Attached files
file | filename |
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EX-31.1 - EX-31.1 - COMMERCIAL BARGE LINE CO | d272698dex311.htm |
EX-31.2 - EX-31.2 - COMMERCIAL BARGE LINE CO | d272698dex312.htm |
EX-32.2 - EX-32.2 - COMMERCIAL BARGE LINE CO | d272698dex322.htm |
EX-32.1 - EX-32.1 - COMMERCIAL BARGE LINE CO | d272698dex321.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K/A
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
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) 333-124454-12
COMMERCIAL BARGE LINE COMPANY
(Exact Name of Registrant as Specified in Charter)
Delaware | 03-0552365 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
1701 E. Market Street, Jeffersonville, Indiana 47130 |
(Address of principal executive offices) (Zip Code) |
(812) 288-0100
(Registrants telephone number, including area code)
Former name or former address, if changed since last report: N/A
1701 E. Market Street, Jeffersonville, Indiana 47130 |
(Address of principal executive offices) (Zip Code) |
(812) 288-0100
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes x No ¨
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 ¨ No ¨ Not applicable.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ NO x
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter. Not applicable
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date. Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE:
None
EXPLANATORY NOTE
The sole purpose of this Amendment No. 1 to the Annual Report on Form 10-K of Commercial Barge Line Company for the year ended December 31, 2010, filed with the Securities and Exchange Commission on March 31, 2011 (the Form 10-K), is to correct scrivener errors contained in the original filing with regard to the exclusion of the conformed signature of the Independent Registered Public Accounting Firm on their report, and to correct the usage of black lines to separate predecessor and successor columns in the consolidated financial statements.
No other changes have been made to the Form 10-K. This Amendment No. 1 to the Form 10-K speaks as of the original filing date of the Form 10-K, does not reflect events that may have occurred after the original filing date and does not modify or update in any way disclosures made in the original Form 10-K.
Report of Independent Registered Public Accounting Firm
The Board of Directors Commercial Barge Line Company
We have audited the accompanying consolidated balance sheets of Commercial Barge Line Company (the Company) as of December 31, 2010 (Successor Company) and 2009 (Predecessor Company), and the related consolidated statements of operations, shareholders equity, and cash flows for the periods January 1, 2010 through December 21, 2010 (Predecessor Company) and December 22, 2010 through December 31, 2010 (Successor Company) and the years ended December 31, 2009 and 2008 (Predecessor Company). Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Commercial Barge Line Company at December 31, 2010 (Successor Company) and 2009 (Predecessor Company), and the consolidated results of their operations and their cash flows for the periods January 1, 2010 through December 21, 2010 (Predecessor Company) and December 22, 2010 through December 31, 2010 (Successor Company) and the years ended December 31, 2009 and 2008 (Predecessor Company), in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth herein.
/s/ ERNST & YOUNG LLP
Louisville, Kentucky
March 31, 2011
3
COMMERCIAL BARGE LINE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Successor
Company December 22 to December 31, 2010 |
Predecessor Company Years Ended December 31, 2010 |
Predecessor
Company Years Ended December 31, |
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2009 | 2008 | |||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Revenues |
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Transportation and Services |
$ | 19,779 | $ | 620,753 | $ | 630,481 | $ | 905,126 | ||||||||
Manufacturing |
4,986 | 85,054 | 215,546 | 254,794 | ||||||||||||
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Revenues |
24,765 | 705,807 | 846,027 | 1,159,920 | ||||||||||||
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Cost of Sales |
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Transportation and Services |
16,921 | 520,128 | 532,224 | 737,665 | ||||||||||||
Manufacturing |
4,838 | 82,504 | 189,565 | 242,309 | ||||||||||||
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Cost of Sales |
21,759 | 602,632 | 721,789 | 979,974 | ||||||||||||
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Gross Profit |
3,006 | 103,175 | 124,238 | 179,946 | ||||||||||||
Selling, General and Administrative Expenses |
8,227 | 47,874 | 70,082 | 77,536 | ||||||||||||
Goodwill Impairment |
| | | 855 | ||||||||||||
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Operating Income (Loss) |
(5,221 | ) | 55,301 | 54,156 | 101,555 | |||||||||||
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Other Expense (Income) |
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Interest Expense |
805 | 37,923 | 40,932 | 26,829 | ||||||||||||
Debt Retirement Expenses |
| 8,701 | 17,659 | 2,379 | ||||||||||||
Other, Net |
(19 | ) | (313 | ) | (1,259 | ) | (2,279 | ) | ||||||||
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Other Expenses |
786 | 46,311 | 57,332 | 26,929 | ||||||||||||
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Income (Loss) from Continuing Operations |
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Before Taxes |
(6,007 | ) | 8,990 | (3,176 | ) | 74,626 | ||||||||||
Income Taxes (Benefit) |
628 | 5,540 | (1,148 | ) | 27,243 | |||||||||||
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Income (Loss) from Continuing Operations |
(6,635 | ) | 3,450 | (2,028 | ) | 47,383 | ||||||||||
Discontinued Operations, Net of Tax |
| 300 | (10,030 | ) | 628 | |||||||||||
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Net Income (Loss) |
$ | (6,635 | ) | $ | 3,750 | $ | (12,058 | ) | $ | 48,011 | ||||||
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The accompanying notes are an integral part of the consolidated financial statements.
4
COMMERCIAL BARGE LINE COMPANY
CONSOLIDATED BALANCE SHEETS
Successor Company December 31, 2010 |
Predecessor Company December 31, 2009 |
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(In thousands) | (In thousands) | |||||||
ASSETS | ||||||||
Current Assets |
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Cash and Cash Equivalents |
$ | 3,707 | $ | 1,198 | ||||
Accounts Receivable, Net |
97,802 | 93,295 | ||||||
Inventory |
50,834 | 39,070 | ||||||
Deferred Tax Asset |
10,072 | 3,791 | ||||||
Assets Held for Sale |
2,133 | 3,531 | ||||||
Prepaid and Other Current Assets |
32,075 | 23,879 | ||||||
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Total Current Assets |
196,623 | 164,764 | ||||||
Properties, Net |
979,655 | 521,068 | ||||||
Investment in Equity Investees |
5,743 | 4,522 | ||||||
Accounts Receivable, Intercompany |
3,116 | 37,351 | ||||||
Other Assets |
53,665 | 27,539 | ||||||
Goodwill |
20,470 | 5,997 | ||||||
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Total Assets |
$ | 1,259,272 | $ | 761,241 | ||||
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LIABILITIES | ||||||||
Current Liabilities |
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Accounts Payable |
$ | 44,782 | $ | 34,163 | ||||
Accrued Payroll and Fringe Benefits |
27,992 | 18,283 | ||||||
Deferred Revenue |
14,132 | 13,928 | ||||||
Accrued Claims and Insurance Premiums |
12,114 | 16,947 | ||||||
Accrued Interest |
11,667 | 13,098 | ||||||
Current Portion of Long Term Debt |
| 114 | ||||||
Customer Deposits |
500 | 1,309 | ||||||
Other Liabilities |
25,810 | 31,825 | ||||||
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Total Current Liabilities |
136,997 | 129,667 | ||||||
Long Term Debt |
385,152 | 345,419 | ||||||
Pension and Post Retirement Liabilities |
38,615 | 31,514 | ||||||
Deferred Tax Liability |
208,651 | 40,133 | ||||||
Other Long Term Liabilities |
60,901 | 6,567 | ||||||
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Total Liabilities |
830,316 | 553,300 | ||||||
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SHAREHOLDERS EQUITY | ||||||||
Other Capital |
435,487 | 23,668 | ||||||
Retained Earnings (Deficit) |
(6,635 | ) | 183,862 | |||||
Accumulated Other Comprehensive Income |
104 | 411 | ||||||
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Total Shareholders Equity |
428,956 | 207,941 | ||||||
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Total Liabilities and Shareholders Equity |
$ | 1,259,272 | $ | 761,241 | ||||
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The accompanying notes are an integral part of the consolidated financial statements.
5
COMMERCIAL BARGE LINE COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
Other Capital |
Retained Earnings (Deficit) |
Other Comprehensive Income (Loss) |
Total | |||||||||||||
(In thousands) | ||||||||||||||||
Predecessor |
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Balance at December 31, 2007 |
$ | 17,192 | $ | 148,426 | $ | 6,590 | $ | 172,208 | ||||||||
Excess Tax Benefit |
3,455 | | | 3,455 | ||||||||||||
Comprehensive Income: |
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Net Income |
| 48,011 | | 48,011 | ||||||||||||
Pension year end date change (Net of Tax Benefit) |
| (517 | ) | | (517 | ) | ||||||||||
Net Loss on Fuel Swaps Designated as Cash Flow Hedging Instruments |
| | (7,496 | ) | (7,496 | ) | ||||||||||
Pension Liability (Net of Tax Benefit) |
| | (17,070 | ) | (17,070 | ) | ||||||||||
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Total Comprehensive Income (Loss) |
$ | | $ | 47,494 | $ | (24,566 | ) | $ | 22,928 | |||||||
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Balance at December 31, 2008 |
$ | 20,647 | $ | 195,920 | $ | (17,976 | ) | $ | 198,591 | |||||||
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Excess Tax Benefit |
(2,170 | ) | | | (2,170 | ) | ||||||||||
Additional Investment in Summit |
5,191 | | | 5,191 | ||||||||||||
Comprehensive Income: |
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Net Loss |
| (12,058 | ) | | (12,058 | ) | ||||||||||
Net Gain on Fuel Swaps Designated as Cash Flow Hedging Instruments |
| | 9,774 | 9,774 | ||||||||||||
Pension Liability (Net of Tax Expense) |
| | 8,613 | 8,613 | ||||||||||||
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Total Comprehensive Income (Loss) |
$ | | $ | (12,058 | ) | $ | 18,387 | $ | 6,329 | |||||||
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Balance at December 31, 2009 |
$ | 23,668 | $ | 183,862 | $ | 411 | $ | 207,941 | ||||||||
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Excess Tax Benefit |
(15 | ) | | | (15 | ) | ||||||||||
Comprehensive Income: |
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Net Income |
| 3,750 | | 3,750 | ||||||||||||
Net Loss on Fuel Swaps Designated as Cash Flow Hedging Instruments |
| | (949 | ) | (949 | ) | ||||||||||
Pension Liability (Net of Tax Expense) |
| | (1,368 | ) | (1,368 | ) | ||||||||||
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Total Comprehensive Income (Loss) |
$ | | $ | 3,750 | $ | (2,317 | ) | $ | 1,432 | |||||||
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Balance at December 21, 2010 |
$ | 23,653 | $ | 187,612 | $ | (1,906 | ) | $ | 209,358 | |||||||
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Successor |
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Balance at December 22,2010 |
$ | 432,561 | $ | | $ | | $ | 432,561 | ||||||||
Excess Tax Benefit of Sharebased Compensation |
2,926 | | | 2,926 | ||||||||||||
Comprehensive Income: |
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Net Loss |
| (6,635 | ) | | (6,635 | ) | ||||||||||
Net Gain on Fuel Swaps Designated as Cash Flow Hedging Instruments |
| | 104 | 104 | ||||||||||||
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Total Comprehensive Income (Loss) |
$ | | $ | (6,635 | ) | $ | 104 | $ | (6,531 | ) | ||||||
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Balance at December 31, 2010 |
$ | 435,487 | $ | (6,635 | ) | $ | 104 | $ | 428,956 | |||||||
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The accompanying notes are an integral part of the consolidated financial statements.
6
COMMERCIAL BARGE LINE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Successor Company December 22 to December 31, 2010 |
Predecessor Company January 1 to December 21, 2010 |
Predecessor
Company Years Ended December 31, |
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2009 | 2008 | |||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
OPERATING ACTIVITIES |
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Net Income(Loss) |
$ | (6,635 | ) | $ | 3,750 | $ | (12,058 | ) | $ | 48,011 | ||||||
Adjustments to Reconcile Net Income(Loss) to Net Cash |
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Provided by Operating Activities: |
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Depreciation and Amortization |
2,860 | 45,253 | 53,838 | 51,876 | ||||||||||||
Debt Retirement Costs |
| 8,701 | 17,659 | 2,379 | ||||||||||||
Debt Issuance Cost Amortization |
(76 | ) | 5,162 | 7,145 | 2,625 | |||||||||||
Deferred Taxes |
(1,600 | ) | 27,644 | (2,184 | ) | 19,337 | ||||||||||
Impairment and Loss on Sale of Summit Contracting |
| | 11,853 | | ||||||||||||
Gain on Property Dispositions |
| (9,019 | ) | (20,264 | ) | (641 | ) | |||||||||
Share-Based Compensation |
41 | 7,423 | 8,164 | 9,284 | ||||||||||||
Other Operating Activities |
59 | 7,168 | 3,885 | 2,158 | ||||||||||||
Changes in Operating Assets and Liabilities: |
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Accounts Receivable |
1,661 | (8,896 | ) | 34,001 | (18,320 | ) | ||||||||||
Inventory |
1,802 | (9,850 | ) | 31,854 | 4,013 | |||||||||||
Other Current Assets |
5,070 | (20,267 | ) | 18,025 | (16,165 | ) | ||||||||||
Accounts Payable |
2,593 | 10,759 | (19,890 | ) | 3,001 | |||||||||||
Accrued Interest |
881 | (2,246 | ) | 11,860 | (461 | ) | ||||||||||
Other Current Liabilities |
1,376 | (2,457 | ) | (15,036 | ) | 13,383 | ||||||||||
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Net Cash Provided by Operating Activities |
8,032 | 63,125 | 128,852 | 120,480 | ||||||||||||
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INVESTING ACTIVITIES |
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Property Additions |
| (57,798 | ) | (33,226 | ) | (97,892 | ) | |||||||||
Proceeds from Sale of Summit Contracting |
| | 2,750 | | ||||||||||||
Investment in Summit Contracting |
| | | (8,462 | ) | |||||||||||
Proceeds from government Grants |
| 2,552 | | | ||||||||||||
Proceeds from Property Dispositions |
| 7,337 | 28,384 | 4,031 | ||||||||||||
Other Investing Activities |
(1,735 | ) | 961 | (4,445 | ) | (1,884 | ) | |||||||||
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Net Cash Used in Investing Activities |
(1,735 | ) | (46,948 | ) | (6,537 | ) | (104,207 | ) | ||||||||
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FINANCING ACTIVITIES |
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Revolving Credit Facility Borrowings |
| 169,204 | 154,518 | | ||||||||||||
Revolving Credit Facility Repayments |
(18,894 | ) | (154,518 | ) | (418,550 | ) | (20,450 | ) | ||||||||
2017 Senior Note Borrowings |
| | 200,000 | | ||||||||||||
Discount on 2017 Senior Notes |
| | (9,638 | ) | | |||||||||||
Bank Overdrafts on Operating Accounts |
(9,090 | ) | 6,356 | (6,479 | ) | 1,806 | ||||||||||
Debt Issuance/Refinancing Costs |
| (15,402 | ) | (40,547 | ) | (4,888 | ) | |||||||||
Tax (Expense) Benefit of Share Based Compensation |
2,926 | (15 | ) | (2,170 | ) | 3,455 | ||||||||||
Other Financing Activities |
| (532 | ) | 532 | | |||||||||||
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Net Cash Provided by (Used in) Financing Activities |
(25,058 | ) | 5,093 | (122,334 | ) | (20,077 | ) | |||||||||
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Net Increase(Decrease) in Cash and Cash Equivalents |
(18,761 | ) | 21,270 | (19 | ) | (3,804 | ) | |||||||||
Cash and Cash Equivalents at Beginning of Period |
22,468 | 1,198 | 1,217 | 5,021 | ||||||||||||
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Cash and Cash Equivalents at End of Period |
$ | 3,707 | $ | 22,468 | $ | 1,198 | $ | 1,217 | ||||||||
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Supplemental Cash Flow Information: |
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Interest Paid |
$ | | $ | 32,852 | $ | 21,155 | $ | 24,162 | ||||||||
Tax (Refunds Received) Paid Net |
| (4,859 | ) | (1,689 | ) | 3,933 |
The accompanying notes are an integral part of the consolidated financial statements.
