CROWLEY MARITIME CORP - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 000-49717

CROWLEY MARITIME CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 94-3148464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

155 GRAND AVENUE, OAKLAND, CALIFORNIA 94612
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(510) 251-7500

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

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

The aggregate market value of the shares of the registrant's voting common
stock held by non-affiliates of the registrant as of June 30, 2003 was
$23,993,238 (based upon $1,140 per share being the average of the closing bid
and asked price on June 30, 2003 as reported in the Pink Sheets).

As of March 17, 2004, 89,404 shares of voting common stock, par value $.01
per share, and 46,138 shares of non-voting Class N common stock, par value $.01
per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be used by the registrant in
connection with its 2004 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Form 10-K.

CROWLEY MARITIME CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2003

TABLE OF CONTENTS

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Certain statements in this Form 10-K and its Exhibits ("Form 10-K") contain
or may contain information that is forward-looking within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended. Actual results
may differ materially from those described in the forward-looking statements and
will be affected by a variety of risks and factors, including, without
limitation, the risks described in "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Risk Factors" of this Form
10-K. Readers should carefully review this Form 10-K in its entirety, including,
but not limited to, Crowley Maritime Corporation's consolidated financial
statements and the notes thereto. The Company undertakes no obligation to
publicly release any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof.

Unless otherwise indicated, dollar amounts are stated in thousands of
dollars, except for per share amounts.

PART I

ITEM 1. BUSINESS

Unless otherwise noted, references to "the Company", "we", "our" or "us"
means Crowley Maritime Corporation, a Delaware corporation, and its
subsidiaries. Our principal executive offices are located at 155 Grand Avenue,
Oakland, California 94612, and our telephone number is (510) 251-7500. The
Company's web site is http://www.crowley.com. Information contained on the
Company's web site is not a part of this report.

COMPANY OVERVIEW

We provide diversified transportation services in domestic and
international markets by means of four operating lines of business: Liner
Services; Ship Assist and Escort Services; Oil and Chemical Distribution and
Transportation Services; and Energy and Marine Services. Liner Services provides
scheduled marine transportation services between designated ports, certain
complementary inland transportation services, terminal operations, vessel
management for third parties, and varied logistics management services. Ship
Assist and Escort Services provides ship assist, tanker escort, docking, fire
fighting and oil spill response services primarily in ports located on the west
coast of the continental United States and in Alaska. Ship Assist and Escort
Services also provides emergency towing services. Oil and Chemical Distribution
and Transportation Services transports crude oil, petroleum products and
chemicals among ports on the east and west coasts of the United States, Alaska,
the Gulf of Mexico and Puerto Rico. This segment also manages vessels for third
party owners, operates tank farms and distributes and sells fuel oil in Alaska.
Energy and Marine Services provides specialized services to companies engaged in
the exploration, production and distribution of oil and gas, including project
management and logistics, inventory control and emergency response services.
Energy and Marine Services also charters tugs, barges and other equipment to
third parties for a wide array of services, including towing, transportation and
other specialized services. The Company supports all four of its segments by
providing corporate services, supervising construction of new vessels and owning
vessels which are chartered for use in our operating lines of business. The
Company arranges most of the insurance required for its operations through its
captive insurance company.

The Company employs approximately 4,000 people and provides its services
using a fleet of more than 270 vessels, consisting of RO/RO (roll on roll off)
vessels, LO/LO (lift on lift off) vessels, tankers, tugs and barges. Our
land-based facilities and equipment include terminals, warehouses, tank farms,
office buildings, trucks, trailers, containers, chassis, cranes and other
specialized vehicles.

The grandfather of our current President, Mr. Thomas B. Crowley, Jr., began
our business on the San Francisco Bay in 1892. The business was incorporated in
the State of Delaware as "Crowley Maritime Corporation" on December 1, 1972. The
present structure, in which Crowley Maritime Corporation is a holding company
for our lines of business, was put in place in 1992.

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The Company is predominantly owned by certain members of the Crowley family
and Company employees and its shares do not trade on any national securities
exchange or in any established trading market. See "Item 5. Market for
Registrant's Common Equity and Related Stockholder Matters" and Risk Factors in
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations".

The following table lists the Company's owned, managed and chartered
vessels as of December 31, 2003:

From time to time, the Company may transfer vessels between the Company's
lines of business to meet changing business needs. Specifically, the Ship Assist
and Escort Services, Oil and Chemical Distribution and Transportation Services
and Energy and Marine Services use tugs and barges for their operations which,
depending upon market conditions, may be shifted and redeployed by the Company
among different geographical locations and among the different lines of
business. It is the Company's practice to regularly monitor the demands for the
services of each of these lines of business and to transfer tugs and barges
among them based upon prevailing market conditions. In addition to using tugs
and barges (including articulated and integrated tug/barges), Oil and Chemical
Distribution and Transportation Services also uses a fleet of tankers which, as
a general matter, are not well suited for use by either Ship Assist and Escort
Services or Energy and Marine Services.

For additional information about the Company's lines of business, see "Item
1. Business -- Liner Services", "Item 1. Business -- Ship Assist and Escort
Services", "Item 1. Business -- Oil and Chemical Distribution and Transportation
Services", and "Item 1. Business -- Energy and Marine Services" below, and Note
20 of the Notes to the Consolidated Financial Statements in "Item 8. Financial
Statements and Supplementary Data". For segment financial information concerning
our revenues, operating profits and long-lived assets, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 20 of the Notes to the Consolidated Financial Statements in "Item 8.
Financial Statements and Supplementary Data."

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LINER SERVICES

Liner Services provides scheduled marine transportation services between
designated ports for the carriage of cargo including containers, trailers,
vehicles and oversized cargo, and performs logistics, warehousing, distribution
and special cargo handling services, including the carriage of apparel,
refrigerated perishable goods and hazardous materials. At December 31, 2003,
Liner Services provided service to approximately 25 countries in the Caribbean,
Central America and South America with 34 ocean going ships, tugs and barges
capable of carrying approximately 11,820 twenty foot equivalent units, or TEUs.
Liner Services also leases space for approximately 660 TEU's on three vessels
under vessel sharing agreements. Liner Services owns or leases approximately
40,000 pieces of intermodal equipment, including containers, trailers and
chassis.

THE PUERTO RICO AND CARIBBEAN ISLANDS SERVICE

Our Puerto Rico and Caribbean Islands service provides scheduled liner
services between:

- ports in the United States North Atlantic and ports in Puerto Rico, and

- ports in the United States South Atlantic and ports in Puerto Rico, U.S.
Virgin Islands, certain Caribbean Islands and the Bahamas.

The Puerto Rico service uses nine triple-deck RO/RO barges. Five of these
barges are 730 feet in length, with an average capacity of 924 TEUs. The
remaining four barges are 580 feet in length with an average capacity of 617
TEUs. The nine barges are towed by a fleet of ten offshore tugs owned by us.
This service also uses one barge for additional dock space. Departures are
normally scheduled for three or four times a week from Jacksonville, Florida and
once a week from Pennsauken, New Jersey. This service also provides third party
vessel management services for eight vessels for the United States government.

The Caribbean Islands service calls on two ports in the Virgin Islands,
three ports in the Caribbean and also provides service to various other ports
through connecting carriers. This service uses two time chartered LO/LO vessels.
The average capacity of these vessels is 530 TEUs. Departures are scheduled from
Jacksonville and Port Everglades, Florida once a week.

The Bahamas service uses a time chartered RO/RO vessel having a capacity of
approximately 191 TEUs. This service has two scheduled departures a week from
Jacksonville and Port Everglades, Florida to Nassau, Bahamas.

THE LATIN AMERICA SERVICE

Our Latin American Service provides scheduled liner services between:

- ports in the United States South Atlantic and ports in the Northern Zone
of Central America, the Southern Zone of Central America, the Dominican
Republic, Haiti, Mexico and Cuba; and

- ports in the Gulf of Mexico and ports in the Northern Zone of Central
America, the Northern Coast of South America and Cuba.

The United States South Atlantic to the Northern Zone of Central America
service employs three time chartered RO/RO vessels with an average capacity of
340 TEUs. This service has three weekly sailings between Port Everglades,
Florida and ports in Guatemala and Honduras with overland services to Nicaragua
and El Salvador.

The United States South Atlantic to the Southern Zone of Central America
service employs: (a) two time chartered RO/RO vessels with an average capacity
of 380 TEUs that provides weekly service between Port Everglades, Florida and
Costa Rica, Panama and Guatemala northbound; and (b) one time chartered RO/RO
vessel with a capacity of 140 TEUs that provides weekly service between Port
Everglades and Costa Rica.

The Gulf of Mexico to the Northern Zone of Central America service employs
three time chartered RO/RO vessels, with an average capacity of 320 TEUs. This
service: (a) has three weekly sailings from Gulfport,

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Mississippi to Honduras and Guatemala with overland services to Nicaragua and El
Salvador; and (b) calls upon Cuba three or four times a month depending on cargo
demand.

The United States South Atlantic to the Dominican Republic service: (a)
employs one time chartered RO/RO vessel, with an average capacity of 320 TEU's;
and (b) purchases a minimum of 160 TEUs aboard other vessels under a Vessel Slot
Purchase Agreement. The service has two sailings a week between Port Everglades,
Florida and the Dominican Republic and one sailing a week between Port
Everglades, Florida and Haiti.

The United States South Atlantic to Mexico service employs one time
chartered LO/LO vessel with a capacity of 280 TEUs. The service offers one
sailing every ten days from Jacksonville and Port Everglades, Florida to
Progresso and Veracruz, Mexico and Havana, Cuba.

The Gulf Latin America Service is operated under a vessel sharing agreement
with Lykes Lines Limited LLC, a subsidiary of Canadian Pacific Ltd., APL Limited
as agent for and on behalf of American President Lines, Ltd. and TMM Lines
Limited, LLC. Three LO/LO vessels with an aggregate capacity of approximately
1,100 to 1,300 TEUs are chartered in and managed by Lykes for this service
between ports in Houston, Texas and ports in Mexico, Costa Rica, Colombia,
Venezuela and the Dominican Republic. The Company pays for and uses
approximately 20% of the total container space in this service. The vessel
sharing agreement expires on May 31, 2004 and we have notified our partners that
we will not participate in the vessel sharing agreement after that date.

The charters for the vessels used in the services described above expire
between 2004 and 2008. Vessels of the type time chartered by the Company for
these services have been readily available and it has not been difficult to
charter new vessels or renew the charters for existing vessels.

Liner Services provides logistics services in Venezuela, Panama, Costa
Rica, Honduras, Guatemala, El Salvador and the United States. Logistics services
include:

- freight forwarding, customs clearance and non-vessel owning common
carrier and warehousing services;

- trucking in the United States, the Northern part of South America and
Central America;

- providing facilities, including trailer containers and chassis, trailer
and container yards, warehouses and distribution centers; and

- other logistics optimization activities intended to create efficiencies
in the carriage of goods.

In December 2003, the Company approved a plan to sell the Logistics
operations of its Liner Services segment in Venezuela and completed the sale in
February 2004.

At December 31, 2003, Liner Services owned or leased, on a long-term basis,
marine terminals and container yards in the locations listed in the table below.
In those ports where the Company does not own or lease terminals or container
yards, it depends upon common use terminals.

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MARINE TERMINALS AND CONTAINER YARDS

The Company also leases warehouse and distribution space in several
locations in Northern South America, Central America and the United States as
listed in the table below.

WAREHOUSE AND DISTRIBUTION SPACE

SHIP ASSIST AND ESCORT SERVICES

Ship Assist and Escort Services provides ship assist, tanker escort,
docking and related services in San Diego, Los Angeles and Long Beach,
California, Puget Sound, Washington and Valdez, Alaska. Included within its
fleet are 28 tugs ranging in length from 85 feet to 150 feet with between 3,500
and 10,192 brake horsepower, and 62 barges of various sizes, capacities and
capabilities. In addition to providing ship assist and escort services, the tugs
and barges based in Valdez, Alaska are also capable of providing fire fighting
and oil spill response services and are predominantly used for these response
services. The tugs operating in San Diego, Los Angeles and Long Beach,
California and Puget Sound, Washington primarily provide assistance to large
tankers and container vessels as they enter and depart from west coast harbors.

Numerous vessels which call upon or trade between United States ports are
precluded, due to their size, the nature of their cargo or by the application of
local regulations from coming within certain distances of the docks where they
load or discharge their cargoes without the assistance of one or more tugs. The
number of tugs required and the distance at which they must be engaged vary
depending upon the port which is called. According to certain regulations
intended to protect the environment which apply to ports located in Alaska,
Washington and California, tankers loaded with full or partial cargoes of oil
are not permitted to enter or leave these ports unless they are escorted by one
or more tugs. These tugs are equipped to assume control of the tankers escorted
by them in the event that the tankers lose navigational control due to the loss
of power or

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otherwise. In certain cases, these escort tugs are tethered to the tankers that
they escort. In certain cases they operate without a tether, but within a
prescribed distance of the escorted tanker.

Our escort tugs typically relinquish responsibility for escorted tankers
either at the time that the tankers have passed beyond the jurisdictional
boundaries of the port or when the tankers have been met by docking tugs. Our
Ship Assist and Escort tugs generally employ three to six crew members and are
available 24 hours a day, seven days a week to respond to calls for their
services. All of our tugs are constructed of steel and each is powered by one or
more diesel engines. After our ship assist tugs have met the vessel which they
will be assisting as it approaches or departs from its designated dock, the
assisted vessel generally decreases the use of its own propulsion system and
relies upon our tugs for the maneuvers required to tie up and depart from a dock
safely. All of our tugs are fitted and equipped with special fenders and other
equipment which allows them to maintain contact with the vessel which is being
served without damaging its hull. Depending upon the demand for their services,
it is our practice to keep between two and seven tugs positioned in the ports
which we serve.

We currently provide various marine services to the Alyeska Pipeline
Service Company ("Alyeska") pursuant to a long-term master time charter and
other related agreements. Alyeska is owned by a group of major oil companies or
their subsidiaries, including BP Pipelines (Alaska) Inc., Phillips
Transportation Alaska, Inc. and ExxonMobil Pipeline Company. Our relationship
with Alyeska began in the early 1970s during construction of the Trans-Alaska
Pipeline and we have had formal agreements with Alyeska since 1994. Under the
master time charter, Alyeska may, pursuant to separate charter orders which set
forth the specific terms and conditions of each time charter, time charter from
us either our vessels or vessels owned by third parties as required to provide
tanker assist services, tanker escort services, ship docking and other related
services needed by the oil companies to transport crude oil by tanker from
Alaska to the continental United States. Each of the vessels chartered to
Alyeska is manned and operated by us. Under our agreements with Alyeska, we also
provide the oil companies with various shore-side services. As of December 31,
2003, 17 vessels owned by us, consisting of 10 tugs, 2 line boats and 5 barges,
are under time charter to Alyeska. The tugs currently chartered to Alyeska are
also capable of providing fire fighting and oil spill response services.

We have also bareboat chartered from Prince William Sound Corporation nine
vessels and 48 mini-barges which are time chartered by us to Alyeska for oil
spill, oil recovery and emergency response services. A number of these vessels
are on standby throughout Prince William Sound solely for emergency response to
oil spills. Unlike the vessels that we own, the vessels owned by Prince William
Sound Corporation may only be used by Alyeska.

Because our tugs, line boats and barges chartered to Alyeska are capable of
performing similar services for other companies in other geographical locations,
in the event that Alyeska decided that it did not require some or all of these
vessels for its operations in Alaska, the Company could redeploy the vessels not
required by Alyeska to other locations.

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES

The oil, chemical and petrochemical industries based in the United States
require various forms of transportation to supply them with the raw materials
required for their plants and to distribute their finished products. While
companies engaged in these industries employ numerous forms of transportation,
including trucks, railroads and pipelines, certain distribution patterns and
requirements make the use of ocean going vessels the most efficient means of
transportation. The ocean going vessels used by Oil and Chemical Distribution
and Transportation Services consist of tugs, barges (including articulated and
integrated tug/barges) and tankers. In each case, the vessels are made of steel
and contain a series of tanks, valves, pumps, generators and other equipment
required for the carriage of liquid cargoes. All of our barges (including
articulated and integrated tug/barges) and tankers are equipped with pumps which
are capable of discharging the cargoes which have been loaded by shore based
facilities.

While our towed barges contain the power generation systems necessary to
operate both the pumps required to discharge cargo and other equipment, they
have no means of self propulsion and depend upon our tugs to be moved between
ports. Although there are no accommodation spaces on our barges and they are not
manned while being towed between ports, our ocean going tugs used to tow these
barges are equipped with
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living quarters and typically employ a crew of seven. As a general rule, and
depending upon the horsepower of the tug which is being used for the tow, our
barges typically maintain sea speeds of between 7 and 12 knots per hour.

Oil and Chemical Distribution and Transportation Services uses four newly
constructed articulated tug/barge units. Unlike our oil barges which are towed
by steel cables connected to tugs, our articulated tug/barge units are powered
by specially designed tug boats which, through mechanical connections that
utilize two large cylindrical pins, are connected to special fittings located in
notches at the rear of their respective barges. Although the connection between
these specially designed tugs and barges is not permanent and the tugs may
operate independently of their barges, once the connection has been made, the
tugs and barges operate as a single unified vessel. Our articulated tug/barge
units employ a crew of eight and are capable of operating at speeds of up to 12
knots per hour.

Our tankers are powered by steam turbine or diesel propulsion systems and
are capable of propelling themselves at speeds of up to approximately 15 knots
per hour. Our integrated tug/barge units are powered by diesel engines and are
capable of propelling themselves at speeds of up to 14 knots per hour. Each of
our tankers and each of our integrated tug/barge units is equipped with living
quarters for its crew members. Our tankers typically employ a crew of
approximately 28. Our integrated tug/barge units typically employ a crew of
approximately 18. Our tanker used for the carriage of crude oil is designed and
equipped only to carry one type of cargo. Our tankers and integrated tug/barge
units used for the carriage of petroleum products are capable of carrying up to
eleven types of cargo simultaneously. Our tanker used for the carriage of
chemicals can carry up to 26 different cargoes at the same time.

THE PETROLEUM SERVICE

Petroleum Services either owns or leases numerous vessels used for the
carriage of crude oil and petroleum products. Among these vessels is a fleet of
21 petroleum barges with capacities of up to 16,550 long tons which are
primarily towed by 14 tugs owned by us. The barges and other specially designed
vessels carry crude oil and petroleum products among refineries and storage
terminals on the West Coast of the United States and Alaska.

Petroleum Services also owns and/or operates four tank farms in western
Alaska with a cumulative storage capacity of approximately 459,000 barrels of
petroleum product. A number of our oil barges are used to carry petroleum
products purchased for our account to and among various Alaskan ports. A number
of these barges also carry, together with the product owned by us, product owned
by third parties. The fuel which is purchased by us and carried aboard our
barges is sold directly from our vessels and tank farms to customers in western
Alaska who are the ultimate consumers.

The Company has been engaged in discussions with Northland Holdings, Inc.
concerning a possible purchase by the Company of all the stock or assets of
Yukon Fuel Company and/or Service Oil & Gas, Inc. as well as certain vessels and
other assets used in Yukon Fuel Company 's fuel distribution business in Alaska.
For further details, refer to "Liquidity and Capital Resources" included in
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations."

MARINE TRANSPORT CORPORATION

Marine Transport Corporation ("MTC"), a wholly owned subsidiary acquired by
the Company in 2001, either owns or leases numerous vessels used for the
carriage of crude oil, petroleum products and chemicals. Among these vessels are
4 tankers and 2 integrated and 4 articulated tug/barges with capacities of up to
approximately 135,000 long tons. The barges, tankers and other specially
designed vessels carry crude oil, petroleum products and chemicals:

- among refineries and storage terminals on the East Coast and West Coast
of the United States, Alaska and the Gulf of Mexico; and

- among ports in Puerto Rico and the Gulf of Mexico.

