CROWLEY MARITIME CORP - 10-K Annual Report

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

FORM 10-K

(Mark One)

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

OR

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 000-49717

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

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

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] 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]

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

The aggregate market value of the shares of the registrant's voting and
non-voting common stock held by non-affiliates of the registrant as of June 30,
2004, was $32,473,475 (based upon $1,175.00 per share being the average of the
closing bid and asked price on June 30, 2004, as reported in the Pink Sheets).

As of March 18, 2005, 88,801 shares of voting common stock, par value $.01
per share, and 46,138 shares of non-voting Class N common stock, par value $.01
per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be used by the registrant in
connection with its 2005 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Form 10-K.
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CROWLEY MARITIME CORPORATION

FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

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Certain statements in this Form 10-K and its Exhibits ("Form 10-K")
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. The words or phrases "can be," "expects," "may affect,"
"anticipates," "may depend," "believes," "estimates," "plans," "projects" and
similar words and phrases are intended to identify such forward-looking
statements. These forward-looking statements are subject to various known and
unknown risks and uncertainties and Crowley Maritime Corporation (the "Company")
cautions that any forward-looking information provided by or on behalf of the
Company is not a guarantee of future results, performance or achievements.
Actual results could differ materially from those anticipated in these
forward-looking statements due to a number of factors, some of which are beyond
the Company's control.

In addition to those risks discussed in Risk Factors under "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the Company's other public filings, press releases and
statements by the Company's management, factors that may cause the Company's
actual results, performance or achievements to differ materially from any future
results, performance or achievements expressed or implied in such
forward-looking statements include:

- changes in worldwide demand for chemicals, petroleum products and other
cargo shipped by the Company's customers;

- the cyclical nature of the shipping markets in which the Company's Liner
Services segment operates;

- changes in domestic and foreign economic, political, military and market
conditions;

- the effect of, and the costs of complying with, federal, state and
foreign laws and regulations;

- the impact of recent and future acquisitions and joint ventures by the
Company on its business and financial condition;

- fluctuations in fuel prices;

- the Company's ongoing need to be timely in replacing or rebuilding
certain of its tankers and barges currently used to carry petroleum
products;

- competition for the Company's services in the various markets in which it
operates;

- risks affecting the Company's ability to operate its vessels or carry out
scheduled voyages, such as catastrophic marine disaster, adverse weather
and sea conditions, and oil, chemical and other hazardous substance
spills;

- the effect of pending asbestos related litigation and related
investigations and proceedings;

- the state of relations between the Company and its unionized work force
as well as the effects of possible strikes or other related job actions;
and

- risks associated with the Company's foreign operations.

All such forward-looking statements are current only as of the date on which
such statements were made. Readers should carefully review this Form 10-K in its
entirety, including, but not limited to, Crowley Maritime Corporation's
consolidated financial statements and the notes thereto.

The Company does not undertake any obligation to update publicly any
forward-looking statement to reflect events or circumstances after the date on
which any such statement is made or to reflect the occurrence of unanticipated
events.

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PART I

ITEM 1. BUSINESS.

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

COMPANY OVERVIEW

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

The Company employs approximately 4,300 people and provides its services
using a fleet of more than 260 vessels, consisting of RO/RO (roll on roll off)
vessels, LO/LO (lift on lift off) vessels, tankers, tugs and barges. Our
land-based facilities and equipment include terminals, warehouses, tank farms,
office buildings, trucks, trailers, containers, chassis, cranes and other
specialized vehicles.

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

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

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The following table lists the Company's owned, managed and chartered
vessels as of December 31, 2004:

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

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

LINER SERVICES

Liner Services provides scheduled marine transportation services between
designated ports for the carriage of cargo, including containers, trailers,
vehicles and oversized cargo, and performs logistics, warehousing, distribution
and special cargo handling services, including the carriage of apparel,
refrigerated perishable goods and hazardous materials. At December 31, 2004,
Liner Services provided service to approximately 24 countries in the Caribbean,
Central America and South America with 35 ocean going ships,

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tugs and barges capable of carrying approximately 12,317 twenty foot equivalent
units, or TEU's. Liner Services also provides third party vessel management
services for eight vessels and leases space for approximately 40 TEU's on a
vessel under a slot charter agreement. Liner Services owns or leases
approximately 40,000 pieces of intermodal equipment, including containers,
trailers and chassis.