7
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1. ACCOUNTING POLICIES
REPORTING ENTITY
Commercial Barge Line Company (CBL) is a Delaware corporation. In these financial statements, unless the context indicates otherwise, the Company refers to CBL and its subsidiaries on a consolidated basis.
The operations of the Company include barge transportation together with related port services along the Inland Waterways and marine equipment manufacturing. Barge transportation accounts for the majority of the Companys revenues and includes the movement of bulk products, grain, coal, steel and liquids in the United States. The Company has long term contracts with many of its customers. Manufacturing of marine equipment is provided to customers in marine transportation and other related industries in the United States. The Company also has an operation engaged in naval architecture and engineering. This operation is significantly smaller than either the transportation or manufacturing segments. During 2009 the Company sold its interests in Summit Contracting Inc. (Summit) which had been a consolidated subsidiary since April 1, 2008. The results of operations of Summit have been reclassified into discontinued operations for all periods presented.
The assets of CBL consist primarily of its ownership of all of the equity interests in American Commercial Lines LLC, ACL Transportation Services LLC, and Jeffboat LLC, Delaware limited liability companies, and their subsidiaries. Additionally, CBL owns ACL Professional Services, Inc., a Delaware corporation. CBL is responsible for corporate income taxes. CBL does not conduct any operations independent of their ownership interests in the consolidated subsidiaries.
CBL is a wholly-owned subsidiary of American Commercial Lines Inc. (ACL). ACL is a wholly-owned subsidiary of ACL I Corporation (ACL I). ACL I is a wholly owned subsidiary of Finn Holding Corporation (Finn). Finn is primarily owned by certain affiliates of Platinum Equity, LLC (Platinum). On December 21, 2010, ACL announced the consummation of the previously announced acquisition of ACL by Platinum (the Acquisition, in all instances of usage. See Note 14 for further information). The Acquisition was accomplished through the merger of Finn Merger Corporation, a Delaware corporation and a wholly owned subsidiary of ACL I, a Delaware corporation, with and into American Commercial Lines Inc. The assets of ACL consist principally of its ownership of all of the stock of CBL. In connection with the Acquisition the purchase price has been preliminarily allocated in these statements as of the Acquisition date and results of operations for the 10 days from December 22, 2010 to December 31, 2010 have been separately stated herein (See Note 14). All amounts in these financial statements designated Predecessor Company refer to periods prior to the Acquisition and all amounts designated Successor Company refer to periods after the Acquisition.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements reflect the results of operations, cash flows and financial position of CBL and its majority-owned subsidiaries. All significant intercompany accounts and transactions with subsidiaries have been eliminated. Net amounts receivable are reflected on the statement of financial position in accounts receivable intercompany.
Investments in companies that are not majority-owned are accounted for under the equity method or at cost, depending on the extent of control during the period presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Some of the significant estimates underlying these financial statements include amounts recorded as reserves for doubtful accounts, reserves for obsolete and slow moving inventories, pension and post-retirement liabilities, incurred but not reported medical and prescription drug claims, insurance claims and related insurance receivables, deferred tax liabilities, assets held for sale, revenues and expenses on special vessels using the percentage-of-completion method, environmental liabilities, valuation allowances related to deferred tax assets, expected forfeitures of share-based compensation, liabilities for unbilled barge and boat maintenance, liabilities for unbilled harbor and towing services, estimated future cash flows of its reporting entities, recoverability of acquisition goodwill and depreciable lives of long-lived assets.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short term investments with a maturity of less than three months when purchased. CBL has, from time to time, cash in banks in excess of federally insured limits.
8
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ACCOUNTS RECEIVABLE
Accounts receivable consist of the following.
December
31, 2010 |
December
31, 2009 |
|||||||||
Accounts Receivable |
$ | 97,802 | $ | 98,477 | ||||||
Allowance for Doubtful Accounts |
| (5,182 | ) | |||||||
|
|
|
|
|||||||
$ | 97,802 | $ | 93,295 | |||||||
|
|
|
|
CBL maintains an allowance for doubtful accounts based upon the expected collectability of accounts receivable. Subsequent to the Acquisition accounts receivable were recorded at estimated fair value which resulted in a reserve amount of zero at December 31, 2010. Trade receivables less allowances reflect the net realizable value of the receivables, and approximate fair value. The Company generally does not require collateral or other security to support trade receivables subject to credit risk. To reduce credit risk, the Company performs credit investigations prior to establishing customer credit limits and reviews customer credit profiles on an ongoing basis. An allowance against the trade receivables is established based either on the Companys specific knowledge of a customers financial condition or a percentage of past due accounts. Accounts are charged to the allowance when management determines that the accounts are unlikely to be collected. Recoveries of trade receivables previously reserved in the allowance are added back to the allowance when recovered.
INVENTORY
Inventory is carried at the lower of cost (based on a weighted average cost method) or market and consists of the following:
December
31, 2010 |
December
31, 2009 |
|||||||||
Raw Materials |
$ | 19,255 | $ | 5,142 | ||||||
Work in Process |
5,844 | 12,230 | ||||||||
Parts and Supplies (1) |
25,735 | 21,698 | ||||||||
|
|
|
|
|||||||
$ | 50,834 | $ | 39,070 | |||||||
|
|
|
|
(1) | Net of reserves for obsolete and slow moving inventories of $0 and $656 at December 31, 2010 and 2009, respectively. |
Subsequent to the Acquisition our fuel and steel inventories were written up to fair value. Fuel increased $0.16 per gallon for a total write-up of $853 which will be absorbed in future earnings as the fuel inventory is used. Steel costs increased our work in process and raw materials inventories by $842 and $2,353 respectively. These higher costs will be absorbed as the steel is used in barge construction.
PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets include estimated claims receivable from insurance carriers of $10,193 at December 31, 2010, and $9,505 at December 31, 2009, and fuel hedge receivables of $2,919 and $4,779 at December 31, 2010 and 2009, respectively. The remainder of current assets primarily relate to prepaid rent, insurance and other contracts.
ASSETS AND ASSET CAPITALIZATION POLICIES
Asset capitalization policies have been established by management to conform to generally accepted accounting principles. All expenditures for property, buildings or equipment with economic lives greater than one year are recorded as assets and amortized over the estimated economic useful life of the individual asset. Generally, individual expenditures less than one thousand dollars are not capitalized. An exception is made for program expenditures, such as personal computers, that involve multiple individual expenditures with economic lives greater than one year. The costs of purchasing or developing software are capitalized and amortized over the estimated economic life of the software.
9
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
New barges built for the transportation segment by the manufacturing segment are capitalized at cost. Repairs that extend the original economic life of an asset or that enhance the original functionality of an asset are capitalized and amortized over the assets estimated economic life. Capitalized expenditures include major steel re-plating of barges that extends the total economic life of the barges, repainting the entire sides or bottoms of barges which also extends their economic life or rebuilding boat engines, which enhances the fuel efficiency or power production of the boats.
Routine engine overhauls that occur on a one to three year cycle are expensed when they are incurred. Routine maintenance of boat hulls and superstructures as well as propellers, shafts and rudders are also expensed as incurred. Routine repairs to barges, such as steel patching for minor hull damage, pump and hose replacements on tank barges or hull reinforcements, are also expensed as incurred.
IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS
Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets. Where impairment is indicated, the assets are evaluated and their carrying amount is reduced to fair value of the underlying assets limited by the discounted net cash flows or other estimates of fair value of the group.
Losses on assets held for sale of $(4), $3,214 and $430 were recorded in 2010, 2009 and 2008, respectively. (No Successor Company expense.) These amounts are included in cost of sales transportation and services in the consolidated statement of operations. See Note 17.
The recoverability of indefinite-lived intangible assets (e.g. goodwill) is evaluated annually, or more frequently if impairment indicators exist, on a reporting unit basis by comparing the estimated fair value to its carrying value.
Goodwill and intangible asset impairment losses of $4,400 and $1,124 were recorded in 2009 and 2008, respectively. There were no comparable charges in 2010. $855 of the 2008 amount of impairment expenses is reported as an operating expense in the consolidated statement of operations. The amount was incurred primarily due to increases in the Companys cost of capital during 2008, which lowered the discounted cash flow calculated in the Companys valuation model, resulting in an excess of carrying values over the estimated fair value of the entity. Underlying expected cash flows did not change significantly from the acquisition date expectations during 2008.
The entire 2009 charge of $4,400 and the $269 balance of the 2008 charge are included in Discontinued Operations, net of tax in the consolidated statement of operations as they relate to Summit which was sold in 2009. See Note 13.
Losses of $133 and $3,655 were also recorded in 2010 and 2009, respectively, for the closure of the Houston office. (No Successor Company expense.) These losses are reported as selling, general and administrative costs in the consolidated statement of operations. Approximately one-half of the 2009 loss represents impairment of the long-lived assets in that office and the remainder of the expected net lease exposure. The 2010 amount relates to additional exposure on final settlement of the lease which was terminated in 2010.
PROPERTIES, DEPRECIATION AND AMORTIZATION
At the Acquisition date the long-lived assets of the Company have been revalued at estimated fair value. Depreciation expense in the 10 day period ended December 31, 2010 was $2,879 which included $1,710 higher depreciation as a result of the Acquisition revaluation.
Property additions subsequent to the Acquisition are stated at cost less accumulated depreciation. Provisions for depreciation of properties are based on the estimated useful service lives computed on the straight-line method. Buildings and improvements are depreciated from 15 to 45 years. Improvements to leased property are amortized over the shorter of their economic life or the respective lease term. Equipment is depreciated from 5 to 42 years.
10
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Properties consist of the following:
December
31, 2010 |
December
31, 2009 |
|||||||||
Land |
$ | 20,002 | $ | 10,855 | ||||||
Buildings and Improvements |
55,058 | 51,315 | ||||||||
Equipment |
907,091 | 672,314 | ||||||||
|
|
|
|
|||||||
982,151 | 734,484 | |||||||||
Less Accumulated Depreciation |
2,496 | 213,416 | ||||||||
|
|
|
|
|||||||
$ | 979,655 | $ | 521,068 | |||||||
|
|
|
|
INTANGIBLE ASSETS
Intangible assets are included in other assets in the consolidated balance sheets and consist of the following.
December 31, | Purchase | December 31, | ||||||||||||||
2009 | Accounting | Amortization | 2010 | |||||||||||||
Covenant Not to Compete EBDG |
$ | 137 | $ | | $ | 137 | $ | | ||||||||
Customer Backlog Jeffboat |
| 200 | 6 | 194 | ||||||||||||
Tradenames Jeffboat |
| 4,300 | 119 | 4,181 | ||||||||||||
Favorable Leases ACLLC |
| 25,761 | 188 | 25,573 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Intangibles other than goodwill |
$ | 137 | $ | 30,261 | $ | 450 | $ | 29,948 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Goodwill McKinney |
$ | 2,100 | $ | (2,100 | ) | $ | | $ | | |||||||
Goodwill EBDG |
3,898 | (3,898 | ) | | | |||||||||||
Goodwill Purchase Accounting |
| 20,470 | | 20,470 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Goodwill |
$ | 5,998 | $ | 14,472 | $ | | $ | 20,470 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Intangibles and Goodwill |
$ | 6,135 | $ | 44,733 | $ | 450 | $ | 50,418 | ||||||||
|
|
|
|
|
|
|
|
Future intangible amortization expense is estimated to be as follows:
2011 |
$ | 7,250 | ||
2012 |
5,927 | |||
2013 |
5,566 | |||
2014 |
4,896 | |||
2015 |
2,738 |
CBL also has capitalized software of $7,430 at December 31, 2010 and $8,970 at December 31, 2009 which is included in Other Assets. Software amortization expense was $2,282, $2,281 and $2,144 for the fiscal years 2010, 2009 and 2008, respectively. (Successor Company expense $67.)