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MTC also provides vessel management services for 20 vessels belonging to other
owners, including commercial companies and the United States government.

ENERGY AND MARINE SERVICES

The vessels primarily used by Energy and Marine Services consist of flat
deck barges designed for the carriage of heavy loads and tugboats of different
sizes and capabilities. Our flat deck barges are unmanned and require the use of
our tugs to be moved between job locations.

Energy and Marine Services provides specialized services to companies
engaged, on a worldwide basis, in the exploration, production and distribution
of oil and gas. Permanent areas of operation extend from Prudhoe Bay, Alaska to
Pedernales, Venezuela and west to the Russian Far East. These services are
traditionally provided through specialized marine transportation projects which
use assets either owned by the Company or chartered by the Company from the
world market as needed.

We also offer turnkey project management for major infrastructure projects
as well as logistics and inventory control services for the oil and gas
industry. Past projects range from sea lifting supplies to Alaska for the
Trans-Alaska oil pipeline, to delivery of oversized modules for oil and gas
exploration and production in Africa, Asia and the Americas. Energy and Marine
Services also provides salvage services, charters vessels to third parties, and
transports petroleum products under term contracts.

Due to our extensive network of facilities, our large fleet of vessels and
active services over a large geographic area, Energy and Marine Services is able
to respond quickly to a variety of situations, including emergencies, and
assemble to customer specifications unique configurations of marine equipment
which are otherwise unavailable. To provide this service, we use 31 tugs, 41
barges, and 2 crewboats and occupy approximately 15 acres of shore side
terminals located in Seattle, Washington.

During 2002 and/or 2003, Energy and Marine Services was involved in the
following projects:

- providing assistance for the installation of several platforms in the
Gulf of Mexico used for oil exploration;

- supporting diving and oil recovery operations off the coast of
California;

- transporting oil exploration cargo from the United States to Sakhalin
Island, Russia, and between ports in Russia;

- transporting cranes from the United States West Coast to the Gulf of
Mexico via the Panama Canal;

- transporting oilfield equipment from Korea to Alaska;

- transporting oilfield equipment from the Gulf of Mexico to Argentina; and

- commencing removal of drilling platform structures in Russia and
demobilization of excess materials to the United States.

CORPORATE SERVICES

Corporate services include supervising the construction of new vessels,
providing engineering services internally, owning vessels which are chartered by
our operating lines of business and providing insurance coverage. The Company's
risk management and insurance program is structured to allow it to self-insure a
multiple of predictable claims based on historical loss/claim experience and to
insure more significant claims in Beacon Insurance Company Ltd., which is a
wholly-owned subsidiary. Beacon Insurance Company Ltd. retains a layer of
risk/losses and purchases reinsurance in the international insurance markets to
cover catastrophic casualties and a multiple of major claims. In addition, the
program is structured to ensure compliance with federal, state and local
insurance regulations. Corporate services also provides accounting, legal, human
resources, information technology and purchasing support.

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SEASONALITY

Revenues from Liner Services' trade between Puerto Rico and the United
States have historically increased during the latter part of the third quarter
and the early part of the fourth quarter of each year in anticipation of
increased holiday sales by our customers and declined during the first quarter
of each year. The activities of Ship Assist and Escort Services are generally
not affected by seasonal factors. The carriage of chemicals and petroleum
products among ports in the United States and Puerto Rico by the vessels used by
Oil and Chemical Distribution and Transportation Services usually experiences a
slight downturn during the summer months because of customer inventory
adjustments and refinery shutdowns. The activities of our barges used by Oil and
Chemical Distribution and Transportation Services to transport fuel to Alaska
tend to increase during the second and third quarters of each year and decline
during the first and fourth quarters. It is our practice to redeploy those
barges which cannot be used in Alaska during the first and fourth quarters of
each year to other areas in which operations are not restricted by weather
conditions. The activities of Energy and Marine Services conducted in Alaska and
Russia tend to increase during the second and third quarters of each year and
decline during the first and fourth quarters.

For quarterly financial information concerning our revenues, operating
profits, net income and earnings per share, see Note 21 of the Notes to
Consolidated Financial Statements in "Item 8. Financial Statements and
Supplementary Data."

CUSTOMERS

Many of our services are provided in response to discrete customer requests
for short-term services. For this reason, customers that account for a
significant portion of revenues in one fiscal year may represent an immaterial
portion of revenues in subsequent years. In general, the Company does not depend
upon a single customer or a small group of customers, the loss of which would
have a material adverse effect on its consolidated financial condition, results
of operations, or cash flows. However, the failure to obtain contracts for a
significant number of services could, in the aggregate, have a material adverse
effect on our financial condition, results of operations, or cash flows.

Ship Assist and Escort Services derives a material amount of its revenues
from a group of contracts with Alyeska. In the event that Alyeska decided not to
renew a substantial number of these contracts and the Company was not able
successfully to redeploy the vessels used for these contracts to other
locations, the decision by Alyeska could have a material adverse effect on the
results of Ship Assist and Escort Services.

No material portion of the Company's business is subject to renegotiation
of profits by the United States government or termination of contracts or
subcontracts at the election of the United States government.

COMPETITION

The competition faced by our operating lines of business is intense. The
principal methods of competition in the Company's business are price, service,
experience and quality of equipment. The Company believes that its pricing is
competitive and that the quality of its services, experience and equipment is
among the highest in the industry. A number of our competitors have capital
resources greater than those of the Company and, from time to time, may use
those resources either to lower rates or acquire equipment which, in either
case, may provide a competitive advantage over the Company. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Risk Factors" below.

Each of our operating lines of business participates from time to time in
markets in which there are more vessels than the market can support at a
profitable level. While we try to shift our tugs, barges, tankers and other
vessels away from those markets in which there is a surplus of capacity to
markets in which the supply of and demand for vessels is more balanced, our
competitors tend to engage in similar practices. Over time, these practices by
our competitors may undermine the effectiveness of our efforts to deploy our
vessels to more balanced markets.

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LINER SERVICES

The services offered by Liner Services between the United States and Puerto
Rico currently compete with three principal other carriers: Horizon Lines,
Trailer Bridge and Sea Star Line, LLC. The services offered by Liner Services
between the United States and Central America currently compete with three
principal carriers: Maersk/Sealand, Seaboard, and American President Line. We
believe our share of these markets in 2003 was substantial. Major competitors
for Logistics services include: United Parcel Service, EXEL, Maersk Logistics,
APL Logistics, Sovereign Logistics and Customs and Trade.

SHIP ASSIST AND ESCORT SERVICES

Our principal competitor for providing ship assist, tanker escort, docking
and lightering services on the West Coast of the United States is Foss Maritime.
Numerous other public or privately held companies are also a source of
competition. In Southern California, major competitors are Foss Maritime and
Millennium Towing Company. In Puget Sound, our major competitor is Foss
Maritime. We believe that we had a substantial share of each of the Southern
California and Puget Sound markets in 2003.

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES

We are a major carrier of petroleum products by barge in Alaska and by
barge and tanker on the United States West Coast, East Coast, and the Gulf of
Mexico. Major competitors in the barge trade are Sause Brothers, Foss Maritime,
SeaCoast, Maritrans, Moran and Leevac. Oil companies and independent owners that
operate vessels and other modes of petroleum transportation, including
pipelines, also compete with our barges for petroleum cargo. Our vessels
primarily compete in the carriage of chemicals against certain United States
railroads, Allied Towing Corp., and Seabulk International. Our vessels primarily
compete in the carriage of petroleum products against certain United States
railroads, Seabulk International, American Heavylift Shipping Co., United States
Shipping LLC, Maritrans Inc., Keystone Shipping Co. and K-Sea Transportation
Partners L.P.

ENERGY AND MARINE SERVICES

Our principal United States based competitors for providing energy and
marine services: (a) in the Gulf of Mexico include Tidewater, Edison Chouest,
Delta Towing, Dolphin Towing, Harvey Gulf Marine, McDonough Marine Service and
Otto Candies Marine Transportation and Towing; and (b) on the West Coast are
Foss, Seacoast and Sause Brothers. West Coast transportation companies such as
Lynden and Northland Services compete with us for general cargo moves, and to a
lesser extent, for general towing and emergency services. Among our principal
foreign competitors are Seacor Smit, Seaspan and Seaspan Cyprus, Ltd., Anchor
Marine Transport of Great Britain, ITC Towing of the Netherlands and Fairplay
Towing. Competitors also include segments of the heavy lift shipping industry
such as Dockwise and Blue Marlin. In providing logistics services, our primary
competitors include ASCO, Sembcorp, Maersk, and S.D.V. Oilfield, which have an
international presence. Further competition, primarily for government work,
comes from qualified small businesses. In addition to the competitive factors
described above, the expenses of Energy and Marine Services may be higher than
those of certain competitors who provide similar services with nonunion labor.

GOVERNMENT REGULATION

The operation of our vessels is subject to regulation under various federal
laws and international conventions, as interpreted and implemented by the United
States Coast Guard, as well as certain state and local laws.

Our vessels are required to meet construction and repair standards
established by the American Bureau of Shipping, a private organization, and/or
the United States Coast Guard, and to meet operational, security and safety
standards presently established by the United States Coast Guard. The United
States Coast Guard licenses our seagoing supervisory personnel and certifies our
seamen and tankermen.

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Our United States marine operations are also subject to regulation by
various United States federal agencies, including the Surface Transportation
Board (the successor federal agency to the Interstate Commerce Commission), the
Maritime Administration, the Customs Service, the Federal Maritime Commission
and the Coast Guard. These regulatory authorities have broad powers over
operational safety, tariff filings of freight rates, certain mergers,
contraband, environmental contamination, financial reporting and homeland, port
and vessel security.

Our common and contract motor carrier operations are regulated by the
United States Surface Transportation Board and various state agencies. The
Company's drivers, including owner-operators, also must comply with the safety
and fitness regulations promulgated by the Department of Transportation,
including certain regulations for drug testing and hours of service. The
officers and unlicensed crew members employed aboard the Company's vessels must
also comply with numerous safety and fitness regulations promulgated by the
United States Coast Guard, including certain regulations for drug testing and
hours of service.

JONES ACT

Section 27 of the Merchant Marine Act of 1920, commonly called the Jones
Act, is a federal law that restricts maritime transportation between United
States ports to vessels built and documented in the United States and owned and
operated by United States citizens. Because we carry cargo between United States
ports, we are subject to the provisions of this law. Other cabotage laws require
all United States vessels to be manned by United States citizens.

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.

Our marine transportation business which is conducted between United States
ports is protected from foreign competition by the Jones Act. While there have
been unsuccessful attempts in the past to broaden access to the Jones Act trade
and to modify, limit or abolish the Jones Act, we believe it is unlikely that
the Jones Act will be rescinded or materially modified in the foreseeable
future. Nonetheless, there can be no assurance that the Jones Act will not be
modified or rescinded.

ENVIRONMENTAL REGULATION

All of the Company's operations are subject to various federal, state and
local environmental laws and regulations implemented principally by the
Environmental Protection Agency, the United States Department of Transportation,
the United States Coast Guard and state environmental regulatory agencies. These
regulations govern the management of hazardous wastes, discharge of pollutants
into the air, surface and underground waters, including rivers, harbors and the
200-mile exclusive economic zone of the United States, and the disposal of
certain substances. We are currently involved in the remediation of eleven
properties and have budgeted approximately $4.7 million to be spent over the
next ten years on these projects. The contamination at these properties is the
result of historic operations. We believe that our operations are in material
compliance with current environmental laws and regulations.

OIL POLLUTION ACT OF 1990

The Oil Pollution Act of 1990 ("OPA 90") established an extensive
regulatory and liability regime intended to protect the environment from oil
spills. OPA 90 applies to owners and operators of facilities operating near
navigable waters and owners, operators and bareboat charterers of vessels
operating in United States waters, which include the navigable waters of the
United States and the 200-mile exclusive economic zone of the United States.
Although it applies in general to all vessels, for purposes of establishing
liability limits, financial responsibility and response planning requirements,
OPA 90 distinguishes tank vessels (which include our chemical and petroleum
product tankers, our crude oil carriers and our oil barges) from "other vessels"
(which include our tugs and the RO/RO and LO/LO vessels used by Liner Services).
As a result of certain oil spills by other shipping companies which received
international publicity, our single hulled tankers and barges are subject to
heightened scrutiny by our customers and various regulatory bodies.
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Under OPA 90, owners and operators of facilities and owners, operators and
bareboat charterers of vessels are "responsible parties" and are jointly,
severally and strictly liable for removal costs and damages arising from oil
spills relating to their facilities and vessels, unless the spill results solely
from the act or omission of a third party, an act of God or an act of war.
Damages are defined broadly to include:

- natural resources damages and the costs of assessment thereof;

- damages for injury to, or economic losses resulting from the destruction
of, real and personal property;

- the net loss of taxes, royalties, rents, fees and profits by the United
States government, and any state or political subdivision thereof;

- lost profits or impairment of earning capacity due to property or natural
resources damage;

- the net costs of providing increased or additional public services
necessitated by a spill response, such as protection from fire, safety or
other hazards; and

- the loss of subsistence use of natural resources.

For facilities, the statutory liability of responsible parties is limited
to $350 million. For tank vessels, the statutory liability of responsible
parties is limited to the greater of $1,200 per gross ton or $10 million ($2
million for a vessel of 3,000 gross tons or less) per vessel; for any "other
vessel" such liability is limited to the greater of $600 per gross ton or
$500,000 per vessel. Such liability limits do not apply, however, to an incident
proximately caused by violation of federal safety, construction or operating
regulations or by the responsible party's gross negligence or willful
misconduct, or if the responsible party fails to report the incident or provide
reasonable cooperation and assistance as required by a responsible official in
connection with oil removal activities. Although we currently maintain the
maximum available pollution liability insurance coverage that is available
through the international Protection & Indemnity Insurers, a catastrophic spill
could result in liability in excess of available insurance coverage, resulting
in a material adverse effect on our business.

Under OPA 90, with certain limited exceptions, all newly built or converted
oil tankers operating in United States waters must be built with double hulls,
and existing single-hull double-side or double-bottom vessels must be phased out
over time, unless retrofitted with double hulls. As a result of this phase-out
requirement, as interpreted by the United States Coast Guard, the vessels listed
below must stop carrying petroleum and petroleum products over the next five
years if they are not retrofitted with double hulls beginning with the listed
year.

In addition to those vessels listed above, we own 19 other vessels which,
during the six year period beginning in 2009, will need to be retrofitted with
double hulls in order to continue to carry petroleum or petroleum products in
United States waters. While the Company has not completed its study of what it
would cost to make such vessels comply with OPA 90 or to replace non-complying
vessels with new or used complying vessels, we believe that the cost would
represent a material capital expenditure.

OPA 90 expanded pre-existing financial responsibility requirements and
requires vessel owners, operators and bareboat charterers to establish and
maintain with the United States Coast Guard evidence of insurance or
qualification as a self-insurer or other evidence of financial responsibility
sufficient to meet their potential liabilities under OPA 90. Coast Guard
regulations also implement the financial responsibility requirements of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
which imposes liability for discharges of hazardous substances such as
chemicals, in an amount equal to $300 per gross ton,

12

thus increasing the overall amount of financial responsibility from $1,200 to
$1,500 per gross ton. We have obtained "Certificates of Financial
Responsibility" pursuant to the Coast Guard Regulations for our product and
chemical carriers through self-insurance and commercial insurance.

OPA 90 also amended the federal Water Pollution Control Act to require the
owner or operator of certain facilities and tank vessels to prepare facility or
vessel response plans and to contract with oil spill removal organizations to
remove to the maximum extent practicable a worst-case discharge. We have
complied with these requirements.

OPA 90 does not prevent individual states from imposing their own liability
regimes with respect to oil pollution incidents occurring within their
boundaries, and many states have enacted legislation providing for unlimited
liability for oil spills. Some states have issued regulations addressing oil
spill liability, financial responsibility, and vessel and facility response
planning requirements. We do not anticipate that such legislation or regulations
will have any material impact on our operations.

We believe we are currently in compliance in all material respects with the
environmental laws and regulations to which our operations are subject. We are
currently working with different state and federal agencies through agreed upon
orders, decrees or voluntary actions on the remediation of the eleven impacted
properties mentioned above. We are unaware of any material pending or threatened
litigation or other judicial, administrative or arbitration proceedings against
us occasioned by any alleged non-compliance with such laws or regulations. The
risks of substantial costs, liabilities and penalties are, however, inherent in
marine operations, and there can be no assurance that significant costs,
liabilities or penalties will not be incurred by or imposed on us in the future.

TITLE XI

Title XI of the Merchant Marine Act of 1936 permits the Secretary of
Transportation, acting through the Maritime Administration, to provide a United
States government guarantee of the repayment of certain loans arranged for the
construction, reconstruction or reconditioning of vessels constructed,
reconstructed or reconditioned in the United States. Debt guaranteed pursuant to
Title XI can have a term of up to twenty five years and interest rates are
generally more favorable than rates available from commercial lenders.

CAPITAL CONSTRUCTION FUND

Pursuant to Section 607 of the Merchant Marine Act of 1936, we have entered
into a Capital Construction Fund Agreement with the Maritime Administration
acting for the United States of America. The Capital Construction Fund program
allows United States citizens who are owners and operators of United States flag
vessels to accumulate the capital necessary to modernize and expand their fleets
by deferring federal income taxes on vessel earnings deposited into the fund.
Moneys deposited by us into our Capital Construction Fund must be used to
acquire, construct or reconstruct United States flag vessels built in United
States shipyards. Any vessel which we may acquire, construct or reconstruct
using Capital Construction Fund funds may only be used in the United States
foreign, non-contiguous domestic or Great Lakes trade.

INTERNATIONAL

Our vessels that operate internationally are subject to various
international conventions, including certain safety, environmental and
construction standards. Among the more significant conventions are: (i) the
International Convention for the Prevention of Pollution from Ships 1973, 1978
Protocol, (ii) the International Convention on the Safety of Life at Sea, 1978
Protocol, including the International Management Code for the Safe Operation of
Ships and for Pollution Prevention, which went into effect for tank vessels on
July 1, 1998, and (iii) the International Convention on Standards of Training,
Certification and Watchkeeping for Seafarers, 1978, as amended in 1995. These
conventions govern oil spills and other matters related to environmental
protection, worker health and safety, and the manning, construction and
operation of vessels. As a general matter, surveys and inspections are performed
by internationally recognized classification societies.

13

Although we believe we are in substantial compliance with all applicable
requirements, the risks of incurring substantial compliance costs and
liabilities and penalties for noncompliance are inherent in some of our offshore
operations and there can be no assurance that such costs, liabilities and
penalties will not be incurred by or imposed on us in the future.

EMPLOYEES

As of December 31, 2003, we had 3,999 employees, including 1,593 employed
on vessels and 2,406 employed at our domestic and foreign offices and other
land-based facilities. Approximately 2,425 of the Company's employees are
employed under the terms of 36 separate collective bargaining agreements with 12
different unions which, among other things, set forth the wages and benefits of
these employees. These agreements have expiration dates ranging from 2004 to
2008.

