves in various capacities, including serving as
director, of Moran Enterprises and each of the Turecamo Entities. 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 1998,
Mormac paid $232,800 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 also provides tug services to, and has provided tug services to 
it by, the Turecamo Entities. Since the Combination, the Turecamo Entities 
paid $261,800 for tug services performed by the Company, and were paid 
$363,400 by the Company for tug services performed by them for the Company. 
Management expects to continue to provide, and have provided to it, such tug 
services. In addition, as a result of the Combination, beginning January 1, 
1999, the Company began providing administrative services to the Turecamo 
Entities and the majority of the Turecamo employees became Company employees 
and as such became eligible for coverage under the Company's employee benefit 
plans. The Company also shares office space with the Turecamo Entities. As 
compensation for such administrative services and use of such office space, 
the Company will be paid a management fee by the Turecamo Entities estimated 
to be between $3.0 and $4.0 million for the full year 1999. All services 
between the Company and the Turecamo Entities have been and will continue to 
be provided on arms'-length terms and conditions.

The Company has entered into the Insurance Agreement with the Mormac Group. The
Turecamo Entities have also joined the agreement for hull insurance. 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, 75% of any additional insurance claims
expense attributable to the higher deductibles will be borne by the Company and
25% 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
$541,300 at December 31, 1998. 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.

As described in item 1, the Combination was financed through the New Senior
Credit Facility. A portion of the New Senior Credit Facility was used (i) to
finance the Combination and to pay related fees and expenses and (ii) to repay
existing debt of the Turecamo Entities. The New Senior Credit Facility also
includes a $40 million revolving credit facility, portions of which may be used
to finance working capital and capital expenditures of Moran Enterprises and its
subsidiaries, including the Company and the Turecamo Entities. The Company and
its domestic subsidiaries have guaranteed the revolving credit facility to the
extent that funds are drawn for their benefit, and in that regard have granted a
first priority lien on accounts receivable and inventory to secure the guaranty.
The Company's floating equipment presently continues to secure its Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources".


                                       29
<PAGE>

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain beneficial ownership information as of
March 25, 1999, 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>
     Moran Enterprises Corporation----------------------------------       44,600              100.0%
     Lakes Shipping Company, Inc.(3)--------------------------------       44,600              100.0%
     Paul R. Tregurtha (4)------------------------------------------       44,600              100.0%
     James R. Barker (5)--------------------------------------------       44,600              100.0%
     Malcolm W. MacLeod---------------------------------------------       0                     0
     Edmond J. Moran, Jr.-------------------------------------------       0                     0
     Andrew P. Langlois---------------------------------------------       0                     0
     Alan Marchisotto-----------------------------------------------       0                     0
     Jeffrey J. McAulay---------------------------------------------       0                     0
     William P. Muller----------------------------------------------       0                     0
     Mort Lowenthal-------------------------------------------------       -                     -
     Directors and executive officers as a group (9 persons) (4), (5)      44,600              100.0%

</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)  Lakes Shipping owns 49,583 shares of common stock of Moran Enterprises, or
     51.3% of the voting stock of Moran Enterprises. As a result, Lakes Shipping
     may be deemed to beneficially own the 44,600 shares of the Company's common
     stock held by Moran Enterprises.
(4)  Mr. Tregurtha owns directly 10,536 shares of common stock of Moran
     Enterprises. 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 49,583
     shares of common stock of Moran Enterprises beneficially owned by Lakes
     Shipping. As a result, Mr. Tregurtha may be deemed to beneficially own the
     44,600 shares of the Company's common stock held by Moran Enterprises.
(5)  Mr. Barker owns directly 3,818 shares of common stock of Moran Enterprises.
     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 49,583 shares of common stock of Moran
     Enterprises beneficially owned by Lakes Shipping. As a result, Mr. Barker
     may be deemed to beneficially own the 44,600 shares of the Company's common
     stock held by Moran Enterprises. Three of Mr. Barker's adult children own,
     in the aggregate, 5,727 shares of common stock of Moran Enterprises. Mr.
     Barker disclaims beneficial ownership of all 5,727 shares that are owned by
     his children.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On October 30, 1998, the Company completed the Combination with the Turecamo 
Entities. Pursuant to the relevant agreements, the existing equityholders of 
the Company contributed all of their shares of capital stock of the Company 
to Moran Enterprises in exchange for (i) newly-issued shares of common stock 
of Moran Enterprises which represent a substantial majority (but less than 
80%) of the common stock of Moran Enterprises and (ii) newly-issued shares of 
Moran Enterprises preferred stock. As 


                                       30
<PAGE>

a result, Moran Enterprises became the new parent of both the Company and the
Turecamo Entities. The Notes are not guaranteed by Moran Enterprises or the
Turecamo Entities.