INVESTMENTS IN EQUITY INVESTEES
The Investment in Equity Investees balance at December 31, 2010, consists of small individual equity investments in four domestic ventures: BargeLink LLC, Bolivar Terminal LLC, TTBarge Services Mile 237 LLC and MarineNet LLC. The Company holds 50% or less of the equity interest in each investee and does not exercise control over any entity. Earnings related to CBLs equity method investees in aggregate were $495, $982 and $1,064 for fiscal years 2010, 2009 and 2008, respectively. (Successor Company earnings $19.) These earnings are included in other income in the consolidated statements of operations. As of the Acquisition these investments were recorded at their fair value. See Note 14. The difference between the fair value and our interest in the underlying net assets will be amortized over a period of five years from the date of the Acquisition.
11
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DEBT COST AMORTIZATION
CBL amortizes debt issuance costs and fees over the term of the debt on the effective interest method. Amortization of debt issuance costs was $12,712, $24,265 and $5,005 for the fiscal years 2010, 2009 and 2008, respectively, and is included in interest expense (scheduled amortization) and debt retirement expenses (write-offs) in the consolidated statement of operations. Amortization of debt issuance cost for 2010, 2009 and 2008 includes $8,701, $17,659 and $2,379, respectively, from the early retirement of debt (see Note 3). (Successor Company amortization of debt issuance cost $82 and no debt retirement costs were incurred.) Subsequent to the Acquisition the unamortized debt cost related to the issuance of the senior notes of $4,830 were eliminated in the purchase accounting. The unamortized balance of $15,170 of debt issuance costs which relates to the Companys Existing Credit Facility (See Note 2) is recorded in other assets in the consolidated balance sheet at December 31, 2010.
DEBT PREMIUM/DISCOUNT
On July 7, 2009, CBL issued $200,000 of senior notes (the Notes). Subsequent to the Acquisition these Notes are recorded at their fair value at the Acquisition date. See Note 14. In periods prior to the Acquisition, the difference between the stated principal amount of the Notes and the fair value at inception (discount) was amortized using the interest method over the life of the Notes. The amortization of the discount was $1,150 and $539 in fiscal years 2010 and 2009, respectively and is included in interest expense in the consolidated statements of operations. Subsequent to the Acquisition the unamortized original issue discount of $7,948 was written off as part of the purchase price allocation. The unamortized discount of $9,099 at December 31, 2009 is shown as a discount from the face amount of the Notes at that date. Also subsequent to the Acquisition the Notes were revalued to fair value representing a premium of $35,000, which will amortize as a reduction of interest expense over the remaining life of the Notes on the interest method. Amortization of the premium in the 10 day period ended December 31, 2010 was $158.
DERIVATIVE INSTRUMENTS
Derivative instruments are recorded on the consolidated balance sheet at fair value. Derivatives not designated as hedges are adjusted through income. If a derivative is designated as a hedge, depending on the nature of the hedge, changes in its fair value that are considered to be effective, as defined, either offset the change in fair value of the hedged assets, liabilities, or firm commitments through income, or are recorded in Other Comprehensive Income until the hedged item is recorded in income. Any portion of a change in a derivatives fair value that is considered to be ineffective, or is excluded from the measurement of effectiveness, is recorded immediately in income. The fair value of financial instruments is generally determined based on quoted market prices.
REVENUE RECOGNITION
The primary source of the Companys revenue, freight transportation by barge, is recognized based on voyage percentage-of-completion. The proportion of freight transportation revenue to be recognized is determined by applying a percentage to the contractual charges for such services. The percentage is determined by dividing the number of miles from the loading point to the position of the barge as of the end of the accounting period by the total miles from the loading point to the barge destination as specified in the customers freight contract. The position of the barge at accounting period end is determined by locating the position of the boat with the barge in tow through use of a global positioning system. The recognition of revenue based upon the percentage of voyage completion results in a better matching of revenue and expenses. The deferred revenue balance in current liabilities represents the uncompleted portion of in-process contracts.
The recognition of revenue generated from contract rate adjustments occurs based on the percentage of voyage completion method. The rate adjustment occurrences are defined by contract terms. They typically occur monthly or quarterly, are based on recent historical inflation measures, including fuel, labor and/or general inflation, and are invoiced at the adjusted rate levels in the normal billing process.
The recognition of revenue due to shortfalls on take or pay contracts occurs at the end of each declaration period. A declaration period is defined as the time period in which the contract volume obligation was to be met. If the volume was not met during that time period, then the amount of billable revenue resulting from the failure to perform will be calculated and recognized as it is billed.
Day rate plus towing contracts have a twofold revenue stream. The day rate, a daily charter rate for the equipment, is recognized for the amount of time the equipment is under charter during the period. The towing portion of the rate is recognized once the equipment has been placed on our boat to be moved for the customer.
12
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Revenue from unit tow equipment day rate contracts is recognized based on the number of days services are performed during the period.
Marine manufacturing revenue is recognized based on the completed contract or the percentage-of-completion method depending on the length of the construction period. Ocean going vessels are significantly more expensive and take substantially longer to construct than typical barges for use on the Inland Waterways. CBL uses the percentage-of-completion method of recognizing revenue and expenses related to the construction of these longer-term production vessels based on labor hours incurred as a percent of estimated total hours for each vessel.
CBL uses the completed contract method for barges built for Inland Waterways use which typically have construction periods of 90 days or less. Contracts are considered complete when title has passed, the customer has accepted the vessel and there is no substantial continuing involvement by the Company with the vessel. Losses are accrued if manufacturing costs are expected to exceed manufacturing contract revenue.
Harbor services, terminal, repair and other revenue are recognized as services are provided.
Revenue from the Companys professional service company is recorded primarily on the percentage-of-completion method wherein the direct costs incurred to date over the estimated total direct costs of a contract times the total revenues under the contract determines revenues to be recorded for any contract.
EXPENSE ESTIMATES FOR HARBOR AND TOWING SERVICE CHARGES
Harbor and towing service charges are estimated and recognized as services are received. Estimates are based upon recent historical charges by specific vendor for the type of service charge incurred and upon published vendor rates. Service events are recorded by vendor and location in our barge tracking system. Vendor charges can vary based upon the number of boat hours required to complete the service, the grouping of barges in vendor tows and the quantity of man hours and materials required.
EXPENSE ESTIMATES FOR UNBILLED BOAT AND BARGE MAINTENANCE CHARGES
Many boat and barge maintenance activities are necessarily performed as needed to maximize the in-service potential of our fleets. Many of these services are provided by long time partners located along the entire length of the Inland Waterways. Estimates are therefore required for unbilled services at any period end in order to record services as they are received. Estimates are based upon historical trends and recent charges.
INSURANCE CLAIM LOSS DEDUCTIBLES AND SELF INSURANCE
Liabilities for insurance claim loss deductibles include accruals of personal injury, property damage, cargo damage and accident claims. These accruals are estimated based upon historical experience with similar claims. The estimates are recorded upon the first report of a claim and are updated as new information is obtained. The amount of the liability is based on the type and severity of the claim and an estimate of future claim development based on current trends and historical data.
EMPLOYEE BENEFIT PLANS
Assets and liabilities of our defined benefit plans are determined on an actuarial basis and are affected by the estimated market value of plan assets, estimates of the expected return on plan assets and discount rates. Actual changes in the fair market value of plan assets and differences between the actual return on plan assets and the expected return on plan assets will affect the amount of pension expense ultimately recognized, impacting our results of operations. The Company is self-insured up to $250 per individual for medical benefits for current employees, per policy year. The liability for post-retirement medical benefits is also determined on an actuarial basis and is affected by assumptions including the discount rate and expected trends in health care costs.
On December 31, 2009, due to a change in the Companys vacation policy regarding accrued benefits payable at any point in time, the Company recorded a non-comparable reversal of $1,209 in accrued vacation liability through selling, general and administrative expenses and $419 through cost of goods sold.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on previously reported net income.
13
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustment in certain circumstances. For the Company these items primarily include all assets and liabilities of the Company at the December 21, 2010 Acquisition date. From time to time the Company also evaluates long-lived assets, goodwill and intangible assets for which fair value is determined as part of the related impairment tests. Other than the purchase accounting adjustments described in Note 14 there were no significant adjustments to fair value or fair value measurements required for non-financial assets or liabilities.
Fair value is defined by accounting standards as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market, or if none exists, the most advantageous market, for the specific asset or liability at the measurement date (the exit price). The fair value should be based on assumptions that market participants would use when pricing the asset or liability. This accounting standard establishes a fair value hierarchy known as the valuation hierarchy that prioritizes the information used in measuring fair value as follows:
Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 Inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
Level 3 Unobservable inputs reflecting managements own assumptions about the inputs used in pricing the asset or liability.
RECENTLY ISSUED ACCOUNTING STANDARDS
In September 2006, the Financial Accounting Standards Board (FASB) issued guidance now contained in Accounting Standards Codification (ASC) Section 715, Compensation Retirement Benefits. The standard requires plan sponsors of defined benefit pension and other postretirement benefit plans (collectively, postretirement benefit plans) to recognize the funded status of their postretirement benefit plans in the consolidated balance sheet, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end consolidated balance sheet, and provide additional disclosures. Most of the provisions of the revised standard were previously adopted in 2006 with the impacts as disclosed in previous filings. The standard also required, beginning in 2008, a change in the measurement date of its postretirement benefit plans to December 31 versus the September 30 measurement date used previously. This provision was adopted as of January 1, 2008, and resulted in a charge of $828 ($518 after-tax). This amount was recorded as an adjustment to retained earnings in January 2008.
Subsequent to July 2009 the FASB has issued additional Accounting Standards Updates. Several were technical corrections to the codification. ASUs considered to have a potential impact on the Company where the impact is not yet determined are discussed as follows.
In January 2010, the FASB issued new guidelines and clarifications for improving disclosures about fair value measurements. This guidance requires enhanced disclosures for purchases, sales, issuances, and settlements on a gross basis for Level 3 fair value measurements. We do not anticipate the adoption of this guidance to materially impact the Company. These new disclosures are effective for interim and annual reporting periods beginning after December 15, 2010.
NOTE 2. DEBT
Successor | Predecessor | |||||||
Company | Company | |||||||
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
Revolving Credit Facility |
$ | 150,310 | $ | 154,518 | ||||
2017 Senior Notes |
200,000 | 200,000 | ||||||
Less Original Issue Discount |
| (9,099 | ) | |||||
Plus Purchase Premium |
34,842 | |||||||
EBDG Note |
| 114 | ||||||
|
|
|
|
|||||
Total Debt |
385,152 | 345,533 | ||||||
Less Current Portion of Long Term Debt |
| 114 | ||||||
|
|
|
|
|||||
Long Term Debt |
$ | 385,152 | $ | 345,419 | ||||
|
|
|
|
Subsequent to the Acquisition, on December 21, 2010, the Company entered into a new the credit agreement, consisting of a senior secured asset-based revolving credit facility (Existing Credit Facility) in an aggregate principal amount of $475,000 with a final maturity date of December 21, 2015. Proceeds of the Existing Credit Facility are available for use by the Company and, subject to certain limitations, their subsidiaries for working capital and general corporate purposes, including funding of certain amounts paid by the Company in connection with the Acquisition. At the Acquisition, proceeds of the Existing Credit Facility were used, in part, to fund the liquidation of the Companys previous facility and certain expenses associated with the Acquisition.
The Borrowers may use the Existing Credit Facility in connection with the issuance of letters of credit up to $50,000. Availability under the Existing Credit Facility is capped at a borrowing base, calculated based on certain percentages of the value of the Borrowers vessels, inventory and receivables and subject to certain blocks and reserves, all as further set forth in the Existing Credit Agreement. The Company is currently prohibited from incurring more than $390,000 of indebtedness under the Existing Credit Facility regardless of the size of the borrowing base until (a) all of the obligations (other than unasserted contingent obligations) under the indenture governing the 2017 Notes are repaid, defeased, discharged or otherwise satisfied or (b) the indenture governing the 2017 Notes is replaced or amended or otherwise modified in a manner such that such additional borrowings would be permitted. At the Borrowers option, the Existing Credit Facility may be increased by $75,000, subject to certain requirements set forth in the Credit Agreement.
14
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In accordance with the Security Agreement, the Borrowers obligations under the Credit Agreement are secured by, among other things, a lien on substantially all of their tangible and intangible personal property (including but not limited to vessels, accounts receivable, inventory, equipment, general intangibles, investment property, deposit and securities accounts, certain owned real property and intellectual property), a pledge of the capital stock of each of ACLs wholly owned restricted domestic subsidiaries, subject to certain exceptions and thresholds.
Borrowings under the Credit Agreement bear interest, at the Borrowers option, at either (i) an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. Such applicable margin will, depending on average availability under the Existing Credit Facility, range from 2.00% to 2.50% in the case of base rate loans and 2.75% to 3.25% in the case of LIBOR rate loans. Interest is payable (a) in the case of base rate loans, monthly in arrears, and (b) in the case of LIBOR rate loans, at the end of each interest period, but in no event less often than every three months. A commitment fee is payable monthly in arrears at a rate per annum equal to 0.50% of the daily unused amount of the commitments in respect of the Existing Credit Facility. The Borrowers, at their option, may prepay borrowings under the Existing Credit Facility and re-borrow such amounts, at any time (subject to applicable borrowing conditions) without penalty, in whole or in part, in minimum amounts and subject to other conditions set forth in the Existing Credit Facility. For any period that availability is less than a certain defined level set forth in the Credit Agreement and until no longer less than such level for a 30-day period, the Credit Agreement imposes several financial covenants on CBL and its subsidiaries, including (a) a minimum fixed charge coverage ratio (as defined in the Credit Agreement) of at least 1.1 to 1; and (b) a maximum first lien leverage ratio of 4.25 to 1.0. The Credit Agreement requires that CBL and its subsidiaries comply with covenants relating to customary matters (in addition to those financial covenants described above), including with respect to incurring indebtedness and liens, using the proceeds received under the Credit Agreement, transactions with affiliates, making investments and acquisitions, effecting mergers and asset sales, prepaying indebtedness, and paying dividends.