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company are as follows:

ITEM 2. PROPERTIES

Our corporate headquarters and executive offices are located at 155 Grand
Avenue, Oakland, California 94612, where we lease approximately 15,800 square
feet pursuant to a lease which expires in 2008. Liner Services conducts its
operations from offices located at 9487 Regency Square Boulevard, Jacksonville,
Florida 32225, a 100,000 square foot building owned by the Company. The
operations of Ship Assist and Escort Services and the operations of Energy and
Marine Services are primarily conducted from offices located at 1102 Southwest
Massachusetts Street, Pier 17, Seattle, Washington 98134, where we lease
approximately 40,000 square feet pursuant to a lease which expires in 2022. The
operations of Oil and Chemical Distribution and Transportation Services are
primarily conducted from our offices located at 1200 Harbor Boulevard,
Weehawken, New Jersey 07087-0901, where we lease approximately 16,500 square
feet pursuant to a lease which expires in 2004, and our offices located at Pier
17, in Seattle, Washington. Beginning May 2004, our operations located at
Weehawken, New Jersey will be moved to 100 Lighting Way, Secaucus, New Jersey
07094, where we will lease approximately 14,030 square feet pursuant to a lease
which expires in 2010.

We also maintain additional facilities in the United States and abroad to
support our businesses, including warehouse facilities and dock facilities in
Jacksonville, Florida, Port Everglades, Florida, Pennsauken, New Jersey, Valdez,
Alaska, Seattle, Washington, and San Juan, Puerto Rico, some of which serve as
ports-of-call for many customers. In addition, we maintain strategically
dispersed operating bases, and offices in Houston, Texas, Long Beach,
California, Atlanta, Georgia, New Orleans, Louisiana, Vancouver, Washington, and
Rye Brook, New York.

14

We believe that all of our facilities and equipment are in good condition,
well maintained and able to support our current operations. For additional
information concerning our properties, see the information concerning our fleet
of vessels and certain other properties as set forth in "Item 1. Business" of
this Form 10-K.

ITEM 3. LEGAL PROCEEDINGS

ASBESTOS LITIGATION

The Company is currently a defendant with respect to approximately sixteen
thousand maritime asbestos cases and other toxic tort cases, most of which were
filed in the Federal Courts in Ohio, Michigan, California and New Jersey.
Additional cases were filed in the Territorial Court of the Virgin Islands and
in state courts in Utah, Pennsylvania, Texas, and Louisiana. Each of the cases,
filed on behalf of a seaman or his personal representative, alleges injury or
illness based upon exposure to asbestos or other toxic substances and sets forth
a claim based upon the theory of negligence under the Jones Act and on the
theory of unseaworthiness under the General Maritime Law. Pursuant to an order
issued by the Judicial Panel on Multidistrict Litigation dated July 29, 1991,
all Federal cases were transferred to the United States District Court for the
Eastern Division of Pennsylvania for pretrial processing. On May 1, 1996, the
cases were administratively dismissed by Judge Charles R. Weiner, subject to
reinstatement in the future. At present, it is not known how long the process
will require. It is also not known whether Judge Weiner will be able to develop
a plan which will result in settlement of the cases. If he is unsuccessful, upon
reinstatement, it is expected that the cases will be remanded to the Ohio and
Michigan courts.

The Company has insurance coverage that reimburses it for a substantial
portion of the: (a) costs incurred defending against asbestos claims; and (b)
amounts the Company pays to settle claims or honor judgments by courts. The
coverage is provided by a large number of insurance policies written by dozens
of insurance companies that wrote the policies over a period of many years. The
amount of insurance coverage depends on the nature of the alleged exposure to
asbestos, the specific subsidiary against which an asbestos claim is asserted
and the terms and conditions of the specific policy.

The uncertainties of asbestos claim litigation make it difficult to
accurately predict the results of the ultimate resolution of these claims. By
their very nature, civil actions relating to toxic substances vary according to
the fact pattern of each case, the applicable jurisdiction and numerous other
factors. This uncertainty is increased by the possibility of adverse court
rulings or new legislation affecting the asbestos claim litigation or the
settlement process. Accordingly, we cannot predict the eventual number of such
cases or their final resolution. The full impact of these claims and proceedings
in the aggregate continues to be unknown. During 2003, there were 44 claims
reinstated related to these asbestos claims. The Company has accrued $813 as an
estimate of the ultimate outcome of this litigation. The Company has also
recorded a receivable from its insurance companies of $479 related to these
claims. While it is not feasible accurately to predict or determine the ultimate
outcome of all pending investigations and legal proceedings or provide
reasonable ranges of potential losses, given the large and/or indeterminate
amounts sought in certain of these matters and the inherent unpredictability of
litigation, it is possible that an adverse outcome in some of these cases could
have a material adverse effect on our financial condition, operating results or
cash flows.

Prior to 2001, the Company recorded its asbestos-related reserves based on
its best estimate of the total cost of the outstanding claims. These estimates
were based on actual costs for settled claims, evidence of liability and damages
as well as industry data regarding the ultimate cost of outstanding asbestos
litigation. During 2001, it became clear based on consultation with legal
counsel and upon the lack of progress since the cases were administratively
dismissed that the ultimate outcome of the outstanding cases was uncertain and
that the accrual of loss contingency requirements of Statement of Financial
Accounting Standards No. 5 "Accounting for Contingencies" were not met due to
the unreliability of the loss estimate. As a result, the Company was no longer
able to estimate the amount of probable loss or range of probable loss relating
to these asbestos cases and reversed $4,321 of asbestos-related reserves. This
was recorded as a reduction to claims expense in general and administrative
expenses in 2001.

15

ENVIRONMENTAL LITIGATION

Environmental costs represent reclamation costs expended by the Company.
Environmental expenditures for reclamation costs that benefit future periods are
capitalized. Expenditures that relate to remediating an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when the Company's
responsibility for remedial efforts is deemed probable and the costs can be
reasonably estimated. The ultimate future environmental costs, however, will
depend on the extent of the contamination of property and the Company's share of
remediation. Historically, actual provisions for environmental costs have not
differed materially from accrued amounts.

During 2003 and 2002, the Company reached agreements with its insurance
underwriters to settle all costs incurred to date and any future costs related
to environmental remediation resulting from occurrences prior to 1986. The
amounts of the settlements were $1,000 and $5,324, in 2003 and 2002,
respectively, net of unrecoverable amounts due to insolvency of certain
underwriters. Both of these settlements were collected during 2003. As a result
of these settlements, the Company increased its estimated liabilities by $3,095
in 2002 for any remaining environmental remediation. The Company also recognized
$1,000 and $2,229 as a reduction to claims expense in 2003 and 2002,
respectively. Refer to "Item 8. Financial Statements and Supplementary Data" for
additional information.

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

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 2003.

PART II

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

No established public trading market exists for our common stock. Shares of
our common stock are neither listed on any national securities exchange, nor
presently traded on any public stock exchange or in any other public market and
there are no plans, proposals, arrangements or understandings with any person
with regard to the development of a public trading market in our common stock.
Although quotations for shares of our common stock may be obtained in the Pink
Sheets (a centralized quotations service that collects and publishes market
maker quotes for over-the-counter securities), because secondary market activity
for shares of our common stock has been limited and sporadic, such quotations
may not accurately reflect the price or prices at which purchasers or sellers
would currently be willing to purchase or sell such shares.

The following table shows the range of high and low closing bid prices (in
dollars per share) for our common stock, as reported in the Pink Sheets, for the
periods indicated. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.

16

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(1) No trades during this quarter

As of March 1, 2004, we had 487 stockholders of record of our voting common
stock and one holder of record of our Class N non-voting common stock.

We pay no dividends on our common stock and do not anticipate declaring or
paying cash dividends on our common stock in the foreseeable future. We
currently intend to retain future earnings to finance operations and fund the
growth of our business. Any payment of future dividends will be at the
discretion of our board of directors and will depend upon, among other things,
our earnings, financial condition, capital requirements, level of indebtedness,
contractual restrictions with respect to the payment of dividends and other
factors that our board of directors may deem relevant. Payment of cash dividends
on our common stock is currently prohibited by the terms of certain agreements
to which the Company is a party. (See Note 12 to the Company's Consolidated
Financial Statements in "Item 8. Financial Statements and Supplementary Data".)

ITEM 6. SELECTED FINANCIAL DATA

The following table presents summary consolidated financial and operating
data for the Company. The data presented in this table are derived from the
audited financial statements of the Company. You should read the consolidated
financial statements and the notes thereto in "Item 8. Financial Statements and
Supplementary Data" for a further explanation of the financial data summarized
here. You should also read "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations", which describes a number of
factors which have affected our financial results.

In December 2003, the Company approved a plan to sell the Logistics
operations of its Liner Services segment in Venezuela. In February 2004, the
Company sold its Logistics operations for $1,506. Accordingly, all financial
information in "Item 6. Selected Financial Data" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" have
been restated to present the Venezuela operations separately from continuing
operations.

17

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

18

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

The following presentation of Management's Discussion and Analysis ("MD&A")
of the Company's financial condition, results of operations and cash flows
should be read in conjunction with the consolidated financial statements,
accompanying notes thereto and other financial information appearing elsewhere
in this Form 10-K. This discussion contains forward-looking statements that
involve risks and uncertainties. These statements are based on current
expectations and assumptions which management believes are reasonable and on
information currently available to management. These forward-looking statements
are identified by words such as "estimates," "expects," "anticipates," "plans,"
"believes," and other similar expressions. The Company's actual results may
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth below under "Risk
Factors" and elsewhere in this Form 10-K.

EXECUTIVE SUMMARY

Crowley Maritime Corporation is a diverse transportation company with
global operations. We have four business segments: Liner Services; Ship Assist
and Escort Services; Oil and Chemical Distribution and Transportation Services;
and Energy and Marine Services. Each segment is capital intensive and requires
the periodic renewal or replacement of the assets used by it. While all of our
segments are primarily engaged in maritime transportation and services related
to maritime transportation, each segment serves a different market with separate
and distinct customers. Certain markets are primarily based in the United States
and certain markets are based overseas. In most cases, each segment uses
equipment that has been specially designed and constructed to meet the needs of
that particular segment. By operating in four distinct markets, we diversify the
nature of our capital investments and hope to minimize the impact that any
economic downturn or other unforeseen adverse event may have upon one or more of
our segments at any particular time.

In 2003:

(a) Our consolidated operating revenues increased to $978,007 from
$972,857 in 2002;

(b) Our consolidated operating income increased to $42,208 from
$40,624 in 2002; and

(c) Our net income attributable to common shareholders decreased to
$11,246 ($82.87 basic earnings per common share and $79.17 diluted
earnings per common share) from $15,606 ($114.74 basic earnings
per common share and $105.89 diluted earnings per common share) in
2002.

The increases in consolidated operating revenues and consolidated operating
income were due to new revenues generated by two transportation management
companies that we acquired, higher prices for fuel sold by us in Alaska, the
operation of four new vessels, an increase in demand for our services provided
to the offshore oil exploration industry in the Gulf of Mexico and an increase
in the number of containers carried by us between the United States and Puerto
Rico and Latin America. Year over year, asset recoveries increased
substantially. The decrease in net income attributable to common shareholders
was due to a decrease in interest income, an increase in interest expense, an
increase in income tax expense and the loss from discontinued operations in
Venezuela.

We are continually looking for companies to acquire or assets to build that
will complement or strengthen our existing businesses. As part of these efforts,
we: (1) purchased Marine Transport Corporation in 2001; (2) took delivery of
four newly built articulated tug/barge units in 2002; (3) purchased one
transportation management company in 2001 and a second in 2002; and (4) have
been in negotiations since the middle of 2003 to purchase a fuel distribution
company located in Alaska. In 2004, we sold our logistics business based in
Venezuela. To be certain that we have the financial resources required for any
project that meets our criteria, we maintain a revolving line of credit that may
provide up to $95,000 and in December, we received proceeds of $115,000 from a
term loan which can be used for general corporate purposes, acquisitions and/or
other corporate projects. In 2003, we replaced approximately $49,000 of
construction financing arranged for two new vessels with long-term debt, with an
annual interest rate of 4.96%, guaranteed by the United States Government. At
December 31, 2003, the Company had cash and cash equivalents of approximately
$160,000 and long-term debt in the amount of $435,000.

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CRITICAL ACCOUNTING POLICIES

The preparation of the consolidated financial statements, upon which this
MD&A is based, requires management to make estimates which impact those
consolidated financial statements. The most critical of these estimates and
accounting policies relate to the long-lived asset depreciation, amortization
and impairment, goodwill, revenue recognition, and litigation and environmental
reserves. In particular, the accounting for these areas requires significant
judgments to be made by management. Different assumptions in the application of
these policies could result in material changes in the Company's consolidated
financial position or consolidated results of operations. For a more complete
discussion of these and other accounting policies, see Note 1 to the Company's
consolidated financial statements in "Item 8. Financial Statements and
Supplementary Data".

LONG-LIVED ASSET DEPRECIATION, AMORTIZATION AND IMPAIRMENT

The Company monitors expenditures for long-lived assets to determine their
appropriate useful lives. This determination is based on historical experience
with similar assets and the assets' expected use in the Company's business. The
determination of the assets' depreciable life can significantly impact the
financial statements. In addition, the Company depreciates property and
equipment, less estimated salvage value, using the straight-line method as such
method is considered to be the most appropriate systematic and rational method
to allocate the cost of property and equipment over the period in which it is to
be in use.

The Company assesses recoverability of the carrying value of the asset by
estimating the future net cash flows expected to result from the asset,
including eventual disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset's carrying value and fair value.

Impairment losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.

GOODWILL

Goodwill represents the excess costs of acquired companies over the fair
value of their net tangible assets. In accordance with Statement of Financial
Accounting Standards ("SFAS") 142, "Goodwill and Other Intangible Assets,"
goodwill deemed to have an indefinite life is not amortized, but is subject to
annual impairment testing. The identification and measurement of goodwill
impairment involves the estimation of the fair value of reporting units. The
estimates of fair value of reporting units are based on the best information
available as of the date of the assessment; the assessment primarily
incorporates management assumptions about expected future cash flows and
contemplate other valuation techniques. Future cash flows can be affected by
changes in industry or market conditions or the rate and extent to which
anticipated synergies or cost savings are realized with newly acquired entities.
Although no goodwill impairment has been recorded to date, there can be no
assurances that future goodwill impairments will not occur.

REVENUE RECOGNITION

The Company's accounting policies for revenue recognition are predicated on
the type of service provided. The common carrier services included in Liner
Services are recognized ratably over each voyage by load and discharge port. The
Company's logistics services and Ship Assist and Escort Services are recognized
as services are provided. Revenues from the Oil and Chemical Distribution and
Transportation Services and Energy and Marine Services are recognized ratably
over the length of the contract. Estimated losses are provided at the time such
losses become evident. The Company's recognition of revenue includes estimates
of the total costs incurred for each service and the total billings to perform
the service that impacts the estimated operating margin. While the Company has
processes in place to assist in developing these estimates, if the Company
experiences significantly higher costs or a significant decrease in estimated
billings, the Company's financial position, results of operation and cash flows
could be materially impacted.

20

LITIGATION AND ENVIRONMENTAL RESERVES

The Company monitors its outstanding litigation (including unasserted
claims). The Company estimates the expected probable loss (if any) of each claim
or potential claim. If a range of probable loss is determined, the Company
records a reserve at the low end of the range, unless there are indications that
another amount within the range better approximates the expected loss. The
determination of whether a litigation reserve is necessary is based on internal
analysis by management, consultation with the Company's general counsel and,
when necessary, consultations with external counsel. The Company's litigation
reserves are a significant estimate that can and does change based on
management's evaluation of the Company's existing and potential litigation
liabilities.

The Company is a defendant with respect to numerous maritime asbestos cases
and other toxic tort cases. The Company is unable to predict the ultimate
outcome of this litigation and an estimate of the amount or range of potential
loss. In addition, the Company is responsible for environmental remediation
relating to contamination of property. Liabilities are recorded when the
responsibility for such remediation is considered probable and the costs can be
reasonably estimated. The ultimate future environmental costs however will
depend upon the extent of contamination and the future costs of remediation. The
ultimate resolution of these litigation and environmental liabilities could have
a material impact on the Company's financial position, results of operations and
cash flows. See "Item 3. Legal Proceedings" and Notes 17 and 18 to the Company's
Consolidated Financial Statements in "Item 8. Financial Statements and
Supplementary Data."

RESULTS OF OPERATIONS

The following table sets forth: (a) operating revenues and operating income
for Liner Services, Ship Assist and Escort Services, Oil and Chemical
Distribution and Transportation Services, and Energy and Marine Services for the
years ended December 31, 2003, 2002 and 2001; and (b) other income and expenses
not specifically attributable to these operating segments. Other income and
expenses include interest income, interest expense, and minority interest in
consolidated subsidiaries. The Company evaluates the performance of its
operating segments based upon the operating income of the segment, excluding
interest income and expense and income taxes. See the Company's Consolidated
Financial Statements in "Item 8. Financial Statements and Supplementary Data"
for further information.

Included in operating income of all four of our segments are allocations
for corporate services, which include vessel acquisition, accounting, legal,
human resources, information technology, insurance services and purchasing
support. Vessel acquisitioncharges represent an allocation of the utilized
vessels, depreciation and amortization based on intercompany bareboat charters.
Other corporate services are allocated based upon various assumptions, depending
on the type of cost being allocated. Asset charges (recoveries) are allocated to
the segment that last used the asset.

The Company changed its method of accounting for goodwill to conform to
SFAS 142. See Note 1 of the Company's consolidated financial statements in "Item
8. Financial Statements and Supplementary Data."

21

SEGMENT OPERATING REVENUE AND OPERATING INCOME
AND OTHER INCOME AND EXPENSES
(IN THOUSANDS)

22

COMPARISON OF FISCAL YEAR 2003 TO FISCAL YEAR 2002

Operating income for 2003 was favorably impacted by an increase in
container and noncontainer volume shipped in the Puerto Rico and Caribbean
Islands Service, an increase in resale fuel activity, and the addition of the
four articulated tug/barge units (the "ATB's") to the Oil and Chemical
Distribution and Transportation Services This was partially offset by reduced
activities from operations in Russia provided by Energy and Marine Services.

Consolidated operating revenues increased $5,150 or .5%, to $978,007 in
2003 from $972,857 in 2002. This increase was primarily attributed to: (a) an
increase in revenues due to the acquisition of two transportation management
companies; (b) an increase in fuel prices for the Company's resale fuel; (c) an
increase in revenues from operation of the ATB's (d) an increase in vessel
activity in the Gulf of Mexico; and (e) an increase in the Company's container
and non-container volume. The increase was partially offset by decreases from:
(a) the sale of MTL Petrolink Corp. on May 15, 2002; (b) fewer vessels operating
as a result of vessel disposals and (c) a decrease in revenues earned from the
vessel outfitting and mobilization and the transportation of oil exploration
cargo to Sakhalin Island, Russia.

Consolidated operating expenses increased $4,234 or .5%, to $848,982 in
2003 from $844,748 in 2002. The increase is primarily attributed to: (a) an
increase in labor, fuel, transportation, and repair and maintenance costs on the
Company's equipment and vessels; and (b) increased expenses associated with the
purchase of two transportation management companies. This increase was partially
offset by decreases from the sale of MTL Petrolink Corp. on May 15, 2002 and
fewer vessels operating as a result of vessel disposals.

Consolidated general and administrative expenses decreased $1,854 or 5.6%,
to $31,447 in 2003 from $33,301 in 2002. This decrease was primarily
attributable to a change in cash surrender value of split-dollar life insurance,
offset by an increase in payroll related costs.

Consolidated depreciation and amortization expense increased $6,773 or
12.5%, to $60,753 in 2003 from $53,980 in 2002 primarily as the result of
depreciation relating to the operation of the ATB's during 2003 and additional
depreciation recognized as a result of the consolidation of a Variable Interest
Entity ("VIE"), (see Note 2 of the Notes to Consolidated Financial Statements in
"Item 8. Financial Statements and Supplementary Data"). The increase was also
attributed to an increase in dry-dock amortization of $2,871 as a result of
amortized dry-dock costs for ten vessels in 2003 compared with nine vessels in
2002. These increases were partially offset by the effect of no depreciation for
vessels sold in 2003 and 2002.