THE PUERTO RICO AND CARIBBEAN ISLANDS SERVICE

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

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

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

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

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

The Bahamas service uses a time chartered LO/LO vessel having a capacity of
approximately 408 TEU's. This service has two scheduled departures a week from
Jacksonville and Port Everglades, Florida to Nassau, Bahamas.

THE LATIN AMERICA SERVICE

Our Latin America Service provides scheduled liner services between:

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

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

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

The United States South Atlantic to the Southern Zone of Central America
service deploys: (a) three time chartered RO/RO vessels with an average capacity
of 360 TEU's that provides weekly service between Port Everglades, Florida and
Costa Rica, Panama and Guatemala northbound; and (b) one time chartered LO/LO
vessel with a capacity of 70 TEU's which feeders cargo weekly between Limon,
Costa Rica and Rama, Nicaragua.

The Gulf of Mexico to the Northern Zone of Central America service deploys
three time chartered RO/ RO vessels, with an average capacity of 325 TEU's. This
service: (a) has three weekly sailings from Gulfport, Mississippi to Honduras
and Guatemala with overland services to Nicaragua and El Salvador; and (b) calls
upon Cuba three or four times a month depending on cargo demand.

The United States South Atlantic to the Dominican Republic and Haiti
service deploys one time chartered LO/LO vessel with an average capacity of 335
TEU's. The service has one sailing a week between Port Everglades, Florida and
ports in the Dominican Republic and Haiti.

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

The charters for the vessels used in the services described above expire
between 2005 and 2008. Vessels of the type time chartered by the Company for
these services have been readily available and it has not been difficult to
charter new vessels or renew the charters for existing vessels.

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

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

- trucking in the United States and Central America;

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

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

In December 2003, the Company approved a plan to sell the Logistics
operations of its Liner Services segment in Venezuela and completed the sale in
February 2004. For further information regarding the sale, refer to Note 4 of
the Notes to Consolidated Financial Statements in "Item 8. Financial Statements
and Supplementary Data."

At December 31, 2004, Liner Services owned or leased, on a long-term basis,
marine terminals and container yards in the locations listed in the table below.
In those ports where the Company does not own or lease terminals or container
yards, it depends upon common use terminals.

MARINE TERMINALS AND CONTAINER YARDS

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

WAREHOUSE AND DISTRIBUTION SPACE

SHIP ASSIST AND ESCORT SERVICES

Ship Assist and Escort Services provides ship assist, tanker escort,
docking and related services in Oakland, San Diego, Los Angeles and Long Beach,
California, Puget Sound, Washington and Valdez, Alaska. Included within its
fleet are 28 tugs ranging in length from 85 feet to 150 feet with between 3,500
and 10,192 brake horsepower, and 61 barges of various sizes, capacities and
capabilities. In addition to providing ship assist and escort services, the tugs
and barges based in Valdez, Alaska are also capable of providing fire fighting
and oil spill response services and are predominantly used for these response
services. The tugs operating in Oakland, San Diego, Los Angeles and Long Beach,
California and Puget Sound, Washington primarily provide assistance to large
tankers and container vessels as they enter and depart from west coast harbors.

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

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

We currently provide various marine services to the Alyeska Pipeline
Service Company ("Alyeska") pursuant to a long-term Master Time Charter as
Amended and Restated on January 1, 1999 (the "Master Time Charter") and other
related agreements. Alyeska is agent for the owners of the Trans-Alaska
Pipeline. Our relationship with Alyeska began in the early 1970s during
construction of the Trans-Alaska Pipeline and we have had formal agreements with
Alyeska since approximately 1991. Under the Master Time Charter, Alyeska may,
pursuant to individual charter orders which set forth the specific terms and
conditions of each

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time charter, time charter from us vessels owned by us or chartered in by us
from third parties, as required to provide tanker escort and docking services,
emergency response in the event of an actual or potential pollution incident,
firefighting and other related services needed by the oil companies to transport
crude oil by tanker from Alaska to the continental United States. We operate
each of the vessels chartered to Alyeska. Under our agreements with Alyeska, we
also provide the oil companies with various shore-side services. As of December
31, 2004, 17 vessels owned by us, consisting of 10 tugs, 2 line boats and 5
barges, are under time charter to Alyeska. The tugs currently chartered to
Alyeska are also capable of providing fire fighting and oil spill response
services.

