10-K/A 1 y63034a1e10vkza.txt AMENDMENT TO FORM 10-K -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 28, 2001 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 333-62227 --------------------- AMERICAN COMMERCIAL LINES LLC (Exact Name of Registrant as Specified in Its Charter) DELAWARE 52-2106600 (State or Other Jurisdiction (IRS Employer of Incorporation or Organization) Identification No.)

~~1701 EAST MARKET STREET JEFFERSONVILLE, INDIANA 47130 (Address of Principal Executive Offices) (Zip Code)~~

(812) 288-0100 (Registrant's Telephone Number, Including Area Code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days prior to the date of filing. NOT APPLICABLE. AS OF DECEMBER 28, 2001, THE REGISTRANT HAD 100 MEMBERSHIP INTERESTS OUTSTANDING. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PRELIMINARY NOTE TO 10-K/A American Commercial Lines LLC ("ACL") is amending certain portions of its Annual Report on Form 10-K for the fiscal year ended December 28, 2001 to restate Item 6 (Selected Financial Data), Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) and Item 8 (Financial Statements and Supplemental Data), each in its entirety. This restatement is being made to correct the accounting in 2001 and 2000 with respect to certain minority interest as more fully described in Note 12 to the financial statements. ITEM 6. SELECTED FINANCIAL DATA

--------------- (1) ACL acquired the barging operations of National Marine, Inc. in 1998 and purchased Peavey in 2000. The results of operations and cash flows of these companies have been included from the date of the respective acquisitions. (2) Includes $11,418 gain from the sale of Waterways Communication System LLC ("Watercom") in 2000. (3) ACL paid $734 for the early redemption premium on the Terminal Revenue bonds in 2000. ACL recorded extraordinary income of $1,885 in 2001 on the early retirement of $5,000 in Senior Notes. (4) ACL adopted American Institute of Certified Public Accountants Statement of Position 97-3 in the first quarter 1999, with a cumulative effect adjustment of $1,737 in non-cash expense for workers' compensa- 1 tion second injury funds. ACL adopted Financial Accounting Standards Board Statement No. 133 in 2001 with a cumulative effect adjustment of $490 in non-cash expense for an interest rate cap. (5) EBITDA, as that term is defined in the Credit Agreement, as amended, which can be found in Exhibits 10.1, 10.14, 10.15, 10.16, 10.17 and 10.18 to previous filings by ACL with the U.S. Securities and Exchange Commission (the "Commission"), represents earnings before interest, income taxes, depreciation, amortization and, in 2001, the addition of $7,139 deferred profit, $652 interest rate cap loss and $1,164 expenses related to re-capitalization and the subtraction of $1,886 gain from the sale of terminals and Omaha condemnation proceeds and $110 earnings from investment in T.T. Barge, and in 2000, the addition of $734 extraordinary loss, $3,688 deferred profit and $3,865 impairment loss on barges and the subtraction of $11,418 gain on sale of Watercom, and in 1998, the addition of $7,958 of non-recurring, non-cash compensation expense related to the Recapitalization. EBITDA is presented because management believes it is a widely accepted financial indicator used by certain investors and securities analysts to analyze and compare companies on the basis of operating performance. EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. ACL understands that while EBITDA is frequently used by securities analysts in the evaluation of companies, EBITDA, as used herein, is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. See the historical financial statements of ACL and the related notes thereto included elsewhere herein. 2 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with Item 6. "Selected Financial Data" and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K contains certain forward-looking statements about ACL's financial position and results of operations. These statements include words such as "believe," "expect," "anticipate," "intend," "estimate" or other similar words. Any statements that express or involve discussions as to expectations, beliefs or plans are not historical facts and involve known and unknown risks, uncertainties and other factors that may cause the actual results to materially differ from those considered by the forward-looking statements. Such factors include: - substantial leverage and ability to service debt; - changing market, labor, legal and regulatory conditions and trends in the barge and inland shipping industries; - general economic and business conditions, including a prolonged or substantial recession in the United States or certain international commodity markets such as the market for grain exports; and - annual worldwide weather conditions, particularly those affecting North and South America. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, actual results could differ from a projection or assumption in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties discussed under Item 1. "Business -- Risks Associated With Our Business" and elsewhere in this Annual Report on Form 10-K as well as in our other filings with the Securities and Exchange Commission. The forward-looking statements contained in this Annual Report on Form 10-K are made only as of the date hereof and ACL does not have or undertake any obligation to update or revise any forward-looking statements whether as a result of new information, subsequent events or otherwise, unless otherwise required by law. OVERVIEW ACL'S BUSINESS ACL is an integrated marine transportation and service company, providing barge transportation and ancillary services. ACL supports its barging operations by providing marine vessel design and construction along with inter-modal cargo transfer services to ACBL and third parties. ACBL is the leading provider of river barge transportation throughout the Inland Waterways. In addition, since expanding its barge transportation operations to South America in 1993, ACL International has become the leading provider of barge transportation services on the Orinoco River in Venezuela and, through UABL, on the Parana/Paraguay River system serving Argentina, Brazil, Paraguay, Uruguay and Bolivia. ACL International, also provides transportation services on the Higuamo River in the Dominican Republic. ACL derives its revenues primarily from the barge transportation of other bulk/steel, grain, coal and liquids in the United States and South America. While ACL's customer base has remained relatively stable and certain of its operations provide steady rate levels and profit margins, its results of operations can be impacted by a variety of external factors. These factors include fluctuations in rates for shipping grain, which in turn affect rates for shipping other dry cargoes, weather and river conditions and fluctuations in fuel prices. Although revenues from ACL's international operations are typically denominated in U.S. dollars, its results could be impacted by currency fluctuations. ACL seeks to enter into multi-year contracts at fixed prices (with inflation-indexed escalation and fuel adjustment clauses) with its customers. Approximately 60% of contracts in effect as of December 28, 2001 were for periods of greater than one year. ACBL's top 25 customers accounted for 55% of ACL's fiscal 2001 operating revenue. One customer, Cargill, Inc., accounted for more than 10% of ACL's fiscal 2001 consolidated operating revenue. 3 POTENTIAL ACQUISITION AND RECAPITALIZATION OF ACL As discussed in Item 1, ACL has been pursuing strategic financial restructuring alternatives and, on March 15, 2002, entered into a recapitalization agreement with Danielson regarding the acquisition and recapitalization of ACL by Danielson. ACL'S STRATEGY Subject to the return of more favorable market and operating conditions and the consummation of the Danielson Recapitalization, discussed in more detail in the "Liquidity and Capital Resources" section of this Item 7, ACL intends to continue to pursue a strategy of growth in its core business units. ACL's pursuit of growth through strategic acquisitions has created value through synergies and economies of scale that have enhanced ACL's long term results of operations. ACL's previous acquisitions have included: - SCNO Barge Lines, Inc. in 1988, Hines American Lines, Inc. in 1991, The Valley Line Company in 1992, Continental Grain's barging operations in 1996 and National Marine's barging operations in 1998; - On May 26, 2000 ACL entered into an agreement to purchase or lease substantially all of the long-term assets of Peavey. This added more than 900 covered hopper barges to ACL's existing fleet of inland marine barges; and - On October 24, 2000, an ACL 80% owned subsidiary, ACBLH entered into an agreement with Ultrapetrol to combine the inland river barge transportation divisions of ACBLH and Ultrapetrol which operate on the Parana/Paraguay River system in South America. ACBLH has a 50% ownership interest in the newly formed company, UABL. UABL operates 20 towboats and a combined fleet of 374 dry cargo and tank barges. UABL serves commodity shippers in Argentina, Bolivia, Brazil, Paraguay and Uruguay. UABL seeks to further consolidate its position in the Parana/Paraguay River system market through acquisitions, and intends to pursue this strategy in 2002. Focusing on its core business units, ACL has also divested certain assets in the past several years, including: - On September 6, 2000, ACL sold its 100% membership interest in Waterway Communications System LLC ("Watercom") to Mobex Network Services Company ("Mobex"). The sale of Watercom will not significantly affect ACL's expected future operating income or cash flow from operating activities. - On May 25, 2001, ACL entered into an agreement to sell seven of ACT's ten terminals, other than its coal transfer facility at St. Louis, Missouri and its tank storage facility at Memphis, Tennessee to GMS. An additional terminal site in Omaha, Nebraska was transferred on June 29, 2001. Subsequent to June 29, 2001, additional proceeds were received from the condemnation of Omaha Terminal. ACL'S FLEET The size of ACL's combined domestic and international fleet, including owned and leased barges, over the past three years is as follows: DOMESTIC AND INTERNATIONAL FLEET (NUMBER OF BARGES)