Consolidated asset recoveries, net increased $5,587 to a recovery of $5,383
in 2003 from a charge of $204 in 2002. The gains during 2003 resulted from the
sale of ten vessels, land, surplus properties and equipment and were partially
offset by a writeoff of vessel improvements. During 2002, four vessels and
various equipment were sold; one vessel was destroyed by fire (resulting in a
gain net of incurred costs from involuntary conversion) and certain impairment
charges were recognized on vessels designated for disposal.

As a result, the consolidated operating income increased $1,584 or 3.9%, to
$42,208 in 2003 from $40,624 in 2002.

Interest income decreased $325 or 47.2%, to $363 in 2003 compared with $688
in 2002. This decrease was due to a decrease in the Company's average cash and
cash equivalents during this period and lower interest rates in 2003.

Interest expense increased $5,848 or 37.8%, to $21,330 in 2003 compared
with $15,482 in 2002. This is a result of lower capitalized interest on the
construction of the ATB's during 2003 as compared with 2002 and additional
interest expense on vessel financings.

The minority interest in consolidated subsidiaries increased $1,133 to
income of $1,762 in 2003 compared with $629 in 2002. This increase is due to a
joint venture in which the Company had a 75% ownership interest. In December
2003, the Company acquired the remaining 25% of this joint venture. The joint
venture partner paid the Company $3,234 in order to exit the joint venture. The
total loss of the joint venture in 2003 was $7,800.

23

Income tax expense increased $400 or 4.8%, to $8,700 in 2003 compared with
$8,300 in 2002. The effective tax rate was 37.6% for 2003 and 31.2% for 2002.

Loss from discontinued operations increased $113 or 10.6%, to $1,177 ($8.67
basic loss per common share and $7.27 diluted loss per common share) in 2003
compared with $1,064 ($7.82 basic loss per common share and $6.55 diluted loss
per common share) in 2002.

As a result, net income attributable to common shareholders decreased
$4,360 to $11,246 ($82.87 basic earnings per common share and $79.17 diluted
earnings per common share) in 2003 from $15,606 ($114.74 basic earnings per
common share and $105.89 diluted earnings per common share) in 2002.

The Company provides diversified transportation services in the United
States domestic and international markets. The Company is organized to provide
services in four lines of business: Liner Services; Ship Assist and Escort
Services; Oil and Chemical Distribution and Transportation Services and Energy
and Marine Services (see "Item 1. Business".) The following is a discussion of
the results of operations by the Company's lines of business.

LINER SERVICES

Operating revenues from our Liner Services segment increased $48,161 or
9.1%, to $578,554 in 2003 from $530,393 in 2002. The increase in revenues is
primarily attributable to a 7.0% increase in container and noncontainer volume
and an increase of 102.4% in other logistical service revenues. This increase
was offset by a .2% decrease in average revenue per TEU ("average revenue"). The
average revenue decrease was a result of competitive pressures in Latin America,
which was partially offset by rate increases from the Puerto Rico and Caribbean
Islands Service. The Company's container and noncontainer volume during 2003 and
2002 was 581,955 TEUs and 543,866 TEUs, respectively. The increase in other
logistical service revenues was primarily due to revenues earned from the
acquisition of a transportation service provider and a transportation management
company specializing in the apparel industry purchased in October 2002 and July
2003, respectively.

Operating expenses increased $43,767 or 9.1%, to $527,151 in 2003 compared
with $483,384 in 2002. These expenses consist primarily of fuel costs, purchased
transportation costs, equipment costs, maintenance and repair costs and labor
costs. The increase in operating expenses is directly attributable to the
increase in container and non-container volume, as noted above, and increased
expenses associated with the purchase of a transportation service provider and a
transportation management company specializing in the apparel industry.

Depreciation and amortization increased $3,219 or 45.3%, to $10,329 in 2003
compared with $7,110 in 2002. The increase was directly attributable to an
increase in dry-dock amortization of $2,948. Liner Services amortized dry-dock
costs for six vessels in 2003 compared with four vessels in 2002. Dry dock costs
are amortized over a period to the next scheduled dry-dock but not in excess of
three years. There was also an increase in amortization of management contracts
and customer lists.

Asset charges (recoveries), net increased $1,545 to a recovery of $993 in
2003 compared with a charge of $552 in 2002. Liner Services recorded an
impairment charge on two vessels in 2002. These impairment charges were offset
by gains on disposals of two vessels and equipment during 2003 and disposals of
equipment in 2002.

As a result, the operating income from Liner Services increased $2,727 to
$20,946 in 2003 from operating income of $18,219 in 2002.

SHIP ASSIST AND ESCORT SERVICES

Operating revenues from our Ship Assist and Escort Services segment
increased $3,161 or 4.5%, to $73,665 in 2003 compared with $70,504 for 2002. The
increase was directly attributable to an increase in rates which included a fuel
surcharge to cover rising fuel prices, higher vessel volumes in North Puget
Sound, and increased utilization in Valdez. Overall vessel utilization was 72%
compared with 73% during 2003 and 2002, respectively.

24

Operating expenses increased $6,768 or 12.3%, to $61,846 in 2003 compared
with $55,078 during 2002. The increase was directly attributable to an increase
in vessel related costs due to increased labor, fuel, and repairs and
maintenance costs of vessels and an increase in property taxes.

As a result, operating income for Ship Assist and Escort Services in 2003
decreased $3,891 to $9,746 compared with $13,637 for 2002.

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES

Operating revenues from our Oil and Chemical Distribution and
Transportation Services segment decreased $27,843 or 9.8%, to $255,540 in 2003
compared with $283,383 for 2002. The decrease was directly attributable to the
sale of MTL Petrolink Corp. on May 15, 2002, and a decrease in the number of
vessels in service in 2003 compared with 2002. This decrease was partially
offset by: (a) an increase in revenue earned in 2003 from an increase in resale
fuel prices; (b) the operation of three ATB's placed in service during the third
and fourth quarters of 2002 and one ATB placed in service during the second
quarter of 2003; and (c) an overall increase in vessel utilization (69% in 2003
compared with 67% in 2002).

Operating expenses decreased $41,445 or 16.4%, to $211,454 during 2003
compared with $252,899 during 2002. This decrease was primarily attributable to
the expenses which were not incurred due to the sale of MTL Petrolink Corp. on
May 15, 2002, and a decrease in the number of vessels in service during 2003
compared with 2002. The decrease was partially offset by an overall increase in
vessel utilization and increased expenses in 2003 related to an increase in
resale fuel prices, the operation of three ATB's placed in service during 2002
and one ATB placed in service in 2003.

Depreciation and amortization decreased $1,513 or 9.4%, to $14,506 during
2003 compared with $16,019 during 2002. The decrease was directly attributable
to a decrease in depreciation of $1,712, which was caused by the sale of vessels
and partially offset by additional depreciation recognized as a result of the
consolidation of the VIE. This decrease was partially offset by an increase in
dry-dock amortization for vessels of $743. Dry-dock costs were amortized for
four vessels during 2003 and three vessels during 2002. Dry-dock costs are
amortized over a period to the next scheduled dry-dock, but not in excess of
three years.

Asset charges (recoveries), net increased $2,233 to a recovery of $1,788 in
2003 compared with charges of $445 in 2002. These gains resulted from the sale
of three vessels and land during 2003. During 2002, two vessels and various
equipment were sold; and one vessel was destroyed by fire, resulting in a gain
net of incurred costs from involuntary conversion. In 2002, an agreement was
reached to sell a vessel in 2003. An impairment analysis was performed which
resulted in a charge of $4,239 in 2002.

As a result, the operating income of Oil and Chemical Distribution and
Transportation Services increased $18,377 to $25,059 in 2003 compared with
$6,682 for 2002.

ENERGY AND MARINE SERVICES

Operating revenues from our Energy and Marine Services segment decreased
$18,329 or 20.7%, to $70,248 in 2003 compared with $88,577 for 2002. The
decrease was directly attributable to a reduction from the revenues earned from:
(a) the vessel outfitting and mobilization and the transportation of oil
exploration cargo to Sakhalin Island, Russia; and (b) government and commercial
contract activity on the West Coast. This decrease was partially offset by
increased vessel activity in the Gulf of Mexico. Overall vessel utilization
increased to 46% in 2003 compared to 45% in 2002. Vessel utilization in this
segment is very volatile and it is impacted by oil exploration activity and
general economic conditions. We believe that the operating revenues for our
Energy and Marine Services will increase in 2004 as we have been awarded some
additional work in Russia.

Operating expenses increased $2,048 or 2.0%, to $103,054 during 2003
compared with $101,006 in 2002. The increase was directly attributable to: (a)
mobilization and outfitting costs for vessels moving to the Gulf of Mexico; and
(b) increases in vessel related costs due to increased labor and repairs and
maintenance costs on tugs and barges in 2003. The increase was partially offset
by decreases in one-time outfitting charges in 2002 related to the Sakhalin
Island project.
25

Depreciation and amortization increased $718 or 6.3%, to $12,205 during
2003 compared with $11,487 during 2002. The increase was the result of a
catch-up in depreciation for a reactivated vessel that was previously classified
as held for sale and depreciation on vessel refurbishments completed in 2002.

Asset charges (recoveries), net increased $1,809 to a recovery of $2,602 in
2003 compared with a recovery of $793 in 2002. These gains resulted from the
sale of five vessels and land improvements, which were partially offset by a
writedown of vessel improvements during 2003 compared with the sale of two
vessels and land during 2002.

As a result, operating loss for Energy and Marine Services increased
$15,629 to $13,543 in 2003 compared with operating income of $2,086 for 2002.

COMPARISON OF FISCAL YEAR 2002 TO FISCAL YEAR 2001

Operating income for 2002 was favorably impacted by the decline in vessel
capacity in the Puerto Rican trades as a result of the consolidation of two
competitors. This was partially offset by a downturn in the Oil and Chemical
Distribution and Transportation market caused by economic conditions and the
sale of MTL Petrolink Corp.

Consolidated operating revenues decreased $20,078 or 2.0%, to $972,857 in
2002 from $992,935 in 2001. The decrease is primarily attributed to a downturn
in the market for Oil and Chemical Distribution and Transportation Services
caused by economic conditions and the sale of MTL Petrolink Corp. during 2002.
This was offset by the decline in vessel capacity in the Puerto Rican trades as
a result of the consolidation of two competitors.

In May 2002, the Company sold all of the outstanding common stock of MTL
Petrolink Corp. (a subsidiary of MTC) for $18,638. The Company decided to sell
MTL Petrolink Corp. subsequent to its acquisition of MTC. In its allocation of
the purchase price of MTC, the Company made no effort separately to determine
the fair value of MTL Petrolink Corp. The Company recorded the excess of the
sales price, net of selling costs, over the net asset value of MTL Petrolink
Corp. as a purchase price adjustment resulting in a reduction to goodwill in the
amount of $3,345. Included in the selling price of MTL Petrolink Corp. was a
$500 escrow deposit which was received during 2003. This amount, net of income
taxes of $189, also reduced goodwill.

During 2002, the Company took delivery of four newly constructed ATB's, the
SEA RELIANCE/ Barge 550-1, the SOUND RELIANCE/Barge 550-2, the OCEAN
RELIANCE/Barge 550-3, and the COASTAL RELIANCE/Barge 550-4. The first three
units were placed into service in 2002 and the fourth unit was placed in service
in 2003. These units are being operated by Oil and Chemical Distribution and
Transportation Services.

Consolidated operating expenses decreased $31,903 or 3.6%, to $844,748 in
2002 from $876,651 in 2001. The decrease is primarily attributed to the sale of
MTL Petrolink Corp. during 2002.

Consolidated general and administrative expenses increased $5,228 or 18.6%,
to $33,301 in 2002 from $28,073 in 2001. The increase is primarily attributable
to a $4,342 reduction in asbestos related claim reserves recorded in 2001 due to
the uncertainty of successful litigation by the claimants. Refer to "Item 3.
Legal Proceedings" and Note 18 of the consolidated financial statements in "Item
8. Financial Statements and Supplementary Data."

Consolidated depreciation and amortization expense increased $2,923 or
5.7%, to $53,980 in 2002 from $51,057 in 2001. The increase is primarily
attributable to an increase in dry-dock amortization of $4,321 as a result of
amortized dry-dock costs for nine vessels in 2002 compared with five vessels in
2001. This increase was partially offset by not recording amortization of
goodwill in 2002 as a result of the Company adopting SFAS 142, "Goodwill and
Other Intangible Assets".

Consolidated asset charges (recoveries), net increased $5,051 or 104.2%, to
a charge of $204 in 2002 from a recovery of $4,847 in 2001. This was primarily
attributed to an impairment charge of $5,487 on vessels designated for disposal.
26

As a result, the consolidated operating income decreased $1,377 or 3.3%, to
$40,624 in 2002 from $42,001 in 2001.

Interest income decreased $1,428 or 67.5%, to $688 in 2002 compared with
$2,116 in 2001. This decrease was due to a decrease in the Company's average
cash and cash equivalents during this period and lower interest rates in 2002.

Interest expense decreased $192 or 1.2%, to $15,482 in 2002 compared with
$15,674 in 2001. This is a result of higher capitalized interest on the
construction of the ATB's during 2002 as compared with 2001, which was offset by
additional interest expense on new vessel financings and borrowings under the
Company's revolving credit agreement.

The minority interest in consolidated subsidiaries decreased $620 to income
of $629 in 2002 compared with income of $1,249 in 2001. This decrease is due to
a joint venture which the Company had a 75% ownership interest in the joint
venture. In December 2003, the Company acquired the remaining 25% of this joint
venture. The total loss of the joint venture in 2002 was $2,777.

Income tax expense decreased $1,500 or 15.3%, to $8,300 in 2002 compared
with $9,800 in 2001. The effective tax rate was 31.2% for 2002 and 32.7% for
2001.

Loss from discontinued operations increased $1,020, to $1,064 ($7.82 basic
loss per common share and $6.55 diluted loss per common share) in 2002 compared
with $44 ($0.32 basic loss per common share and $0.27 diluted loss per common
share) in 2001.

As a result, net income attributable to common shareholders decreased
$2,626 to $15,606 ($114.74 basic earnings per common share and $105.89 diluted
earnings per common share) in 2002 from $18,232 ($134.14 basic earnings per
common share and $122.14 diluted earnings per common share) in 2001.

The following is a discussion of the results of operations of each or our
lines of business.

LINER SERVICES

Operating revenues from our Liner Services segment increased $37,233 or
7.5%, to $530,393 in 2002 from $493,160 in 2001. The increase in revenues is
primarily attributable to a 9.6% increase in container and noncontainer volume
and an increase of 56.4% in other logistical service revenues. This increase was
offset by a 4.8% decrease in average revenue per TEU ("average revenue") due to
competitive pressures in our Puerto Rico and Caribbean Islands Service and Latin
America Service. The Company's container and noncontainer volume during 2002 and
2001 was 543,866 TEUs and 496,074 TEUs, respectively. The increase in other
logistical service revenues was primarily due to revenues earned from the
acquisition of a transportation service provider purchased in October 2002.

Operating expenses increased $12,124, or 2.6%, to $483,384 in 2002 compared
with $471,260 in 2001. These expenses consist primarily of fuel costs, purchased
transportation costs, equipment costs, maintenance and repair costs and labor
costs. The increase in operating expenses is directly attributable to the
increase in container and non-container volume, as noted above.

Depreciation and amortization increased $387, or 5.8%, to $7,110 in 2002
compared with $6,723 in 2001. The increase in depreciation was due to an
increase in dry-dock amortization for additional vessels dry-docked in 2002,
which was partially offset by the sale of container and trailer equipment in
2001.

Asset charges (recoveries), net decreased $160 to a charge of $552 in 2002
compared with a charge of $392 in 2001. Liner Services recorded an impairment
charge on 2 vessels in 2002 and 2001 of $763 and $484, respectively. These
impairment charges were offset by gains on various equipment disposals of $211
in 2002 and $92 in 2001.

As a result, the operating income from Liner Services increased $19,864 to
$18,219 in 2002 from an operating loss of $1,645 in 2001.

27

SHIP ASSIST AND ESCORT SERVICES

Operating revenues from our Ship Assist and Escort Services segment
decreased $809 or 1.1%, to $70,504 in 2002 compared with $71,313 for 2001. The
decrease was directly attributable to a decrease in activity in Puget Sound,
Washington and Los Angeles and Long Beach, California. Overall vessel
utilization was 72% compared with 73% during 2002 and 2001, respectively.

Operating expenses decreased $4,525 or 7.6%, to $55,078 in 2002 compared
with $59,603 during 2001. The decrease was directly attributable to the decrease
in vessel related costs due to decreased utilization hours, with the largest
component being a decrease in fuel and crewing expenses.

As a result, operating income for Ship Assist and Escort Services in 2002
increased $2,528 to $13,637 compared with $11,109 for 2001.

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES

Operating revenues from our Oil and Chemical Distribution and
Transportation Services segment decreased $69,621 or 19.7%, to $283,383 in 2002
compared with $353,004 for 2001. The decrease was directly attributable to the
sale of MTL Petrolink Corp. on May 15, 2002, and an overall decrease in vessel
utilization (67% compared with 77%). As a result of the sale of MTL Petrolink
Corp., only 4.5 months of the results of its operations were included in the
Company's consolidated results in 2002 as opposed to 10.5 months of operations
which were included in the Company's consolidated results in 2001. Due to
uncertainty surrounding the sale of MTL Petrolink Corp. and the time which was
required to conclude the sale, some of its customers chose to use other
lightering companies during the months preceding the conclusion of the sale. The
loss of these customers, combined with an overall decline in the market,
adversely affected the results of MTL Petrolink Corp. which, in turn, adversely
affected the results of Oil and Chemical Distribution and Transportation
Services. The decrease in vessel utilization is a result of declining oil and
trading activity among West Coast suppliers and the 2001 reopening of the
Olympic Pipeline. The decrease was offset by an increase based upon: (a) the
acquisition of MTC on February 7, 2001, which provided additional revenue due to
its inclusion in operations for a full quarter during the first quarter of 2002;
and (b) revenue earned from the operations of three ATB's placed in service
during 2002.

Operating expenses decreased $46,976 or 15.7%, to $252,899 during 2002
compared with $299,875 during 2001. This decrease was primarily attributable to
reduced expenses associated with MTL Petrolink Corp., reduced activity due to
declining oil shipments as discussed above and a decrease in vessel related
costs due to decreased vessel utilization. The decrease was offset by: (a) the
acquisition of MTC in 2001, which resulted in the inclusion of a full 12 months
of expenses in the Company's operations in 2002 versus the inclusion of only
10.5 months of expenses in 2001; and (b) expenses related to the operation of
three ATB's placed in service during 2002.

Depreciation and amortization increased $1,021 or 6.8%, to $16,019 during
2002 compared with $14,998 during 2001. The increase was directly attributable
to the acquisition of MTC, which resulted in additional depreciation expense in
2002 because MTC's operations were included for a full 12 months in 2002 versus
10.5 months in 2001, and an increase in dry-dock amortization for vessels
dry-docked in 2002. This increase was partially offset by a decrease arising
from the sale of MTL Petrolink Corp. in 2002, a decrease from not recording
goodwill amortization in 2002, in accordance with SFAS 142, and an increase in
the number of operating vessels that became fully depreciated in 2002.