On February 20, 2009, ACL signed an amendment (Amendment No. 6) to the then-existing credit facility extending the maturity to March 31, 2011. The Company was a guarantor of Amendment No. 6. The extended facility initially provided a total of $475,000 in credit availability. The facility was set to reduce credit availability to $450,000 on December 31, 2009, and to $400,000 on December 31, 2010. Fees for Amendment No. 6 totaled approximately $21,200. These fees were initially capitalized and were included in Other Assets at the date of the transaction in the consolidated balance sheet and were being amortized over the life of the amended facility. Amendment No. 6 contained more stringent covenants as to fixed charge coverage and consolidated leverage ratio and placed limitations on annual capital expenditures. The facility initially bore interest at a LIBOR floor of 3% plus a 550 basis point spread. Per the agreement the spread rate was set to increase by 50 basis points every six months during the term of the agreement.
On July 7, 2009, CBL issued $200,000 aggregate principal amount of senior secured second lien 12.5% notes due July 15, 2017 (the Notes). The issue price was 95.181% of the principal amount of the Notes ($9,638 discount at issuance date), resulting in an effective interest rate of approximately 13.1%. The Notes are guaranteed by ACL and by all material existing and future domestic subsidiaries of CBL. Simultaneously with CBLs issuance of the notes, ACL closed a new four year $390,000 senior secured first lien asset-based revolving credit facility (the Credit Facility) also guaranteed by CBL, ACL and certain other direct wholly owned subsidiaries of CBL. Proceeds from the Notes, together with borrowings under the Credit Facility, were used to repay ACLs existing credit facility, to pay certain related transaction costs and expenses and for general corporate purposes.
The Notes and Existing Credit Facility have no maintenance covenants unless borrowing availability is generally less than $59,375. This is $180,315 less than the availability at December 31, 2010. Should the springing covenants be triggered in the Notes and Credit Facility the leverage calculation includes only first lien senior debt, excluding debt under the Notes. The Notes and Credit Facility also provide flexibility to execute sale leasebacks, sell assets, and issue additional debt to raise additional funds. In addition the Notes and Credit Facility place no restrictions on capital spending, but do limit the payment of dividends.
The Notes were offered in accordance with Rule 144A under the Securities Act of 1933, as amended, to purchasers in the United States and in accordance with Regulation S under the Securities Act to purchasers outside of the United States. The Notes were subsequently registered under the Securities Act. In October 2009 CBL completed the filing of a Registration Statement on Form S-4 to meet the registration rights requirements it assumed under the Rule 144A private placement of Notes completed on July 7, 2009. In December 2009 an amended registration statement became effective and the contemplated exchange offer was completed on January 22, 2010.
In the partial year ended December 21, 2010 the Company wrote off $8,701 representing the unamortized balance of debt issuance costs related to its immediately then-existing July 2009 credit agreement which was replaced by the Existing Credit Facility.
15
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In the third quarter of 2009, the Company wrote-off $17,659 representing the unamortized balance of debt issuance costs related to a prior revolving credit facility.
During all periods presented the Company has been in compliance with the respective covenants contained in its credit agreements.
The principal payments of long-term debt outstanding as of December 31, 2010, over the next five years and thereafter are as follows.
2011 |
$ | | ||
2012 |
| |||
2013 |
150,310 | |||
2014 |
| |||
2015 |
| |||
Thereafter |
200,000 | |||
|
|
|||
350,310 | ||||
Unamortized debt premium |
34,842 | |||
|
|
|||
$ | 385,152 | |||
|
|
NOTE 3. INCOME TAXES
CBLs operating entities are primarily single member limited liability companies that are owned by a corporate parent, and are subject to U.S. federal and state income taxes on a combined basis. Currently tax years 2007 to 2010 have not been examined by tax authorities.
The components of income tax expense, exclusive of income tax expense associated with discontinued operations, follow.
Successor Company | Predecessor Company | |||||||||||
2010 | 2009 | 2008 | ||||||||||
Income taxes currently payable |
||||||||||||
Federal |
$ | (15,104 | ) | $ | (4,269 | ) | $ | 9,842 | ||||
State |
(811 | ) | 181 | 934 | ||||||||
|
|
|
|
|
|
|||||||
(15,915 | ) | (4,088 | ) | 10,776 | ||||||||
|
|
|
|
|
|
|||||||
Deferred income tax expense (benefit) |
||||||||||||
Federal |
20,106 | 2,478 | 14,804 | |||||||||
State |
1,977 | 462 | 1,663 | |||||||||
|
|
|
|
|
|
|||||||
22,083 | 2,940 | 16,467 | ||||||||||
|
|
|
|
|
|
|||||||
Total income taxes |
$ | 6,168 | $ | (1,148 | ) | $ | 27,243 | |||||
|
|
|
|
|
|
|||||||
Income tax attributable to other comprehensive income (loss): |
$ | (1,517 | ) | $ | 11,928 | $ | (15,205 | ) |
Income tax computed at federal statutory rates reconciled to income tax expense exclusive of income tax expense associated with discontinued operations as follows.
16
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Successor Company | Predecessor Company | |||||||||||||||
December 22 to | January 1 to | Successor Company | ||||||||||||||
December 31, 2010 | December 21, 2010 | 2009 | 2008 | |||||||||||||
Tax at federal statutory rate |
$ | (2,103 | ) | $ | 3,146 | $ | (6,583 | ) | $ | 26,203 | ||||||
State income taxes, net |
41 | (188 | ) | (316 | ) | 1,701 | ||||||||||
Other: |
||||||||||||||||
Prior year taxes |
| 1,346 | 224 | (673 | ) | |||||||||||
Acquisition Costs |
2,690 | 1,104 | | | ||||||||||||
Other miscellaneous items |
| 132 | (254 | ) | 109 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total income tax expense |
$ | 628 | $ | 5,540 | $ | (6,929 | ) | $ | 27,340 | |||||||
|
|
|
|
|
|
|
|
The components of deferred income taxes included on the balance sheet are as follows.
December 31, | December 31, | |||||||||
2010 | 2009 | |||||||||
DEFERRED TAX ASSETS: |
||||||||||
Reserve for bad debts |
$ | 1,940 | $ | 1,942 | ||||||
Inventory adjustments |
365 | (153 | ) | |||||||
Employee benefits and compensation |
7,550 | 772 | ||||||||
Loss on Houston Office Closure |
| 1,370 | ||||||||
Other accruals |
(131 | ) | (283 | ) | ||||||
Warranty accruals |
348 | 143 | ||||||||
|
|
|
|
|||||||
CURRENT DEFERRED TAX ASSET |
$ | 10,072 | $ | 3,791 | ||||||
|
|
|
|
|||||||
Net Operating Loss Carryback |
$ | 12,289 | $ | 20,439 | ||||||
Accrued claims |
720 | 2,789 | ||||||||
Accrued pension - ACL plan long-term |
11,793 | 9,804 | ||||||||
Deferred gains |
1,413 | 2,444 | ||||||||
Accrued post-retirement medical |
1,366 | 2,004 | ||||||||
Stock compensation |
723 | 4,327 | ||||||||
Temporary differences due to income recognition timing |
221 | 81 | ||||||||
Sale of Summit |
125 | 260 | ||||||||
Charitable contribution carryforward |
122 | | ||||||||
AMT credit |
1,594 | 2,472 | ||||||||
|
|
|
|
|||||||
TOTAL DEFERRED TAX ASSETS |
$ | 40,438 | $ | 48,411 | ||||||
|
|
|
|
|||||||
DEFERRED TAX LIABILITIES |
||||||||||
Domestic property |
$ | (93,802 | ) | $ | (80,587 | ) | ||||
Equity investments in domestic partnerships and limited liability companies |
(223 | ) | (267 | ) | ||||||
Long term leases |
(1,245 | ) | (887 | ) | ||||||
Prepaid insurance |
(287 | ) | (294 | ) | ||||||
Software |
(1,167 | ) | (1,026 | ) | ||||||
Gain on Fuel Futures |
(1,094 | ) | (1,791 | ) | ||||||
Goodwill |
(72 | ) | 99 | |||||||
Purchase Accounting |
(141,127 | ) | | |||||||
|
|
|
|
|||||||
TOTAL DEFERRED TAX LIABILITIES |
$ | (239,017 | ) | $ | (84,753 | ) | ||||
|
|
|
|
|||||||
NET DEFERRED TAX LIABILITY |
$ | (198,579 | ) | $ | (36,342 | ) |
17
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. EMPLOYEE BENEFIT PLANS
CBL sponsors or participates in defined benefit plans covering most salaried and hourly employees. Effective February 1, 2007, for non-represented salaried and hourly employees, and February 19, 2007, for represented employees, the defined benefit plan was closed to new employees. The plans provide for eligible employees to receive benefits based on years of service and either compensation rates or at a predetermined multiplier factor. Contributions to the plans are sufficient to meet the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974 (ERISA), as amended. Plan assets consist primarily of common stocks, corporate bonds, and cash and cash equivalents.
In addition to the defined benefit pension and related plans, CBL has a defined benefit post-retirement healthcare plan covering certain full-time employees. The plan provides medical benefits and is contributory. Retiree contributions are adjusted annually. The plan also contains other cost-sharing features such as deductibles and coinsurance. The accounting for the healthcare plan anticipates future cost-sharing changes to the written plan that are consistent with CBLs expressed intent to increase the retiree contribution rate annually. In 2003 CBL modified the post-retirement healthcare plan by discontinuing coverage to new hires and current employees who had not reached age 50 by July 1, 2003, and by terminating the prescription drug benefit for all retirees as of January 1, 2004.
CBL also sponsors a contributory defined contribution plan (401k) covering eligible employee groups. Contributions to such plans are based upon a percentage of employee contributions and were $3,506, $3,924 and $4,046 in 2010, 2009 and 2008, respectively, representing a match of up to 4% of the employees contribution. (Successor Company expense $80.)
Certain employees are covered by a union-sponsored, collectively-bargained, multi-employer defined benefit pension plan. Contributions to the plan, which are based upon a union contract, were approximately $253, $291 and $251 in 2010, 2009 and 2008, respectively. (Successor Company expense $7.) In addition there was an accrual of $2,130 made in 2007 to buy out the remaining obligations of a union pension program which was reversed in 2008 as a result of a 2008 settlement with the represented employees. Subsequent to the Acquisition as part of the purchase price allocation a liability of $3,497 was established for the estimated present value of our obligations to the plan. On March 18, 2011 ACL Transportation Services LLC filed a declaratory judgment action seeking a declaration that ACL be allowed to withdraw from the plan and be assessed withdrawal liability. The estimate established in purchase accounting is the estimate of the withdrawal liability.
See Recently Issued Accounting Standards in Note 1 for a discussion of a provision contained in ASC Section 715, Compensation Retirement Benefits, which was adopted in 2008.
A summary of the pension and post-retirement plan components follows.