Certain members of management (the "Management Group") entered into stockholder
agreements (the "Stockholder Agreements") concurrently with the consummation of
the Combination. All members of the Management Group were issued shares of the
capital stock of Moran Enterprises in exchange for a portion of their shares of
the Company's Common Stock. The Stockholder Agreements place the following
restrictions upon the transfer of the capital stock of Moran Enterprises by each
member of the Management Group: (i) the members of the Management Group may not
transfer the capital stock of Moran Enterprises 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 capital stock of Moran
Enterprises to any other individuals or entities except in certain limited
situations, such as through obtaining the consent of Moran Enterprises 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 Moran Enterprises to purchase (a "Put") all of such
member's shares of the capital stock of Moran Enterprises at any time after 180
days have elapsed following the date on which the member ceases to be an
employee of any of Moran Enterprises, its Subsidiaries or its affiliates, with
certain limitations. Moran Enterprises has the right to purchase (a "Call") the
shares of the capital stock of Moran Enterprises 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 Moran Enterprises, 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 Moran Enterprises 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 Moran
Enterprises prohibiting the transfer of the capital stock of Moran Enterprises
to any Foreigner.

In November 1998, Moran Enterprises redeemed the then-exercisable options held
by Mr. MacLeod for approximately $920,000 (less the aggregate exercise price of
the options).

At December 31, 1998, Moran Enterprises owed the Company $1.4 million.


                                       31
<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:

<TABLE>
<CAPTION>

<S>                                                                                  <C>
                    Report of Independent Accountants . . . . . . . . . . . . . . .   F-1

                    Consolidated Balance Sheets at December 31, 1997
                    and December 31, 1998 . . . . . . . . . . . . . . . . . . . . .   F-2 to F-3

                    Consolidated Statements of Income for the Years Ended
                    December 31, 1996, December 31, 1997 and December 31, 1998. . .   F-4

                    Consolidated Statements of Cash Flows for the Years Ended
                    December 31, 1996, December 31, 1997 and December 31, 1998. . .   F-5

                    Consolidated Statement of Stockholder's Equity for  the
                    Years Ended December 31, 1996, December 31, 1997 and
                    December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . .   F-6

                    Notes to Consolidated Financial Statements. . . . . . . . . . .   F-7 to F-22

</TABLE>


                                       32
<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(1)     Certificate of Incorporation of the Registrant

3.2(1)     By-Laws of the Registrant.

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

4.1(b)(3)  Supplemental Indenture No. 2, dated January 2, 1996.

4.1(c)(4)  Supplemental Indenture No. 3, dated December 31, 1996

4.1(d)(8)  Supplemental Indenture No. 4, dated December 31, 1997.

4.1(e)     Supplemental Indenture No. 5, dated October 28, 1998.

4.2(1)     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(1)     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(9)    Stock Exchange Agreement, dated as of August 31, 1998, among Moran
           Enterprises Corporation, Moran Transportation Company, the Moran
           Stockholders named therein, Turecamo Maritime, Inc., White Stack
           Maritime Corp., Turecamo of Savannah, Inc., Turecamo Environmental
           Services, Inc., and the Turecamo Stockholders named therein
           (schedules and exhibits omitted--the Company agrees to furnish a copy
           of any schedule or exhibit to the Commission upon request).

10.2(9)    Credit Agreement, dated as of October 30, 1998, among Moran
           Enterprises Corporation, the financial institutions named therein,
           and Fleet Bank, N.A., as administrative agent (schedules and exhibits
           omitted--the Company agrees to furnish a copy of any schedule or
           exhibit to the Commission upon request).

10.3(9)    Security Agreement, dated October 30, 1998, from Moran Transportation
           Company and certain of its subsidiaries to Fleet Bank, N.A., as
           administrative agent.

10.4(9)    Guaranty, dated October 30, 1998, from Moran Enterprises Corporation
           and certain of its subsidiaries, in favor of Fleet Bank, N.A., as
           administrative agent.

10.7(6)    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(6)    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(8)    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.


                                       33
<PAGE>

10.10(8)   Licensed Agreement, effective November 24, 1996, between American
           Maritime Officers and Moran Mid-Atlantic Corporation, Moran Towing of
           Pennsylvania Division.

10.11(8)   Memorandum of Agreement between Local 333, United Marine Division,
           International Longshoreman's Association, AFL-CIO, and Moran Towing &
           Transportation Co., Inc.

10.12(8)   Agreement, effective May 1, 1997, between International Organization
           of Masters, Mates & Pilots and Moran Towing of Florida, Inc.

10.18      Moran Enterprise Corporation 1998 Stock Option Plan of the
           Registrant.

10.19      Form of Moran Enterprise Corporation's 1998 Stock Option Agreement.

10.20(1)   Moran Towing Corporation and Subsidiaries Supplemental Employee
           Retirement Plan.

10.21(5)   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.

27         Financial Data Schedule.

____________

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

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

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

(4)        Filed as an Exhibit to the Registrant's Form 10-K for the year ended
           December 31, 1996 and incorporated herein by reference.

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

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

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

(8)        Filed as an Exhibit to the Registrant's Form 10-K for the year ended
           December 31, 1997 and incorporated herein by reference.

(9)        Filed as an Exhibit to the Registrant's Form 10-Q for the quarterly
           period ended September 30, 1998, and incorporated herein by
           reference.


                                       34
<PAGE>

(b)  Reports on Form 8-K. The following reports on Form 8-K were filed during
     the last quarter of the year covered by this report.:

     (i)  Current Report on Form 8-K, dated November 25, 1998, attaching press
          release announcing commencement of tender offer for the Notes.

     (ii) Current Report on Form 8-K, dated December 29, 1998, attaching press
          release announcing completion of tender offer for the Notes.