Asset charges (recoveries), net decreased $2,050 to charges of $445 in 2002
compared with recoveries of $1,605 in 2001. In July 2002, a fire occurred in the
engine room of one of the tankers used by Oil and Chemical Distribution and
Transportation Services. As a result of the fire, the extensive damages caused
by it and the short remaining useful life of the vessel, management decided not
to repair the vessel. The Company has received insurance proceeds based upon the
damage to the vessel caused by the fire. Accordingly, the Company has recognized
a gain net of incurred costs from involuntary conversion of $3,897. Also, in
December 2002, an agreement was entered into to sell a vessel. An impairment
analysis was performed which

28

resulted in a charge of $4,239 in 2002. During 2002, two vessels and
miscellaneous equipment were sold for a loss of $103. During 2001, three vessels
and miscellaneous equipment were sold for a gain of $1,605.

As a result, the operating income of Oil and Chemical Distribution and
Transportation Services decreased $26,691 to $6,682 in 2002 compared with
$33,373 for 2001.

ENERGY AND MARINE SERVICES

Operating revenues from our Energy and Marine Services segment increased
$13,119 or 17.4%, to $88,577 in 2002 compared with $75,458 for 2001. The
increase was directly attributable to: (a) a strong exploration season during
2002 in Alaska and non-recurring demobilization and contract termination fees
related to contracts performed in Hawaii, Alaska, and South America; and (b) the
commencement of services under new contracts with a global service provider to
transport oil exploration cargo from the United States to Sakhalin Island,
Russia, and between ports in Russia. This increase in revenue was partially
offset by a decrease in vessel utilization. Vessel utilization during 2002 was
45% compared with 53% during 2001. Vessel utilization is very volatile and it is
impacted by oil exploration activity and general economic conditions.

Operating expenses increased $9,686 or 10.6%, to $101,006 during 2002
compared with $91,320 in 2001. The increase was directly attributable to the
higher level of activity during 2002 as noted above, and was offset by the
decrease in vessel utilization.

Depreciation and amortization decreased $1,295 or 10.1%, to $11,487 during
2002 compared with $12,782 during 2001. The decrease was directly attributable
to an increase in the number of operating vessels, terminals and equipment that
became fully depreciated in 2002.

Asset charges (recoveries), net decreased $2,847 to a recovery of $793 in
2002 compared with a recovery of $3,640 in 2001. Energy and Marine Services sold
two vessels and land for a gain of $1,243 in 2002. Energy and Marine Services
also performed an impairment analysis on five vessels and recorded a charge of
$450 in 2002. During 2001, five vessels, land and facilities and miscellaneous
assets were sold for a gain of $3,640.

As a result, operating income for Energy and Marine Services increased
$2,922 to $2,086 in 2002 compared with an operating loss of $836 for 2001.

LIQUIDITY AND CAPITAL RESOURCES

The following schedule summarizes contractual obligations and other
contractual commitments as of December 31, 2003:

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

(1) The Company has a contract with a fuel supplier where the Company has agreed
to purchase approximately 750 barrels of fuel during 2004, at market value.
Under the terms of the contract, the Company can extend the contract for one
year. The Company purchased 772 barrels of fuel at a market price of $27,633
during 2003 under this contract. The estimated value of the fuel to be
purchased in 2004 is $29,866 at December 31, 2003. The Company may negotiate
a greater or lesser quantity of fuel if

29

future business conditions change. The Company has designated this contract as a
normal purchase and not as a hedge for financial statement purposes as the
Company has not agreed to the price of the fuel.

(2) Other contractual commitments are related to remaining spending on the
construction of two vessels, leasehold improvements under an operating lease
and software maintenance agreements.

LIQUIDITY

The Company's ongoing liquidity requirements arise primarily from its need
to fund working capital, to acquire, construct, or improve equipment, to make
investments and to service debt. Management believes that cash flows from
operations will provide sufficient working capital to fund the Company's
operating needs. In 2003 and previous years, the Company has used Title XI
financing for the acquisition, construction and improvement of vessels. As of
December 31, 2003, the repayment of approximately $214 million of the Company's
outstanding indebtedness is guaranteed by the United States government pursuant
to Title XI. Management believes that funds needed for the acquisition and
construction of vessels will continue to be available through Title XI and bank
financing. In addition, the Company has generated significant proceeds from the
disposition of certain assets and believes that additional proceeds will be
generated as it sells older assets and continues to modernize its fleet.

The Company has been engaged in discussions with Northland Holdings, Inc.
concerning a possible purchase by the Company of all the stock or assets of
Yukon Fuel Company ("Yukon") and/or Service Oil & Gas, Inc. as well as certain
vessels and other assets used in Yukon's fuel distribution business in Alaska.
The Company anticipates a cash purchase price of approximately $72,000
(depending on the level of working capital and other adjustments at closing.)
The parties have not arrived at a definitive agreement concerning the terms of
any such transaction and there can be no assurance that these discussions will
lead to such an agreement or a purchase of such stock or assets by the Company.
Any such transaction is subject to, among other things, the negotiation,
execution and delivery of a definitive acquisition agreement, completion by the
Company of its due diligence investigation, approval of such agreement by the
board of directors of the Company, receipt of necessary consents from certain
lenders to the Company, satisfactory resolution of pending litigation, and the
parties' joint determination that such a transaction could be effected in
compliance with applicable state and federal antitrust laws.

On November 20, 2003, a lawsuit was filed in the Superior Court for the
State of Alaska, Second Judicial District at Nome, against the Company, its
wholly owned subsidiary, Crowley Marine Services, Inc., Yukon and Northland
Holdings, Inc. by certain cooperatives and associations located in Western
Alaska. The complaint in this litigation alleges violations or threatened
violations by defendants of Alaska's antitrust and unfair trade practices
statutes in connection with the foregoing possible acquisition. Plaintiffs in
this litigation are seeking declaratory and injunctive relief which would
prevent completion of such transaction. The Company believes that the lawsuit is
without merit. On February 27, 2004, the court stayed the proceedings at the
defendants' request pending the outcome of an investigation by the Attorney
General of Alaska as to whether the proposed transaction violates such Alaska
statutes. Depending upon the outcome of this investigation and further
proceedings in the litigation, the Company may close the proposed acquisition
despite the pending litigation, but reserves the right not to do so.

Off-Balance Sheet Arrangements

As of December 31, 2003, the Company does not have any off-balance sheet
arrangements as defined by Item 303(a)(4) of Securities and Exchange Commission
Regulation S-K.

Comparison of the Financial Condition as of December 31, 2003 and December 31,
2002

At December 31, 2003, the Company's cash and cash equivalents totaled
$160,625 ($43,355 at December 31, 2002). Net cash provided by continuing
operations was $61,642 for 2003 compared with $34,221 in 2002.

30

Net cash provided by discontinued operations was $1,013 in 2003 compared
with net cash used of $2,575 in 2002.

Net cash used in investing activities of continuing operations was $32,561
in 2003 compared with $87,529 in 2002. The decrease reflects a decrease in
capital expenditures ($19,247 in 2003 compared with $96,825 in 2002) associated
with the construction and modernization of assets of the Company. The Company
spent $30,366 for nine vessel dry-dockings during 2003 compared with $11,787
spent on six vessel dry-dockings during 2002. The Company received proceeds from
asset dispositions of $10,451 during 2003 compared with $9,679 received during
2002. The Company received the balance of the purchase price of $500 from the
sale of MTL Petrolink Corp. during 2003. This amount, net of income taxes of
$189, reduced goodwill. The Company received proceeds of $18,138 from the sale
of MTL Petrolink Corp. in 2002. In 2003, the Company purchased a transportation
management company specializing in the apparel industry for $3,357. In 2002, the
Company purchased the assets of a transportation services provider for $2,986.
The Company assumed cash of $1,915 from the consolidation of the VIE effective
January 1, 2003; however, the Company does not have access to this cash and
accordingly it has been disclosed as restricted cash in the consolidated
financial statements. In 2002, the Company paid net premiums of $2,700 for
split-dollar life insurance policies. In 2003, the Company received
reimbursement from an employee of $7,508 of the total net premiums paid by the
Company on these policies. In 2003, the Company purchased life insurance
policies on a member of the Board of Directors life, with a cash surrender value
of $1,894 at December 31, 2003.

Net cash provided by financing activities was $87,176 in 2003 compared with
$66,212 in 2002. This increase was a result of higher principal payments on
long-term debt ($82,835 in 2003, which includes the repayment of $49,394 of
construction financing used for two ATB's, compared with long-term debt in the
amount of $75,238 in 2002) and an increase in the proceeds from issuance of
debt. In 2002, proceeds in the amount of $127,534 were received to finance the
construction of four ATB's. In 2003, the Company received proceeds of $205,909
from permanent financings to refinance the construction financing for two of the
ATB's ($60,909) and for general corporate purposes, acquisitions, and other
capital expenditures ($145,000). The Company borrowed $50,000 and repaid $25,000
on its Revolving Credit Agreement in 2002 and borrowed an additional $20,000 and
repaid $45,000 in 2003. The Company paid $6,568 of debt issuance costs during
2002 compared with $866 during 2003. The Company paid $7,967 in 2003 upon
maturity of a rate lock agreement. The Company redeemed the remaining $2,367 of
its Redeemable Preferred Class B stock during 2002.

CAPITAL RESOURCES

Management plans to continue its efforts to modernize the Company's fleet
of vessels. Many of the tugs and barges and a number of the tankers used in Oil
and Chemical Distribution and Transportation Services are more than two-thirds
through their estimated useful lives. Federal regulations currently require the
phase-out of single hull oil barges and of single hull tankers beginning in
2003. Four of the Company's barges and one of the Company's tankers will be
retired between 2004 and 2006. In addition, nineteen of the Company's single
hull oil barges will be retired between 2009 and 2015. Accordingly, the Company
is consulting with its customers and developing plans where justified by
business prospects, either to refurbish the existing fleet of tugs, barges and
tankers, thereby extending their useful lives, or to purchase used equipment or
build new equipment which complies with current federal regulations.

In July 2003, the Company purchased the stock of a transportation
management company specializing in the apparel industry for $3,357. This
purchase price will be adjusted for certain working capital adjustments and
payments based on earnings. In October 2002, the Company purchased the assets of
a transportation services provider for $2,986. These acquisitions are included
in our Liner Services segment.

In December 2003, the Company entered into an agreement to acquire the 25%
minority interest in a joint venture which was accounted for using the purchase
method of accounting. The Company received approximately $3,234 and recorded the
excess of fair value of acquired net assets over cost, totaling approximately
$5,944, as a reduction to the fair value of the vessels, the joint ventures only
long-term assets.

For information concerning our debt including our revolving credit
agreement and certain borrowings which we made in 2003, see Note 12 of the Notes
to Consolidated Financial Statements in "Item 8. Financial Statements and
Supplementary Data."

31

RESTRICTIVE COVENANTS

For information concerning our restrictive covenants see Note 12 of the
Notes to Consolidated Financial Statements in "Item 8. Financial Statements and
Supplementary Data."

TRANSACTIONS WITH SPECIAL PURPOSE ENTITY

In January 1997, MTC entered into a transaction with an unconsolidated
Variable Interest Entity ("VIE") for the sale/leaseback of a vessel that MTC
time chartered to a third party. The Company adopted Financial Accounting
Standards Board Interpretation No. 46, "Consolidation of Variable Interest
Entities" and determined that it is the primary beneficiary of the VIE and, as a
result, consolidated the VIE effective January 1, 2003. For additional
discussion of the VIE, refer to Note 2 to the Company's consolidated financial
statements in "Item 8. Financial Statements and Supplementary Data".

EFFECTS OF INFLATION

The Company does not consider inflation to be a significant risk to the
cost of doing business in the current or foreseeable future. Inflation has a
moderate impact on operating expenses, including fuel, dry-docking expenses and
corporate overhead. Refer to Risk Factors included in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations."

RECENT ACCOUNTING PRONOUNCEMENTS

For a complete discussion of new account pronouncements, see Note 1 to the
Company's consolidated financial statements in "Item 8. Financial Statements and
Supplementary Data".

RISK FACTORS

If any of the following risks actually occur, our business, financial
condition, operating results or cash flows could be materially adversely
affected.

DEMAND FOR OUR SERVICES DEPENDS ON FACTORS BEYOND OUR CONTROL

Demand for our services is dependent on a number of factors beyond our
control, including:

- worldwide demand for chemicals and petroleum products and other cargo
shipped by our customers;

- local and international political and economic conditions and policies;
and

- weather conditions.

We have high fixed costs, and downtime or low productivity due to reduced
demand or other causes can have a significant negative effect on our operating
results.

LINER SERVICES IS SUBJECT TO ECONOMIC FACTORS AND THE CYCLICAL NATURE OF ITS
BUSINESS

Economic factors affecting the geographic regions in which Liner Services
are provided and cyclical business patterns experienced by this part of the
maritime shipping industry have caused the earnings of Liner Services to vary in
the past and are likely to cause similar variations in the future. There is no
assurance that Liner Services will be able to redeploy its vessels from less
profitable markets into other markets or uses. See "Item 1. Business -- Liner
Services".

FLUCTUATION OF FUEL PRICES

Economic and political factors can affect fuel prices. The Company's
operations may be impacted due to the timing and our ability to pass these
changes in fuel prices to our customers.

32

ENERGY AND MARINE SERVICES ARE FREQUENTLY PROVIDED FOR DISCRETE PROJECTS

Energy and Marine Services frequently provides many of its services in
response to discrete customer projects or in response to emergency conditions
and its contracts are generally short-term, usually terminating within one year.
Accordingly, customers which account for a significant portion of operating
revenues and operating income in one fiscal year may represent an immaterial
portion of revenues in subsequent fiscal years. See "Item 1. Business -- Energy
and Marine Services".

THE COMPANY FACES INTENSE COMPETITION THAT COULD ADVERSELY AFFECT ITS ABILITY
TO INCREASE ITS MARKET SHARE AND ITS REVENUES

Our businesses operate in highly competitive industries. These intense
levels of competition could reduce our revenues, increase our expenses and
reduce our profitability.

In addition to price, service, experience and reputation, important
competitive factors include safety record, ability to meet the customer's
schedule, customers' national flag preference, operating conditions, capability
and intended use, complexity of logistical support needs and presence of
equipment in the appropriate geographical locations.

Many of our major competitors are diversified multinational companies. Some
of these companies have financial resources and operating staffs substantially
larger than ours. As a result, they may be better able to compete in making
vessels available more quickly and efficiently, meeting the customer's schedule
and withstanding the effect of declines in market prices. They may also be
better able to weather a downturn in our customers' industries. As a result, we
could lose customers and market share to these competitors.

THE COMPANY MAY INCUR SIGNIFICANT COSTS, LIABILITIES AND PENALTIES IN
COMPLYING WITH GOVERNMENT REGULATIONS

Government regulation, such as international conventions, federal, state
and local laws and regulations in jurisdictions where the Company's vessels
operate or are registered have a significant impact on our operations. These
regulations relate to worker health and safety, the manning, construction and
operation of vessels, homeland, port and vessel security, and oil spills and
other aspects of environmental protection.

Risks of incurring substantial compliance costs and liabilities and
penalties for non-compliance, particularly with respect to environmental laws
and regulations, are inherent in the Company's business. If this happens, it
could have a substantial negative impact on the Company's profitability and
financial position. The Company cannot predict whether it will incur such costs
or penalties in the future. See "Item 1. Business -- Government Regulation".

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES EMPLOYS A NUMBER OF
TANKERS AND BARGES WHICH, IN THEIR PRESENT CONDITION, WILL NOT BE PERMITTED TO
CARRY PETROLEUM PRODUCTS IN UNITED STATES WATERS AS OF CERTAIN DATES OCCURRING
OVER THE NEXT THREE YEARS. SEE "ITEM 1. BUSINESS -- ENVIRONMENTAL REGULATION"

In the event that the Company is not able to replace or rebuild those
tankers and barges which it currently uses to carry crude oil or petroleum
products, it could become impossible for Oil and Chemical Distribution and
Transportation Services to continue to transport crude oil and petroleum
products at current levels for its current customers between ports in the United
States. Should this occur, it could have a substantial negative impact on the
profitability of Oil and Chemical Distribution and Transportation Services.

MARINE-RELATED RISKS COULD LEAD TO THE DISRUPTION OF OUR SERVICES AND ADDED
LIABILITIES

The operation of our vessels is subject to various risks, including
catastrophic marine disaster, adverse weather and sea conditions, capsizing,
grounding, mechanical failure, collision, oil, chemical and other hazardous
substance spills and navigation errors. These risks could endanger the safety of
our personnel, our vessels, the cargo we carry, the equipment under tow and
other property, as well as the environment. If any of

33

these events was to occur, the Company could be held liable for resulting
damages. In addition, the affected vessels could be removed from service and
would not be available to generate revenue.

THE COMPANY IS A DEFENDANT IN NUMEROUS ASBESTOS-RELATED LAWSUITS

The Company is a defendant in numerous lawsuits filed on behalf of current,
retired or deceased seamen seeking damages for unspecified asbestos-related
injuries or diseases as a result of occupational exposure to fibers emitted from
asbestos-containing products in the course of employment aboard vessels owned or
operated by the Company. See Note 18 to our Consolidated Financial Statements in
"Item 8. Financial Statements and Supplementary Data". Additional litigation
relating to these matters may be commenced in the future. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings or provide reasonable ranges of potential
losses, given the large and/or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation, it is possible that an
adverse outcome in certain matters could have a material adverse effect on our
financial condition, operating results or cash flows.

INSURANCE COVERAGE MAY NOT PROTECT THE COMPANY FROM ALL OF THE LIABILITIES
THAT COULD ARISE FROM THE RISKS INHERENT IN ITS BUSINESSES

The Company maintains insurance coverage against the risks related to its
operations. There can be no assurance, however, that its existing insurance
coverage can be renewed at commercially reasonable rates or that available
coverage will be adequate to cover future claims. If a loss occurs that is
partially or completely uninsured, the Company could be exposed to substantial
liability.

While our vessels are not trading in the areas of the potential war zone, a
terrorist attack on one or more of our vessels anywhere in the world could have
a material adverse effect on our financial condition, results of operations or
cash flows. Although we currently maintain the maximum available War Risk and
Terrorism liability insurance coverage that is available through the
international Protection & Indemnity Insurers, a catastrophic occurrence could
result in liability in excess of available insurance coverage, resulting in a
material adverse affect on our business.

WE DEPEND ON ATTRACTING AND RETAINING QUALIFIED, SKILLED EMPLOYEES TO OPERATE
OUR BUSINESSES AND PROTECT OUR KNOW-HOW

Our results of operations depend in part upon our business know-how. We
believe that protection of our know-how depends in large part on our ability to
attract and retain highly skilled and qualified personnel. Any inability we
experience in the future to hire, train and retain a sufficient number of
qualified employees could impair our ability to manage and maintain our
businesses and to protect our know-how.

We require skilled employees who may have to perform physically demanding
work. As a result of the volatility of our customers' industries, particularly
the oil and petrochemical industries, and the demanding nature of the work,
potential employees may choose to pursue employment in fields that offer a more
desirable work environment at wage rates that are competitive with ours. With a
reduced pool of workers, it is possible that we will have to raise wage rates to
attract workers from other fields and to retain our current employees. If we are
not able to increase the rates we charge our customers to compensate for
wage-rate increases, our operating results may be adversely affected.

THE COMPANY IS HEAVILY DEPENDENT ON UNIONIZED LABOR

The Company's operations are heavily dependent on unionized labor, both in
the United States and in foreign markets. Maintenance of satisfactory labor
relations is important to our operations. At December 31, 2003, approximately
61% of the Company's employees were members of unions. A protracted strike or
similar action by a union could have a material adverse effect on our results of
operations or financial condition. See "Item 1. Business -- Employees".