18
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension Plan | ||||||||
Successor Company December 31, 2010 |
Predecessor Company December 31, 2009 |
|||||||
Accumulated Benefit Obligation, End of Year |
$ | 185,552 | $ | 166,548 | ||||
|
|
|
|
|||||
CHANGE IN PROJECTED BENEFIT OBLIGATION: |
||||||||
Projected benefit obligation, beginning of period |
$ | 171,002 | $ | 167,440 | ||||
Service cost |
4,487 | 5,366 | ||||||
Interest cost |
10,424 | 9,945 | ||||||
Actuarial (gain) loss |
11,399 | (3,428 | ) | |||||
Benefits paid |
(7,620 | ) | (8,321 | ) | ||||
|
|
|
|
|||||
Projected benefit obligation, end of period |
$ | 189,692 | $ | 171,002 | ||||
|
|
|
|
|||||
CHANGE IN PLAN ASSETS: |
||||||||
Fair value of plan assets, beginning of period |
$ | 144,837 | $ | 130,997 | ||||
Actual return on plan assets |
21,002 | 20,651 | ||||||
Company contributions |
| 1,510 | ||||||
Benefits paid |
(7,619 | ) | (8,321 | ) | ||||
|
|
|
|
|||||
Fair value of plan assets, end of period |
$ | 158,220 | $ | 144,837 | ||||
|
|
|
|
|||||
Funded status |
$ | (31,472 | ) | $ | (26,165 | ) | ||
|
|
|
|
|||||
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS: |
||||||||
Noncurrent assets |
$ | | $ | | ||||
Current liabilities |
| | ||||||
Noncurrent liabilities |
(31,472 | ) | (26,165 | ) | ||||
|
|
|
|
|||||
Net amounts recognized |
$ | (31,472 | ) | $ | (26,165 | ) | ||
|
|
|
|
|||||
AMOUNTS RECOGNIZED IN CONSOLIDATED OTHER COMPREHENSIVE INCOME: |
||||||||
Net actuarial (gain) loss |
$ | | $ | 7,179 | ||||
Prior service cost |
| 416 | ||||||
|
|
|
|
|||||
Total |
$ | | $ | 7,595 | ||||
|
|
|
|
|||||
Measurement date |
December 31, 2010 | December 31, 2009 |
19
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Post-Retirement Plan | ||||||||
Successor Company December 31, 2010 |
Predecessor Company December 31, 2009 |
|||||||
CHANGE IN BENEFIT OBLIGATION: |
||||||||
Benefit obligation, beginning of period |
$ | 5,931 | $ | 8,477 | ||||
Service cost |
12 | 22 | ||||||
Interest cost |
278 | 414 | ||||||
Plan participants contributions |
337 | 397 | ||||||
Actuarial gain |
(1,996 | ) | (2,756 | ) | ||||
Benefits paid |
(440 | ) | (623 | ) | ||||
|
|
|
|
|||||
Benefit obligation, end of period |
$ | 4,122 | $ | 5,931 | ||||
|
|
|
|
|||||
CHANGE IN PLAN ASSETS: |
||||||||
Fair value of plan assets, beginning of period |
$ | | $ | | ||||
Employer contributions |
103 | 226 | ||||||
Plan participants contributions |
337 | 397 | ||||||
Benefits paid |
(440 | ) | (623 | ) | ||||
|
|
|
|
|||||
Fair value of plan assets, end of period |
$ | | $ | | ||||
|
|
|
|
|||||
FUNDED STATUS: |
||||||||
|
|
|
|
|||||
Funded status |
$ | (4,122 | ) | $ | (5,931 | ) | ||
|
|
|
|
|||||
AMOUNTS RECOGNZED IN THE CONSOLIDATED BALANCE SHEETS: |
||||||||
Noncurrent assets |
$ | | $ | | ||||
Current liabilities |
(476 | ) | (582 | ) | ||||
Noncurrent liabilities |
(3,646 | ) | (5,349 | ) | ||||
|
|
|
|
|||||
Net amounts recognized |
$ | (4,122 | ) | $ | (5,931 | ) | ||
|
|
|
|
|||||
AMOUNTS RECOGNIZED IN CONSOLIDATED OTHER COMPREHENSIVE INCOME: |
||||||||
Net actuarial gain |
$ | | $ | (4,654 | ) | |||
Measurement date |
December 31, 2010 | December 31, 2009 |
20
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Components of net periodic benefit cost and other amounts recognized in other comprehensive income:
2010 | 2009 | 2008 | ||||||||||||
Pension: |
||||||||||||||
Service cost |
$ | 4,487 | $ | 5,366 | $ | 5,320 | ||||||||
Interest cost |
10,424 | 9,945 | 9,520 | |||||||||||
Expected return on plan assets |
(12,519 | ) | (12,381 | ) | (12,187 | ) | ||||||||
Amortization of prior service cost |
56 | 56 | 57 | |||||||||||
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
$ | 2,448 | $ | 2,986 | $ | 2,710 | ||||||||
|
|
|
|
|
|
|||||||||
Additional 4th quarter 2007 accrual of expense for measurement date change |
$ | | $ | | $ | 726 | ||||||||
Acquisition accounting adjustment |
$ | (10,454 | ) | $ | | $ | | |||||||
Net (gain) loss |
$ | 2,915 | $ | (11,698 | ) | $ | 28,537 | |||||||
Prior service cost |
(10,095 | ) | | | ||||||||||
Recognized prior service cost |
(415 | ) | (56 | ) | (56 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Total recognized in other comprehensive income (before tax effects) |
$ | (7,595 | ) | $ | (11,754 | ) | $ | 28,481 | ||||||
|
|
|
|
|
|
|||||||||
Total recognized in net benefit cost and other comprehensive income (before tax effects) |
$ | (5,147 | ) | $ | (8,768 | ) | $ | 31,917 | ||||||
|
|
|
|
|
|
|||||||||
Amounts expected to be recognized in net periodic cost in the coming year: |
||||||||||||||
Prior service cost recognition |
$ | | $ | 56 | $ | 56 | ||||||||
Post-retirement: |
||||||||||||||
Service cost |
$ | 12 | $ | 22 | $ | 45 | ||||||||
Interest cost |
278 | 414 | 501 | |||||||||||
Amortization of net actuarial gain |
(1,325 | ) | (735 | ) | (421 | ) | ||||||||
Adjustment for prior benefit payment overstatement |
| 109 | | |||||||||||
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
$ | (1,035 | ) | $ | (190 | ) | $ | 125 | ||||||
|
|
|
|
|
|
|||||||||
Additional 4th quarter 2007 accrual of expense for measurement date change |
$ | | $ | | $ | 102 | ||||||||
Acquisition accounting adjustment |
$ | 5,324 | $ | | $ | | ||||||||
Net gain |
$ | (1,996 | ) | $ | (2,756 | ) | $ | (811 | ) | |||||
Recognized prior service cost |
6,649 | 735 | 421 | |||||||||||
|
|
|
|
|
|
|||||||||
Total recognized in other comprehensive income (before tax effects) |
$ | 4,653 | $ | (2,021 | ) | $ | (390 | ) | ||||||
|
|
|
|
|
|
|||||||||
Total recognized in net benefit cost and other comprehensive income (before tax effects) |
$ | 3,618 | $ | (2,211 | ) | $ | (163 | ) | ||||||
|
|
|
|
|
|
|||||||||
Amounts expected to be recognized in net periodic cost in the coming year: |
||||||||||||||
Gain recognition |
$ | | $ | (1,041 | ) | $ | (385 | ) |
Note: | The 2010 year for purposes of this table has not been bifurcated due to the insignificance of separate Successor Company amounts to the 2010 year. |
21
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Subsequent to the Acquisition the amounts that had previously been recorded in other comprehensive income until their recognition were part of the fair value recognition in the push-down of the purchase price allocation.
Weighted-average assumptions
2010 | 2009 | |||||||
Pension: |
||||||||
Discount rate - benefit cost |
6.175% | 6.10% | ||||||
Discount rate - benefit obligation |
5.705% | 6.175% | ||||||
Expected return on plan assets |
8.25% | 8.25% | ||||||
Rate of compensation increase |
4% for 2011 | 2% for 2010 | ||||||
3% thereafter | 4% thereafter |
The following table presents the fair value of plan assets by asset category. All fair values are based on quoted prices in active markets for identical assets (Level 1).
Fair Value at | Fair Value at | |||||||||
December 31, 2010 | December 31, 2009 | |||||||||
Equity securities - large cap fund |
$ | | $ | 36,063 | ||||||
Equity securities - S&P 500 index fund |
42,793 | | ||||||||
Equity securities - small/mid cap fund |
11,082 | 11,412 | ||||||||
Equity securities - world fund |
15,477 | 18,039 | ||||||||
Debt securities - high yield bond fund |
12,468 | 9,280 | ||||||||
Debt securities - long duration bond fund |
30,912 | 51,103 | ||||||||
Debt securities - core fixed income fund |
29,050 | | ||||||||
Debt securities - emerging markets debt fund |
5,925 | 8,717 | ||||||||
Other assets - opportunity collective fund |
10,513 | | ||||||||
Cash |
| 10,223 | ||||||||
|
|
|
|
|||||||
Total |
$ | 158,220 | $ | 144,837 | ||||||
|
|
|
|
CBL employs a historical market and peer review approach in determining the long term rate of return for plan assets. Historical markets are studied and long term historical relationships between equities and fixed income are preserved consistent with the widely-accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long term capital market assumptions are determined. The long term portfolio return is established via a building block approach with proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed to check for reasonableness and appropriateness.
2010 | 2009 | |||||||
Post-retirement: |
||||||||
Discount rate - benefit cost |
6.175 | % | 6.10 | % | ||||
Discount rate - benefit obligation |
5.705 | % | 6.175 | % |
The net post-retirement benefit obligation was determined using the assumption that the health care cost trend rate for retirees was 10.0% for the current year, decreasing gradually to a 5.0% trend rate by 2016 and remaining at that level thereafter. A 1% decrease in the discount rate would have increased the net periodic benefit cost for 2010 by $1,000 and increased the year-end accumulated postretirement benefit obligation by $3,000.
22
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investment Policies and Strategies
CBL employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks as well as growth, value and small, mid and large capitalizations. During normal market environments target allocations are maintained through monthly rebalancing procedures but may be altered due to existing market conditions or opportunities. Derivatives may be used to gain market exposure in an efficient and timely manner. To the extent that the non-derivative component of a portfolio is exposed to clearly defined risks, and derivative contracts exist which can be used to reduce those risks, the investment managers are permitted to use such derivatives for hedging purposes. For example, derivatives can be used to extend the duration of the portfolio via interest rate swaps. Investment risk is measured and monitored on an ongoing basis through daily, monthly and annual asset/liability analysis, periodic asset/liability studies and timely investment portfolio reviews.
Contributions and Payments
The post-retirement medical benefit plan is unfunded. CBL expects to pay approximately $489 in medical benefits under the plan in 2011, net of retiree contributions. The pension plan is funded and held in trust. CBL expects to contribute $4,750 to the pension plan in 2011. The expected payments to plan participants are as follows.
Post-Retirement | ||||||||
Pension Plan | Medical Plan | |||||||
2011 |
$ | 7,442 | $ | 489 | ||||
2012 |
8,210 | 513 | ||||||
2013 |
8,954 | 532 | ||||||
2014 |
9,892 | 534 | ||||||
2015 |
10,613 | 503 | ||||||
Next 5 years |
62,852 | 1,860 |
23
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5. LEASE OBLIGATIONS
CBL leases operating equipment, buildings and data processing hardware under various operating leases and charter agreements, which expire from 2011 to 2075 and which generally have renewal options at similar terms. Certain vessel leases also contain purchase options at prices approximating fair value of the leased vessels. Rental expense under continuing obligations was $21,619, $23,518 and $25,811 for fiscal years 2010, 2009 and 2008, respectively. (Successor Company expense $612.)
At December 31, 2010, obligations under CBLs operating leases with initial or remaining non-cancellable lease terms longer than one year and capital leases were as follows.
2016 and | ||||||||||||||||||||||||
2011 | 2012 | 2013 | 2014 | 2015 | after | |||||||||||||||||||
Operating Lease Obligations |
$ | 23,370 | $ | 17,976 | $ | 14,773 | $ | 12,668 | $ | 9,673 | $ | 52,915 |
CBL incurred interest expense related to capital leases of $22, $65 and $0 for fiscal years 2010, 2009 and 2008, respectively. (No Successor Company expense.)
NOTE 6. RELATED PARTY TRANSACTIONS
There were no related party freight revenues in the three year period ended December 31, 2010 and there were no related party receivables included in accounts receivable on the consolidated balance sheets at December 31, 2010 or 2009 except contained in the caption Accounts Receivable Intercompany, related to the receivable from Finn Holding Company related to the Acquisition. The $14,284 portion of the funding of the Acquisition purchase price represented the intrinsic value of the share-based compensation for certain non-executive level employees. Per the share-based compensation plan, which was assumed by Finn (See Note 12), on a change of control, as defined in the American Commercial Lines 2008 Omnibus Incentive Plan, outstanding awards either vested and paid or had to be rolled over to equity of the acquirer. The payout of the non-executive level employees was paid with proceeds of an advance on the Companys credit facility. The amount of the advance is shown as a receivable from Finn.
NOTE 7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The carrying amounts and fair values of CBLs financial instruments are as follows:
Successor Company December 31, 2010 |
Predecessor Company December 31, 2009 |
|||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Assets: |
||||||||||||||||
Fuel Hedge Swap Receivables |
$ | 166 | $ | 166 | $ | 4,779 | $ | 4,779 | ||||||||
Liabilities: |
||||||||||||||||
Revolving Credit Facility |
150,310 | 150,310 | 154,518 | 154,518 | ||||||||||||
2017 Senior Notes |
234,842 | 235,000 | 200,000 | 208,000 | ||||||||||||
EBDG Note |
| | 114 | 114 |
The fuel hedge swaps are valued at quoted market rates for identical instruments, or Level 1 inputs as to fair value. The carrying value of the revolving credit facility bears interest at floating rates and therefore approximates its fair value. The 2017 Senior Notes are based on quoted market rates at December 31, 2010.
24
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash, accounts receivable, accounts payable and accrued liabilities are reflected in the consolidated financial statements at their carrying amount which approximates fair value because of the short term maturity of these instruments.
Fuel Price Risk Management
CBL has price risk for fuel not covered by contract escalation clauses and in time periods from the date of price changes until the next monthly or quarterly contract reset. From time to time CBL has utilized derivative instruments to manage volatility in addition to contracted rate adjustment clauses. Beginning in December 2007 the Company began entering into fuel price swaps with commercial banks. In 2010 settlements occurred on contracts for 20,527,000 gallons and a net gain of $3,389 (no gain for Successor Company in 2010) which was recorded as a decrease to fuel expense, a component of cost of sales, as the fuel was used. In 2009 settlements occurred on contracts for 17,432,000 gallons and a net loss of $11,792 which was recorded as an increase to fuel expense, a component of cost of sales, as the fuel was used. In 2008 settlements occurred on 9,515,000 gallons at a net loss of $867 was recorded to increase cost of sales as the fuel was used. The fair value of unsettled fuel price swaps is listed in the following table. These derivative instruments have been designated and accounted for as cash flow hedges, and to the extent of their effectiveness, changes in fair value of the hedged instrument will be accounted for through other comprehensive income until the fuel hedged is used, at which time the gain or loss on the hedge instruments will be recorded as fuel expense (cost of sales). The amounts in other comprehensive income are expected to be recorded in income in 2011 as the underlying gallons are used. Hedge ineffectiveness is recorded in income as incurred.
Description |
12/31/2010 | Fair Value of Measurements at Reporting Date Using Markets for Identical Assets (Level 1) |
||||||
Fuel Price Swaps |
$ | 166 | $ | 166 |
At December 31, 2010, the increase in the fair value of the financial instruments is recorded as a net receivable of $166 in the consolidated balance sheet. and $104 as a net of tax deferred gain in other comprehensive income in the consolidated balance sheet less hedge ineffectiveness. Hedge ineffectiveness resulted in no change to fuel expense in the fourth quarter of 2010, in a reduction of fuel expense of $738 in the fourth quarter 2009 and $1,518 for the year 2009. The fair value of the fuel price swaps is based on quoted market prices. 7,638,000 gallons were hedged under open fuel swap contracts which be settled between January 2011 and December 2011. The Company may increase the quantity hedged or add additional months based upon active monitoring of fuel pricing outlooks by the management team.
Gallons | Dollars | |||||||
Fuel Price Swaps at December 31, 2009 |
17,928 | $ | 4,779 | |||||
1st Quarter 2010 Fuel Hedge Expense |
(5,302 | ) | (981 | ) | ||||
1st Quarter 2010 Changes |
3,001 | 546 | ||||||
2nd Quarter 2010 Fuel Hedge Expense |
(3,881 | ) | (814 | ) | ||||
2nd Quarter 2010 Changes |
3,087 | (2,397 | ) | |||||
3rd Quarter 2010 Fuel Hedge Expense |
(4,547 | ) | (205 | ) | ||||
3rd Quarter 2010 Changes |
3,550 | 1,687 | ||||||
4th Quarter 2010 Fuel Hedge Expense |
(6,797 | ) | (1,388 | ) | ||||
4th Quarter 2010 Changes |
599 | 1,692 | ||||||
4th Quarter 2010 Purchase Accounting |
| (2,753 | ) | |||||
|
|
|
|
|||||
Fuel Price Swaps at December 31, 2010 |
7,638 | $ | 166 | |||||
|
|
|
|
25
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. CONTINGENCIES
A number of legal actions are pending against CBL in which claims are made in substantial amounts. While the ultimate results of pending litigation cannot be predicted with certainty, management does not currently expect that resolution of these matters will have a material adverse effect on CBLs consolidated statements of operations, balance sheets and cash flows.