                                       35
<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 26, 1999                   /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 26, 1999                   /s/ Paul R. Tregurtha
                                 -----------------------------------------------
                                 Paul R. Tregurtha
                                 Chairman of the Board and Director



March 26, 1999                   /s/ James R. Barker
                                 -----------------------------------------------
                                 James R. Barker
                                 Vice-Chairman of the Board and Director




March 26, 1999                   /s/ Malcolm W. Macleod
                                 -----------------------------------------------
                                 Malcolm W. MacLeod
                                 President, Chief Executive Officer and Director


                                       36
<PAGE>

                                   SIGNATURES


March 26, 1999                   /s/ Edmond J. Moran, Jr.
                                 -----------------------------------------------
                                 Edmond J. Moran, Jr.
                                 Director


March 26, 1999                   /s/ Robert J. Patten
                                 -----------------------------------------------
                                 Robert J. Patten
                                 Controller (Principal Accounting Officer)



March 26, 1999                   /s/ Andrew P. Langlois
                                 -----------------------------------------------
                                 Andrew P. Langlois
                                 Director



March 26, 1999                   /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.


                                       37
<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholder 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 stockholder's
equity present fairly, in all material respects, the financial position of Moran
Transportation Company and its subsidiaries (the "Company") at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, 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.


PricewaterhouseCoopers LLP

Stamford, Connecticut
February 18, 1999


                                      F-1
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                          ------------
                                                                        1997       1998
                                                                      --------   --------
<S>                                                                   <C>        <C>     
                      ASSETS
Current assets
  Cash and cash equivalents .......................................   $  9,945   $  4,349
  Accounts receivable, less allowance for doubtful accounts of $288
  and $448 at December 31, 1997 and 1998, respectively ............     14,319     14,973
  Inventory (note 4) ..............................................      4,161      3,669
  Unexpired insurance and other prepaid expenses ..................      2,487      3,701
                                                                      --------   --------
     Total current assets .........................................     30,912     26,692

Investment in joint venture (note 6) ..............................      3,164      3,340
Insurance claims receivable .......................................      2,563      3,176
Fixed assets, net (note 3) ........................................    119,920    125,359
Other assets ......................................................      3,731      2,967
                                                                      --------   --------

Total assets ......................................................   $160,290   $161,534
                                                                      ========   ========
</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,
                                                                          ------------
                                                                         1997       1998
                                                                       --------   --------
<S>                                                                    <C>        <C>     
LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
  Trade accounts payable ...........................................   $  3,602   $  6,617
   Current portion of long-term debt (note 8) ......................        168         --
  Accounts payable to joint venture ................................        477      2,295
  Accrued interest payable .........................................      4,331      4,254
  Other accrued liabilities ........................................      3,936      2,441
  Backpay liability ................................................        837        787
  Income taxes payable (note 9) ....................................         --        243
                                                                       --------   --------
     Total current liabilities .....................................     13,351     16,637

Long-term debt (note 8) ............................................     83,252     78,997
Insurance claims reserves ..........................................      7,227      7,984
Deferred income taxes (note 9) .....................................     32,450     31,768
Postretirement benefits other than pensions (note 10) ..............      4,321      4,729
Other liabilities ..................................................      5,045      4,060
                                                                       --------   --------
     Total liabilities .............................................    145,646    144,175

Commitments and contingencies (notes 11 and 12)

Mandatorily redeemable capital stock 4,000 shares outstanding
   at December 31,1997 and none at December 31, 1998 ...............      1,000         --

Stockholder's Equity
   Common stock, par value $0.01 per share authorized-100,000 shares
   issued and outstanding 40,600 shares at December 31, 1997 and
   44,600 shares at December 31, 1998 ..............................          1          1

   Capital surplus .................................................     10,149     11,149
   Retained earnings ...............................................      3,494      6,209
                                                                       --------   --------
   Total stockholders' equity ......................................     13,644     17,359
                                                                       --------   --------

   Total liabilities and stockholder's equity ......................   $160,290   $161,534
                                                                       ========   ========
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-3
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                     -----------------------
                                                                 1996         1997         1998
                                                               --------    ---------    ---------
<S>                                                            <C>         <C>          <C>      
Operating revenue ..........................................   $ 91,458    $ 100,526    $ 107,448
Cost of operations
   Operating expenses ......................................     57,451       66,090       70,195
   Depreciation ............................................      7,719        7,769        8,108
                                                               --------    ---------    ---------
    Total cost of operations ...............................     65,170       73,859       78,303
                                                               --------    ---------    ---------
Gross profit ...............................................     26,288       26,667       29,145
General and administrative expenses ........................     14,283       13,755       14,914
                                                               --------    ---------    ---------
Operating income ...........................................     12,005       12,912       14,231
Interest expense ...........................................    (10,132)     (10,026)     (10,266)
Interest income ............................................        146          346          437
Equity in (loss)/income from joint venture (note 6) ........        (66)        (727)         176
Other income/(expense), net ................................        160         (273)         102
                                                               --------    ---------    ---------
Income before provision for income taxes ...................      2,113        2,232        4,680
Provision for income taxes (note 9) ........................        808          613        1,965
                                                               --------    ---------    ---------
   Net income ..............................................   $  1,305    $   1,619    $   2,715
                                                               ========    =========    =========