34

WE MAY NOT BE ABLE TO NEGOTIATE COLLECTIVE BARGAINING AGREEMENTS ON TERMS
FAVORABLE TO THE COMPANY

The Company has collective bargaining agreements with 12 different unions.
These agreements will expire through 2008. There is no assurance that we will be
able to negotiate new collective bargaining agreements on terms favorable to the
Company upon expiration of the agreements. If the Company is not able to
negotiate favorable terms, it may be at a competitive disadvantage. See "Item 1.
Business -- Employees".

THERE ARE CERTAIN RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS

Substantial amounts of our operating revenues are derived from our foreign
operations. (See Note 20 to the Consolidated Financial Statements in "Item 8.
Financial Statements and Supplementary Data".) These operations are subject to
various conditions and potential events associated with and inherent in the
conduct of business with foreign nations. These include, without limitation,
political instability, vessel seizure, nationalization of assets, fluctuating
currency values, hard currency shortages, controls of currency exchange, the
repatriation of income or capital, import-export quotas, and other forms of
public and governmental regulation, all of which are beyond our control.

While it is not possible to predict whether any of these conditions will
develop or events will occur, the development or occurrence of any one or more
of them could have a material adverse affect on our financial condition, results
of operations or cash flows. While we do business in many countries outside of
the United States, substantially all such business is denominated in United
States dollars. For additional information about our foreign operations, see
Note 20 of the Notes to the Consolidated Financial Statements in "Item 8.
Financial Statements and Supplementary Data".

OTHER BUSINESS RISKS

Other risks which may affect our operations and revenues include our
ability to:

- manage our costs effectively;

- finance our operations and construct new vessels on acceptable terms;

- charter our vessels on acceptable terms; and

- manage these risks successfully.

THERE IS NO ESTABLISHED PUBLIC TRADING MARKET FOR OUR STOCK

There is no established public trading market for our capital stock and
none is expected to develop in the foreseeable future. We do not intend to apply
for listing of any shares of our capital stock on any securities exchange. We
also will not seek to have any of our shares quoted on an interdealer quotations
system. Accordingly, no assurances can be given as to the liquidity of our
shares and the ability of the holders of our shares to sell them in secondary
market transactions, or as to the prices at which such shares may be sold.

MR. CROWLEY CAN EXERCISE CONTROL OVER ALL MATTERS REQUIRING STOCKHOLDER
APPROVAL AND COULD MAKE DECISIONS ABOUT OUR BUSINESS THAT CONFLICT WITH OTHER
STOCKHOLDERS' INTERESTS

As of March 17, 2004, Thomas B. Crowley, Jr., the Chairman of the Board of
Directors, President and Chief Executive Officer of the Company, owns or is
deemed to own approximately 64.7% of our outstanding common stock, 100% of our
Class N common stock, and approximately 99.9% of our outstanding Series A
preferred stock. This ownership gives Mr. Crowley approximately 77.7% of the
total votes attributable to our outstanding voting stock as of March 17, 2004.
Because the Series A preferred stock is entitled to vote along with the shares
of common stock, Mr. Crowley's stock ownership means that he is able to exercise
control over all matters requiring stockholder approval even if other
stockholders oppose them. As a result, Mr. Crowley controls all matters
affecting the Company, including:

- the composition of our board of directors and, through it, any
determination with respect to our business direction and policies,
including the appointment and removal of officers;

35

- any determinations with respect to mergers or other business
combinations;

- our acquisition or disposition of assets;

- our financing arrangements; and

- the payment of dividends on our stock.

Mr. Crowley and his family are the beneficiaries of certain split-dollar
life insurance agreements. The Board of Directors has approved these agreements
in furtherance of its belief that preserving Crowley family control and the
closely held nature of the Company is beneficial to the Company's stockholders
and will maximize stockholder value over the long-term. The Board of Directors
has long been concerned that short-term and long-term estate tax and other
obligations of certain Crowley family stockholders could lead to an unrelated
third party gaining a highly influential and potentially detrimental position
with respect to the business and management of the Company. Such circumstances
also could lead to stock falling into the hands of speculative investors who may
later attempt to disrupt Company affairs in order to encourage the Company to
take action favorable to such investors, yet not in the best interests of the
Company and remaining stockholders.

The Board of Directors also has been concerned that should the Company
receive a request to purchase shares held by such stockholders or their estates
in lieu of a possible sale to such investors, the Company would be unable to
effect such a purchase without negatively impacting its results of operations,
financial condition or cash flows. In this regard, the split-dollar life
insurance agreements enable Mr. Crowley and certain trusts for the benefit of
his descendants to purchase most, if not all, of such shares without involving
the Company.

The Company expects that following the death of Mrs. Molly M. Crowley, the
net proceeds of the policies of insurance on the life of Mrs. Crowley will be
used by Mr. Crowley and the trusts under his control to purchase shares of
Common Stock held by the Thomas B. Crowley Marital Trust so that this trust can
pay applicable estate taxes. Essentially, the split dollar life insurance
agreements enable Mr. Crowley and his family to retain ownership of shares and
control of the Company under circumstances when certain of such shares otherwise
might have to be sold to a third party to pay applicable estate taxes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest rates and
foreign currency exchange rates which may adversely affect the results of our
operations and financial condition. The Company's policy is not to use financial
instruments for trading purposes or other speculative purposes. A discussion of
the Company's credit risk and the fair value of financial instruments is
included in Note 14 of the Company's consolidated financial statements. See
"Item 8. Financial Statements and Supplementary Data."

The Company's debt is primarily in fixed interest rate instruments. While
the fair value of these debt instruments will vary with changes in interest
rates, the Company has fixed most of its cash flow requirements and its
operations are not significantly impacted by interest rate fluctuations.

The Company leases certain equipment under operating leases which are
subject to interest rate risk. Payments under these leases are adjusted based on
a variable interest rate. At the end of the lease term, the Company may purchase
the equipment by paying the amount remaining under the lease, sell the equipment
and repay an amount remaining under the lease, or renegotiate the lease to
extend the term. If the Company was to purchase the equipment, the Company would
be at risk that the fair value of the equipment may be less than the amount
required to purchase it.

36

The following table provides information about the Company's non-trading
financial instruments sensitive to changes in interest rates at December 31,
2003. For debt obligations, the table presents principal cash flows and
corresponding weighted average interest rates by expected maturity dates. For
operating leases, the table presents future minimum lease payments and
corresponding weighted average interest rates by expected payment dates.
Weighted average variable rates are based on rates in place at the reporting
date.

In May 2002, the Company entered into a rate lock agreement to fix at 5.45%
the underlying benchmark rate on the permanent financing arranged for the
construction of two ATB's. The permanent financing, which consists of debt
guaranteed pursuant to Title XI of the Merchant Marine Act of 1936, was
concluded on January 16, 2003. Because the rate lock agreement was designated as
a cash flow hedge, the changes in the fair value of the borrowings subject to
the agreement were recognized in other comprehensive income (loss) until the
debt was funded. Effective upon the funding of the debt on January 16, 2003, the
amount recorded in other comprehensive income (loss) was recognized as an
adjustment to interest expense over the term of the underlying debt agreement
using the effective interest method. The Company's liability under the rate lock
agreement was fixed on January 16, 2003 and resulted in a payment to a financial
institution in the amount of $7,967.

In February 2003, the Government of Venezuela introduced restrictions on
the exchange of Venezuelan bolivars (VEB) for U.S. dollars, established the
official rate of exchange ("Official Rate") at 1,600 VEB, and made exchanges for
U.S. dollars subject to Government approval. The Company has continued to
translate the financial results for its Venezuela operations using the Official
Rate of 1,600 VEB, with a resulting adjustment to other comprehensive income. As
a result of the Venezuelan government currency restrictions, the VEB's that were
exchanged for U.S. dollars during 2003 were exchanged at 1,600 VEB.

The Venezuelan government has publicly stated that certain measures are
being considered, such as an increase in the Official Rate. In February 2004,
the Government of Venezuela increased the official rate to 1,920 VEB. The
Company is uncertain as to the amount of currency that will be approved for
transfer, the timing of such transfers and the exchange rate that would apply to
such transfers.

At December 31, 2003, the Company's net assets in Venezuela have been
translated to approximately $3,198 using an exchange rate of 1,600 VEB. The
impact of an increase of 320 VEB to 1,920 VEB in the exchange rate would result
in a decrease in other comprehensive income of approximately $270 at December
31, 2003. Any future increases in the exchange rate would result in realized
losses on currency exchange transactions.

The Company's market risk exposure has not changed materially since
December 31, 2003.

37

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TABLE OF CONTENTS

38

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Crowley Maritime Corporation
Oakland, California

We have audited the accompanying consolidated balance sheets of Crowley
Maritime Corporation and subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2003. Our
audits also included the financial statement schedule listed in the Table of
Contents at Item 8. These financial statements and financial statement schedule
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on the financial statements and financial statement schedule
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Crowley Maritime Corporation
and subsidiaries as of December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the
Company consolidated a Variable Interest Entity effective January 1, 2003 in
accordance with the adoption of Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities."

DELOITTE & TOUCHE LLP
Certified Public Accountants

Jacksonville, Florida
March 9, 2004

39

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of the consolidated financial
statements.
40

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The accompanying notes are an integral part of the consolidated financial
statements.
41

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

The accompanying notes are an integral part of the consolidated financial
statements.
42

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements.
43

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Crowley Maritime Corporation, operating through its subsidiaries (the
"Company"), is comprised of four principal business segments: Liner Services;
Ship Assist and Escort Services; Oil and Chemical Distribution and
Transportation Services; and Energy and Marine Services. The Liner Services
segment consists of scheduled common carrier services and logistic services. The
Ship Assist and Escort Services segment provides ship assist, tanker escort,
docking and related services. The Oil and Chemical Distribution and
Transportation Services segment uses vessels for the carriage of crude oil,
petroleum products and chemicals. This segment also owns and/or operates four
tank farms and provides vessel management services to third parties. The Energy
and Marine Services segment provides specialized services to companies engaged,
on a worldwide basis, in the exploration, production and distribution of oil and
gas. The Company operates in the United States, Mexico, Central America, South
America, the Caribbean, Russia, and other international markets.

In December 2003, the Company approved a plan to sell the operations of its
Liner Services segment in Venezuela. Accordingly, the Company's previously
reported consolidated financial statements and related notes for 2002 and 2001
have been restated to present the Venezuela operations separate from continuing
operations (refer to Discontinued Operations in Note 4).

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Crowley
Maritime Corporation and all majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. The Company has
joint ventures that it maintains more than a 50% ownership interest in and
maintains effective control over their operations. Based on this, the Company
consolidates these joint ventures and records minority interests for the
partners' ownership interests in the joint ventures.

RELATED PARTY

Thomas B. Crowley, Jr., President, Chief Executive Officer, and Chairman of
the Board of Directors and principal shareholder, has the ability to control
operations through his beneficial ownership of a majority of the Company's
common shares.

RECLASSIFICATION

Certain items in prior year's consolidated financial statements have been
reclassified to conform with the current year presentation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid securities primarily invested in
overnight repurchase agreements with original maturities of three months or less
to be cash equivalents. These securities are stated at cost, which approximates
fair value. At December 31, 2003, the Company has restricted cash and cash
equivalents of $4,032. This restricted cash and cash equivalents is used in the
operation of certain vessels which the Company manages for an unrelated third
party and for use by a Variable Interest Entity (refer to Note 2).

44

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

GOODWILL

Goodwill represents the excess costs of acquired companies over the fair
value of their net tangible assets. With the acquisition of Marine Transport
Corporation ("MTC") on February 7, 2001, goodwill was recorded and amortized on
the straight-line method over 20 years. Effective January 1, 2002, the Company
adopted Statement of Financial Accounting Standards 142, "Goodwill and Other
Intangible Assets" and no longer amortizes goodwill but is required to annually
evaluate goodwill for impairment. The Company identified no impairment as a
result of its evaluation of goodwill during 2003 and 2002. The Company performs
an annual test of goodwill unless an event occurs or circumstances change that
would reduce the fair value of MTC below its carrying amount.

The proforma effects of not amortizing goodwill had this Statement been
adopted as of January 1, 2001 are as follows:

INTANGIBLES

Deferred financing costs are amortized on the effective interest method
over the terms of the related financing. The weighted average amortization
period for deferred financing costs is 19 years. Non-compete agreements and
customer lists are amortized over 5 years.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Renewals and refurbishments
which extend asset useful lives are capitalized while normal repair and
maintenance expenditures are charged to expense as incurred. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets as follows: floating equipment (15 to 25 years); other operating
equipment (5 to 20 years); and buildings (5 to 25 years). Leasehold improvements
are depreciated over the lesser of their estimated useful lives or the remaining
lease term. Interest is capitalized in conjunction with the construction and
refurbishment of vessels.

The Company assesses recoverability of the carrying value of a long-lived
asset by estimating the future net cash flows expected to result from the asset,
including eventual disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal to the
difference between the asset's carrying value and fair value. Impairment losses
are recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the asset's carrying amount.

INTERNAL USE SOFTWARE

Costs related to the development of internal use software other than those
incurred during the application development stage are expensed as incurred.
Costs considered to be in the application development stage include design,
coding, installation of hardware and testing. Costs capitalized during this
stage include: external direct costs of materials and services consumed in
developing or obtaining the software; payroll and

45

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

payroll-related costs for employees directly associated with the project; and
interest costs incurred during development.

DRY-DOCKING

Dry-docking costs for major vessels are deferred and amortized over the
estimated period between dry-dockings. Dry-docking inspections are required
generally every two to three years for regulatory purposes to demonstrate that a
vessel meets standards established by the U.S. Coast Guard and the American
Bureau of Shipping. Amortization expense of the dry-docking costs was $8,912,
$6,040, and $1,718, in 2003, 2002 and 2001 respectively.

REVENUE RECOGNITION

The Company's accounting policies for revenue recognition are predicated on
the type of service provided. The common carrier services included in Liner
Services are recognized ratably over each voyage by load and discharge port. The
Company's logistics services and Ship Assist and Escort Services are recognized
as services are provided. Revenues from the Oil and Chemical Distribution and
Transportation Services and Energy and Marine Services are recognized ratably
over the length of the contract. Estimated losses are recognized at the time
such losses become evident. Costs related to the shipment of goods under
long-term contracts are expensed as incurred.

INCOME TAXES

The Company accounts for certain income and expense items for financial
reporting differently than for income tax purposes. The deferred tax liabilities
or assets are determined based on differences between the financial statement
carrying values and the tax bases of assets and liabilities. Deferred tax assets
and liabilities are determined based on current enacted tax rates applicable to
the period in which the deferred tax assets or liabilities are expected to be
settled or realized.

EARNINGS PER COMMON SHARE

Basic earnings per common share is computed by dividing net income
attributable to common shareholders by the weighted average number of shares of
Common Stock and Class N Common Stock outstanding during each year. Shares
issued during the year and shares reacquired during the year are weighted for
the portion of the year that they were outstanding. Diluted earnings per common
share is computed by giving effect to all potentially dilutive common shares,
which are Preferred Class A Convertible Stock, that were outstanding during the
period.

INSURANCE

The Company is self-insured for marine, liability, cargo and medical
coverages. Reinsurance is obtained to cover losses in excess of certain limits.
Provisions for losses are determined on the basis of claim adjusters'
evaluations and other estimates including those for salvage and subrogation
recoveries. Such provisions and any related claim receivables are recorded when
insured events occur. The determinations of such estimates and the establishment
of the related reserves are continually reviewed and updated; however, the
actual provisions and claims receivable have not differed materially from
accrued estimated amounts. Any adjustments resulting from these reviews are
reflected in current operations.

46

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ENVIRONMENTAL COSTS

Environmental costs represent reclamation costs filed against the Company.
Environmental expenditures for reclamation costs that benefit future periods are
capitalized. Expenditures that relate to remediating an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when the Company's
responsibility for environmental remedial efforts is deemed probable and the
costs can be reasonably estimated. The ultimate future environmental costs,
however, will depend on the extent of contamination of property and the
Company's share of remediation responsibility.

FOREIGN CURRENCY TRANSLATION

For non-U.S. subsidiaries whose functional currency is not the U.S. dollar,
the results of operations are translated from local currencies into U.S. dollars
using average exchange rates during each period. Assets and liabilities are
translated using exchange rates at the end of each period. Translation gains and
losses on assets and liabilities are reported as a separate component of
stockholders' equity as other comprehensive income (loss) and are not included
in the determination of net income (loss).

DERIVATIVE FINANCIAL INSTRUMENTS

The Company does not invest in derivatives for trading or speculative
purposes. From time to time, as part of its risk management strategy, the
Company uses derivative financial instruments, such as rate lock agreements, to
manage exposures to interest rate risk. These instruments are accounted for as
cash flow hedges with unrealized gains and losses recorded in other
comprehensive income (loss). The amount paid by the Company on maturity of a
rate lock agreement is recognized as an adjustment to interest expense over the
term of the underlying debt obligation. The Company recognized $567 as an
adjustment to interest expense in 2003.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets, liabilities, revenues, expenses, and
disclosure of contingent assets and liabilities during the reporting period.
Actual results may differ from these estimates.

NEW ACCOUNTING STANDARDS

In December 2003, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 104 ("SAB 104"), which deals with revenue
recognition accounting issues. SAB 104 revised and rescinded portions of Staff
Accounting Bulletin No. 101 in order to make the interpretive guidance
consistent with the current authoritative accounting and auditing guidance and
SEC rules and regulations.

Statement of Financial Accounting Standards 149, "Amendment to Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS 149"), addresses
certain decisions made by the Financial Accounting Standards Board as part of
the Derivatives Implementation Group process. In general, SFAS 149 is effective
for contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003.

SFAS 150, "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity" addresses how an issuer
classifies and measures certain financial instruments with characteristics of

47

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

both liabilities and equity. The provisions of SFAS 150 are effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
are effective July 1, 2003.

The Company adopted SFAS 149 and SFAS 150 on July 1, 2003 and SAB 104 in
December 2003. The adoption of these standards did not have a material impact on
the Company's financial position, results of operations or cash flows.

NOTE 2 -- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

In January 1997, Marine Transport Corporation ("MTC"), a wholly owned
subsidiary of the Company, arranged a transaction with an unconsolidated
Variable Interest Entity (the "VIE") by which MTC: (a) sold a vessel to the VIE;
(b) time chartered the vessel back from the VIE; and (c) time chartered the
vessel to a third party. As consideration for the sale of the vessel, MTC
received from the VIE a total of: (a) approximately $40,000 in cash; and (b) a
note receivable for $9,000. After considering certain characteristics of the
note receivable, it was subsequently recorded at its estimated net realizable
value of $3,000. In August of 1999, MTC negotiated the termination of the time
charters and arranged a series of bareboat charters for the vessel with periods
that extend through November 2006. In January of 2000, MTC received
approximately $25,000 from the VIE after the VIE borrowed certain additional
amounts from its lenders. Of the approximately $25,000 which was accounted for
as debt, $14,395 was outstanding at December 31, 2002.

Prior to the adoption of Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities" (the
"Interpretation"), the Company followed: (a) EITF 90-15, "Impact of
Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in
Leasing Transactions"; and (b) EITF 96-21, "Implementation Issues in Accounting
for Leasing Transactions Involving Special-Purpose Entities" in determining not
to consolidate the VIE. In 1997, an unrelated third party (the "Foundation")
capitalized the VIE with a substantive equity payment of $1,500, which
represented more than 3% of the total funding of the VIE, in exchange for the
beneficial interests in the VIE.

The Interpretation clarified the accounting treatment of certain entities
in which equity investors do not have: (a) the characteristics of a controlling
financial interest; or (b) sufficient equity at risk for the entity to finance
its activities without additional subordinated financial support from other
parties. The Company adopted the Interpretation and determined that it is the
primary beneficiary of the VIE and consolidated the VIE effective January 1,
2003.