Stockholder litigation. On October 22, 2010, a putative class action lawsuit was commenced against ACL, the direct parent of the Company, ACLs directors, Platinum Equity LLC (Platinum Equity), Finn and Merger Sub in the Court of Chancery of the State of Delaware. The lawsuit is captioned Leonard Becker v. American Commercial Lines Inc., et al, Civil Action No. 5919-VCL. Plaintiff amended his complaint on November 5, 2010, prior to a formal response from any defendant. On November 9, 2010, a second putative class action lawsuit was commenced against us, our directors, Platinum Equity, Finn and Merger Sub in the Superior/Circuit Court for Clark County in the State of Indiana. The lawsuit is captioned Michael Eakman v. American Commercial Lines Inc., et al., Case No. 1002-1011-CT-1344. In both actions, plaintiffs allege generally that our directors breached their fiduciary duties in connection with the Transaction by, among other things, carrying out a process that they allege did not ensure adequate and fair consideration to our stockholders. They also allege that various disclosures concerning the Transaction included in the Definitive Proxy Statement are inadequate. They further allege that Platinum Equity aided and abetted the alleged breaches of duties. Plaintiffs purport to bring the lawsuits on behalf of the public stockholders of the Company and seek equitable relief to enjoin consummation of the merger, rescission of the merger and/or rescissory damages, and attorneys fees and costs, among other relief. The Company believes the lawsuits are without merit. On December 3, 2010, counsel for the parties in the Delaware action entered into a Memorandum of Understanding (MOU) in which they agreed on the terms of a settlement of the Delaware litigation, which includes the supplementation of the Definitive Proxy Statement and the dismissal with prejudice of all claims against all of the defendants in both the Delaware and Indiana actions. The proposed settlement is conditional upon, among other things, the execution of an appropriate stipulation of settlement and final approval of the proposed settlement by the Delaware Court of Chancery. Counsel for the named plaintiffs in both actions agreed to stay the actions pending consideration of final approval of the settlement in the Delaware Court of Chancery. Assuming such approval, the named plaintiffs in both actions would dismiss their respective lawsuits with prejudice against all defendants. In connection with the settlement agreed upon in the MOU, the parties contemplate that plaintiffs counsel will seek an award of attorneys fees and expenses as part of the settlement. There can be no assurance that the parties will ultimately enter into a stipulation of settlement or that the Delaware Court of Chancery will approve the settlement as stipulated by the parties. In such event, the proposed settlement as contemplated by the MOU may be terminated.
We have been involved in the following environmental matters relating to the investigation or remediation of locations where hazardous materials have or might have been released or where we or our vendors have arranged for the disposal of wastes. These matters include situations in which we have been named or are believed to be a potentially responsible party (PRP) under applicable federal and state laws.
Collision Incident, Mile Marker 97 of the Mississippi River. ACL and American Commercial Lines LLC, a wholly-owned subsidiary of CBL, (ACLLLC), have been named as defendants in the following putative class action lawsuits, filed in the United States District Court for the Eastern District of Louisiana (collectively the Class Action Lawsuits): Austin Sicard et al on behalf of themselves and others similarly situated vs. Laurin Maritime (America) Inc., Whitefin Shipping Co. Limited, D.R.D. Towing Company, LLC, American Commercial Lines, Inc. and the New Orleans-Baton Rouge Steamship Pilots Association, Case No. 08-4012, filed on July 24, 2008; Stephen Marshall Gabarick and Bernard Attridge, on behalf of themselves and others similarly situated vs. Laurin Maritime (America) Inc., Whitefin Shipping Co. Limited, D.R.D. Towing Company, LLC, American Commercial Lines, Inc. and the New Orleans-Baton Rouge Steamship Pilots Association, Case No. 08-4007, filed on July 24, 2008; and Alvin McBride, on behalf of himself and all others similarly situated v. Laurin Maritime (America) Inc.; Whitefin Shipping Co. Ltd.; D.R.D. Towing Co. LLC; American Commercial Lines Inc.; The New Orleans-Baton Rouge Steamship Pilots Association, Case No. 09-cv-04494 B, filed on July 24, 2009. The McBride v. Laurin Maritime, et al. action has been dismissed with prejudice because it was not filed prior to the deadline set by the Court. The claims in the Class Action Lawsuits stem from the incident on July 23, 2008, involving one of ACLLLCs tank barges that was being towed by DRD Towing Company L.L.C. (DRD), an independent towing contractor. The tank barge was involved in a collision with the motor vessel Tintomara, operated by Laurin Maritime, at Mile Marker 97 of the Mississippi River in the New Orleans area. The tank barge was carrying approximately 9,900 barrels of #6 oil, of which approximately two-thirds was released. The tank barge was damaged in the collision and partially sunk. There was no damage to the towboat. The Tintomara incurred minor damage. The Class Action Lawsuits include various allegations of adverse health and psychological damages, disruption of business operations, destruction and loss of use of natural resources, and seek unspecified economic, compensatory and punitive damages for claims of negligence, trespass and nuisance. The Class Action Lawsuits were stayed pending the outcome of the two actions filed in the United States District Court for the Eastern District of Louisiana seeking exoneration from, or limitation of, liability related to the incident as discussed in more detail below. All claims in the class actions have been settled with payment to be made from funds on deposit with the court in the IINA interpleader, mentioned below. IINA is
26
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DRDs primary insurer. The settlement is agreed to by all parties and we are awaiting final approval from the court and a dismissal of all lawsuits against all parties, including our company, with prejudice. Claims under OPA 90 were dismissed without prejudice. There is a separate administrative process for making a claim under OPA 90 that must be followed prior to litigation. We are processing OPA 90 claims properly presented, documented and recoverable. We have also received numerous claims for personal injury, property damage and various economic damages, including notification by the National Pollution Funds Center of claims it has received. Additional lawsuits may be filed and claims submitted. The claims that remain for personal injury are by the three DRD crewmen on the vessel at the time of the incident. Two crew members have agreed to a settlement of their claims to be paid from the funds on deposit in the interpleader action mentioned below. We are in early discussions with the Natural Resource Damage Assessment Group, consisting of various State and Federal agencies, regarding the scope of environmental damage that may have been caused by the incident. Recently Buras Marina filed suit in the Eastern District of Louisiana in Case No. 09-4464 against the Company seeking payment for rental cost of its marina for cleanup operations. ACL and ACLLLC have also been named as defendants in the following interpleader action brought by DRDs primary insurer IINA seeking court approval as to the disbursement of the funds: Indemnity Insurance Company of North America v. DRD Towing Company, LLC; DRD Towing Group, LLC; American Commercial Lines, LLC; American Commercial Lines, Inc.; Waits Emmet & Popp, LLC, Daigle, Fisse & Kessenich; Stephen Marshall Gabarick; Bernard Attridge; Austin Sicard; Lamont L. Murphy, individually and on behalf of Murphy Dredging; Deep Delta Distributors, Inc.; David Cvitanovich; Kelly Clark; Timothy Clark, individually and on behalf of Taylor Clark, Bradley Barrosse; Tricia Barrosse; Lynn M. Alfonso, Sr.; George C. McGee; Sherral Irvin; Jefferson Magee; and Acy J. Cooper, Jr., United States District Court, Eastern District of Louisiana, Civil Action 08-4156, Section I-5, filed on August 11, 2008. DRDs excess insurers, IINA and Houston Casualty Company intervened into this action and deposited $9,000 into the Courts registry. ACLLLC has filed two actions in the United States District Court for the Eastern District of Louisiana seeking exoneration from or limitation of liability relating to the foregoing incident as provided for in Rule F of the Supplemental Rules for Certain Admiralty and Maritime Claims and in 46 U.S.C. sections 30501, 30505 and 30511. We have also filed a declaratory judgment action against DRD seeking to have the contracts between them declared void ab initio. Trial has been set for August of 2011 and discovery has begun. We participated in the U.S. Coast Guard investigation of the matter and participated in the hearings which have concluded. A finding has not yet been announced. We have also made demand on DRD (including its insurers as an additional insured) and Laurin Maritime for reimbursement of cleanup costs, defense and indemnification. However, there is no assurance that any other party that may be found responsible for the accident will have the insurance or financial resources available to provide such defense and indemnification. We have various insurance policies covering pollution, property, marine and general liability. While the cost of cleanup operations and other potential liabilities are significant, we believe our company has satisfactory insurance coverage and other legal remedies to cover substantially all of the cost.
At December 31, 2010, approximately 625 employees of the Companys manufacturing segment were represented by a labor union under a contract that expires in April 2013.
At December 31, 2010, approximately 20 positions at ACL Transportation Services LLCs terminal operations in St. Louis, Missouri, are represented by the International Union of United Mine Workers of America, District 12-Local 2452 (UMW), under a collective bargaining agreement that expired March 14, 2011, after a short extension for negotiations. We have unilaterally implemented new contract terms, mostly terms agreed with the UMW, and the employees continue to work without interruption.
Although we believe that our relations with our employees and with the recognized labor unions are generally good, we cannot assure that we will be able to reach agreement on renewal terms of these contracts or that we will not be subject to work stoppages, other labor disruption or that we will be able to pass on increased costs to our customers in the future.
NOTE 9. BUSINESS SEGMENTS
CBL has two significant reportable business segments: transportation and manufacturing. The caption All other segments currently consists of our services company, which is much smaller than either the transportation or manufacturing segment. ACLs transportation segment includes barge transportation operations and fleeting facilities that provide fleeting, shifting, cleaning and repair services at various locations along the Inland Waterways. The manufacturing segment constructs marine equipment for external customers as well as for CBLs transportation segment. All of the Companys international operations, civil construction and environmental consulting services are excluded from segment disclosures due to the reclassification of those operations to discontinued operations (see Note 13).
Management evaluates performance based on segment earnings, which is defined as operating income. The accounting policies of the reportable segments are consistent with those described in the summary of significant accounting policies. Intercompany sales are transferred at the lower of cost or fair market value and intersegment profit is eliminated upon consolidation.
27
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reportable segments are business units that offer different products or services. The reportable segments are managed separately because they provide distinct products and services to internal and external customers.