Earnings per share
   Basic ...................................................   $  29.26    $   36.30    $   60.87
                                                               ========    =========    =========
   Diluted .................................................   $  28.56    $   35.20    $   59.02
                                                               ========    =========    =========

Weighted average number of shares outstanding (in thousands)
   Basic ...................................................       44.6         44.6         44.6
                                                               ========    =========    =========
   Diluted .................................................       45.7         46.0         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,
                                                            -----------------------
                                                         1996        1997        1998
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income ....................................   $  1,305    $  1,619    $  2,715

ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
     Depreciation and amortization .................     11,092      11,666      13,496
     Deferred income taxes .........................     (1,898)     (1,661)       (682)
     Equity in loss/(income) from joint venture ....         66         727        (176)
     Loss on disposal of floating equipment ........        128          90          --

     Changes in operating assets and liabilities:
         Accounts receivable .......................       (697)     (1,575)       (654)
         Other current assets ......................       (182)        219        (722)
         Accounts payable and accrued expenses .....      2,811      (1,740)      3,211
         Income taxes payable ......................        (69)       (926)        243
         Insurance claims receivable ...............       (629)       (217)       (613)
         Insurance claims reserve ..................      1,658       1,238         757
         Other assets and liabilities ..............     (2,158)       (679)       (578)
                                                       --------    --------    --------
Net cash provided by operating activities ..........     11,427       8,761      16,997
                                                       --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures ..........................     (5,110)    (12,713)    (18,170)
     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 .............     (5,110)     (8,063)    (18,170)
                                                       --------    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
      Proceeds from borrowings .....................      2,250       3,420          --
      Repayment of debt ............................     (5,664)         --      (4,423)
      Payment of financing costs ...................        (82)         --          --
                                                       --------    --------    --------
Net cash (used for)/provided by financing activities     (3,496)      3,420      (4,423)
                                                       --------    --------    --------
Net increase/(decrease) in cash and cash equivalents      2,821       4,118      (5,596)
Cash and cash equivalents at beginning of period ...      3,006       5,827       9,945
                                                       --------    --------    --------
Cash and cash equivalents at end of period .........   $  5,827    $  9,945    $  4,349
                                                       ========    ========    ========

Cash paid during period for
     Interest ......................................   $  9,816    $  9,579    $  9,864
                                                       ========    ========    ========
     Income taxes ..................................   $  2,742    $  3,656    $  2,526
                                                       ========    ========    ========
</TABLE>

See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                                AND SUBSIDIARIES

           Consolidated Statements of Changes in Stockholder's Equity
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                         COMMON     CAPITAL        RETAINED
                                                          STOCK     SURPLUS        EARNINGS       TOTAL
                                                          -----     -------        --------       -----
<S>                                                         <C>     <C>             <C>           <C>
  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 
                                                             --      -------         ------        -------

  Exchange of mandatorily redeemable capital stock...         -        1,000              -          1,000

  Net income.........................................         -            -          2,715          2,715
                                                             --      -------         ------        -------

  Balance at December 31, 1998.......................        $1      $11,149         $6,209        $17,359
                                                             ==      =======         ======        =======
</TABLE>


                                      F-6
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  (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 manages its business as one operating segment. 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.

  On October 30, 1998, the Company completed a combination (the "Combination")
  with Turecamo Maritime, Inc., a Delaware corporation, and certain of its
  affiliated entities (the "Turecamo Entities"). The Turecamo Entities operate
  33 tugboats and seven barges along the East Coast of the United States.
  Pursuant to the relevant agreements, the existing equityholders of the Company
  contributed all of their shares of capital stock of the Company to Moran
  Enterprises Corporation ("Moran Enterprises") in exchange for (i) newly-issued
  shares of common stock of Moran Enterprises which represents a substantial
  majority (but less than 80%) of the common stock of Moran Enterprises and (ii)
  newly-issued shares of Moran Enterprises preferred stock. Simultaneously, the
  existing stockholders of the Turecamo Entities contributed all of their shares
  of capital stock of each of the Turecamo Entities to Moran Enterprises in
  exchange for (i) newly-issued shares of common stock of Moran Enterprises,
  including certain shares which vest if certain financial criteria are met,
  which represent a minority interest in the common stock of Moran Enterprises,
  and (ii) an aggregate cash amount of $45.0 million. As a result, Moran
  Enterprises became the new parent of both the Company and the Turecamo
  Entities. The Company's 11 3/4% First Preferred Ship Mortgage Notes due 2004
  (the "Notes") are not guaranteed by Moran Enterprises or the Turecamo
  Entities.

  The Combination was financed through a $200 million syndicated Credit
  Agreement among Moran Enterprises, certain participating financial
  institutions and Fleet Bank, N.A., as administrative agent (the "New Senior
  Credit Facility"). A portion of the New Senior Credit Facility has been used
  (i) to finance the Combination and to pay related fees and expenses and (ii)
  to repay existing debt of the Turecamo Entities. In addition, the Company
  repaid a $3.5 million term loan from its cash reserves as part of the
  transaction. The Company's Notes remain outstanding.

   (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.


                                      F-7
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

    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.

     RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS

  Financial Accounting Standards No. 133 (FAS 133) - "Accounting for Derivative
  Instruments and Hedging Activities" was issued in 1998. This statement
  establishes accounting and reporting standards for derivative instruments. It
  requires an entity to recognize all derivatives as either assets or
  liabilities in the statement of financial position and measure those
  instruments at fair value. The Company will adopt this new standard as of
  January 1, 2000. Management does not expect the adoption to have a material
  impact on the Company's results of operations, however, the impact on the
  Company's financial statements is dependent upon the market values of the
  Company's derivatives and related financial instruments at the date of
  adoption.

    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.

    CASH AND CASH EQUIVALENTS

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


                                      F-8
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

    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 earnings 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, with
  out 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.

    COMPREHENSIVE INCOME

  For the years ended December 31, 1997 and 1998, other than net income, there
  were no items of comprehensive income to report.

   (3) FIXED ASSETS

   Fixed assets consist of the following:

<TABLE>
<CAPTION>
                                                                          DEC. 31,                DEC. 31,
                                                                          --------                --------
                                                                            1997                    1998
                                                                          --------                --------
<S>                                                                      <C>                     <C>
         Floating equipment...................................            $135,550                $147,227
         Capitalized drydocking costs.........................              10,123                  13,597
         Construction in progress.............................               2,425                   2,707
         Shipyard and pier improvements.......................                 171                     173
         Furniture, fixtures and leasehold improvements.......                 903                     970
         Equipment............................................                 199                     240
         Land.................................................                 663                     663
                                                                          --------                --------

         Less: Accumulated depreciation and amortization......              30,114                  40,218  
                                                                          --------                --------
         Total................................................            $119,920                $125,359
                                                                          ========                ========
</TABLE>


                                      F-9
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

   (4) INVENTORIES OF FUEL, SUPPLIES AND REPAIR MATERIALS

  The components of inventory are as follows:

<TABLE>
<CAPTION>
                                                            DEC. 31,    DEC. 31,
                                                              1997        1998
                                                              ----        ----
<S>                                                         <C>         <C>
         Fuel...........................................     $  916      $  550
         Diesel parts...................................      1,583       1,491
         Propeller wheels and shafts....................      1,221       1,197
         Rope, fenders, supplies and miscellaneous......        441         431
                                                             ------      ------
         Total..........................................     $4,161      $3,669
                                                             ======      ======
</TABLE>

  (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
  $968, $1,480, and $1,897 at December 31, 1996, 1997 and 1998 respectively. The
  Company received no cash dividends in the three years ended December 31, 1998
  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)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

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

<TABLE>
<CAPTION>
                                                          AS OF DECEMBER 31,
                                                       -------------------------

                                                         1997               1998
                                                       ------             ------
<S>                                                   <C>                <C>
Total assets .............................             $1,858             $2,091
                                                       ======             ======
Total liabilities ........................             $  378             $  194
                                                       ======             ======
</TABLE>

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31,
                                            ------------------------------------

                                              1996           1997          1998
                                            -------        -------        ------
<S>                                        <C>            <C>            <C>
Total revenues ......................       $ 2,528        $ 1,460        $2,924
                                            =======        =======        ======
Total expenses ......................       $ 2,354        $ 1,947        $2,508
                                            =======        =======        ======
Income/(loss) .......................       $   174        $  (487)       $  416
                                            =======        =======        ======
Additional amortization .............       $   240        $   240        $  240
                                            =======        =======        ======
Equity in (loss)/income .............       $   (66)       $  (727)       $  176
                                            =======        =======        ======
</TABLE>

  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, 1998.

  (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:

<TABLE>
<CAPTION>
                                                           AS OF DECEMBER 31,
                                                       -------------------------

                                                        1997               1998
                                                        ----               ----
<S>                                                    <C>                <C>
Total assets .............................             $2,188             $2,253
                                                       ======             ======
Total liabilities ........................             $  384             $  381
                                                       ======             ======
</TABLE>

<TABLE>
<CAPTION>
                                               FOR THE YEARS ENDED DECEMBER 31,
                                               --------------------------------

                                                1996           1997         1998
                                               -----          -----          ---
<S>                                            <C>             <C>          <C>
Total income (a) ....................           $118            $70          $67
                                                ====            ===          ===
</TABLE>

(a) Total income includes interest income of $156, $91 and $90 for the years
    ended December 31, 1996, 1997 and 1998, respectively.


                                      F-11
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  (8) LONG-TERM DEBT

  Long-term debt at December 31 was as follows:

<TABLE>
<CAPTION>
                                                                               1997      1998
                                                                             -------   -------
<S>                                                                          <C>       <C>
     11.75% Series B First Preferred Ship Mortgage Notes due July 15, 2004   $80,000   $78,997
      8.1% Term Loan due June 1, 2005 ....................................     3,420        --
                                                                             -------   -------
                                                                              83,420    78,997

          Less: Current maturities .......................................       168        --
                                                                             -------   -------
          Long-term portion ..............................................   $83,252   $78,997
                                                                             =======   =======
</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

  Because the Combination could have been deemed to have been a "Change of
  Control" under the terms of the indenture governing the Notes, the Company was
  required to commence a tender offer to purchase for cash any and all of the
  outstanding Notes which the Company commenced on November 25, 1998. The 
  Company completed the tender offer on December 28, 1998, and as of such date,
  approximately $1,003 in aggregate principal of the Notes had been tendered,
  representing approximately 1.25% of the $80,000 Notes outstanding subject
  to the tender offer. Following the expiration of the offer, the  Company
  accepted for payment all Notes validly tendered using available cash to 
  make such a payment. The purchase price paid for the Notes was equal to 
  101% of their principal amount ($1,010 per $1,000 principal amount), plus
  accrued and unpaid interest.