--------------- * In addition ACL operates 298 covered hoppers, 40 open hoppers and 36 tank barges through its participation in UABL. 4 The average age of ACL's domestic barge fleet is currently 18 years, compared with an industry average of 16 years. These barges have an expected life of approximately 25 to 30 years. In addition, at year end ACBL operated 187 towboats domestically, with an average age of 25 years. ACL International operates 129 barges, with an average age of 17 years, six towboats and in addition, through UABL, 374 barges with an average age of 16 years and 20 towboats. TAXES ACL is a limited liability company and its operations are conducted mainly through a series of limited liability company subsidiaries, and, as a result, ACL will not itself generally be subject to U.S. federal or state income tax. Taxable income will be allocated to the equity holders of the Parent and such holders will be responsible for income taxes on such taxable income. ACL intends to make distributions to the Parent which, in turn, will make distributions to its equity holders to enable them to meet all or a portion of their tax obligations with respect to taxable income allocated to them by ACL. The Amended and Restated Limited Liability Company Agreement of the Parent (the "LLC Agreement") reduces the amount of tax distributions to CSX (or its affiliate) until 2005, which may make additional funds available for use by ACL, subject to the discretion of the Parent. Notwithstanding the foregoing, in certain circumstances the tax distribution provisions of the LLC Agreement permit distributions which could exceed the combined federal, state, local and foreign income taxes that would be payable with respect to taxable income of ACL for any given period if it were a Delaware corporation filing separate tax returns. Such distributions are permitted under the Indenture. See Item 13, "Certain Relationships and Related Transactions." RESULTS OF OPERATIONS YEAR ENDED DECEMBER 28, 2001 COMPARED WITH YEAR ENDED DECEMBER 29, 2000 ACL follows a 52/53 week fiscal year ending on the last Friday in December of each year. Operating Revenue. Operating revenue for the year ended December 28, 2001 increased 2% to $788.5 million from $773.8 million for the year ended December 29, 2000. The revenue increase was due to higher barge freight volumes as a result of the operation of the Peavey barges for the whole year 2001 as compared to seven months in 2000 and higher freight rates on certain domestic barging commodities largely due to the effect of contract, fuel price adjustment clauses. The increase was partially offset by the impact of ice and flooding on the domestic barging operation in the first half of the year, reduced volume at Jeffboat and the sale of the ACT terminals. Domestic barging revenue increased $44.2 million to $636.0 million primarily due to the addition of revenue from the Peavey barges, improved barging freight rates for bulk and steel commodities and higher contract freight rates from fuel price adjustment clauses. The increase was partially offset by reduced loads per barge due to severe ice conditions on the Mississippi and Illinois Rivers in the first quarter of 2001 and the closure of the upper Mississippi River due to flooding during the second quarter of 2001. International revenues fell $0.3 million to $39.7 million primarily due to ACL's share of the net earnings from UABL being reported, net of expenses, as an other income item in 2001 according to the equity method, compared to the consolidating of revenue from the Argentine operation during the first ten months of 2000. This decrease was partially offset by increased revenue from equipment charters to the UABL venture. Increased revenue from additional bauxite freight revenue in Venezuela, additional revenue recognized in 2001 for settlement of minimum contract tonnage in Venezuela, continuing revenue from a terminal operation in Venezuela, that began in the fourth quarter of 2000, and the start of barging operations in the Dominican Republic in 2001 also contributed to offset the fall in revenue. Revenue at Jeffboat decreased $21.2 million to $102.9 million primarily due to lower volume of hopper barge sales and an increase in the number of hoppers completed for ACL's leasing program on which the profit on sales is deferred. The profit on sales of equipment that was subsequently leased to ACL's barge operating division, ACBL, has been deferred and will be recognized over the life of the leases. An absence of towboat construction revenue in 2001 as compared to revenue from the construction of one towboat in 2000 5 also contributed to the decline. Tank barge construction volume at Jeffboat improved in 2001 as increased revenue from large tank barge (30,000 barrel tank barges) sales was partially offset by a reduction in the sales of smaller tank barges (10,000 barrel tank barges). Operating Expense. Operating expense for the year ended December 28, 2001 rose 1% to $723.1 million from $717.5 million for the year ended December 29, 2000. Domestic barging expenses increased $34.4 million primarily due to operating the Peavey barges for the full year 2001 and due to higher fuel prices as a result of the timing of fuel price swap agreements. High proportions (75%) of the Peavey barges were rented under operating leases, which were assumed by ACL. The high proportion of Peavey-leased equipment has the impact of disproportionately raising operating expense in relation to operating revenue as compared to the fleet prior to the addition of Peavey. Although the timing of fuel price swaps raised fuel prices, average fuel prices before user tax on gallons of fuel consumed by vessels decreased 3 cents per gallon to 81 cents per gallon in 2001. Operating expenses for 2001 include a $16.5 million gain on property dispositions primarily from the sale of towboats and marine repair shipyard assets and a $1.1 million favorable adjustment due to a change in accounting estimate of the depreciable lives of towboats. Operating expenses for 2000 include a non-cash impairment loss on inactive barges of $3.8 million and a $1.9 million gain on property dispositions primarily from the sale of towboats. International barging expenses fell $5.2 million to $33.9 million, largely due to ACL's share of the net earnings from UABL being reported, net of expenses, as an other income item in 2001 according to the equity method, compared to the consolidating of expense from the Argentine operation during the first ten months of 2000. The decrease was partially offset by increased expense from the additional movement of bauxite in Venezuela, the operation of the terminal in Venezuela and the start of barging operations in the Dominican Republic. Jeffboat's expenses decreased $17.7 million to $98.1 million, due to the lower hopper barge, small tank barge and towboat construction volumes, partially offset by an increase in large tank barge construction volume. Lower steel prices and improved productivity also contributed to the decline in expense at Jeffboat. Operating Income. Operating income for the year increased 16% to $65.4 million from $56.3 million for 2000, due to the reasons discussed above. Interest Expense. Interest expense for 2001 increased to $70.9 million from $70.8 million for 2000. The increase is due to higher interest rate spreads as a result of the amendment to the Senior Credit Facilities, a higher outstanding balance on the revolver in 2001 as compared to 2000 and higher debt amortization as a result of fees associated with the amendment to the Senior Credit Facilities. The increase was partially offset by lower London InterBank Offered Rates ("LIBOR"), which are the basis for certain interest rate adjustments under ACL's Senior Credit Facilities, lower Term Loan balances and lower other debt balances. Gain on Sale of Watercom. There was no inclusion of a gain on the sale of ACL's membership interest in Watercom in 2001 as compared to $11.4 million in 2000. (Loss) Earnings Before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change. The loss before income taxes, extraordinary item and cumulative effect of accounting change for the year was $7.1 million compared to a loss of $7.1 million in 2000, due to the reasons discussed above. Income Taxes. Income taxes for the year decreased to $0.1 million from $4.3 million for 2000 due to lower withholding tax on foreign source income. ACL's domestic corporate subsidiaries, except ACL Capital Corp., are limited liability companies. ACL passes its U.S. federal and substantially all of its state taxable income to its Parent, whose equity holders are responsible for those income taxes. (Loss) Earnings Before Extraordinary Item and Cumulative Effect of Accounting Change. The loss before extraordinary item and the cumulative effect of an accounting change was $7.2 million for 2001 compared with a loss of $11.4 million for 2000, due to the reasons discussed above. Extraordinary Item -- Gain (Loss) on Early Extinguishment of Debt. The gain on early extinguishment of debt was $1.9 million for 2001 compared to a loss of $0.7 million for 2000. The gain for 2001 is a result of ACL's purchase in the open market of $5.0 million par value of a portion of ACL's Senior Notes for a 6 discount. The loss for 2000 was due to the early redemption premium on certain terminal revenue refunding bonds (the "Terminal Revenue Refunding Bonds"). Cumulative Effect of Accounting Change. The cumulative effect of accounting change was a loss of $0.5 million for 2001 due to recognition of a loss on the fair value of an interest rate cap as a result of ACL's adoption of FASB Statement No. 133 as of December 30, 2000. Net (Loss) Earnings. Net loss for 2001 was $5.8 million compared to net loss of $12.1 million in 2000, due to the reasons discussed above. YEAR ENDED DECEMBER 29, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999 ACL follows a 52/53 week fiscal year ending on the last Friday in December of each year. 2000 was a 52 week year compared with prior year 1999 of 53 weeks. Operating Revenue. Operating revenue for the year ended December 29, 2000 increased nearly 5% to $773.8 million from $739.1 million for the year ended December 31, 1999. The revenue increase was due to higher barge freight volumes as a result of the addition of Peavey and higher freight rates on certain domestic barging commodities largely due to the effect of contract, fuel price adjustment clauses. The increase was partially offset by lower contract coal freight rates, one less week in the reporting period and reduced revenue due to the sale of the Watercom business unit. Domestic barging revenue increased nearly 7% or $37.9 million from $553.9 million in 1999 to $591.8 million in 2000 despite the effect of the shorter reporting period. The increase is primarily due to increased volume as a result of the larger fleet, higher contract freight rates from fuel price adjustment clauses, higher market rates for bulk, steel and liquid commodities and adverse operating conditions in the year ago period. The increase was partially offset by lost volume as a result of grain inspection delays in the fourth quarter of 2000 due to the introduction of a new type of genetically altered seed into the U.S. corn supply and the closure of the Illinois River due to ice in December, 2000. Domestic fleet velocity was further reduced by customers holding barge equipment at loading and unloading ports for longer than usual during the second and third quarters of 2000. International revenues fell $0.1 million to $40.0 million as charter revenue from the UABL joint venture offset volume shortfalls in Venezuela due to a customer's unloading dock accident. A large portion of the Venezuelan volume shortfall earlier in the year was recovered in the fourth quarter from cargo transfer revenue and increased freight volumes attributable to ACL's start up of a new crane barge cargo unloading facility. Revenue at Jeffboat, ACL's marine construction subsidiary, fell $0.3 million to $124.1 million, reflecting reduced hopper barge construction for third-party customers, offset by increased construction of tank barges. The profit on sales of equipment that was subsequently leased to the barge operating division has been deferred and will be recognized over the life of the leases. Operating Expense. Operating expense for the year ended December 29, 2000 rose 8% to $717.5 million from $664.5 million for the year ended December 31, 1999. Domestic barging expenses increased $51.8 million primarily due to operating the Peavey barges and higher fuel prices. High proportions (75%) of the Peavey barges were rented under operating leases. This has the impact of disproportionately raising operating expense in relation to operating revenue as compared to the fleet prior to the addition of Peavey. Average fuel prices increased from 50 cents per gallon in 1999 to 84 cents per gallon in 2000. The increase in operating expense due to the change in fuel price from the year ago period was $35 million. The net impact of rising fuel prices offset by contract revenue adjustments and hedging is estimated to be a $7 million reduction in operating income vs. the year ago period. Record cold temperatures in the mid-west resulted in an unusual, December closing of the Illinois River that also contributed to the increase in 2000 operating expenses. Operating expenses for 2000 include a non-cash impairment loss on inactive barges of $3.8 million. Operating expenses for 1999 include charges of $1.6 million for a partially deferred employment contract payment to a former ACL executive. 7 International barging expenses fell $0.6 million to $39.1 million, largely due to the contribution of the Argentine based operation to UABL and lower barge freight volume in Venezuela. Jeffboat's expenses increased $3.8 million to $115.8 million, due to increased tank barge construction. The volume related increase was partially offset by improved productivity and lower steel prices. ACL implemented a number of internal changes in 2000, including staff reductions that resulted in cost savings of approximately $1 million per year, and reassignment of senior level responsibilities. Changes in health and benefit plans, including the American Commercial Lines LLC Pension Plan, that affect salaried employees covered by the plans, were also implemented and resulted in annual cost savings of approximately $5 million. In 2000, management of ACL's tank barge cleaning facility at Baton Rouge was assigned to a non-affiliated third party whose core business is barge cleaning. ACL received a variable monthly fee linked to the facility's operating profit in 2000. Management of ACL's boat and barge repair yard in New Orleans and its fleeting facility in Mobile were also assigned to non-affiliated third parties in 2000 with ACL receiving monthly fees containing both fixed and variable components. ACL sold its tank barge cleaning and boat and barge repair facilities to the third party operators in 2001. Operating Income. Operating income for the year decreased 25% to $56.3 million from $74.6 million for 1999, due to the reasons discussed above. Interest Expense. Interest expense for 2000 decreased to $70.8 million from $71.3 million for the same period in 1999. The decrease is due to lower outstanding balances and lower LIBOR base interest on the Senior Credit Facilities. Gain on Sale of Watercom. The gain on the sale of the membership interest in Watercom was $11.4 million. The gain results from a purchase price of $16.0 million, which consist of $13.6 million in cash and $2.4 million in Mobex preferred stock, less $4.6 million which was the total of ACL's net investment in Watercom and transaction related costs. (Loss) Earnings Before Income Taxes, Extraordinary Item and Cumulative Effect of Accounting Change. The loss before income taxes, extraordinary item and cumulative effect of accounting change for the year was $7.1 million compared to earnings of $6.4 million in 1999, due to the reasons discussed above. Income Taxes. Income taxes for the year increased to $4.3 million from $1.7 million for 1999 due to additional withholding tax on foreign source income. ACL's domestic corporate subsidiaries, except ACL Capital Corp., were converted to limited liability companies as of June 30, 1998. ACL passes its U.S. federal and state taxable income to its Parent, whose equity holders are responsible for those income taxes. (Loss) Earnings Before Extraordinary Item and Cumulative Effect of Accounting Change. The loss before extraordinary item and the cumulative effect of an accounting change was $11.4 million for 2000 compared with an earnings of $4.7 million for the same period in 1999, due to the reasons discussed above. Extraordinary Item -- Loss on Early Extinguishment of Debt. ACL recognized $0.7 million as an extraordinary loss in the second quarter of 2000 reflecting the redemption premium on the Terminal Revenue Refunding Bonds. This amount was paid out of an escrow account previously established as an irrevocable trust. Cumulative Effect of Accounting Change. ACL recognized $1.7 million in non-cash expense related to a workers compensation secondary injury fund in accordance with adoption of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" in the first quarter of 1999. Net (Loss) Earnings. Net loss for 2000 was $12.1 million compared to net earnings of $3.0 million in 1999, due to the reasons discussed above. 