The Company determined that the total third party equity investment in the
VIE at risk, as defined in paragraph 5 of the Interpretation, is $0. While the
Foundation capitalized the VIE with a substantive equity payment during 1997,
the $1,500 used for that payment was donated to the Foundation by MTC just
before it was invested by the Foundation in the VIE. Because the $1,500 was
donated to the Foundation, the Company concluded that the Foundation does not,
according to the Interpretation, have any equity investment at risk.

As a result of recording the assets and liabilities of the VIE at their
fair value, a cumulative effect of change in accounting principle of $420, net
of a $257 deferred tax benefit, ($3.10 basic earnings per common share and $2.59
diluted earnings per common share) has been recorded in the Consolidated
Statements of Operations. Prior year consolidated financial statements have not
been restated as a result of the consolidation of the VIE.

48

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The consolidation of the VIE resulted in recording of the following assets
and liabilities based upon their fair values as of January 1, 2003:

Cash and cash equivalents................................... $ 1,915
Deferred taxes.............................................. 257
Property and equipment...................................... 14,097
Other liabilities........................................... (3,512)
Minority interest........................................... (1,977)
Long-term debt.............................................. (11,200)
--------
Cumulative effect of change in accounting principle......... $ (420)
========

As a result of the consolidation of the VIE, the outstanding balance of
$25,595 at January 1, 2003 of long-term debt due the VIE's lenders has been
consolidated with the Company's financial statements and is treated as if it is
the Company's debt. As of December 31, 2003, the outstanding balance of this
debt is $21,079. The debt is payable in monthly installments through January
2006 and bears interest at interest rates ranging from 5.0% to 8.35%. As of
December 31, 2003, the debt is collateralized by: (a) the VIE's vessel with a
net book value of $11,104; (b) all other VIE assets of $1,936; and (b) an
assignment of the vessel's earnings. Notwithstanding the accounting requirement
to consolidate the VIE's debt with the Company's financial statements, the VIE's
lender's have no recourse to the general credit of the Company.

NOTE 3 -- ACQUISITIONS AND SALES OF BUSINESSES

On February 7, 2001, the Company acquired all of the outstanding shares of
MTC for a total cost of approximately $49,130. The acquisition of MTC was
accounted for as a purchase and, accordingly, the Consolidated Statements of
Operations include the operating results of MTC beginning February 7, 2001. The
purchase price was allocated to the assets acquired and liabilities assumed
based on the estimated relative fair values. Goodwill of $50,752 was recognized
for the amount of the excess of the purchase price paid over the fair market
value of the net assets acquired.

The purchase price of the acquisition of MTC was allocated to the assets
purchased and the liabilities assumed based upon the relative fair values on the
date of acquisition as follows:

Cash........................................................ $ 8,740
Other current assets........................................ 33,129
Other assets................................................ 9,354
Goodwill.................................................... 50,752
Property and equipment...................................... 68,768
Current liabilities......................................... (41,980)
Other liabilities........................................... (27,838)
Long-term debt.............................................. (51,795)
--------
$ 49,130
========

In May 2002, the Company sold all of the outstanding common stock of MTL
Petrolink Corp. (a subsidiary of MTC) for $18,638. The Company decided to sell
MTL Petrolink Corp. subsequent to its acquisition of MTC. In its allocation of
the purchase price of MTC, the Company made no effort to separately determine
the fair value of MTL Petrolink Corp. The Company recorded the excess of the
sales price, net of selling costs, over the net asset value of MTL Petrolink
Corp. as a purchase price adjustment resulting in a
49

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

reduction to goodwill in the amount of $3,345. Included in the selling price of
MTL Petrolink Corp. is a $500 escrow deposit which was received during 2003.
This amount, net of income taxes of $189, also reduced goodwill.

In July 2003, the Company purchased the stock of a transportation
management company specializing in the apparel industry. In October 2002, the
Company purchased the assets of a transportation services provider. These
acquisitions are included in our Liner Services segment. The purchase prices
consisted of the following:

The purchase price of the transportation management company will be
adjusted for certain working capital adjustments and payments based on earnings.

In December 2003, the Company entered into an agreement to assume ownership
of the 25% minority interest in a joint venture which was accounted for using
the purchase method of accounting. The Company received cash of approximately
$3,234 and recorded fair value in excess of the cost of the acquired net assets,
approximately $5,944, as a reduction to the fair value of vessels, the joint
ventures only long-term assets.

The following unaudited pro forma results of operations for the years ended
December 31, 2003, 2002, and 2001, are presented as if the above acquisitions
and sales had been completed on January 1, 2001. The pro forma results include
estimates and assumptions which management believes are reasonable. However, pro
forma results do not include any anticipated cost savings or other effects of
the planned integration of the Company and the above acquisitions and sales, and
are not necessarily indicative of the results which would have occurred if the
business combinations had been in effect on the dates indicated, or which may
result in the future.

NOTE 4 -- DISCONTINUED OPERATIONS

In December 2003, the Company approved a plan to sell the Logistics
operations of its Liner Services segment in Venezuela. As a result, the Company
has ceased depreciation on the assets and classified them as discontinued
operations in the Consolidated Balance Sheets. The Company performed an
impairment analysis of these assets based on the estimated sales price and has
recognized an impairment charge of $404 to write down those assets to fair
value; this impairment charge is included in discontinued operations loss from
operations in the 2003 Consolidated Statements of Operations. In February 2004,
the Company sold its Venezuelan Logistics operations for $1,506.

50

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The Venezuelan operations have been reflected as discontinued operations in
the accompanying Consolidated Statements of Operations. Discontinued operations
for the years ended December 31 are summarized as follows:

On April 1, 1999, the Company adopted a plan to sell its South America
trade lanes, river barging operations, related subsidiaries, vessels and certain
other assets. Related to the sale, the Company adopted a strategy to exit
operations of several other South America operations.

The combined assets and liabilities of the above discontinued operations
included in the Company's Consolidated Balance Sheets at December 31, 2003 and
2002 are as follows:

51

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 5 -- RECEIVABLES

Receivables consist of the following at December 31, 2003 and 2002:

Other receivables include insurance claims receivable from third party
reinsurance companies, tax claims receivables, pollution claims receivables and
rebillable charges to customers for vessel management services and other
services.

NOTE 6 -- RECEIVABLE FROM RELATED PARTY

The Company has entered into a Split Dollar Life Insurance Agreement
("Agreement") with the Company's President, Chief Executive Officer, Chairman of
the Board, and principal shareholder (the "Employee") whereby the Company pays
the premiums on certain life insurance policies ("Policies") of the Employee and
a related Director. Upon death of the insureds, the Company will receive the
total paid for premiums under the policies, net of certain payments made by or
on behalf of the Employee. If the Company and the Employee terminate the
Agreement, the Company will be paid an amount equal to the lesser of the Policy
cash surrender value or the amounts of premiums paid by the Company reduced by
certain payments made by or on behalf of the Employee. The Company has accounted
for this receivable at the lower of the net premium payments made or the cash
surrender value of the Policies. The receivable is non-interest bearing and is
stated at the amount the Company is entitled to receive under the agreement. Net
premiums paid in 2002 and 2001 were $2,700, and $2,979, respectively.

In December 2003, the Company and the Employee reached a settlement
agreement whereby three of the Policies were cancelled and the Employee
reimbursed the Company $7,508 which represented the total amount of net premiums
paid by the Company on those Policies. In order to reimburse the Company, the
Employee obtained a personal loan. The Company is not obligated to pay this loan
and has not guaranteed repayment of this loan. However, the Company has agreed
to reimburse the Employee the interest on the loan.

NOTE 7 -- DIRECTORS LIFE INSURANCE

In December 2003, the Company purchased life insurance policies which
insure the life of a member of the Board of Directors. The Company is the owner
and beneficiary of the policies. Accordingly, the Company has recorded the cash
surrender value of the policies of $1,894 in Other Assets in the Consolidated
Balance Sheet as of December 31, 2003.

52

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 8 -- INTANGIBLES

The gross carrying amount and accumulated amortization of the Company's
intangible assets other than goodwill as of December 31, 2003 are as follows:

Amortization expense recorded on the intangible assets for the years ended
December 31, 2003 2002, and 2001 was $2,049, $2,147, and $1,268, respectively.
The amortization expense for each of the five succeeding fiscal years ending
December 31 is as follows:

2004........................................................ $1,884
2005........................................................ 1,838
2006........................................................ 1,794
2007........................................................ 1,631
2008........................................................ 1,019

NOTE 9 -- PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2003 and
2002:

Restricted cash and cash equivalents included in property and equipment
represent funds for the future purchase of property and equipment currently
restricted by lenders. Depreciation and amortization of property and equipment
was $51,200, $47,300, and $46,542 for the years ended December 31, 2003, 2002,
and 2001, respectively.

Capitalized interest is recorded as part of the asset to which it relates
and is amortized over the estimated useful life of the asset. Interest of $627,
$4,489, and $1,584, was capitalized in 2003, 2002, and 2001, respectively.

53

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 10 -- ASSET CHARGES (RECOVERIES), NET

The components of asset charges (recoveries), net for the years ended
December 31, 2003, 2002, and 2001 are as follows:

In July 2002, a fire occurred in the engine room of one of the Company's
tankers. As a result of the fire, the extensive damages caused by it and the
short remaining useful life of the vessel, management decided not to repair the
vessel. The Company received insurance proceeds based upon the damage to the
vessel caused by the fire. The net book value of the vessel was $2,009.
Accordingly, the Company recognized a gain net of incurred costs from
involuntary conversion of $3,897.

The Company has certain vessels it has designated as surplus and has
implemented a plan to dispose of them. The Company evaluated the recoverability
of its carrying value of these vessels and as a result recorded a write down of
$5,487, and $484 in 2002 and 2001, respectively. The net book value of these
vessels at December 31, 2003 is $3,672.

NOTE 11 -- LEASES AND LEASE COMMITMENTS

The Company leases and subleases vessels on both a time charter and
bareboat charter basis. It also leases and subleases terminals, office
facilities, and operating equipment.

Future minimum annual rental payments and receipts required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 2003 are summarized as follows:

Total rental expense for all leases, including short-term leases, was
approximately $135,000, $146,000, and $172,000 for the years ended December 31,
2003, 2002, and 2001, respectively.

Certain lease agreements contain restrictive covenants which require the
maintenance of minimum amounts of net worth. Furthermore, a vessel with a net
book value of $9,562 at December 31, 2003 has been pledged as collateral for
certain equipment leases.

54

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 12 -- LONG-TERM DEBT

Long-term debt consists of the following at December 31, 2003 and 2002:

The Company's $115,000 Amended and Restated Credit Agreement (the
"Revolving Credit Agreement") has been extended to February 15, 2005. Borrowing
rates are based on either Eurodollar or Bank Base rates. There were no
borrowings outstanding under the Revolving Credit Agreement at December 31,
2003. Outstanding letters of credit totaled $33,068 at December 31, 2003,
leaving $81,932 borrowing capacity under the Revolving Credit Agreement.

In January 2003, the Company issued bonds in the amount of $60,909, which
are guaranteed pursuant to Title XI of the Merchant Marine Act of 1936 by the
United States Department of Transportation, Maritime Administration. The bonds
bear interest at a fixed rate of 4.96% and are payable in semiannual
installments through 2027. The proceeds from the bonds were used to: (a)
refinance the construction financing arranged to build two articulated tug/barge
units ("ATB's"), the OCEAN RELIANCE/Barge 550-3 and COASTAL RELIANCE/Barge
550-4; and (b) reimburse the Company for expenditures incurred for their
construction.

In May 2002, the Company entered into a rate lock agreement to fix at 5.45%
the underlying benchmark rate on the permanent financing arranged for the
construction of these two ATB's. The permanent financing, which consists of debt
guaranteed pursuant to Title XI of the Merchant Marine Act of 1936, was
concluded on January 16, 2003. Because the rate lock agreement was designated as
a cash flow hedge, the changes in the fair value of the borrowings subject to
the agreement were recognized in other comprehensive income (loss) until the
debt was funded. Effective upon the funding of the debt on January 16, 2003, the
amount recorded in other comprehensive income (loss) is recognized as an
adjustment to interest expense over the term of the underlying debt agreement
using the effective interest method. The Company's liability under the rate lock

55

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

agreement was fixed on January 16, 2003 and resulted in a payment to a financial
institution in the amount of $7,967.

In October 2003, the Company received proceeds in the amount of $30,000
from a loan from two financial institutions. The loan is scheduled to be repaid
in 24 quarterly installments of $1,250 plus interest at LIBOR plus 1.5%. The
loan is collateralized by four vessels with a net book value of $21,770 at
December 31, 2003.

In December 2003, the Company received proceeds of $115,000 from a loan
with several financial institutions. The loan is scheduled to be repaid in 23
quarterly installments of $2,875 with a balloon payment of $48,875 in December
2009. Interest is due quarterly at LIBOR plus 1.5%. The loan is collateralized
by twenty five vessels with a net book value of $31,999 at December 31, 2003.

In February 2004, the Company redeemed $10,366 of Title XI financial bonds
at a price ranging from $100.871 to $101.161. Accordingly, this debt has been
classified as current debt in the Consolidated Balance Sheet as of December 31,
2003.

The Company's financing agreements contain restrictive covenants which
require, among other things: (a) maintenance of a net debt (as defined in such
agreements) to stockholders' equity ratio which shall not exceed 2.5 to 1; (b)
reduction of debt with the proceeds generated by the sale of any vessels; (c) a
maximum net debt (as defined in such agreements) to earnings before interest,
taxes, depreciation and amortization ratio not to exceed 6.0 to 1 in 2003 and
2004; and (d) maintenance of an interest coverage ratio of 3.5 to 1. The Company
is limited to $60,000 of capital expenditures for a calendar year, not including
amounts expended for articulated tug/barge units, which are limited to total
expenditures of $210,000. While the Company is prohibited from repurchasing
shares of any class of capital stock or declaring or paying any dividend, it may
repurchase common stock from employee stock ownership plans and pay dividends in
any twelve-month period at a combined cost not to exceed $10,000. At December
31, 2003, the Company was in compliance with all covenants under its financing
and leasing arrangements.

Annual scheduled payments for long-term debt as of December 31, 2003 are as
follows:

2004........................................................ $ 52,847
2005........................................................ 40,237
2006........................................................ 32,604
2007........................................................ 32,687
2008........................................................ 34,799
Thereafter.................................................. 241,476
--------
$434,650
========

Total interest expense, including capitalized interest, for the years ended
December 31, 2003, 2002, and 2001 was $21,957, $19,971, and $17,258,
respectively.

In February 2004, the Company amended its Revolving Credit Agreement. The
$95,000 Second Amended and Restated Credit Agreement expires in February 2009.
Borrowing rates are based on either Eurodollar or Bank Base rates. The Company's
$95,000 Second Amended and Restated Credit Agreement contains restrictive
covenants which require, among other things: (a) maintenance of a leverage ratio
(as defined in such agreement) which shall not exceed 3.25 in 2004, 3.0 in 2005,
2.75 in 2006 and 2.5 in 2007 and thereafter; and (b) a maximum total debt (as
defined by such agreement) to earnings before interest, taxes,

56

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

depreciation, amortization and rent expense (as defined by such agreement) not
to exceed 3.25 in 2004 and 2005 and 3.0 in 2006 and thereafter.

NOTE 13 -- INCOME TAXES

The income tax provision (benefit) on income from continuing operations
includes the following for the years ended December 31, 2003, 2002, and 2001:

A reconciliation of the federal statutory income tax rate for 2003, 2002,
and 2001 of 35%, and the provision for federal, foreign, and state taxes on
income is as follows for the years ended December 31, 2003, 2002, and 2001:

57

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The net deferred income tax assets (liabilities) shown below, both current
and noncurrent, result from the tax effects of the following temporary
differences at December 31, 2003 and 2002:

Under its agreement with the U.S. Government, the Company is allowed to
make deposits to the Capital Construction Fund ("CCF") of earnings and gains
from qualified operations without payment of federal taxes. CCF cash and
marketable securities are restricted to provide for the replacement of vessels,
additional vessels, or improvement of vessels within strict guidelines
established by the U.S. Maritime Administration for use of these funds. Any
withdrawals of funds for purposes other than those permitted will result in a
taxable event, equivalent to the statutory tax rate. The Company has $4,900 of
restricted CCF Funds at December 31, 2003 which is classified in Other Assets in
the Consolidated Balance Sheet. Taxes on CCF deposits and earnings made prior to
January 1, 1993 are being recognized over the remaining lives of the assets
purchased with qualified CCF withdrawals. At December 31, 2003, 2002, and 2001,
the difference between the book carrying value and the tax bases of assets as a
result of these past deposits for which the Company has not provided taxes, is
approximately $16,000, $19,000, and $21,000, respectively.

The Company has alternative minimum tax credit carryforwards of
approximately $7,787, which have no expiration date, available to offset future
federal taxes.

Valuation allowances have been recorded against certain deferred tax
assets. Each item has been reviewed for expected utilization using a "more
likely than not" approach based on the character of the item, the associated
taxing jurisdiction, the relevant history of the item, and identified actions
under the control of the Company.

NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts of financial instruments have been
determined by the Company using available market information and valuation
methodologies. However, considerable judgment is required in

58

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

interpreting market data to develop the estimates of fair value. In addition,
costs of refinancing and/or prepayment penalties have not been considered.
Accordingly, the estimates presented are not indicative of the amounts that the
Company could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies could have a material effect on the
estimated fair value amount.

The methods and assumptions used to estimate the fair value of each class
of financial instruments, which potentially subject the Company to
concentrations of credit risk, are set forth below:

- Cash and cash equivalents, marketable securities, and cash held in the
Capital Construction Fund -- The Company places its temporary cash
investments with high credit quality financial institutions and, by
policy, limits the amount of credit exposure to any one financial
institution. The carrying amounts reported in the Consolidated Balance
Sheet for these items approximate fair value at December 31, 2003 and
2002.

- Trade receivables -- Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising
the Company's customer base, and their dispersion across many diverse
industries and geographies. The carrying amounts reported in the
Consolidated Balance Sheet for trade receivables approximate fair value
at December 31, 2003 and 2002.

- Long-term debt -- Valuations for long-term debt are determined based on
borrowing rates currently available to the Company for loans with similar
terms and maturities. At December 31, 2003, the estimated fair value of
the Company's debt, with a carrying value of $434,650 is $449,071. At
December 31, 2002, the estimated fair value of the Company's debt, with a
carrying value of $325,376, was $347,250.

NOTE 15 -- STOCKHOLDERS' EQUITY

PREFERRED STOCK

Dividends on preferred class A convertible stock are cumulative at 5% per
annum, payable annually on July 1st. Cumulative dividends in arrears bear
interest at a rate determined by the Board of Directors between 8% and 12%,
inclusive, compounded annually. There are no dividends in arrears at December
31, 2003. These shares, together with unpaid cumulative dividends and interest,
if any, are convertible to common stock at a conversion price of $1,200 per
share, subject to specified anti-dilution adjustments. Shares may be redeemed,
at the Company's option, for $100 per share plus unpaid cumulative dividends and
interest.

59

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

EARNINGS PER COMMON SHARE

The computations of the numerator and denominator for calculating basic and
diluted earnings per common share for the years ended December 31, 2003, 2002,
and 2001 are as follows:

NOTE 16 -- EMPLOYEE BENEFIT PLANS

The Company contributes to Company and multi-employer pension plans
covering substantially all employees. The Company sponsors the Crowley
Retirement Income System Plan (the "CRISP"). The CRISP is a profit sharing plan
designed to provide eligible employees with retirement, death and disability
benefits. The Company contributes 3% of eligible earnings to participants'
accounts and matches 50% of employee contributions up to 6%.