  All of the Company's subsidiaries (the "Guarantors") have guaranteed the
  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, 


                                      F-12
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  investments, capital expenditures, and dividend and upstream payments. The
  Company must also comply with certain other financial covenants.

  The New Senior Credit Facility includes two $80 million term loan facilities,
  one of which was used to finance the Combination and the other of which may be
  drawn upon to redeem in full the Company's Notes when they become eligible for
  redemption under the applicable indenture. The indenture permits redemption of
  all such Notes commencing on July 15, 1999 at a redemption price equal to 108%
  of principal amount, with the redemption price decreasing over time
  thereafter. The Company currently intends to redeem the Notes on or about July
  15, 1999 at 108% of their principal amount and has arranged financing under
  the New Credit Facility to do so; however, no assurance can be made that the
  Company will redeem the Notes at such time. Under the New Senior Credit
  Facility, several conditions must be satisfied prior to drawing on the term
  loan facility to redeem the Notes, including that no event of default shall
  have occurred or be continuing, that certain representations and warranties
  are true and correct, and that there shall have been no material adverse
  change in the condition of the vessels owned by Moran Enterprises and its
  subsidiaries. The New Senior Credit Facility also includes a $40 million
  revolving credit facility. Until the Notes are redeemed and the applicable
  term loan facility is drawn upon, however, the maximum amount that may be
  outstanding under the revolving credit facility is $20 million, no more than
  $15 million of which may be drawn upon for the benefit of the Company and its
  subsidiaries. The revolving credit facility includes a letter of credit
  subfacility of a separate sublimit which is available to the Company and its
  subsidiaries and which reduces the available credit under the revolving credit
  facility by the amount of any outstanding letter of credit and any
  unreimbursed drawings under letters of credit. The New Senior Credit Facility
  bears interest at rates linked to the prime rate and/or a Eurodollar rate, at
  Moran Enterprises's option. The term loan facility, which may be drawn upon to
  redeem the Notes, matures on June 30, 2004; the other $80 million term loan
  facility matures on December 31, 2005. The revolving credit facility has a
  term of six years.

  The New Senior Credit Facility is secured by substantially all of the personal
  property of Moran Enterprises and the Turecamo Entities, including floating
  equipment (i.e., vessels) and a pledge of all the capital stock of Moran
  Enterprises, the Company and the Turecamo Entities. The Company and its
  domestic subsidiaries have guaranteed the revolving credit facility to the
  extent that funds are drawn for their benefit, and in that regard, have
  granted a first priority lien on accounts receivable and inventory to secure
  the guaranty. If and when the Notes are redeemed in full, the Company and its
  subsidiaries will grant security interests in substantially all of their
  assets, including floating equipment, to secure the New Senior Credit
  Facility. The Company's floating equipment presently continues to secure its
  Notes.

  The New Senior Credit Facility contains customary affirmative and negative
  covenants, including compliance with law, maintenance of insurance, and
  limitations on incurrence of debt, liens, investments, sales of assets and
  mergers. The revolving credit facility thereunder may be used on an ongoing
  basis to finance working capital and for general corporate purposes.

  Concurrently with the closing of the Combination, the Company used available
  cash to pay the outstanding indebtedness of the Company due under a separate
  term loan facility of the Company, totaling $3.4 million, inclusive of
  principal, interest and any fees.

  The Company has deferred debt placement costs incurred in connection with the
  First Preferred Ship Mortgage Notes. The unamortized balance of such fees was
  $2,415 and $2,013 at December 31, 1997 and 1998, respectively.


                                      F-13
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  (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:

<TABLE>
<CAPTION>
                                               FOR THE YEARS ENDED DECEMBER 31,
                                           -----------------------------------------
                                             1996             1997             1998
                                           -------          -------          -------
<S>                                       <C>              <C>              <C>
     Current .....................         $ 2,680          $ 2,274          $ 2,647
     Deferred ....................          (1,872)          (1,661)            (682)
                                           -------          -------          -------
                                           $   808          $   613          $ 1,965
                                           =======          =======          =======
</TABLE>

  This provision includes state tax expense for the years ended December 31,
  1996, 1997 and 1998 of $34, $182 and $497, respectively.