Reportable Segments | All Other | Intersegment | ||||||||||||||||||
Transportation | Manufacturing | Segments(1) | Eliminations | Total | ||||||||||||||||
Predecessor Companys |
||||||||||||||||||||
January 1, 2010 to December 21, 2010 |
||||||||||||||||||||
Total revenue |
$ | 613,939 | $ | 117,641 | $ | 7,688 | $ | (33,461 | ) | $ | 705,807 | |||||||||
Intersegment revenues |
874 | 32,587 | | (33,461 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue from external customers |
613,065 | 85,054 | 7,688 | | 705,807 | |||||||||||||||
Operating expense |
||||||||||||||||||||
Materials, supplies and other |
212,567 | | | | 212,567 | |||||||||||||||
Rent |
20,222 | | | | 20,222 | |||||||||||||||
Labor and fringe benefits |
122,462 | | | | 122,462 | |||||||||||||||
Fuel |
117,372 | | | | 117,372 | |||||||||||||||
Depreciation and amortization |
41,737 | | | | 41,737 | |||||||||||||||
Taxes, other than income taxes |
11,741 | | | | 11,741 | |||||||||||||||
Gain on Disposition of Equipment |
(9,021 | ) | | | | (9,021 | ) | |||||||||||||
Cost of goods sold |
| 82,504 | 3,048 | | 85,552 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cost of sales |
517,080 | 82,504 | 3,048 | | 602,632 | |||||||||||||||
Selling, general & administrative |
40,882 | 2,667 | 4,325 | | 47,874 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
557,962 | 85,171 | 7,373 | | 650,506 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
$ | 55,103 | $ | (117 | ) | $ | 315 | $ | | $ | 55,301 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Property additions |
$ | 56,276 | $ | 1,486 | $ | 36 | $ | | $ | 57,798 |
28
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reportable Segments | All Other | Intersegment | ||||||||||||||||||
Transportation | Manufacturing | Segments(1) | Eliminations | Total | ||||||||||||||||
Successor Company |
||||||||||||||||||||
December 22, 2010 to December 31, 2010 |
||||||||||||||||||||
Total revenue |
$ | 19,652 | $ | 4,986 | $ | 177 | $ | (50 | ) | $ | 24,765 | |||||||||
Intersegment revenues |
50 | | | (50 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue from external customers |
19,602 | 4,986 | 177 | | 24,765 | |||||||||||||||
Operating expense |
||||||||||||||||||||
Materials, supplies and other |
6,311 | | | | 6,311 | |||||||||||||||
Rent |
570 | | | | 570 | |||||||||||||||
Labor and fringe benefits |
3,102 | | | | 3,102 | |||||||||||||||
Fuel |
3,986 | | | | 3,986 | |||||||||||||||
Depreciation and amortization |
2,532 | | | | 2,532 | |||||||||||||||
Taxes, other than income taxes |
330 | | | | 330 | |||||||||||||||
Gain on Disposition of Equipment |
| | | | | |||||||||||||||
Cost of goods sold |
| 4,838 | 90 | | 4,928 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cost of sales |
16,831 | 4,838 | 90 | | 21,759 | |||||||||||||||
Selling, general & administrative |
8,029 | 65 | 133 | | 8,227 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
24,860 | 4,903 | 223 | | 29,986 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
$ | (5,258 | ) | $ | 83 | $ | (46 | ) | $ | | $ | (5,221 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Segment assets |
$ | 1,159,011 | $ | 87,707 | $ | 12,553 | $ | | $ | 1,259,271 | ||||||||||
Goodwill |
$ | 20,470 | $ | | $ | | $ | | $ | 20,470 | ||||||||||
Property additions |
$ | | $ | | $ | | $ | | $ | |
29
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reportable Segments | All Other | Intersegment | ||||||||||||||||||
Transportation | Manufacturing | Segments(1) | Eliminations | Total | ||||||||||||||||
Predecessor Company |
||||||||||||||||||||
Year ended December 31, 2009 |
||||||||||||||||||||
Total revenue |
$ | 621,611 | $ | 239,885 | $ | 9,715 | $ | (25,184 | ) | $ | 846,027 | |||||||||
Intersegment revenues |
751 | 24,339 | 94 | (25,184 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue from external customers |
620,860 | 215,546 | 9,621 | | 846,027 | |||||||||||||||
Operating expense |
||||||||||||||||||||
Materials, supplies and other |
225,647 | | | | 225,647 | |||||||||||||||
Rent |
21,715 | | | | 21,715 | |||||||||||||||
Labor and fringe benefits |
115,998 | | | | 115,998 | |||||||||||||||
Fuel |
122,752 | | | | 122,752 | |||||||||||||||
Depreciation and amortization |
48,615 | | | | 48,615 | |||||||||||||||
Taxes, other than income taxes |
14,072 | | | | 14,072 | |||||||||||||||
Gain on Disposition of Equipment |
(20,282 | ) | | | | (20,282 | ) | |||||||||||||
Cost of goods sold |
| 189,565 | 3,707 | | 193,272 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cost of sales |
528,517 | 189,565 | 3,707 | | 721,789 | |||||||||||||||
Selling, general & administrative |
60,740 | 4,579 | 4,763 | | 70,082 | |||||||||||||||
Goodwill Impairment |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
589,257 | 194,144 | 8,470 | | 791,871 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
$ | 31,603 | $ | 21,402 | $ | 1,151 | $ | | $ | 54,156 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Segment assets |
$ | 652,831 | $ | 67,129 | $ | 13,029 | $ | | $ | 732,989 | ||||||||||
Goodwill |
$ | 2,100 | $ | | $ | 3,898 | $ | | $ | 5,998 | ||||||||||
Property additions |
$ | 26,968 | $ | 6,141 | $ | 117 | $ | | $ | 33,226 |
30
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reportable Segments | All Other | Intersegment | ||||||||||||||||||
Transportation | Manufacturing | Segments(1) | Eliminations | Total | ||||||||||||||||
Predecessor Company |
||||||||||||||||||||
Year ended December 31, 2008 |
||||||||||||||||||||
Total revenue |
$ | 897,272 | $ | 284,274 | $ | 8,617 | $ | (30,243 | ) | $ | 1,159,920 | |||||||||
Intersegment revenues |
| 29,480 | 763 | (30,243 | ) | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenue from external customers |
897,272 | 254,794 | 7,854 | | 1,159,920 | |||||||||||||||
Operating expense |
||||||||||||||||||||
Materials, supplies and other |
304,858 | | | | 304,858 | |||||||||||||||
Rent |
23,345 | | | | 23,345 | |||||||||||||||
Labor and fringe benefits |
118,737 | | | | 118,737 | |||||||||||||||
Fuel |
227,489 | | | | 227,489 | |||||||||||||||
Depreciation and amortization |
47,255 | | | | 47,255 | |||||||||||||||
Taxes, other than income taxes |
14,855 | | | | 14,855 | |||||||||||||||
Gain on Disposition of Equipment |
(954 | ) | | | | (954 | ) | |||||||||||||
Cost of goods sold |
| 242,309 | 2,080 | | 244,389 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total cost of sales |
735,585 | 242,309 | 2,080 | | 979,974 | |||||||||||||||
Selling, general & administrative |
69,493 | 2,798 | 5,245 | | 77,536 | |||||||||||||||
Goodwill Impairment |
| | 855 | 855 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
805,078 | 245,107 | 8,180 | | 1,058,365 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
$ | 92,194 | $ | 9,687 | $ | (326 | ) | $ | | $ | 101,555 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Segment assets |
$ | 700,174 | $ | 101,877 | $ | 37,200 | $ | | $ | 839,251 | ||||||||||
Goodwill |
$ | 2,100 | $ | | $ | 3,897 | $ | | $ | 5,997 | ||||||||||
Property additions |
$ | 89,938 | $ | 7,441 | $ | 513 | $ | | $ | 97,892 |
(1) | Financial data for segments below the reporting thresholds is attributable to a segment that provides architectural design services that was acquired in the fourth quarter 2007. |
NOTE 10. QUARTERLY DATA (UNAUDITED)
All data in the following table reflects the reclassification of Summit to discontinued operations. See Note 13.
2010 | ||||||||||||||||||||||||
Predecessor Company | Successor Company |
|||||||||||||||||||||||
Oct. 1 - | Dec. 22 - | |||||||||||||||||||||||
1st | 2nd | 3rd | Dec. 21 | Dec. 31 | Total | |||||||||||||||||||
Operating Revenue |
$ | 148,296 | $ | 164,301 | $ | 207,286 | $ | 185,924 | $ | 24,765 | $ | 730,572 | ||||||||||||
Gross Profit |
14,712 | 17,593 | 32,271 | 38,598 | 3,007 | 106,181 | ||||||||||||||||||
Operating Income |
3,092 | 7,029 | 20,282 | 24,898 | (5,221 | ) | 50,080 | |||||||||||||||||
Discontinued Operations |
| (2 | ) | | 302 | | 300 | |||||||||||||||||
(Loss) Income From Continuing Operations |
(3,480 | ) | (1,363 | ) | 5,065 | 3,228 | (6,635 | ) | (3,185 | ) |
31
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Predecessor Company 2009 |
||||||||||||||||||||
1st | 2nd | 3rd | 4th | Total | ||||||||||||||||
Operating Revenue |
$ | 192,705 | $ | 218,523 | $ | 207,888 | $ | 226,911 | $ | 846,027 | ||||||||||
Gross Profit |
22,203 | 23,315 | 32,357 | 46,363 | 124,238 | |||||||||||||||
Operating Income |
890 | 7,336 | 14,057 | 31,873 | 54,156 | |||||||||||||||
Discontinued Operations |
(984 | ) | (831 | ) | (3,404 | ) | (4,811 | ) | (10,030 | ) | ||||||||||
(Loss) Income from Continuing Operations |
(4,474 | ) | (2,937 | ) | (8,768 | ) | 14,151 | (2,028 | ) |
CBLs business is seasonal, and its quarterly revenues and profits historically are lower during the first and second fiscal quarters of the year (January through June) and higher during the third and fourth fiscal quarters (July through December) due to the North American grain harvest and seasonal weather patterns.
NOTE 11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) as of December 31, 2010, and December 31, 2009, consists of the following:
2010 | 2009 | |||||||||||
Minimum pension liability, net of tax provision (benefit) of $0 and ($2,847), respectively |
$ | | $ | (4,748 | ) | |||||||
Minimum post retirement liability, net of tax provision of $0 and $1,745, respectively |
| 2,909 | ||||||||||
Gain on fuel hedge, net of tax provision of $64 and $2,529, respectively |
104 | 2,250 | ||||||||||
|
|
|
|
|||||||||
$ | 104 | $ | 411 | |||||||||
|
|
|
|
NOTE 12. SHARE-BASED COMPENSATION
Since January 2005 share-based compensation has been granted to the Companys employees and, formerly, to the directors of the Companys parent, ACL, from time to time. The Company had no surviving, outstanding share-based compensation agreements with employees or directors prior to that date. Prior to 2009 share-based awards were made to essentially all employees. Since 2009 the Company has restructured its compensation plans and share-based awards have been granted to a significantly smaller group of salaried employees. ACL had reserved 750,000 ACLI shares (equivalent to approximately 54,000 shares of Finn Holding) for grants to employees and directors under the American Commercial Lines Inc. 2008 Omnibus Incentive Plan (the Plan) which in 2008 replaced the American Commercial Lines Inc. Equity Award Plan for Employees, Officers and Directors and the ACL 2005 Stock Incentive Plan. According to the terms of the Plan, forfeited share awards and expired stock options become available for future grants.
For all share-based compensation, as employees and directors render service over the vesting periods, expense is recorded to the same line items used for cash compensation. Generally, this expense is for the straight-line amortization of the grant date fair market value adjusted for expected forfeitures. Other capital is correspondingly increased as the compensation is recorded. Grant date fair market value for all non-option share-based compensation is the closing market value on the date of grant. Adjustments to estimated forfeiture rates are made when actual results are known, generally when awards are fully earned. Adjustments to estimated forfeitures for awards not fully vested occur when significant changes in turnover rates become evident.
Effective as of the date of the Acquisition on December 21, 2010, all awards that had been granted to non-executive employees and to the former ACL board members vested and were paid out consistent with certain provisions in the Plans. The payment of the intrinsic value of these awards totaling $14,284 was a part of the consideration paid for the Acquisition and included certain previously vested executive shares. The remaining fair market value at the date of grant for these awards totaling $3,179 was expensed immediately prior to the Acquisition date. Awards previously granted to Company executives under the Plan were assumed by Finn and remained outstanding through December 31, 2010 with no changes in the terms and conditions, except for adjustment to denomination in Finn shares and conversion to time-based vesting as to the performance restricted units. At December 31, 2010, 8,799 shares were available under the Plan for future awards.
32
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During 2010, no share-based compensation awards were made after March 31, 2010. During the quarter ended March 31, 2010 the following share-based awards were issued to directors and employees under the ACLs 2008 Omnibus Stock Incentive Plan (Stock Incentive Plan): stock options for 110,451 ACL shares (approximately 7,924 Finn Holding shares) with an average strike price of $22.01 ($306.81 per option post-conversion), 121,476 restricted stock units (approximately 8,715 post-conversion shares) and 28,413 performance shares (approximately 2,038 post-conversion shares). The terms of all of the awards were essentially the same as prior grants under the Stock Incentive Plan and the American Commercial Lines Equity Award Plan for Employees, Officers and Directors. The fair value of the restricted stock units and performance shares was $22.01 ($306.81 adjusted for the conversion), the closing price on the date of grant. Stock option grant date fair values are determined at the dates of grant using a Black-Scholes option pricing model, a closed-form fair value model, based on market prices at the date of grant. The dividend yield, weighted average risk-free interest rate, expected term and volatility were respectively 0.0%, 2.7%, 6 years and 175.7% for the majority of the issued options. Certain options issued to the Board of Directors had a slightly shorter expected term. Options granted had a computed average fair value of $14.15 per option ($197.24 post conversion).
The Company recorded total stock-based employee compensation of $7,464 (including the acceleration of expense for non-executive outstanding awards discussed above), $8,165 for 2009 and $9,284 for 2008. The total income tax benefit recognized was $2,817, $2,952 and $3,376 for 2010, 2009 and 2008, respectively.
The following table contains information as to the number and related expense and tax benefit associated with remaining share-based compensation at December 31, 2010.
Non-qualified stock options |
Restricted stock units |
Performance restricted stock units |
||||||||||
Number outstanding |
14,074.5 | 6,167.0 | 5,811.0 | |||||||||
Weighted average exercise price |
$ | 213.03 | ||||||||||
Previously recognized compensation cost |
$ | 755 | $ | 688 | $ | 641 | ||||||
Income tax benefit |
$ | 283 | $ | 258 | $ | 240 | ||||||
Unrecognized compensation cost |
$ | 1,170 | $ | 669 | $ | 648 | ||||||
Weighted average remaining life for compensation |
1.6 years | 1.5 years | 1.5 years |
The Company has no vested options at December 31, 2010. The weighted average grant date fair value of the 14,074.5 outstanding unvested options at December 31, 2010 was $9.81 ($136.81 adjusted for the conversion). Remaining compensation to be expensed related to these options was $1,170 at December 31, 2010. The weighted average strike price of unvested options was $15.28 ($213.03 adjusted for the conversion). The weighted average remaining life for unvested compensation is slightly less than two years.
The general characteristics of issued types of share-based awards granted under the Plans through December 31, 2010, are as follows.
Stock OptionsStock options granted to management employees generally vest over three years in equal annual installments. Stock options granted to board members generally cliff vested in six months. All options issued through December 31, 2010, generally expire ten years from the date of grant. Stock option grant date fair values are determined at the date of grant using a Black-Scholes option pricing model, a closed-form fair value model, based on market prices at the date of grant. Options outstanding at December 31, 2010, had a remaining weighted average contractual life of approximately 8.6 years.
Restricted Stock Units Restricted stock units granted to non-officers generally vest over three years in equal annual installments, while a less significant amount of the grants cliff vest twelve months from date of grant. Restricted stock units granted to officers cliff vest thirty-six months from the date of issuance.
Performance Share Units Each year since 2006 performance share units have been awarded to certain senior management personnel. Each grant of units contains specific cumulative three-year-term performance-based criteria which must be met as a condition of award vesting. At the end of each period for which these awards represent potentially dilutive securities, the cumulative performance against the criteria of each outstanding award is separately evaluated based on cumulative performance applicable to
33
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
each award. The probability of each awards vesting then is used to determine if the grant should be included in the computation of diluted earnings per share. Awards prior to 2009 were either fully vested or fully forfeited based on achievement of that awards cumulative target. Prior to the 2009 awards the Compensation Committee of the Board of Directors revised the conditions for vesting, allowing for graded vesting of grants for 2009 and beyond. The new conditions of vesting provide that if performance against the established three-year target is below an 80% achievement level none of the units vest, with 50% vesting at 80% achievement, 75% vesting at 100% achievement and 100% vesting at 120% achievement of the three-year performance criteria. The 2006 awards were forfeited at the conclusion of the performance period in 2009. As of the Acquisition date, performance share units were converted to restricted stock units with the original vesting dates.
NOTE 13. DISCONTINUED OPERATIONS
During the third quarter of 2009 an impairment charge of $4,400 related to certain intangible assets of Summit was recorded and is included in cost of sales in the table below. On November 30, 2009, CBL sold its investment in Summit for $2,750 cash, a $250 note receivable and certain other receivables. The sale of Summit and the operating results of Summit have been reported as Discontinued Operations net of applicable taxes for all periods presented.
During 2006, in separate transactions, the Company sold its Venezuelan operations and the operating assets of its operations in the Dominican Republic. These transactions resulted in cessation of all international operations of the Company. For all periods presented, any continuing charges or credits related to the international operations have been reported as Discontinued Operations net of applicable taxes.
The impact of discontinued operations on earnings per share in all periods presented is disclosed on the consolidated statements of operations. Discontinued Operations, net of tax consist of the following. (No activity occurred in the ten days ended December 31, 2010.)