8 OUTLOOK Domestic barging demand for bulk, steel and liquid commodities is expected to remain at 2001 levels throughout 2002. The U.S. Department of Agriculture currently forecasts 2002 crop year corn exports of 1.975 billion bushels as compared to 1.937 billion bushels for the 2001 crop year. In the first quarter of 2002, the average price of fuel consumed by ACBL vessels is expected to decrease $0.07 per gallon from the fourth quarter of 2001. With the addition of boats required to move the Peavey barges, ACBL vessels will consume approximately 110 million gallons annually and generally ratably throughout the year. ACBL has contract price adjustment clauses and a fuel-hedging program, which provide protection for approximately 75% of gallons consumed. Contract adjustments are deferred one quarter. The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the same period. Actual results could differ from those estimates. CRITICAL ACCOUNTING POLICIES Critical accounting policies that affect the reported amounts of assets and liabilities include barge transportation revenue being recognized proportionately as shipments move from origin to destination, estimates of harbor and towing service charges being made at the time such services are received, and expense from insurance claim loss deductibles being recognized based upon liability estimates that are made as claim incidents occur. The proportion of barge transportation revenue to be recognized is determined by applying a percentage to the contractual charges for such services. The percentage is determined by dividing the number of miles from the loading point to the position of the barge as of the end of the accounting period by the total miles from the loading point as specified in the relevant freight contract. The position of the barge at accounting period end is determined by locating the position of the boat with the barge in tow through use of a global positioning system. The recognition of revenue based upon the percent of voyage completion results in a better matching of revenue and expenses. Harbor and towing service charges are estimated by vendor based upon recent historical charges for the same type of service. Liabilities for insurance claim loss deductibles are estimated based upon historical experience with similar claim incidents. Routine engine overhauls that occur on a one to three year cycle are expensed when they are incurred. Repairs that extend the original economic life of an asset or that enhance the original functionality of an asset are capitalized and amortized over their estimated economic life. The costs of purchasing or developing software are capitalized and amortized over the estimated economic life of the software. See note 1 to the financial statements in Item 8 for a further discussion of significant accounting policies. LIQUIDITY AND CAPITAL RESOURCES ACL INDEBTEDNESS As of December 28, 2001, ACL had outstanding indebtedness of $692.5 million, including $313.3 million drawn under its two Term Loans and $295.0 million aggregate principal amount of Senior Notes. ACL had other notes outstanding of $0.2 million at year end. In addition, ACL had $5.9 million in outstanding capital lease obligations and had securitized $51.0 million of the trade receivables of two subsidiaries. ACL also has available borrowings of up to $100.0 million under the Revolving Credit Facility. At the end of 2001, $15.4 million of letters of credit had been issued under the facility and $84.0 million revolving loans were outstanding. ACL had $47.3 million cash on deposit in bank accounts as of December 28, 2001. The Senior Credit Facilities and the Indenture contain a number of covenants with specified financial ratios and tests including, with respect to the Senior Credit Facilities, maximum leverage ratios which could lead to an event of default which could result in acceleration of the debt, higher interest rates or other adverse consequences. The Indenture also contains certain cross default provisions. Compliance with financial ratios is 9 measured at the end of each quarter. ACL's ability to meet the financial ratios is affected by adverse weather conditions, seasonal market conditions and other risk factors inherent in its business. These and other risk factors are discussed in and incorporated by reference from "Risk Factors," Exhibit 99.1, appended hereto. IMPACT OF AMENDMENT TO SENIOR CREDIT FACILITIES Due to less than anticipated financial results relating to poor river operating conditions in the domestic barging operation in the fourth quarter of 2000 and an adverse barging freight market largely due to the introduction of a genetically altered seed into the U.S. corn supply which delayed barge shipments, ACL completed an agreement with its lenders to amend the Senior Credit Facilities effective December 29, 2000 through December 31, 2001 ("Amendment No. 5"). The amendment added a rent adjusted consolidated leverage ratio, a limitation on annual rent expense, reduced allowable capital expenditures, increased the interest rates on the Term Loans and the Revolving Credit Facility and required a $40.0 million reduction of the Term Loans by October 30, 2001, to be funded primarily through the sale of assets. ACL was in compliance with the requirements of Amendment No. 5 as of the end of fiscal year 2001. The outstanding balance on the Term Loans was reduced by $40.0 million primarily by use of proceeds from the sale of certain ACT terminals to GMS, from the sale of the property and assets of a marine repair and tank barge cleaning operation located in Louisiana to a newly formed limited liability company of which ACL has a minority interest, from the sale of the assets located at a marine repair yard in Louisiana to an unaffiliated third party, and from the sale of five towboats to unaffiliated third parties. Following December 31, 2001, the covenant requirements reverted to those specified in the original Senior Credit Facilities which are more restrictive than the amended covenants. Certain covenants added by Amendment No. 5 also become more restrictive. ACL is currently not in compliance with certain covenants in the Senior Credit Facilities and it is not likely that ACL will be able to meet these covenant requirements in 2002, absent an additional amendment to the Senior Credit Facilities and the consummation of the Danielson Recapitalization. Failure to meet these covenants could have a material adverse effect on the liquidity of ACL. FAILURE TO PAY INTEREST ON SENIOR NOTES On December 31, 2001, ACL elected not to pay the interest due (the "Bond Interest Payment") on its Senior Notes due to ongoing negotiations with its lenders and noteholders regarding the restructuring of ACL's bank and bond debt. Following the thirty (30) day grace period provided by the Indenture, ACL again elected not to make the Bond Interest Payment. This election not to pay the Bond Interest Payment constituted an event of default under the Indenture. However, certain noteholders entered into forebearance agreements with ACL agreeing not to accelerate the maturity of the Senior Notes or take additional adverse actions against ACL. Acceleration of the Senior Notes under the Indenture would have a material adverse effect on ACL's liquidity. Further, as a result of ACL's failure to make the Bond Interest Payment, J.P. Morgan Chase Bank ("J.P. Morgan") delivered a notice to ACL in January 2002 asserting that ACL was in default of the Credit Agreement. Certain lenders party to the Credit Agreement also entered into forebearance agreements with ACL, agreeing not to accelerate the debt or take additional adverse actions against ACL. An acceleration of the debt under the Senior Credit Facilities would have a material adverse effect on ACL's liquidity. As a result of the events described above, PNC Bank, National Association ("PNC"), as Administrator under ACL's receivables facility with PNC (the "Receivables Purchase Agreement"), asserted that ACL was in default under the Receivables Purchase Agreement. ACL and PNC entered into a waiver of the Receivables Purchase Agreement on February 11, 2002 (the "RPA Waiver") and a modification to that waiver on February 25, 2002 (the "RPA Waiver"). The RPA Waiver has the effect of waiving the default asserted by PNC, provided that ACL enters into certain definitive agreements with Danielson relating to the Danielson Recapitalization and refinances the Receivables Purchase Agreement on or before April 30, 2002. The RPA Waiver also requires ACL to reduce its overall borrowings under the facility to no more than $50.0 million. A default under the Receivables Purchase Agreement or the RPA Waiver could have a material adverse effect on ACL's liquidity. 10 DANIELSON RECAPITALIZATION As discussed in Item 1, ACL has entered into the Recapitalization Agreement with Danielson which will result in an acquisition and recapitalization of ACL by Danielson. Should the Danielson Recapitalization be consummated, ACL anticipates that it will obtain a waiver of any current default under, and certain amendments to, its Senior Credit Facilities and, with respect to holders of Senior Notes who tender their Senior Notes in the exchange offer and consent solicitation, the Indenture governing the Senior Notes. NET CASH, CAPITAL EXPENDITURES AND CASH FLOW Net cash provided by operating activities was $24.6 million, $30.8 million and $94.6 million for fiscal 2001, 2000 and 1999, respectively. The decrease in net cash from operating activities in 2001 compared with 2000 was primarily due to a small increase in inventories in 2001 compared to a large inventory reduction in 2000 and due to two interest payments on the senior notes being remitted in 2001 compared to one payment remitted in 2000. The decrease was partially offset by the timing of cash disbursements related to accounts payable. The decrease in net cash from operating activities in 2000 compared with 1999 was primarily due to $50.0 million provided by the initial sale of the trade receivables of two subsidiaries in 1999, the timing of cash disbursements related to accounts payable and the lower net earnings. Net cash from operating activities was used primarily for repayment of third-party debt and capital expenditures. Capital expenditures were $25.6 million, $57.0 million and $55.9 million in 2001, 2000 and 1999, respectively. Expenditures in 2001 and 2000 include $5.8 million and $6.1 million, respectively, in expenditures associated with capital leases. Cash expenditures included $0.4 million, $48.0 million and $23.9 million for domestic marine equipment and $3.4 million, $2.9 million and $8.9 million for foreign investments in 2001, 2000 and 1999, respectively. The remaining $16.0 million in domestic cash capital expenditures in 2001 was primarily for marine equipment maintenance. ACL expects capital expenditures in 2002 to be approximately $33 million and to be primarily for fleet maintenance. Additional operating lease expense of approximately $4 million will be incurred to provide fleet replacement equipment. This will be partially offset by reductions in existing barge charter rates. Management believes that cash generated from operations is sufficient to fund its cash requirements, including capital expenditures for fleet maintenance, working capital, interest payments and scheduled principal payments. ACL may from time to time, borrow under the Revolving Credit Facility. ACL currently plans to use excess cash provided by operations to pay down the Revolving Credit Facility and the Term Loans. Demand for freight moved by ACL barges is influenced by the economic demand for the cargoes. A decrease in that demand could adversely affect ACL's operating cash flows. Some cargoes are more highly dependent upon general economic conditions, such as certain liquid and steel cargoes which have experienced a recent softening in demand. Cash flows from ACL's barging and manufacturing operations are also affected by weather and river conditions. Extreme weather conditions can have a materially adverse affect on ACL's operating cash flows. ACL has various environmental liabilities that could have an impact on its financial condition and results of operations. These environmental matters are discussed in Item 3, "Legal Proceedings," contained in this Annual Report on Form 10-K. At December 28, 2001 and December 29, 2000 ACL had $51.0 million and $56.0 million, respectively, outstanding under the Receivables Purchase Agreement, its accounts receivable securitization facility discussed above, and had $22.6 million and $15.3 million, respectively, of net residual interest in the securitized receivables which is included in "Accounts Receivable, Net" in ACL's consolidated financial statements. The fair value of the net residual interest is measured at the time of the sale and is based on the sale of similar assets. In 2001, ACL received gross proceeds of $30.8 million from the sale of receivables and made gross payments of $35.8 million under the Receivables Purchase Agreement. 11 CHANGES IN CREDIT RATINGS On January 2, 2002, the debt rating agency Standard & Poor's lowered its rating on ACL's Senior Notes to 'D' from single-'B'-minus and ACL's corporate credit rating to 'SD' from single-'B'-plus and removed both items from CreditWatch, where they had been placed with negative implications on May 7, 2001. Also on January 2, 2002, the rating on ACL's Senior Credit Facilities was lowered to single-'B'-plus from double-'B'-minus (on CreditWatch with negative implications). On March 1, 2002, following the announcement of the potential Danielson Recapitalization, Standard & Poor's reaffirmed its single-'B'-plus rating on ACL's Senior Credit Facilities and that it remained on CreditWatch with negative implications. Standard & Poor's also reaffirmed ACL's corporate credit rating of 'SD' and the 'D' rating on the Senior Notes. These rating changes could adversely affect ACL's liquidity. NON-CONSOLIDATED ENTITIES In 2001, ACL and Vectura invested in a new company named Vessel Leasing. 399 Venture Partners, Inc., the majority owner of ACL, also holds a majority ownership interest in Vectura Holding Company LLC which holds a majority ownership interest in Vectura. ACL accounts for its 50% ownership in Vessel Leasing by the equity method. ACL's investment of $6.8 million in Vessel Leasing is included in other assets on the consolidated statement of financial position. ACL's share of Vessel Leasing's net loss is $.04 million in 2001 and is included in other income in the consolidated statement of operations. Vessel Leasing's statement of financial position is not consolidated with ACL. As of December 28, 2001 Vessel Leasing had total assets of $54.9 million and total liabilities of $45.6 million including public long term debt of $42.6 million (including current portion) and $2.8 million in unearned revenue from prepaid charter payments made by ACL's domestic barging subsidiary. Vessel Leasing's long term debt is not guaranteed by ACL or any of ACL's subsidiaries. ACL's domestic barge operating subsidiary has a long term operating lease commitment to Vessel Leasing, which is guaranteed by ACL. ACL sold new barges for $47.8 million to Vessel Leasing in 2001. Profit on sales of barges to Vessel Leasing is deferred by Jeffboat and recognized over the life of the lease. All of these barges, except for those representing a capital lease commitment of $3.9 million, were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1.7 million. ACL also recorded $3.9 million in capital leases with Vessel Leasing in 2001. ACL also has fifty percent (50%) ownership interests in UABL and GMS, as previously described, which are accounted for by the equity method. 12 CONTRACTUAL AND COMMERCIAL COMMITMENT SUMMARY A summary of ACL's contractual commitments under debt and lease agreements appears below. CONTRACTUAL OBLIGATIONS