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

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

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES

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

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

Oil and Chemical Distribution and Transportation Services uses four
articulated tug/barge units. Unlike our oil barges which are towed by steel
cables connected to tugs, our articulated tug/barge units are powered by
specially designed tug boats which, through mechanical connections that utilize
two large cylindrical pins, are connected to special fittings located in notches
at the rear of their respective barges. Although the connection between these
specially designed tugs and barges is not permanent and the tugs may operate
independently of their barges, once the connection has been made, the tugs and
barges operate as a single unified vessel. Our articulated tug/barge units
employ a crew of eight and are capable of operating at speeds of up to 12 knots
and carrying 155,000 barrels of refined products. We are currently constructing
two new articulated tug/barge units which will be capable of carrying 180,000
barrels of refined product. These new units will utilize a design similar to the
design used for the four units discussed above and will employ the same number
of crew members and operate at the same speeds.

Our tankers are powered by steam turbine or diesel propulsion systems and
are capable of propelling themselves at speeds of up to approximately 15 knots.
Our integrated tug/barge units are powered by diesel engines and are capable of
propelling themselves at speeds of up to 14 knots. Each of our tankers and each
of our integrated tug/barge units is equipped with living quarters for its crew
members. Our tankers typically

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employ a crew of approximately 28. Our integrated tug/barge units typically
employ a crew of approximately 18. Our tankers and integrated tug/barge units
used for the carriage of petroleum products are capable of carrying up to eleven
types of cargo simultaneously. Our tanker used for the carriage of chemicals can
carry up to 26 different cargoes at the same time.

THE PETROLEUM SERVICE

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

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

In July 2004, the Company entered into a definitive agreement to purchase a
marine and land-based refined petroleum products distribution business from
Northland Fuel LLC and Yukon Fuel as well as certain vessels and other assets
used in Yukon Fuel Company's fuel distribution business in Alaska. For further
information, see "Liquidity and Capital Resources" included in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

MARINE TRANSPORT CORPORATION

Marine Transport Corporation ("MTC"), a wholly owned subsidiary acquired by
the Company in 2001, either owns or leases several vessels used for the carriage
of petroleum products and chemicals. Among these vessels are 3 tankers and 2
integrated and 4 articulated tug/barges with capacities of up to approximately
46,000 long tons. The barges, tankers and other specially designed vessels carry
petroleum products and chemicals: (a) among refineries and storage terminals on
the East Coast and West Coast of the United States and the Gulf of Mexico; and
(b) among ports in Puerto Rico and the Gulf of Mexico.

MTC also provides vessel management services for 22 vessels belonging to
other owners, including commercial companies and the United States government.

In November 2004, MTC sold a vessel that represented a component of the
Company, as defined in Statement of Financial Accounting Standard Board ("SFAS")
144 Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly,
the results of operations of this vessel have been classified as discontinued
operations. For further information, see Note 2 of the Notes to Consolidated
Financial Statements in "Item 8. Financial Statements and Supplementary Data."

ENERGY AND MARINE SERVICES

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

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

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

Due to our extensive network of facilities, our large fleet of vessels and
active services over a large geographic area, Energy and Marine Services is able
to respond quickly to a variety of situations, including emergencies, and
assemble to customer specifications unique configurations of marine equipment
which are otherwise unavailable. To provide this service, we use 31 tugs, 35
barges, and 2 crewboats and occupy approximately 15 acres of shore side
terminals located in Seattle, Washington.

During 2004, Energy and Marine Services was involved in the following
projects:

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

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

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

- transporting materials between Pacific islands and the United States West
Coast;

- transporting oilfield equipment overland in winter-time Alaskan
operations;

- salvage/recovery projects in California and Alaska;

- transporting cargoes between Washington and Alaska; and

- transporting petroleum products between U.S. ports and between Venezuela
and Trinidad.

CORPORATE SERVICES

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

SEASONALITY

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

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Services conducted in Alaska and Russia tend to increase during the second and
third quarters of each year and decline during the first and fourth quarters.