2010 | 2009 | 2008 | ||||||||||
Revenue |
$ | | $ | 23,647 | $ | 37,521 | ||||||
Cost of Sales |
| 27,816 | 32,672 | |||||||||
Selling, General and Administrative |
(287 | ) | 3,986 | 4,371 | ||||||||
Goodwill Impairment |
| | 269 | |||||||||
Other (Income) Expense |
(13 | ) | 33 | (807 | ) | |||||||
Loss on Sale of Summit |
| 7,453 | | |||||||||
|
|
|
|
|
|
|||||||
Income (Loss) from Discontinued Operations Before Income Tax |
300 | (15,641 | ) | 1,016 | ||||||||
Income Tax (Benefit) |
| (5,611 | ) | 388 | ||||||||
|
|
|
|
|
|
|||||||
Income (Loss) from Discontinued Operations |
$ | 300 | $ | (10,030 | ) | $ | 628 | |||||
|
|
|
|
|
|
Note: No Predecessor/Successor breakdown provided for this table due to insignificance.
NOTE 14. ACQUISITIONS, DISPOSITIONS AND IMPAIRMENT
Finn Holding Corporation (owned primarily by certain affiliates of Platinum Equity, LLC) Acquisition of ACL
On December 21, 2010, Finn Holding Corporation through the merger of Finn Merger Corporation, a wholly-owned subsidiary of Finn Intermediate Holding Corporation, subsequently renamed ACL I Corporation, (both of whom had no other business activity outside the acquisition) with ACL, completed the acquisition of all of the outstanding equity of ACL, which had its common shares publicly traded since October 7, 2005. ACL is the direct parent of the Company. The purchase price has been preliminarily (pending finalization of valuation of certain acquired tangible and intangible assets and liabilities assessment) allocated and pushed down to the Company. The impacts of the purchase accounting fair valuations are reflected in earnings for the ten-day period ended December 31, 2010. The ten-day period after the Acquisition has been bifurcated in these financial statements and indicated by the heading Successor Company.
34
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The funding of the purchase was made by cash of $460,000 invested in ACL I. $317,200 was paid to the transfer agent to purchase all outstanding shares of the Company not held by affiliates of Sam Zell, the largest ACL shareholder. The purchase price was $33.00 per share for the 9,612,110 outstanding shares. $101,077 was also paid to the Zell affiliates for their 3,234,474 shares bringing the total cash invested to $418,277. As further discussed in Note 12 certain participants in the share-based compensation plans of ACL (specifically all non-executive participants, including former board members) were paid a total of $14,284 representing the intrinsic value of their vested and unvested shares at the acquisition date computed by multiplying the number of restricted stock units and performance restricted stock units by $33.00 per unit, with in the money non-qualified stock options valued by $33.00 minus the strike prices of the underlying options. This payment was funded by the Company and represents a receivable from Finn on the Company balance sheet at the acquisition date. This brought the total consideration paid to $432,561. In addition ACL I assumed the concurrently funded obligations under the Companys Existing Credit Facility in the amount of $169,204 including obligation for the payment of $15,170 in debt costs which were paid out of the initial draw down on the Existing Credit Facility. These debt costs were capitalized and will be amortized to interest expense on the effective interest method over the expected life of the Existing Credit Facility. All expenses associated with the transaction ($6,331 in the predecessor period and $7,688 in the successor period in selling, general and administrative expenses) have been expensed by the parties who incurred the expenses. As further discussed in Note 2, the Company had previously issued $200,000 in 2017 maturity, 12.5% face rate senior notes which remain in place. At the acquisition date these publicly traded senior notes were trading at 117.5, yielding a fair market value of $235,000 on the acquisition date.
The summation of the consideration paid is in the following table.
Paid to Zell affilitates |
$ | 101,077 | ||
Paid to remaining shareholders |
317,200 | |||
Payments to Share-based comp holders |
14,284 | |||
Assumed Credit Facility |
169,204 | |||
Fair value of the 2017 Senior Notes |
235,000 | |||
|
|
|||
Purchase price |
$ | 836,765 | ||
|
|
Allocation of the Purchase Price
The purchase price has been preliminarily allocated as indicated in the following table based primarily on third party appraisal of the major assets and liabilities. These adjustments to fair value are based on Level 3 inputs as to their fair values. The amounts allocated to goodwill consist primarily of the value of the Companys assembled workforces in its transportation and manufacturing segments, but has not yet been allocated to those segments at December 31, 2010. The amount of goodwill is not tax deductible.
35
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash and cash equivalents |
$ | 22,468 | ||
Trade receivables acquired at fair value |
90,693 | |||
Other working capital, net |
(29,958 | ) | ||
Land |
20,002 | |||
Buildings/Land Improvements |
42,187 | |||
Boats |
294,534 | |||
Barges |
543,403 | |||
Construction-in-progress |
13,110 | |||
Other long-lived tangible assets |
67,780 | |||
Favorable charter contracts |
25,761 | |||
Other long term assets |
23,841 | |||
Equity Investments |
5,725 | |||
Jeffboat tradename and intangibles |
4,500 | |||
Unfavorable contracts |
(61,300 | ) | ||
Multi-employer pension liability |
(3,497 | ) | ||
Pension and post retirement |
(35,102 | ) | ||
Net deferred tax liability |
(207,852 | ) | ||
Goodwill |
20,470 | |||
|
|
|||
Total |
$ | 836,765 | ||
|
|
36
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Dispositions and Impairments
In November 2009 the Company disposed of its interest in Summit. Due to the sale all results of operations are reflected in discontinued operations. See Note 1 and Note 13. Summit provided environmental and civil construction services.
During the second quarter 2008, seven boats were identified as held for sale. Based on market conditions at that time five of the seven boats had a current market value less than their respective carrying value and an impairment charge of $430 was recorded in transportation segment cost of sales in the second quarter 2008 to reflect the reduction of their carrying value to estimated fair value. During the third quarter of 2008, five of the boats were sold at a gain of $782 which was included in the transportation segment cost of sales. Nine additional boats were identified as held for sale in the fourth quarter 2008 and resulted in two sales at a net gain of $2,112 in the first quarter of 2009. In the second quarter 2009 one boat was returned to active service. During the third quarter of 2009, the Company continued to assess its ongoing boat power needs and as a result returned four of nine boats previously classified as held for sale to active service, placed ten additional boats into held for sale status and sold three boats which had not previously been held for sale. The sale of the three boats, impairment charges related to ten boats which were moved to held for sale status and other asset disposal activity resulted in a net gain of $15,276 which has been reflected in transportation cost of sales in the consolidated statement of operations. During the fourth quarter 2009, four of the boats held for sale were sold at a small gain. Also during the quarter two additional boats were identified as surplus and placed in held for sale status, bringing to thirteen the number of boats which were being actively marketed. In the first quarter 2010 twelve boats were sold and one returned to service. Three boats were placed into held for sale in the second quarter 2010, which are currently being actively marketed.
Number of | ||||||||
Amount | Boats | |||||||
Balance at January 1, 2009 |
$ | 4,577 | 12 | |||||
1st Quarter 2009 Sales |
(908 | ) | (2 | ) | ||||
2nd Quarter 2009 Returned to Service |
(325 | ) | (1 | ) | ||||
3rd Quarter 2009 Additions to Held for Sale |
752 | 10 | ||||||
3rd Quarter 2009 Returned to Service |
(1,874 | ) | (4 | ) | ||||
4th Quarter 2009 Additions to Held for Sale |
1,726 | 2 | ||||||
4th Quarter 2009 Sales |
(417 | ) | (4 | ) | ||||
|
|
|
|
|||||
Balance at December 31, 2009 |
3,531 | 13 | ||||||
1st Quarter 2010 Returned to Service |
(693 | ) | (1 | ) | ||||
1st Quarter 2010 Sales |
(2,838 | ) | (12 | ) | ||||
2nd Quarter 2010 Additions to Held for Sale |
1,703 | 3 | ||||||
4th Quarter 2010 Purchase Accounting |
430 | | ||||||
|
|
|
|
|||||
Balance at December 31, 2010 |
$ | 2,133 | 3 | |||||
|
|
|
|
Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets. Where impairment is indicated the assets are evaluated for sale or other disposition, and their carrying amount is reduced to fair value based on discounted net cash flows or other estimates of fair value. The recoverability of indefinite-lived intangible assets (i.e. goodwill) is evaluated annually, or more frequently if impairment indicators exist, on a reporting unit basis by comparing the estimated fair value to its carrying value.
Due primarily to the economic recessions negative impact on the operating results and cash flows of the Companys EBDG and Summit reporting units, the Company completed an evaluation of remaining indefinite lived intangible assets and of the long lived assets of these reporting units during the fourth quarter 2008 and third quarter 2009. Goodwill impairment losses of $1,124 were due primarily to increases in the Companys cost of capital which lowered the discounted cash flow models, resulting in an excess of carrying values over the estimated fair value of the entities at December 31, 2008. The losses were recorded in the fourth quarter 2008 in the amount of $269 related to Summit and $855 related to EBDG. Underlying expected cash flows of the entities had not changed significantly from the acquisition date expectations. As a result of the third quarter 2009 evaluation, all remaining indefinite
37
COMMERCIAL BARGE LINE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
lived intangibles totaling $1,980 on the Summit reporting unit were written off. Additionally, due to a shortfall of the estimated undiscounted cash flows to the recorded asset values, an impairment charge of $2,420 was recorded against certain long lived intangible assets. These two impairment charges, which represented the full remaining value of the Summit indefinite lived intangible and the majority of other intangible assets, totaled $4,400 in the third quarter 2009. This amount and the 2008 Summit goodwill impairment amount are reflected in Discontinued Operations as a result of the subsequent sale of Summit in November 2009. The assets of EBDG were not deemed to be impaired based on the valuation performed in the fourth quarter of 2010.
NOTE 15. EXIT ACTIVITIES
Since 2008 CBL has executed several cost reduction initiatives. Through reduction in force actions and non-replacement of terminating employees, the Companys land-based salaried headcount was reduced by more than 23% during 2009. Charges of $3,194 and $1,935 were recorded as a component of selling, general and administrative expense in 2009 and 2008, respectively, related to these actions. Affected employees received their separation pay in equal bi-weekly installments. The number of weeks paid to each employee was determined based on tenure with the Company. At December 31, 2009, the remaining liability was insignificant. During 2010 the Company continued to selectively consolidate and eliminate positions resulting in $467 in current year severance expenses.
In March 2009 the Company consolidated the majority of the activities that had been performed at the ACL sales office in Houston, Texas to the Jeffersonville, Indiana headquarters office. The consolidation resulted in a charge of $3,655 representing the expected non-cash write-off of leasehold improvements and the estimated net lease exposure related to the former facility. These charges are recorded in the transportation segments selling, general and administrative expense in the consolidated statements of operations for the year ended December 31, 2009.
Date | Amount | |||||||
Houston rent accrual at March 31, 2009 |
$ | 976 | ||||||
Initial office closure estimate |
1Q 2009 | 2,130 | ||||||
Additional Houston office closure accrual |
2Q 2009 | 175 | ||||||
Additional Houston office closure accrual |
3Q 2009 | 350 | ||||||
Additional Houston office closure accrual |
4Q 2009 | 1,000 | ||||||
Rent payments (April December 2009) |
(522 | ) | ||||||
|
|
|||||||
Balance at December 31, 2009 |
4,109 | |||||||
Additional Houston office closure accrual |
2Q 2010 | 133 | ||||||
Write-off Houston fixed assets and moving expenses |
2Q 2010 | (2,044 | ) | |||||
Houston office lease termination costs |
3Q 2010 | (1,624 | ) | |||||
Asset sales |
3Q 2010 | 55 | ||||||
Rent payments (January October 2010) |
(629 | ) | ||||||
|
|
|||||||
Balance at December 31, 2010 |
$ | | ||||||
|
|
NOTE 16. SUBSEQUENT EVENTS
On February 15, 2011 ACLs parent corporation, ACL I, completed a private placement of $250,000 in aggregate principal amount of 10.625%/11.375% Senior Payment in Kind (PIK) Toggle Notes due 2016. Interest on the Senior PIK Toggle Notes the PIK Notes) will accrue at a rate of 10.625% with respect to interest paid in cash and a rate of 11.375% with respect to interest paid by issuing additional Notes. Selection of the interest payment method is solely a decision of ACL I. The net of original issue discount proceeds of the PIK Notes offering were used primarily to pay a special dividend to the Companys stockholder to redeem equity advanced in connection with the acquisition of the Company by certain affiliates of Platinum Equity, LLC and to pay certain costs and expenses related to the Notes Offering. Neither ACL nor ACL I conducts activities outside the Company. These notes are unsecured and not guaranteed by the Company.
The PIK Notes are not registered under the Securities Act of 1933, as amended and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The Notes were sold only to qualified institutional buyers under Rule 144A and outside the United States in compliance with Regulation S under the Securities Act.
38
COMMERCIAL BARGE LINE COMPANY
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (Dollars in thousands)
Balance at | Charges | Additions to/ | Balance | |||||||||||||
Beginning | To | (Deductions) from | at End | |||||||||||||
of Period | Expense | Revenue (a) | of Period | |||||||||||||
December 31, 2010: |
$ | 6,183 | $ | | $ | (6,183 | ) | $ | | |||||||
Allowance for uncollectible accounts |
||||||||||||||||
December 21, 2010: |
$ | 5,182 | $ | 1,351 | $ | (350 | ) | $ | 6,183 | |||||||
Allowance for uncollectible accounts |
||||||||||||||||
December 31, 2009: |
$ | 1,150 | $ | 4,427 | $ | (395 | ) | $ | 5,182 | |||||||
Allowance for uncollectible accounts |
||||||||||||||||
December 31, 2008: |
$ | 1,218 | $ | 700 | $ | (768 | ) | $ | 1,150 | |||||||
Allowance for uncollectible accounts |
(a) | Write-off of uncollectible accounts receivable and a $6,183 purchase accounting adjustment in 2010. |
F-39
SIGNATURES
Pursuant to the requirements 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.
Commercial Barge Line Company
By: /s/ David J. Huls
David J. Huls
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: December 22, 2011