                                      F-14
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

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

<TABLE>
<CAPTION>
                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                     --------------------------------
                                                      1996         1997         1998
                                                      ----         ----         ----
<S>                                                  <C>          <C>          <C>
     Statutory income tax rate ................       35.0%        35.0%        34.0%
     Increases (decreases) due to:

          State taxes .........................        6.4          5.3          7.0
          Meals and entertainment .............        2.0          1.9          0.8
          Rate differential ...................       (2.6)         1.8           --
          Release of valuation allowance ......         --        (17.3)          --
          Other-net ...........................       (2.6)         0.8          0.2
                                                    ------       ------       ------
     Effective income tax rate ................       38.2%        27.5%        42.0%
                                                    ======       ======       ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                          Dec. 31,     Dec. 31,
                                                            1997         1998
                                                            ----         ----
<S>                                                       <C>          <C>     
Deferred tax assets
   State and local taxes .............................    $    749     $    607
   Insurance claims reserves .........................         623          464
   Post retirement benefits other than pensions ......       1,469        1,608
   Additional compensation ...........................         268          318
   Hull insurance aggregate reserves .................       1,179        1,214
   P & I insurance aggregates reserve ................         373          230
   Backpay liability .................................       1,403        1,102
   Other items-net ...................................        (109)          89
                                                          --------     --------
   Total deferred tax assets .........................       5,955        5,632
                                                          --------     --------
Deferred tax liabilities
   Depreciation and amortization .....................     (34,411)     (33,247)
   Pension benefits ..................................        (368)        (273)
   Capitalized drydocking costs ......................      (2,263)      (2,641)
   Land valuation ....................................        (197)        (197)
   Fuel inventory ....................................        (311)        (187)
                                                          --------     --------
   Total deferred tax liabilities ....................     (37,550)     (36,545)

   Valuation allowance ...............................        (335)        (335)
                                                          --------     --------
   Net deferred tax liabilities ......................    $(31,930)    $(31,248)
                                                          ========     ========
</TABLE>

  The current portion of net deferred income taxes of $520 at December 31, 1997
  and 1998, respectively, is included in other prepaid expenses.


                                      F-15
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  (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:

<TABLE>
<CAPTION>
                                                    FOR THE YEARS ENDED DECEMBER 31,
                                                    --------------------------------

                                                         1996     1997     1998
                                                        -----    -----    -----
<S>                                                     <C>      <C>      <C>  
Service cost-benefits earned during the period ......   $ 327    $ 305    $ 358
Interest cost projected benefit obligation ..........     559      532      603
Expected return on plan assets ......................    (757)    (609)    (650)
Recognized actuarial loss ...........................     117        4       29
                                                        -----    -----    -----
Net periodic pension expense ........................   $ 246    $ 232    $ 340
                                                        =====    =====    =====
</TABLE>

  The changes in benefit obligation and plan assets and the funded status
  reconciliation as of December 31, 1997 and 1998 for the Company's defined
  benefit pension plan are shown below:

<TABLE>
<CAPTION>
                                                             Pension Benefits
                                                            1997        1998
                                                           -------     -------
<S>                                                        <C>         <C>    
CHANGE IN BENEFIT OBLIGATION:
   Benefit obligation at beginning of year .............   $ 7,099     $ 7,878
     Service cost ......................................       305         358
     Interest cost .....................................       532         603
     Benefits paid .....................................      (481)       (604)
     Actuarial loss ....................................       423       1,333
                                                           -------     -------
  Benefit obligation at end of year ....................   $ 7,878     $ 9,568

CHANGE IN PLAN ASSETS
   Fair value of plan assets at beginning of year ......   $ 7,776     $ 8,339
     Actual return on plan assets ......................     1,044         780
     Benefits paid .....................................      (481)       (604)

   Fair value of plan assets at end of year ............   $ 8,339     $ 8,515

  RECONCILIATION OF FUNDED STATUS
    Funded status ......................................   $   461     $(1,053)
    Unrecognized actuarial loss ........................       675       1,849
                                                           -------     -------
      Prepaid benefit cost .............................   $ 1,136     $   796
                                                           =======     =======

 THE ACTUARIAL ASSUMPTIONS ARE AS OF DECEMBER 31:
    Discount rate ......................................      7.25%       6.75%
    Expected long term rate of return on plan assets ...      8.00%       8.00%
    Rate of compensation increase ......................      4.00%       4.00%
</TABLE>


                                      F-16
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  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. Since the plan was fully funded, no
  contributions were required for the 1997 and 1998 plan years. In addition, the
  Company has an unfunded supplemental employee retirement plan ("SERP") for
  certain executives. The Company's pension SERP liability was $651 and $750 at
  December 31, 1997 and 1998 respectively.

  In accordance with contractual agreements, the Company makes contributions to
  union-sponsored pension and welfare plans. Such contributions were $1,965,
  $2,287 and $2,504 for years December 31, 1996, 1997 and 1998, respectively. In
  addition, the Company has a defined contribution pension plan for non-union
  fleet employees. The Company made contributions of $201, $333 and $376 for the
  years ended December 31, 1996, 1997 and 1998, 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 $674, $681 and
  $759 for the years ended December 31, 1996, 1997 and 1998, respectively. In
  addition, the Company has an unfunded profit sharing SERP for certain
  executives. The Company's profit sharing SERP liability was $137 and $188 at
  December 31, 1997 and 1998, respectively.

  POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

  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 $265, $271 and $286
  for the years ended December 31, 1996, 1997 and 1998, 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-17
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  The changes in benefit obligation and plan assets and the funded status
  reconciliation as of December 31, 1997 and 1998 for the Company's
  postretirement benefits are shown below:

<TABLE>
<CAPTION>
                                                              OTHER BENEFITS
                                                           --------------------
                                                             1997         1998
                                                           -------      -------
<S>                                                        <C>          <C>    
CHANGE IN BENEFIT OBLIGATION:
  Benefit obligation at the beginning of year ........     $ 4,646      $ 5,416
   Service cost ......................................         176          219
   Interest cost .....................................         366          398
   Benefits paid .....................................        (265)        (412)
   Actuarial loss ....................................         493          653
                                                           -------      -------
  Benefit obligation at end of year ..................     $ 5,416      $ 6,274

CHANGE IN PLAN ASSETS
  Fair value of plan assets at beginning of year .....     $    --      $    --
   Actual return on plan assets ......................          --           --
   Employer contributions ............................         265          412
   Benefits paid .....................................        (265)        (412)
                                                           -------      -------
  Fair value of plan assets at end of year ...........     $    --      $    --

 RECONCILIATION OF FUNDED STATUS
   Funded status .....................................     $(5,416)     $(6,274)
   Unrecognized actuarial loss .......................       1,107        1,693
                                                           -------      -------
     Prepaid benefit cost ............................     $(4,309)     $(4,581)
                                                           =======      =======
</TABLE>

  Net periodic postretirement benefit cost for periods ended December 31, 1997
  and December 31, 1998 included the following components:

<TABLE>
<CAPTION>
                                                                  1996   1997   1998
                                                                  ----   ----   ----
<S>                                                               <C>    <C>    <C> 
Service cost of benefits earned ...............................    161   $176   $219
Interest cost on accumulated postretirement benefits obligation    318    366    398
Recognized actuarial loss .....................................     32     49     67
                                                                  ----   ----   ----
Net periodic postretirement benefit cost ......................   $511   $591   $684
                                                                  ====   ====   ====
</TABLE>

  The discount rate used in determining the APBO was 7.5% in 1996, 7.25% in 1997
  and 6.75% in 1998.

  ASSUMED HEALTH CARE COST TREND

  For measurement purposes, a 10% annual rate of increase in the per capita cost
  of covered health care benefits was assumed for 1998. The rate is assumed to
  decrease gradually to 6% for 2000 and remain at that level thereafter.


                                      F-18
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  Assumed health care cost trend rates have a significant effect on the amounts
  reported for the health care plan. A one percentage point change in assumed
  health care cost trend rate would have the following effects.

<TABLE>
<CAPTION>
                                                                             ONE PERCENTAGE    ONE PERCENTAGE
                                                                             POINT INCREASE    POINT DECREASE
                                                                             --------------    --------------
<S>                                                                              <C>             <C>
  Effect on total of service and interest cost components for 1998.....           $109            $ (82)
  Effect on year-end 1998 postretirement benefit obligation............           $802            $(705)
</TABLE>

  (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, 1998, under non-cancelable
  operating leases, including the bareboat charter for the Portsmouth, are as
  follows:

<TABLE>
<S>                                                       <C>   
              1999.................................       $1,880
              2000.................................        1,860
              2001.................................        1,790
              2002.................................        1,713
              2003.................................        1,659
              2004 and beyond......................        3,126
</TABLE>

  Total gross rent expense was $1,160, $1,896 and $1,906 for the years ended
  December 31, 1996, 1997 and 1998, 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 Federal court hearing this matter has ruled that the PRPs are liable
  in contribution only, not joint and severally. 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.


                                      F-19
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  (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.

  (14) FINANCIAL INSTRUMENTS

  The following disclosure of the estimated fair value of financial instruments
  at December 31, 1997 and 1998 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, 1997 and 1998 is approximately
  $88,800 and $84,900 respectively.

  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, 1997 and 1998. 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 under the risk sharing agreement was $541 at
  December 31, 1998.


                                      F-20
<PAGE>

                          MORAN TRANSPORTATION COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)

                    THREE-YEAR PERIOD ENDED DECEMBER 31, 1998

  At December 31, 1998, Moran Enterprises Corporation owed the Company $1.4
  million. In addition, during 1998, Mormac paid $232,800 for ship docking
  services performed by the Company. All such services were provided on
  arms'-length terms at customary rates. The Company also provides tug services
  to, and has tug services provided to it by, the Turecamo Entities. Since the
  Combination, the Turecamo Entities paid $261,800 for tug services performed by
  the Company, and were paid $363,400 by the Company for tug services performed
  by them for the Company.

  (16) MANDATORILY REDEEMABLE CAPITAL STOCK

  Mandatorily Redeemable Capital Stock was the same as the Company's Common
  Stock in terms of voting rights, dividends and other attributes except that
  under certain circumstances it was redeemable at the option of stockholders or
  the Company at fair market value. In 1998, as part of the Combination, the
  Company's Mandatorily Redeemable Capital Stock was exchanged for stock in
  Moran Enterprises Corporation. The Company is now a 100%-owned subsidiary of
  Moran Enterprises Corporation. As of December 31, 1997, the fair market value
  of the shares was $250 per share. The Company's Common Stock contains no
  redemption 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. Effective
  as of October 30, 1998, the effective date of the Combination, 1994 Stock
  Options held by employees were exchanged for options ("1998 Stock Options") to
  purchase units of capital stock of Moran Enterprises pursuant to the Moran
  Enterprises Corporation 1998 Stock Option Plan (the "1998 Plan").

  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-21