The Company has a deferred compensation plan for which the participants and
annual contributions, if any, are determined by the Board of Directors. For each
year's contribution, participants become fully vested after five years, upon
attaining age 65, upon death, or other financial criteria as established by the
Board of Directors. Funds for each years' contribution may be distributed, at
the participant's election, upon becoming 100% vested, at attainment of age 65
or upon retirement. Contributions are placed in an irrevocable trust available
only to the participants and the Company's creditors.

The Company also sponsors the Crowley Maritime Corporation Retirement Stock
Plan ("RSP"). Contributions to the RSP are made by the Company based on an
annual determination made by the Board of Directors. If stock is contributed,
the stock is valued at the stock's non-marketable fair value, as determined by
an independent appraisal. The RSP purchased 2,010 shares of stock in 2001. At
December 31, 2003, 2002, and 2001, the plan held 9,372, 9,482, and 9,572 shares
of common stock, respectively. Vesting occurs upon completion of five years of
credited service or upon the attainment of age 65, disability retirement or
death. In the event of termination prior to becoming vested, the participant's
account balance is forfeited and

60

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

reallocated to active participants. Distribution to participants are made as
soon as practicable following the participant's death, disability retirement or
termination of Company employment after attainment of age 65. All other vested
participants are eligible for distribution on the earlier of the third calendar
quarter of the third Plan Year that follows the Plan Year in which the
participant terminates Company employment verses the attainment of age 65. All
distributions to a participant are in the form of a single, lump sum payment in
the form of shares of Company stock. Upon the date of distribution and for the
immediately succeeding ten days, such shares of Company stock shall be subject
to the Company's right to repurchase such shares for cash equal to their fair
market value determined as of the Valuation Date that coincides with or
immediately precedes the date of distributions.

The Company also sponsors the Stock Savings Plan ("SSP"), an employee stock
ownership plan which holds 4,873 shares of common stock at December 31, 2003,
all of which are fully vested. Participants in this plan have the option to sell
their stock to the Company at the common stock's marketable fair value, as
determined by an independent appraisal, upon retirement, death or after a break
in service. No contributions were made during the years ended December 31, 2003,
2002, and 2001.

Pursuant to collective bargaining agreements with labor unions representing
the Company's sea-going personnel, contributions are also made to various
defined benefit and defined contribution pension and welfare plans, including
some multi-employer plans, in accordance with their terms.

Expenses included in operations under the Company's benefit plans are as
follows for the years ended December 31, 2003, 2002 and 2001:

NOTE 17 -- ENVIRONMENTAL COSTS

The Company's estimates for environmental remediation costs include labor
costs, equipment rental, engineering consulting fees and material costs.
Estimates for environmental remediation are based on the phase of the remedial
action, the type of technology being used, the experience of the type of
technology used and on the environmental consultant's experience or personal
experience. Other costs, such as legal and regulatory oversight, are based on
experience with similar remedial projects in the same geographic region as the
site in question. The recorded liabilities for the estimated future
environmental costs at December 31, 2003 and 2002 are approximately $4,728 and
$5,048, respectively. The estimated annual payments for future environmental
costs as of December 31, 2003 are as follows:

2004........................................................ $ 830
2005........................................................ 804
2006........................................................ 579
2007........................................................ 354
2008........................................................ 404
Thereafter.................................................. 1,757
------
$4,728
======

The actual provision for environmental costs have not differed materially
from the amounts recorded.

61

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 18 -- COMMITMENTS AND CONTINGENCIES

The Company is subject to various foreign and domestic legal and regulatory
rules and certain proceedings arising therefrom in the conduct of normal
business activities. In the opinion of management, resolution of these matters
will not have a material adverse or beneficial effect on the Company's
consolidated financial condition or results of operations.

During 2003 and 2002, the Company reached agreements with its insurance
underwriters to settle all costs incurred to date and any future costs related
to environmental remediation resulting from occurrences prior to 1986. The
amounts of the settlements were $1,000 and $5,324, in 2003 and 2002,
respectively, net of unrecoverable amounts due to insolvency of certain
underwriters. Both of these settlements were collected during 2003. As a result
of these settlements, the Company increased its estimated liabilities by $3,095
in 2002 for any remaining environmental remediation. The Company also recognized
$1,000 and $2,229 as a reduction to claims expense in 2003 and 2002,
respectively.

The Company is currently a defendant with respect to approximately sixteen
thousand maritime asbestos cases and other toxic tort cases, most of which were
filed in the Federal Courts in Ohio, Michigan, California and New Jersey.
Additional cases were filed in the Territorial Court of the Virgin Islands, and
in state courts in Utah, Pennsylvania, Texas, and Louisiana. Each of the cases,
filed on behalf of a seaman or his personal representative, alleges injury or
illness based upon exposure to asbestos or other toxic substances and sets forth
a claim based upon the theory of negligence under the Jones Act and on the
theory of unseaworthiness under the General Maritime Law. Pursuant to an order
issued by the Judicial Panel on Multidistrict Litigation dated July 29, 1991,
all Federal cases were transferred to the United States District Court for the
Eastern Division of Pennsylvania for pretrial processing. On May 1, 1996, the
cases were administratively dismissed by Judge Charles R. Weiner, subject to
reinstatement in the future. At present it is not known how long the process
will require. It is also not known whether Judge Weiner will be able to develop
a plan which will result in settlement of the cases. If he is unsuccessful, upon
reinstatement, it is expected that the cases will be remanded to the Ohio and
Michigan courts.

The Company has insurance coverage that reimburses it for a substantial
portion of the: (a) costs incurred defending against asbestos claims; and (b)
amounts the Company pays to settle claims or honor judgments by courts. The
coverage is provided by a large number of insurance policies written by dozens
of insurance companies over a period of many years. The amount of insurance
coverage depends on the nature of the alleged exposure to asbestos, the specific
subsidiary against which an asbestos claim is asserted and the terms and
conditions of the specific policy.

The uncertainties of asbestos claim litigation make it difficult to
accurately predict the results of the ultimate resolution of these claims. By
their very nature, civil actions relating to toxic substances vary according to
the fact pattern of each case, the applicable jurisdiction and numerous other
factors. This uncertainty is increased by the possibility of adverse court
rulings or new legislation affecting the asbestos claim litigation or the
settlement process. Accordingly, we cannot predict the eventual number of such
cases or their final resolution. The full impact of these claims and proceedings
in the aggregate continues to be unknown. During 2003, there were 44 claims
reinstated related to these asbestos claims. The Company has accrued $813 as an
estimate of the ultimate outcome of this litigation. The Company has also
recorded a receivable from its insurance companies of $479 related to these
claims. While it is not feasible accurately to predict or determine the ultimate
outcome of all pending investigations and legal proceedings or provide
reasonable ranges of potential losses, given the large and/or indeterminate
amounts sought in certain of these matters and the inherent unpredictability of
litigation, it is possible that an adverse outcome in some of these cases could
have a material adverse affect on our financial condition, operating results or
cash flows.

62

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

Prior to 2001, the Company recorded its asbestos-related reserves based on
its best estimate of the total cost of the outstanding claims. These estimates
were based on actual costs for settled claims, evidence of liability and damages
as well as industry data regarding the ultimate cost of outstanding asbestos
litigation. During 2001, it became clear based on consultation with legal
counsel and upon the lack of progress since the cases were administratively
dismissed that the ultimate outcome of the outstanding cases was uncertain and
that the accrual of loss contingency requirements of Statement of Financial
Accounting Standards No. 5 "Accounting for Contingencies" were not met due to
the unreliability of the loss estimate. As a result, the Company was no longer
able to estimate the amount of probable loss or range of probable loss relating
to these asbestos cases and reversed $4,321 of asbestos-related reserves. This
was recorded as a reduction to claims expense in general and administrative
expenses in 2001.

The Company is also party to numerous long-term contracts for shipment of
goods for other parties. Several of these contracts include clauses under which
contract prices may change if certain economic events occur, primarily increases
or decreases in certain components of vessel operating costs. These contracts
are subject to audit by the cargo owners. Management has estimated the
applicable amount of revenue to record for these contracts and, although it is
at least reasonably possible that contract prices will change in the near term,
management believes that it has accounted for these contracts appropriately. It
is management's opinion that adjustments, if any, will not have a material
adverse impact on the Company's consolidated financial condition, results of
operations or cash flows.

At December 31, 2003, the Company is obligated under contractual
commitments for the completion of construction of two vessels, leasehold
improvements under an operating lease, and software maintenance agreements
totaling approximately $15,302. Payments of approximately $1,218 have been made
through December 31, 2003.

The Company has a contract with a fuel supplier where the Company has
agreed to purchase approximately 750 barrels of fuel during 2004, at market
value. Under the terms of the contract, the Company can extend the contract for
one year. The Company purchased 772 barrels of fuel at a market price of $27,633
during 2003 under this contract. The estimated value of the fuel to be purchased
in 2004 is $29,866 at December 31, 2003. The Company may negotiate a greater or
lesser quantity of fuel if future business conditions change. The Company has
designated this contract as a normal purchase and not as a hedge for financial
statement purposes as the Company has not agreed to the price of the fuel.

NOTE 19 -- ADDITIONAL CASH FLOW INFORMATION

Interest paid, net of amounts capitalized, and income tax payments
(refunds) for the years ended December 31, 2003, 2002 and 2001 are as follows:

NOTE 20 -- FINANCIAL INFORMATION BY SEGMENT AND GEOGRAPHIC AREA

SEGMENT INFORMATION

Segment information has been prepared in accordance with Statement of
Financial Accounting Standards 131, "Disclosures about Segments of an Enterprise
and Related Information." Segments were determined based on the types of
services provided by each segment. Accounting policies of the segments are the
same as those described in the Summary of Significant Accounting Policies in
Note 1. Performance of the

63

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

segments is evaluated on operating revenue and operating income. The Company
accounts for intersegment revenue and transfers at cost.

The Company provides diversified transportation services in domestic and
international markets by means of seven operating segments: Puerto Rico and
Caribbean Liner Service; Latin America Liner Service; Crowley Logistics; Ship
Assist and Escort Services; Petroleum Services; Marine Transport Corporation;
and Energy and Marine Services.

The Company has aggregated Puerto Rico and Caribbean Liner Service, Latin
America Liner Service and Crowley Logistics into one reportable segment called
Liner Services. The Company has also aggregated Petroleum Service and Marine
Transport Corporation into one reportable segment called Oil and Chemical
Distribution and Transportation Services. These operating segments are
aggregated based on their long-term financial performance, their products and
services and their class of customers being similar.

Liner Services provides ocean transportation services for the carriage of
cargo between two geographic areas: (1) ports in the United States and ports in
Puerto Rico and certain eastern Caribbean islands; and (2) ports in the United
States and ports in Mexico, Central America, the Northern Coast of South America
and certain Western Caribbean islands. The Liner Services segment provides a
broad range of transportation services including the carriage of containers,
trailers, vehicles and oversized cargo known as "NIT service", cargo on a
door-to-door basis known as "intermodal service", logistics, warehousing and
distribution services, special cargo handling, including the carriage of
apparel, refrigerated or perishable goods and hazardous materials, and vessel
management services for third parties including the United States Government.
The Liner Services Segment also provides minor sub-assembly services to one or
more of its customers.

Ship Assist and Escort Services segment provides ship assist, tanker
escort, docking and related services, and fire fighting and oil spill response
through contracts of affreightment, and voyage, time and bareboat charters for
periods ranging from a single voyage to long-term arrangements.

Oil and Chemical Distribution and Transportation Services segment owns or
leases numerous vessels used for the carriage of crude oil, petroleum products
and chemicals. This segment also owns and/or operates four tank farms and
provides vessel management services to third parties for which it receives fees.

Energy and Marine Services segment provides specialized services to
companies engaged, on a worldwide basis, in the exploration, production and
distribution of oil and gas. These services are traditionally provided through
specialized marine transportation projects which use assets either owned by the
Company or chartered from the world market as needed. This segment also offers
turnkey project management for major infrastructure projects as well as
logistics and inventory control services for the oil and gas industry.

Other segment includes corporate services. Corporate services provides
accounting, legal, human resources, information technology, purchasing support,
insurance services and vessel acquisition to the Company's operating segments
and allocates 100% of their associated costs to the operating segments. Asset
charges (recoveries) are allocated to the segment that last used the asset.

The table below summarizes certain financial information of the Company's
segments and reconciles such information to the consolidated financial
statements for the years ended December 31, 2003, 2002, and 2001. The Company
does not segregate assets or expenditures for long lived assets by reporting
segment; therefore these amounts are reported in Other. Additionally, the
Company does not allocate interest expense, interest income, or income taxes to
operating segments. Accordingly, such amounts are included in Other.

64

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

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

(1) MTL Petrolink Corp. was sold on May 15, 2002 as disclosed in Note 2.

(2) Marine Transport Corporation was purchased on February 7, 2001, as discussed
in Note 2.

(3) During 2003, the Company contributed a subsidiary from the Oil and Chemical
Distribution and Transportation Services segment to the Other segment.
Intersegment revenues and depreciation and amortization expenses have been
restated for the years ended December 31, 2002 and 2001 to reflect this
transaction. There was no effect on the operating income of either of these
segments.

(4) The Liner Services segment has been restated in 2002 and 2001 for
discontinued operations. See Note 4.

65

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

GEOGRAPHIC AREA INFORMATION

Revenues are attributed to the United States and to all foreign countries
based on the port of origin for the ocean transportation of the carriage of
cargo and the location of service provided for all other operations. Revenues
from external customers attributable to an individual country, other than the
United States, were not material for disclosure.

The Company has restated its foreign revenues for the years ended December
31, 2002 and 2001, to include certain foreign revenues previously classified as
United States revenue. Operating revenue from external customers and property
and equipment, net information by geographic area are summarized as follows:

66

CROWLEY MARITIME CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

NOTE 21 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Summary data relating to the results of operations for each quarter of the
years ended December 31, 2003 and December 31, 2002 follows:

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

(1) MTL Petrolink Corp. was sold on May 15, 2002 as disclosed in Note 2.

67

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 2003
(IN THOUSANDS)

ALLOWANCE FOR BAD DEBTS:

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

(1) Represents the allowance for doubtful accounts acquired through the
acquisition of Marine Transport Corporation.

(2) Represents the allowance for doubtful accounts disposed of through the sale
of MTL Petrolink Corp.

(3) 2002 and 2001 have been restated for discontinued operations. See Note 4 of
the Notes to Consolidated Financial Statements in "Item 8. Financial
Statements and Supplementary Data.

2003 COMPARED WITH 2002

The Company's provision for doubtful accounts decreased $709 to $4,008 in
2003 compared with $4,717 in 2002. In 2003, two of the Company's customers filed
for bankruptcy and the Company has taken legal action against three separate
customers. As a result, the Company wrote-off those accounts. The Company also
settled a receivable with a major customer resulting in a writeoff of a portion
of the receivable.

2002 COMPARED WITH 2001

The Company's provision for doubtful accounts increased $2,433 to $4,717 in
2002 compared with $2,284 in 2001. In 2002, four of the Company's customers
filed for bankruptcy and as a result, the Company wrote-off those accounts. The
Company has legal action against five customers resulting in the writeoff of
those accounts. The Company attributes these circumstances to a weak economy in
2002.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company's management, including its principal executive officer (who is
the Chief Executive Officer) and the principal financial officer (who is the
Vice President, Tax and Audit), have conducted an evaluation of the
effectiveness of the Company's disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")). Based on that evaluation, the Company's principal executive
officer and the principal financial officer concluded that such disclosure
controls and procedures are effective, as of the end of the period covered by
this Annual Report on Form 10-K, to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

No change in the Company's internal control over financial reporting
identified in connection with the evaluation required by Rule 13a-15(d) under
the Exchange Act that occurred during the Company's fourth fiscal quarter has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

69

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Information concerning directors of the Company appears in the
Company's Proxy Statement to be filed with the Securities Exchange Commission in
connection with the Company's 2004 Annual Meeting of Stockholders (the "Proxy
Statement") under "Nominees for Election as Directors." This portion of the
Proxy Statement is incorporated herein by reference.

(b) For information with respect to Executive Officers, see "Item 1.
Business -- Executive Officers of the Registrant" of this Annual Report on Form
10-K.

(c) Information concerning Section 16(a) beneficial ownership reporting
compliance appears in the Proxy Statement under "Section 16(a) Beneficial
Ownership Reporting Compliance." This portion of the Proxy Statement is
incorporated herein by reference.

(d) Gary L. Depolo and Leland S. Prussia, both of whom serve on the Audit
Committee of the Board of Directors of the Company, have been designated by the
Board of Directors as "audit committee financial experts" (as such term has been
defined in Item 401(h) of Regulation S-K of the Securities and Exchange
Commission). Messrs. Depolo and Prussia are "independent" as that term is used
in Rule 4200(a)(15) of the NASDAQ Stock Market's listing rules.

(e) Information concerning procedures for making recommendations for
director nominees appears in the Proxy Statement under "Nominating Committee."
This portion of the Proxy Statement is incorporated herein by reference.

(f) On October 2, 2003, we adopted a code of ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. A copy of this
code of ethics is filed with this Annual Report on Form 10-K as Exhibit 14.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is hereby incorporated by reference
from the Proxy Statement under the captions "Compensation of Directors",
"Compensation Committee Interlocks and Insider Participation" and "Executive
Compensation".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is hereby incorporated by reference
from the Proxy Statement under the caption "Security Ownership of Certain
Beneficial Owners and Management".

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is hereby incorporated by reference
from the Proxy Statement under the caption "Certain Relationships and Related
Transactions".

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is hereby incorporated by reference
from the Proxy Statement under the caption "Auditors".

70

PART IV

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

(a) The following documents are filed as part of this report:

1. Consolidated financial statements: See Table of Contents to "Item 8.
Financial Statements and Supplementary Data".

2. Consolidated financial statement schedules: Schedule II -- Valuation
and Qualifying Accounts for each of the three years in the period
ended December 2003. All other schedules are omitted because they are
not required or the information is included in the consolidated
financial statements.

3. Exhibits.

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

(1) Neither the Company nor its subsidiaries are parties to any other
instrument with respect to long-term debt for which the securities
authorized thereunder does not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis. Copies of
instruments with respect to long-term debt of lesser amounts will be
provided to the Securities and Exchange Commission upon request.

(2) Schedules and exhibits listed in the table of contents for this agreement
have been omitted. Copies thereof will be furnished supplementally to the
Securities and Exchange Commission upon request.

(3) Schedule A (Policies on Life of the Survivor of Thomas B. and Molly
Crowley) and Schedule B (Bank Loan) have been omitted. Copies thereof will
be furnished supplementally to the Securities and Exchange Commission upon
request.

* Incorporated by reference to the indicated exhibit to the Company's
Registration Statement on Form 10 filed April 1, 2002.

** Incorporated by reference to the indicated exhibit to Amendment No. 1 of
the Company's Registration Statement on Form 10 filed June 4, 2002.

*** Incorporated by reference to the indicated exhibit to the Company's Form
10-Q for the quarter ended June 30, 2002.

**** Incorporated by reference to the indicated exhibit to the Company's Form
10-Q for the quarter ended September 30, 2003.

# Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K

On October 28, 2003 and December 3, 2003, the Company furnished a report
on Form 8-K pursuant to Item 9 Regulation FD Disclosure, which
disclosed, respectively, acquisition discussions and related litigation
commenced by third parties.

72

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.

CROWLEY MARITIME CORPORATION

By: /s/ THOMAS B. CROWLEY, JR.
------------------------------------
Thomas B. Crowley, Jr.
Chairman of the Board, President and
Chief Executive Officer

Date: March 18, 2004

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.

73

EXHIBIT INDEX