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

CUSTOMERS

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

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

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

COMPETITION

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

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

LINER SERVICES

The services offered by Liner Services between the United States and Puerto
Rico currently compete with three principal other carriers: Horizon Lines,
Trailer Bridge and Sea Star Line, LLC. The services offered by Liner Services
between the United States and Central America currently compete with three
principal carriers: Maersk/Sealand, Seaboard, and American President Line. We
believe our share of these markets in 2004 was substantial. Major competitors
for Logistics services include: United Parcel Service, EXEL, Maersk Logistics,
APL Logistics, Sovereign Logistics and Customs and Trade.

SHIP ASSIST AND ESCORT SERVICES

Our principal competitor for providing ship assist, tanker escort, docking
and lightering services on the West Coast of the United States is Foss Maritime.
Numerous other public or privately held companies are also a source of
competition. In Oakland, California, major competitors are Foss Maritime and
Starlight. In

10

Southern California, major competitors are Foss Maritime and Millennium Towing
Company. In Puget Sound, Washington, our major competitor is Foss Maritime. We
believe that we had a substantial share of each of the Oakland, Southern
California and Puget Sound markets in 2004.

OIL AND CHEMICAL DISTRIBUTION AND TRANSPORTATION SERVICES

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

ENERGY AND MARINE SERVICES

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

GOVERNMENT REGULATION

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

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

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

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

11

aboard the Company's vessels must also comply with numerous safety and fitness
regulations promulgated by the United States Coast Guard, including certain
regulations for drug testing and hours of service.

JONES ACT

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

The United States Coast Guard and American Bureau of Shipping maintain the
most stringent regime of vessel inspection in the world, which tends to result
in higher regulatory compliance costs for United States flag operators than for
owners of vessels registered under foreign flags.

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

ENVIRONMENTAL REGULATION

All of the Company's operations are subject to various federal, state and
local environmental laws and regulations implemented principally by the
Environmental Protection Agency, the United States Department of Transportation,
the United States Coast Guard and state environmental regulatory agencies. These
regulations govern the management of hazardous wastes, discharge of pollutants
into the air, surface and underground waters, including rivers, harbors and the
200-mile exclusive economic zone of the United States, and the disposal of
certain substances. We are currently involved in the remediation of fourteen
properties and have projected approximately $4.4 million to be spent over the
next ten years on these projects. The contamination at these properties is the
result of historic operations. We believe that our operations are in material
compliance with current environmental laws and regulations. We are currently
working with different state and federal agencies through agreed upon orders,
decrees or voluntary actions on the remediation of the impacted properties
mentioned above. We are unaware of any material pending or threatened litigation
or other judicial, administrative or arbitration proceedings against us
occasioned by any alleged non-compliance with such laws or regulations. The
risks of substantial costs, liabilities and penalties are, however, inherent in
marine operations, and there can be no assurance that significant costs,
liabilities or penalties will not be incurred by or imposed on us in the future.

OIL POLLUTION ACT OF 1990

The Oil Pollution Act of 1990 ("OPA 90") established an extensive
regulatory and liability regime intended to protect the environment from oil
spills. OPA 90 applies to owners and operators of facilities operating near
navigable waters and owners, operators and bareboat charterers of vessels
operating in United States waters, which include the navigable waters of the
United States and the 200-mile exclusive economic zone of the United States.
Although it applies in general to all vessels, for purposes of establishing
liability limits, financial responsibility and response planning requirements,
OPA 90 distinguishes tank vessels (which include our chemical and petroleum
product tankers, our crude oil carriers and our oil barges) from "other vessels"
(which include our tugs and the RO/RO and LO/LO vessels used by Liner Services).
As a result of certain oil spills by other shipping companies which received
international publicity, our single hulled tankers and barges are subject to
heightened scrutiny by our customers and various regulatory bodies.

Under OPA 90, owners and operators of facilities and owners, operators and
bareboat charterers of vessels are "responsible parties" and are jointly,
severally and strictly liable for removal costs and damages arising

12

from oil spills relating to their facilities and vessels, unless the spill
results solely from the act or omission of a third party, an act of God or an
act of war. Damages are defined broadly to include:

- natural resources damages and the costs of assessment thereof;

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

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

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

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

- the loss of subsistence use of natural resources.