--------------- * Operating leases having initial or remaining non-cancelable lease terms longer than one year. A summary of ACL's other commercial commitments appears below. COMMERCIAL COMMITMENTS

Additional disclosures regarding these obligations and commitments can be found in notes 4 and 7 to the consolidated financial statements in Item 8. FUEL HEDGING AND INTEREST RATE CAP ACL uses forward purchases of diesel fuel to provide protection against increases in prices of diesel fuel used to operate ACL's vessels. The forward purchases are swap agreements whereby ACL locks into a fixed future price at the time of purchase. Diesel fuel is not delivered under these future purchases. Instead the swap is settled when due and ACL pays or receives a dollar amount based on the difference in the fixed future price and the actual price index for the settlement month. The fair value of the net swap is the difference between the future price of the fuel index as of the date of valuation and the fixed future price established at the time each individual contract is purchased, multiplied by the number of gallons purchased. ACL typically enters into one forward contract each month for gallons associated with freight bookings that have fixed price commitments with no contract fuel adjustment protection clauses. 13 Due to the bankruptcy of Enron Corp., one of the trading partners to the fuel swap, ACL has expensed the mark-to-market loss of $0.1 million as fuel expense in the 2001 Consolidated Statement of Operations. Management believes the other trading partner does not present credit risk to ACL. FAIR VALUE OF CONTRACTS AT PERIOD END

ACL also has an interest rate cap agreement on a notional amount of $202 million in debt. The agreement expires August 11, 2003 and has a fair value of $.04 million as of December 28, 2001. The fair value of the cap agreement has been provided by an external source. For additional disclosures regarding non-exchange traded contracts, please refer to note 9 to the consolidated financial statements included in Item 8. RELATED PARTY TRANSACTIONS ACL has transactions with various related parties, primarily affiliated entities accounted for by the equity method. ACL believes that the terms and conditions of those transactions are in the aggregate not materially more favorable or unfavorable to ACL than would be obtained on an arm's-length basis among unaffiliated parties. In 2001 ACL received $12.0 million from GMS for the sale of terminals and proceeds from the condemnation of a terminal, resulting in a gain of $1.9 million which is reported in Other Income. ACL recorded charter income from UABL of $11.1 million and $2.1 million in 2001 and 2000, respectively. ACL also recorded administrative fee expenses to UABL of $7.7 million and $1.5 million in 2001 and 2000, respectively. ACL sold used barges to UABL for $0.8 million in 2001. Charter rates are established at fair market value based upon similar transactions. As of December 28, 2001 ACL has recorded $13.4 million in accounts receivable and $8.4 million in other current liabilities with UABL. ACL, through its subsidiary, Jeffboat, sold new barges for $47.8 million to Vessel Leasing in 2001. Jeffboat recognizes the profit associated with the sales of barges to Vessel Leasing over the life of the lease. All of these barges except for $3.9 million were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1.7 million in 2001. ACL recorded $3.9 million in capital leases with Vessel Leasing in 2001. Charter rates and sales of barges are established at fair market value based upon similar transactions. See also information contained under "Affiliate Agreements" included under Item 13 in this Annual Report on Form 10-K. BACKLOG ACL's backlog represents firm orders for barge transportation and marine equipment. The backlog for barge transportation was approximately $760 million and $1,124 million at December 28, 2001 and 14 December 29, 2000, respectively. This backlog ranges from one to eight years with approximately 40% expected to be filled in 2002. The backlog for marine equipment was approximately $69 million and $24 million at December 28, 2001 and December 29, 2000, respectively. The backlog for marine equipment is one year with 100% expected to be filled in 2002. SEASONALITY ACL's business is seasonal, and its quarterly revenues and profits historically have been lower during the first and second fiscal quarters of the year (January through June) and higher during the third and fourth fiscal quarters (July through December) due to the North American grain harvest. In addition, working capital requirements fluctuate throughout the year. Adverse market or operating conditions during the last four months of the year could have a greater effect on ACL's business, financial condition and results of operations than during other periods. CHANGES IN ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141"), which provides that all business combinations should be accounted for using the purchase method of accounting and establishes criteria for the initial recognition and measurement of goodwill and other intangible assets recorded in connection with a business combination. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001 and to all business combinations accounted for by the purchase method that are completed after June 30, 2001. ACL will apply the provisions of SFAS 141 to any future business combinations. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which establishes the accounting for goodwill and other intangible assets following their recognition. SFAS 142 applies to all goodwill and other intangible assets whether acquired singly, as part of a group, or in a business combination. SFAS 142 provides that goodwill should not be amortized but should be tested for impairment annually using a fair-value based approach. In addition, SFAS 142 provides that intangible assets other than goodwill should be amortized over their useful lives and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 142 is effective beginning on December 29, 2001. Upon adoption, ACL will be required to perform a transitional impairment test under SFAS 142 for all goodwill recorded as of December 29, 2001. Any impairment loss recorded as a result of completing the transitional impairment test will be treated as a change in accounting principle. The impact of the adoption of SFAS 142 on ACL's results of operations for all periods beginning on or after December 29, 2001 will be to eliminate amortization of goodwill. Management of ACL has not performed a transitional impairment test under SFAS 142 and accordingly cannot estimate the impact of the adoption of SFAS 142 as of December 29, 2001. In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"). The Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supercedes SFAS 121, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The objectives of SFAS 144 are to address significant issues relating to the implementation of SFAS 121 and to develop a single accounting model, based on the framework established in FAS 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. The Company will adopt FAS 144 in the Company's first quarter 2002. Management is currently evaluating the impact of FAS 144 on the Company's future financial reporting. 15 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ACL is exposed to certain market risks which are inherent in its financial instruments and which arise from transactions entered into in the normal course of business. A discussion of ACL's primary market exposures in financial instruments is presented below. FUEL PRICE RISK Fuel consumed in 2001 represented approximately 13% of ACL's operating expenses. Most of ACL's long-term contracts contain clauses under which increases in fuel costs are passed on to customers thereby reducing the fuel price risk. In addition, ACL has entered into fuel rate swap agreements for short-term protection. As a result of ACL's fuel hedging strategy, it might not fully benefit from certain fuel price declines. Based on ACL's 2002 projected fuel consumption, a one cent change in the average annual price per gallon of fuel would impact ACL's annual operating income by approximately $0.3 million (compared to the 2001 projection of $0.3 million), after the effect of escalation clauses in long-term contracts and fuel rate swap agreements in place as of December 28, 2001. As of December 28, 2001, ACL had hedged approximately 4% of its projected 2002 fuel requirements using fuel rate swap agreements with an aggregate fair value of $0.4 million. ACL estimates that at December 28, 2001, a 10% change in the price per gallon of fuel would have changed the fair value of the existing fuel rate swap contracts by $0.2 million. See ACL's disclosures relating to fuel hedging in "Fuel Hedging and Interest Rate Cap" included under Item 7 elsewhere in this Annual Report on Form 10-K. INTEREST RATE AND OTHER RISKS At December 28, 2001, ACL had $397.3 million of floating rate debt outstanding, which represented the outstanding balance of the Senior Credit Facilities. A 1% change in interest rates would change interest expense by $4.0 million annually. On August 11, 2000, ACL entered into an interest rate cap agreement which limits ACL's base LIBOR to 7.5% on a notional amount of $201.8 million, corresponding to that amount of floating rate debt outstanding which is based on LIBOR. The agreement is designed to hedge ACL's exposure to future increases in market interest rates. As of December 28, 2001 the fair value of the interest rate cap agreement was $.04 million. At December 28, 2001, ACL had sold at a discount based upon commercial paper rates, $51.0 million of the accounts receivable of two subsidiaries. ACL has the right to repurchase these receivables. At this amount outstanding, a 1% change in the commercial paper rates would change other expense by $0.5 million annually. FOREIGN CURRENCY EXCHANGE RATE RISKS As in 2000, all of ACL's significant transportation contracts in South America are currently denominated in U.S. dollars. However, many expenses incurred in the performance of such contracts, such as crew wages and fuel, are, by necessity, denominated in a foreign currency. Therefore, ACL is affected by fluctuations in the value of the U.S. dollar as compared to certain foreign currencies. Additionally, ACL's investments in foreign affiliates subject it to foreign currency exchange rate and equity price risks. Management does not consider its exposure to exchange rate risks to be material and considers its investments in foreign affiliates to be denominated in relatively stable currencies and of a long-term nature. Accordingly, ACL does not typically manage its related foreign currency exchange rate and equity price risks through the use of financial instruments. 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA AMERICAN COMMERCIAL LINES LLC CONSOLIDATED STATEMENT OF OPERATIONS

The accompanying notes are an integral part of the consolidated financial statements. 17 AMERICAN COMMERCIAL LINES LLC CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of the consolidated financial statements. 18 AMERICAN COMMERCIAL LINES LLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The accompanying notes are an integral part of the consolidated financial statements. 19 AMERICAN COMMERCIAL LINES LLC CONSOLIDATED STATEMENT OF MEMBER'S DEFICIT

The accompanying notes are an integral part of the consolidated financial statements. 20 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The operations of American Commercial Lines LLC ("ACL") (formerly American Commercial Lines, Inc. which was converted to a limited liability company in the second quarter of 1998) include barge transportation together with related terminal, marine construction and repair along inland waterways. Barge transportation services include the movement of steel and other bulk products, grain, coal, and liquids in the United States and South America and account for the majority of ACL's revenues. Marine construction, repair and terminal services are provided to customers in marine transportation and other related industries in the United States. ACL has long term contracts with some customers. ACL was a wholly-owned subsidiary of CSX Corporation ("CSX") until June 30, 1998. On June 30, 1998 ACL's parent, American Commercial Lines Holdings LLC (the "Parent") completed a recapitalization in a series of transactions in which the barge business of Vectura Group, Inc. (now Vectura Group LLC, "Vectura") and its subsidiaries ("NMI" or the "NMI Contribution") were combined with that of ACL. PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements reflect the results of operations, cash flows and financial position of ACL and its majority-owned subsidiaries as a single entity. All significant intercompany accounts and transactions have been eliminated. Investments in companies that are not majority-owned are accounted for under the equity method. FISCAL YEAR ACL follows an annual fiscal reporting period, which ends on the last Friday in December. The consolidated financial statements presented are for the fiscal years ended December 28, 2001 and December 29, 2000 and December 31, 1999. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACL's significant estimates include barge transportation revenue and expense recognition, the carrying values and estimated useful lives of fixed assets, allowances for doubtful accounts, insurance reserves, employee benefit plan liabilities and others. CASH AND CASH EQUIVALENTS Cash and cash equivalents include short-term investments with a maturity of less than three months when purchased. ACL has from time to time, cash in banks in excess of federally insured limits. 21 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ACCOUNTS RECEIVABLE Accounts Receivable, Net consist of the following:

ACL maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable. MATERIALS AND SUPPLIES Materials and Supplies are carried at the lower of cost (average) or market and consist of the following:

PROPERTIES Properties, at cost, consist of the following:

Provisions for depreciation of properties are based on the estimated useful service lives computed on the straight-line method. Buildings and improvements are depreciated from 15 to 45 years. Equipment is depreciated from 5 to 42 years. Depreciation expense was $52,100 in 2001, $53,457 in 2000 and $49,779 in 1999. In the fourth quarter 2001, ACL changed the useful life of towboats from 30 to 42 years, which reduced the loss before extraordinary items and net loss by $1,142 for the year ended December 28, 2001. This change in accounting estimate was based on additional information about the useful life of the towboat fleet. Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets. Where impairment is indicated, the assets are evaluated for sale or other disposition, and their carrying 22 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amount is reduced to fair value based on discounted net cash flows or other estimates of fair value. There were no fixed asset impairment losses in 2001. Fixed asset impairment losses of $3,865 and $230 were recorded in 2000 and 1999 respectively in Materials, Supplies and Other on the Consolidated Statement of Operations. These losses affect the barging segment. GLOBAL MATERIALS SERVICES LLC ACL's ownership interest in Global Materials Services LLC ("GMS"), a joint venture between American Commercial Terminals LLC ("ACT") a wholly owned subsidiary of ACL, and Mid-South Terminal Company, L.P., or unaffiliated third party, was 50% at December 28, 2001 and December 29, 2000. ACL accounts for this investment by the equity method. ACL's investment in GMS at December 28, 2001 and December 29, 2000 of $10,208 and $9,124 respectively, is included in other assets on the consolidated statement of financial position. Earnings related to ACL's investment in GMS for the year ended December 28, 2001 and December 29, 2000 were $1,015 and $1,138, respectively, and are included in other income in the consolidated statement of operations. During 2001, ACL contributed $1,200 in cash to GMS. Other comprehensive loss related to ACL's investment in GMS for the year ended December 28, 2001 and December 29, 2000 was $1,131 and $329, respectively, related to interest rate swaps and foreign currency translation. UABL LIMITED On October 24, 2000, ACL contributed certain assets at book value to UABL Limited ("UABL"), an Argentine company. ACL accounts for its 50% ownership in UABL by the equity method. ACL's investment in UABL of $49,892 at December 28, 2001 and $49,686 at December 29, 2000, is included in other assets on the consolidated statement of financial position. ACL's loss (net of minority interest) of $2,960 and $1,440 for the years ended December 28, 2001 and December 29, 2000, respectively, are included in other income in the consolidated statement of operations. In 2001, ACL made additional investments in UABL of $4,069. VESSEL LEASING LLC In 2001 ACL and Vectura invested in a new company named Vessel Leasing LLC ("Vessel Leasing"). 399 Venture Partners, Inc., the majority owner of ACL, also holds a majority ownership interest in Vectura Holding Company LLC which holds a majority ownership interest in Vectura. ACL accounts for its 50% ownership in Vessel Leasing by the equity method. ACL's investment of $6,808 in Vessel Leasing is included in other assets on the consolidated statement of financial position. ACL's share of Vessel Leasing's net loss is $38 in 2001 and is included in other income in the consolidated statement of operations. Vessel Leasing's statement of financial position is not consolidated with ACL. As of December 28, 2001 Vessel Leasing had total assets of $54,921 and total liabilities of $45,571 including public long term debt of $42,580 (including current portion) and $2,830 in unearned revenue from prepaid charter payments made by ACL's domestic barging subsidiary. Vessel Leasing's long term debt is not guaranteed by ACL or any of ACL's subsidiaries. ACL's domestic barge operating subsidiary has a long term operating lease commitment to Vessel Leasing, which is guaranteed by ACL. ACL sold new barges for $47,757 to Vessel Leasing in 2001. Profit on sales of barges to Vessel Leasing is deferred by Jeffboat and recognized over the life of the lease. All of these barges, except for those representing a capital lease commitment of $3,924 were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1,705. ACL also recorded $3,924 in capital leases with Vessel Leasing in 2001. 23 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) DEBT AMORTIZATION ACL amortizes debt costs over the term of the debt. Amortization expense was $4,413 in 2001, $2,801 in 2000 and $2,802 in 1999 and is included in interest expense. REVENUE RECOGNITION Barge transportation revenue is recognized proportionately as shipments move from origin to destination. The position of shipments is determined by boat position tracking through use of a global positioning system. This method results in a better matching of revenue and expense. Terminal, repair and other revenue is recognized as services are provided. Marine construction revenue and related expense is primarily recognized on the completed-contract method, due to the short-term nature of contracts. Revenue from sale/leaseback transactions is deferred in other liabilities and recognized over the life of the lease. SECOND INJURY FUND ACL recognized $1,737 in non-cash expense related to a workers compensation second injury fund in accordance with adoption of the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments" in the first quarter of 1999. RECLASSIFICATION Certain prior year amounts have been reclassified to conform to the current year presentation. NOTE 2. PURCHASES AND DISPOSITIONS In 2001, ACL sold five towboats, a shipyard in Harahan, Louisiana, a cleaning facility in Baton Rouge, Louisiana and other assets to meet the requirements of the Senior Debt Facility amendments described in Note 4. This resulted in a gain of $16,762 which is reported in gain on property dispositions in the consolidated statement of operations. On May 25, 2001, ACL entered into an agreement to sell substantially all of the terminals of ACT, other than its coal transfer facility at St. Louis, Missouri and its tank storage facility at Memphis, Tennessee. The sale of seven terminals was completed on May 25, 2001. An additional terminal site in Omaha, Nebraska was transferred on June 29, 2001. Subsequent to June 29, 2001, additional proceeds were received from the condemnation of Omaha Terminal. ACL recorded a gain from these transactions of $1,886 in Other Income. On May 26, 2000, ACL purchased certain barging assets of the Peavey Barge Line ("Peavey") from ConAgra, Inc. for $31,500 in cash. The purchase price was financed with existing credit facilities and cash flows from operations. ACL also assumed $3,800 in capital leases. ACL sold its 100% membership interest in Waterway Communications System LLC ("Watercom") on September 6, 2000 to Mobex Communications, Inc. ("Mobex") for $13,600 in cash and $2,400 in Mobex preferred stock. The sale resulted in a gain of $11,418. Cash proceeds were used to pay existing ACL debt. NOTE 3. ACCOUNTS RECEIVABLE SECURITIZATION At December 28, 2001 and December 29, 2000 ACL had $51,000 and $56,000, respectively, outstanding under the accounts receivable securitization facility agreement and had $22,603 and $15,332, respectively, of net residual interest in the securitized receivables which is included in Accounts Receivable, Net in ACL's consolidated financial statements. The fair value of the net residual interest is measured at the time of the sale and is based on the sale of similar assets. In 2001, ACL received gross proceeds of $30,800 from the sale of receivables and made gross payments of $35,800 under this Agreement. 24 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PNC Bank, National Association ("PNC"), as Administrator under ACL's receivables facility with PNC (the "Receivables Purchase Agreement"), asserted that ACL was in default under the Receivables Purchase Agreement. ACL and PNC entered into a waiver of the Receivables Purchase Agreement on February 11, 2002 (the "RPA Waiver") and a modification to that waiver on February 25, 2002 (the "RPA Waiver"). The RPA Waiver has the effect of waiving the default asserted by PNC, provided that ACL enters into certain definitive agreements with Danielson relating to the Danielson Recapitalization and refinances the Receivables Purchase Agreement on or before April 30, 2002. The RPA Waiver also requires ACL to reduce its overall borrowings under the facility to no more than $50.0 million. A default under the Receivables Purchase Agreement or the RPA Waiver could have a material adverse effect on ACL's liquidity. In September 2000, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 140"). The Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. ACL adopted FAS 140 on April 1, 2001. The adoption required the consolidation of ACL Funding Corp. ("ACLF"), a wholly-owned subsidiary, that was previously treated as a non-consolidated Qualified Special Purpose Entity. The consolidation resulted in a charge to Retained Earnings of $989 in the second quarter 2001. NOTE 4. DEBT Debt consists of the following:

ACL has a Revolving Credit Facility, which provides for revolving loans and letters of credit not to exceed the aggregate principal amount of $100,000, maturing in June, 2005, but each loan must be repaid within one year. The Revolving Credit Facility bears an interest rate equal to LIBOR plus a margin based on ACL's performance. Borrowings on the facility at December 28, 2001 and December 29, 2000 were $84,000 and $66,750, respectively, with interest rates of 5.75% to 7.5% at December 28, 2001 and 8.75% at December 29, 2000. The borrowing base was reduced by outstanding letters of credit of $16,260 and $17,857 at December 28, 2001 and December 29, 2000, respectively. The $235,000 Term Loan matures in 2001 through 2007. The $200,000 Term Loan matures in 2001 through 2006. The two Term Loans bear interest at a rate equal to LIBOR plus a margin based on ACL's performance. The interest rate at December 28, 2001 was 6.3125% for the $235,000 and 6.0625% for the $200,000 term loans. Interest on the Term Loans is payable quarterly. The Senior Notes require no principal payments until maturity in 2008 and have a fixed interest rate of 10.25%. Interest is payable semi-annually. The Term Loans and Revolving Credit Facility are collateralized by most of ACL's assets. The Senior Notes are not collateralized. ACL has Other Notes totaling $190 which mature in 2002 with rates of 6.75% and 4.9%. 25 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Term Loans, Revolving Credit Facility and Senior Notes contain a number of covenants, including specified financial ratios. As of December 28, 2000 ACL failed to meet the leverage ratio and the coverage ratio covenants as defined in the Senior Credit Facility ("Amendment No. 5"). ACL entered into an agreement to amend the covenants in the Senior Credit Facility. Under the terms of the amendment, ACL sold $40,000 in certain identified assets and used the proceeds to repay the Term Loans in 2001. ACL also purchased $5,000 par value of ACL Senior Notes at a discount in 2001 which resulted in a gain of $1,885 in 2001 from the early extinguishment of debt and is reported as an extraordinary item in the consolidated statement of operations. ACL also repaid $4,937 in Other Notes in 2001. Following December 31, 2001, the covenant requirements reverted to those specified in the original Senior Credit Facilities which are more restrictive than the amended covenants. Certain covenants added by Amendment No. 5 also become more restrictive. Due in part to reduced EBITDA as a result of the closure of the upper Mississippi River because of flooding during the second quarter of 2001, it is not likely that the Company will be able to meet these covenant requirements in 2002, absent an additional amendment to the Senior Credit Facilities and the consummation of the Danielson Recapitalization discussed below. Failure to meet these covenants could have a material adverse effect on the Company. On December 31, 2001, ACL elected not to pay the interest due (the "Bond Interest Payment") on its Senior Notes due to ongoing negotiations with its lenders and noteholders regarding the restructuring of ACL's bank and bond debt. Following the thirty (30) day grace period provided by the Indenture, ACL again elected not to make the Bond Interest Payment. This election not to pay the Bond Interest Payment is an event of default under the Indenture, however, certain Noteholders party thereto entered into forebearance agreements with ACL agreeing not to accelerate the debt or take additional adverse actions against ACL. Acceleration of the debt under the Indenture would have a material adverse effect on ACL's liquidity. Further, as a result of ACL's failure to make the Bond Interest Payment, J.P. Morgan Chase & Co. ("J.P. Morgan") delivered a notice to ACL in January 2002 asserting that ACL was in default of the Credit Agreement. Certain lenders party to the Credit Agreement also entered into forebearance agreements with ACL, agreeing not to accelerate the debt or take additional adverse actions against ACL. An acceleration of the debt under the Credit Agreement would have a material adverse effect on ACL's liquidity. In accordance with these facts and circumstances, ACL has reclassified the outstanding obligations under the Indenture and the Credit Agreement from long term to current. ACL has been pursuing strategic financial restructuring alternatives. On March 15, 2002, ACL entered into a definitive recapitalization agreement (the "Recapitalization Agreement") regarding the acquisition and recapitalization of ACL (the "Danielson Recapitalization") by Danielson Holding Corporation ("Danielson"). Under the terms of the Danielson Recapitalization, Danielson would acquire 100% of the membership interests of the Parent. ACL's present indirect preferred equity holders would receive $7,000 in cash. ACL management will receive approximately $1,695 of restricted Danielson common stock. In addition, Danielson will deliver $25,000 in cash and approximately $58,493 of ACL's existing Series B 10 1/4% Senior Notes due June 2008 (the "Senior Notes") issued pursuant to an indenture dated as of June 30, 1998 with the United States Trust Company of New York (the "Indenture"), to ACL Holdings in connection with the transaction. Danielson currently expects to fund the acquisition through a rights offering to its existing security holders, upon terms and conditions to be determined. However, consummation of the Recapitalization Agreement is not conditioned on the successful completion of the rights offering. The Danielson Recapitalization will result in a reduction of ACL's senior secured bank debt incurred under the Senior Credit Facilities and the restructuring of the Senior Notes pursuant to an exchange offer and consent solicitation in which $236,507 of the existing Senior Notes (all notes held by parties other than Danielson) would be exchanged for $120,000 of new 11 1/4% senior notes due January 1, 2008 ("New Senior Notes") and approximately $116,507 of new 12% pay-in-kind senior subordinated notes due July 1, 2008 ("PIK Notes"). Senior Notes held by Danielson would be retired in conjunction with the Danielson 26 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Recapitalization. ACL would also issue additional New Senior Notes in an aggregate principal amount equal to the accrued and unpaid interest on its existing Senior Notes, other than those held by Danielson, through the effective date of the transaction up to $20,000, and to the extent that such accrued and unpaid interest exceeds $20,000, additional PIK Notes in an amount equal to such excess would be issued. The Recapitalization Agreement provides that the exchange offer and consent solicitation will be made in reliance on a registration exemption provided by Section 3(a)(9) under the Securities Act of 1933, conditioned on the minimum participation of 95% of the outstanding principal amount of ACL's outstanding Senior Notes, as to which noteholders holding more than two-thirds of the outstanding principal amount of such notes have agreed to tender. In the event that the exchange offer and consent solicitation is not consummated by June 15, 2002, the Recapitalization Agreement provides for the implementation of the Danielson Recapitalization through a voluntary prepackaged bankruptcy plan under Chapter 11 of the Bankruptcy Code, as to which noteholders holding more than two-thirds of the outstanding principal amount of ACL's outstanding Senior Notes have agreed to accept. In order to assist in the consummation of the Danielson Recapitalization, ACL has received forbearance agreements from its senior secured lenders pending the negotiation and execution of definitive documentation relating to the amendment of ACL's Senior Credit Facilities satisfactory to the parties. In June 1998, ACL deposited $26,128 into an escrow fund which, together with future income earned on such amount, was used to repay $24,400 principal of the Terminal Revenue Refunding Bonds ("Revenue Bonds") plus redemption premium and interest in 2000. The redemption premium of $734 was reported as an extraordinary item in the consolidated statement of operations. Long-term debt due in the next five years under the revised Term Loan agreement, the Senior Notes and Other Notes is $608,519 in 2002, and $0 thereafter. NOTE 5. INCOME TAXES ACL and its subsidiaries (except for ACL Capital Corp., American Commercial Lines Funding Corporation and the foreign subsidiaries) are organized as limited liability companies. As such, ACL passes through its U.S. federal and substantially all of its state (but not foreign) taxable income to its members who are responsible for income taxes on such taxable income. Components of income tax expense (benefit) follow:

Income tax computed at federal statutory rates reconciled to income tax expense (benefit) follows:

27 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. EMPLOYEE BENEFIT PLANS ACL sponsors or participates in defined benefit plans covering both salaried and hourly employees. The plans provide for eligible employees to receive benefits based on years of service and either compensation rates near retirement or at a predetermined multiplier factor. Contributions to the plans are sufficient to meet the minimum funding standards set forth in the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. Plan assets consist primarily of common stocks, corporate bonds and cash and cash equivalents. As of January 31, 2000, the accrued benefit obligation under the American Commercial Lines LLC Pension Plan ("ACL Pension Plan") was frozen. The past service benefit obligation is complemented by a new prospective annual benefit obligation. This change affects salaried employees covered by the ACL Pension Plan and resulted in cost savings to ACL in 2001 and 2000. In 1999 the National Marine Pension Plan was merged into the ACL Pension Plan. In addition to the defined benefit pension and related plans, ACL has a defined benefit post-retirement plan covering most full-time employees. The plan provides medical benefits and is contributory, with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. The accounting for the health care plan anticipates future cost-sharing changes to the written plan that are consistent with ACL's expressed intent to increase the retiree contribution rate annually. A summary of the pension and post-retirement plan components at September 30 (valuation date) follows:

28 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

The net post-retirement benefit obligation was determined using the assumption that the health care cost trend rate for retirees was 8.0% for 2000-2001, decreasing gradually to a 5.5% trend rate by 2008 and remaining at that level thereafter. A 1% increase in the assumed health care cost trend rate would have increased the accumulated post-retirement benefit obligation as of December 28, 2001 by $875 and the aggregate of the service and interest cost components of net periodic post-retirement benefit expense for 2001 by $125. A 1% decrease in the assumed health care cost trend rate would have decreased the accumulated 29 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) post-retirement obligation as of December 28, 2001 by $750 and the aggregate of the service and interest cost components of net periodic post-retirement benefit expense for 2001 by $105. ACL also sponsors certain contributory defined contribution plans covering eligible employee groups. Contributions to such plans are based upon a percentage of employee contributions and were $1,471, $1,456 and $2,028 in 2001, 2000 and 1999, respectively. Certain employees are covered by union-sponsored, collectively-bargained, multi-employer defined benefit pension plans. Contributions to such plans, which are based upon union contracts, were approximately $74, $84 and $76 in 2001, 2000 and 1999, respectively. NOTE 7. LEASE OBLIGATIONS ACL leases buildings, data processing hardware and operating equipment under various operating leases and charter agreements, which expire from 2001 to 2017 and which generally have renewal options at similar terms. Certain vessel leases also contain purchase options at prices approximating fair value of the leased vessels. Rental expense under continuing obligations was approximately $56,711 in 2001, $49,463 in 2000 and $43,978 in 1999. At December 28, 2001, ACL's operating leases with initial or remaining noncancelable lease terms longer than one year and capital leases were as follows:

ACL entered into capital leases of $3,924 and $6,163 in 2001 and 2000, respectively. The 2001 capital lease was with a related party. ACL incurred interest expense related to capital leases of $235 in 2001 and $112 in 2000. The total future minimum lease payments under capital leases of $10,172 less an interest amount of $4,245 results in a present value of net minimum lease payments of $5,927. NOTE 8. RELATED PARTIES Prior to July 1, 1998, ACL was a wholly-owned subsidiary of CSX. ACL had a new equipment charter with a CSX subsidiary and recorded expense of $1,070 in 1999 until the charter was bought out in 1999 for $2,419. In 2001 ACL received $11,969 from GMS for the sale of terminals and proceeds from the condemnation of a terminal. ACL recognized a gain of $1,886 from these transactions. ACL recorded charter income from UABL of $11,052 and $2,089 in 2001 and 2000, respectively. ACL also recorded administrative fee expenses to UABL of $7,709 and $1,457 in 2001 and 2000, respectively. ACL 30 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) sold used barges to UABL for $790 in 2001. At December 28, 2001 ACL had receivables of $13,402 and payables of $8,397 with UABL. In 2001, ACL and Vectura Group invested in Vessel Leasing; 399 Venture Partners, Inc., the majority owner of ACL, also holds a majority ownership interest in Vectura Holding Company LLC which holds a majority ownership interest in Vectura Group. ACL accounts for its 50% ownership in Vessel Leasing by the equity method. ACL's investment of $6,808 in Vessel Leasing is included in other assets on the consolidated statement of financial position. ACL's share of Vessel Leasing's net loss is $38 in 2001 and is included in other income in the consolidated statement of operations. Vessel Leasing's statement of financial position is not consolidated with ACL. As of December 28, 2001 Vessel Leasing had total assets of $54,921 and total liabilities of $45,571 including public long term debt of $42,580 (including current portion) and $2,830 in unearned revenue from prepaid charter payments made by ACL's domestic barging subsidiary. Vessel Leasing's long term debt is not guaranteed by ACL or any of ACL's subsidiaries. ACL's domestic barge operating subsidiary has a long term operating lease commitment to Vessel Leasing, which is guaranteed by ACL. ACL sold new barges for $47,757 to Vessel Leasing in 2001. Profit on sales of barges to Vessel Leasing is deferred by Jeffboat and recognized over the life of the lease. All of these barges, except for those representing a capital lease commitment of $3,924 million, were leased by Vessel Leasing to ACL as operating leases which resulted in ACL charter expense of $1,705. ACL also recorded $3,924 in capital leases with Vessel Leasing in 2001. NOTE 9. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The carrying amounts and fair values of ACL's financial instruments are as follows:

The fair values of the Interest Rate Cap and Senior Notes payable are based on quoted market values. The carrying values of the Term Loans, all of which bear interest at floating rates, approximate their fair values. The fair value of the Other Notes have been estimated using discounted cash flow analyses based on ACL's current incremental borrowing rates for similar types of borrowing arrangements. FUEL PRICE RISK MANAGEMENT ACL uses forward purchases to provide short-term protection against a sharp increase in diesel fuel prices. These instruments generally cover a portion of the company's forecasted diesel fuel needs for towboat 31 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) operations over the next one to twelve months. ACL accounts for the forward fuel purchases as cash flow hedges. In accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), such financial instruments are marked-to-market with the offset to other comprehensive income and then subsequently recognized as a component of fuel expense when the underlying fuel being hedged is used. ACL adopted SFAS 133 at the beginning of the first quarter of 2001. At December 28, 2001, ACL had forward fuel purchase contracts outstanding with an aggregate notional value of approximately $2,806, and a fair value of approximately $242 (loss), which has been recorded in other current liabilities with the offset to other comprehensive earnings for $242 (loss) and an additional fair value of $131 (loss) which has been recorded as other current liabilities with the offset to fuel expense in the consolidated statement of operations. The $242 loss will be recognized in earnings within the next ten months. Under these agreements, ACL will pay fixed prices ranging from $0.51 to $0.86 per gallon. There were 4.4 million gallons remaining on the contracts at December 28, 2001. The agreements terminate October 31, 2002. Due to the bankruptcy of Enron, one of the trading partners, ACL believes the hedge is no longer effective and has expensed the mark-to-market loss of $131 as fuel expense in the 2001 consolidated statement of operations. Management believes that the other trading partner does not present a credit risk to ACL. INTEREST RATE RISK MANAGEMENT ACL entered into an interest rate cap agreement in the third quarter of 2000 to reduce the impact of potential rate increases on floating rate debt. The interest rate cap has a notional amount of $202,000 and a fair value of $37 as of December 28, 2001 and is effective through August 11, 2003. The Company accounts for the interest rate cap as a cash flow hedge whereby the fair value of the interest rate cap is reflected as an asset or liability in the accompanying consolidated statement of financial position. The cap rate (hedging instrument) is the same interest rate index as the base interest rate for the floating rate debt (hedged item). When the interest rate index exceeds the interest rate cap, a portion of the change in fair value of the instrument represents a change in intrinsic value which is an effective hedge. This portion of the change in value will be recorded as other comprehensive income. The remaining change in fair value of $162 in 2001 is recorded as other expense (income) on the consolidated statement of operations. ACL also records changes to other assets on the accompanying consolidated statement of financial position, with the offset recorded as comprehensive income (loss), for changes in the fair value of interest rate swap agreements entered into by GMS, ACL recognized a comprehensive loss of $747 for its share of these swaps in 2001. NOTE 10. CONTINGENCIES A number of legal actions are pending against ACL in which claims are made in substantial amounts. While the ultimate results of pending litigation cannot be predicted with certainty, management does not currently expect that resolution of these matters will have a material adverse effect on the consolidated results of operations, financial position and cash flows. NOTE 11. BUSINESS SEGMENTS ACL has two reportable business segments -- barging and construction. ACL's barging segment includes barge transportation operations in North and South America and domestic fleeting facilities that provide fleeting, shifting, cleaning and repair services at various locations along the inland waterways. The construction segment constructs marine equipment for ACL's domestic and international fleets as well as external customers. 32 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Management evaluates performance based on segment earnings, which is defined as operating income before income taxes. The accounting policies of the reportable segments are consistent with those described in the summary of significant accounting policies. Intercompany sales are transferred at cost. Reportable segments are business units that offer different products or services. The reportable segments are managed separately because they provide distinct products and services to internal and external customers.

--------------- * Barging includes $20,307 of purchased Barging Assets. (1) Financial data for segments below the reporting thresholds are attributable to two operating segments -- a segment operating terminals along the U.S. inland waterways and a segment providing voice and data communications to marine companies operating on the U.S. inland waterways. The segment providing voice and data communications was sold in 2000. 33 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a reconciliation of ACL's revenues from external customers and segment earnings to ACL's consolidated totals.

GEOGRAPHIC INFORMATION

Revenues are attributed to countries based on the location of the service provided. Properties represent the only long lived assets of ACL. MAJOR CUSTOMER Revenues from one customer of the barging segment represented approximately 15% in 2001, 14% in 2000 and 14% in 1999 of ACL's consolidated revenues. NOTE 12. RESTATEMENT The 2001 and 2000 consolidated financial statements have been restated to properly reflect minority interest. An inadvertent error occurred when operating losses, attributable to ACBL Hidrovias Ltd. ("ACBLH"), the ACL 80% owned subsidiary which holds ACL's ownership interest in the marine transportation operation on the Parana/Paraguay River system in South America, were assigned to minority interests in excess of their original capital contributions. While these excess losses will be deducted from any income which may arise and be assigned to minority interests in the future, there is no current obligation on 34 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) behalf of the minority interests to fund these losses. Accordingly the 2001 and 2000 financial statements were restated as follows:

NOTE 13. RESTATEMENT OF QUARTERLY DATA (UNAUDITED) As discussed in Note 12, the 2001 and 2000 consolidated financial statements have been restated. The effects of the restatement on quarterly data is summarized below.

35 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACL's business is seasonal, and its quarterly revenues and profits historically are lower during the first and second fiscal quarters of the year (January through June) and higher during the third and fourth fiscal quarters (July through December) due to the North American grain harvest. A loss of $490 was recorded in the first quarter of 2001 as the cumulative effect of adopting SFAS 133. An extraordinary gain of $1,885 was recorded in the second quarter of 2001 relating to the retirement of Senior Notes. In the fourth quarter 2001, the estimated useful life of boats was changed from 30 to 42 years. This resulted in $1,142 less depreciation for the quarter. The year 2000 included a second quarter extraordinary item charge of $734 for the Terminal Bond redemption premium, the gain on the sale of Watercom of $11,418 is included in the third quarter and an impairment loss of $3,865 is included in the fourth quarter. The first quarter of 1999 includes a non-cash charge of $1,737 for the workers' compensation second-injury funds due to the adoption of Statement of Position (SOP) 97-3. NOTE 14. CHANGES IN ACCOUNTING STANDARDS In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), which provides that all business combinations should be accounted for using the purchase method of accounting and establishes criteria for the initial recognition and measurement of goodwill and other intangible assets recorded in connection with a business combination. The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. ACL will apply the provisions of SFAS 141 to any future business combinations. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which establishes the accounting for goodwill and other intangible assets following their recognition. SFAS 142 applies to all goodwill and other intangible assets whether acquired singly, as part of a group, or in a business combination. SFAS 142 provides that goodwill should not be amortized but should be tested for impairment annually using a fair-value based approach. 36 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In addition, SFAS 142 provides that other intangible assets other than goodwill should be amortized over their useful lives and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of" ("SFAS 121"). SFAS 142 is effective beginning on December 29, 2001. Upon adoption, ACL will be required to perform a transitional impairment test under SFAS 142 for all goodwill recorded as of December 29, 2001. Any impairment loss recorded as a result of completing the transitional impairment test will be treated as a change in accounting principle. The impact of the adoption of SFAS 142 on ACL's results of operations for all periods beginning on or after December 29, 2001 will be to eliminate amortization of goodwill. Management of ACL has not performed a transitional impairment test under SFAS 142 and accordingly cannot estimate the impact of the adoption SFAS 142 as of December 29, 2001. In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). The Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS 121, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of business (as previously defined in that Opinion). This statement also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The objectives of SFAS 144 are to address significant issues relating to the implementation of SFAS 121 and to develop a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. ACL will adopt SFAS 144 in ACL's first quarter 2002. Management is currently evaluating the impact of SFAS 144 on ACL's future financial reporting. NOTE 15. SUMMARIZED FINANCIAL INFORMATION FOR SIGNIFICANT 50-PERCENT-OR-LESS-OWNED PERSONS

NOTE 16. GUARANTOR FINANCIAL STATEMENTS The $735,000 of debt issued by ACL and a revolving credit facility, which provides for revolving loans and the issuance of letters of credit in an aggregate amount up to $100,000, are guaranteed by ACL's wholly-owned domestic subsidiaries, other than ACL Capital Corp. (which was formed in connection with the transaction), any Accounts Receivable Subsidiary (as defined in the Indentures with respect to such debt) 37 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and certain subsidiaries of ACL without substantial assets or operations (collectively the "Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint and several. Separate financial statements of the Guarantor Subsidiaries are not presented because management has determined that they would not be material to investors. The following supplemental financial information sets forth on a combined basis, combining statements of financial position, statements of earnings and statements of cash flows for the Guarantor Subsidiaries, non-guarantor subsidiaries and for ACL as of December 28, 2001 and December 29, 2000 and for the fiscal years ended December 28, 2001, December 29, 2000 and December 31, 1999. 38 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 2001 (AS RESTATED)

39 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 29, 2000 (AS RESTATED)

40 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999

41 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 28, 2001 (AS RESTATED)

42 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 29, 2000 (AS RESTATED)

43 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999

44 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 28, 2001

45 AMERICAN COMMERCIAL LINES LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMBINING STATEMENT OF FINANCIAL POSITION AT DECEMBER 29, 2000

46 REPORT OF INDEPENDENT ACCOUNTANTS To Board of Managers of American Commercial Lines LLC: In our opinion, based on our audits and the reports of other auditors, the consolidated financial statements listed in the Index appearing under Item 14(a)(1), after the restatement described in Note 12, present fairly, in all material respects, the financial position of American Commercial Lines LLC and its subsidiaries (ACL) at December 28, 2001 and December 29, 2000, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 28, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, based on our audits and the reports of other auditors, the financial statement schedule listed in the Index appearing under Item 14(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of ACL's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We did not audit the financial statements of UABL Limited (UABL), a 50% owned subsidiary, for 2001, which statements reflect 7% of consolidated total assets as of December 28, 2001, and 27% of consolidated net loss for the fiscal year ended December 28, 2001. We also did not audit the financial statements of Global Material Services LLC (GMS), a 50% owned subsidiary, for 1999, which statements reflect 1% of consolidated total assets as of December 31, 1999, and 45% of consolidated net earnings for the fiscal year ended December 31, 1999. Those statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for UABL and GMS, is based solely on the reports of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. The accompanying consolidated financial statements have been prepared assuming that ACL will continue as a going concern. ACL incurred a substantial loss during 2001. As discussed in Note 4 to the consolidated financial statements, subsequent to December 28, 2001 ACL also defaulted on its Senior Notes and Senior Credit Facilities and has determined that it is not likely that it will be able to meet the covenant requirements included in the Senior Credit Facilities agreement for 2002. Accordingly, ACL's outstanding debt has been classified as current in its consolidated balance sheet at December 28, 2001. The above facts raise substantial doubt about ACL's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As discussed in Note 1 to the consolidated financial statements, during the fourth quarter of 2001 the Company prospectively increased its estimate of the useful life of towboats, which reduced the loss before extraordinary items and the net loss by $1.1 million for the fiscal year ended December 28, 2001. PRICEWATERHOUSECOOPERS LLP Louisville, Kentucky March 26, 2002, except for Notes 12 and 13, as to which the date is August 13, 2002. 47 SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)

--------------- (1) Contribution of assets to UABL. (2) Securitization of accounts receivable. 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. American Commercial Lines LLC (Registrant) By: /s/ MICHAEL C. HAGAN ------------------------------------ Michael C. Hagan President and Chief Executive Officer August 13, 2002 49

AMERICAN COMMERCIAL LINES LLC 10-K/A