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

Under OPA 90, with certain limited exceptions, all newly built or converted
oil tankers operating in United States waters must be built with double hulls,
and existing single-hull double-side or double-bottom vessels must be phased out
over time, unless retrofitted with double hulls. As a result of this phase-out
requirement, as interpreted by the United States Coast Guard, the Company has
one vessel in 2005 and one vessel in 2006 that must stop carrying petroleum and
petroleum products if they are not retrofitted with double hulls. If these
vessels are not replaced, the impact on the Company's financial condition,
results of operations and cash flows would not be material. In addition, we own
19 other vessels which, during the six year period beginning in 2010, will need
to be retrofitted with double hulls in order to continue to carry petroleum or
petroleum products in United States waters. While the Company has not completed
its study of what it would cost to make such vessels comply with OPA 90 or to
replace non-complying vessels with new or used complying vessels, we believe
that the cost would represent a material capital expenditure.

OPA 90 expanded pre-existing financial responsibility requirements and
requires vessel owners, operators and bareboat charterers to establish and
maintain with the United States Coast Guard evidence of insurance or
qualification as a self-insurer or other evidence of financial responsibility
sufficient to meet their potential liabilities under OPA 90. Coast Guard
regulations also implement the financial responsibility requirements of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
which imposes liability for discharges of hazardous substances such as
chemicals, in an amount equal to $300 per gross ton, thus increasing the overall
amount of financial responsibility from $1,200 to $1,500 per gross ton. We have
obtained "Certificates of Financial Responsibility" pursuant to the Coast Guard
Regulations for our product and chemical carriers through self-insurance and
commercial insurance.

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

OPA 90 does not prevent individual states from imposing their own liability
regimes with respect to oil pollution incidents occurring within their
boundaries, and many states have enacted legislation providing for

13

unlimited liability for oil spills. Some states have issued regulations
addressing oil spill liability, financial responsibility, and vessel and
facility response planning requirements. We do not anticipate that such
legislation or regulations will have any material impact on our operations.

TITLE XI

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

CAPITAL CONSTRUCTION FUND

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

INTERNATIONAL

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

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

EMPLOYEES

As of December 31, 2004, we had 4,268 employees, including 1,904 employed
on vessels and 2,364 employed at our domestic and foreign offices and other
land-based facilities. Approximately 2,770 of the Company's employees are
employed under the terms of 32 separate collective bargaining agreements with 13
different unions which, among other things, set forth the wages and benefits of
these employees. These agreements have expiration dates ranging from 2005 to
2008. The Company's operations have not been affected significantly by work
stoppages and, in the opinion of management, employee relations are good.

14

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the Company are as follows:

ITEM 2. PROPERTIES.

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

We also maintain additional facilities in the United States and abroad to
support our businesses, including warehouse facilities and dock facilities in
Jacksonville, Florida, Port Everglades, Florida, Miami, Florida, Pennsauken, New
Jersey, Valdez, Alaska, Seattle, Washington, and San Juan, Puerto Rico, some of
which serve as ports-of-call for many customers. In addition, we maintain
strategically dispersed operating bases, and offices in Houston, Texas, Long
Beach, California, Atlanta, Georgia, New Orleans, Louisiana, and Vancouver,
Washington. Petroleum tank farms are located in Bethel, Kotzebue, Nome and
Captain's Bay, Alaska in support of our Alaska petroleum businesses.

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

15

ITEM 3. LEGAL PROCEEDINGS.

GENERAL LITIGATION

In the normal course of business, the Company is subject to legal
proceedings, lawsuits and other claims. Such matters are subject to many
uncertainties and outcomes are not predictable with assurance. Consequently, the
ultimate aggregate amount of monetary liability or financial impact with respect
to these matters at December 31, 2004, cannot be ascertained. While these
matters could affect our operating results for any one quarter when resolved in
future periods and while there can be no assurance with respect thereto,
management believes, with the advice of outside legal counsel, that after final
disposition any monetary liability or financial impact to the Company from these
matters (except as otherwise disclosed below in this "Item 3. Legal
Proceedings.") would not be material to the Company's consolidated financial
condition, results of operations or cash flows.

LITIGATION INVOLVING DIRECTORS

A purported class action and derivative complaint was filed on November 30,
2004, in the Court of Chancery in the State of Delaware against the Company and
its Board of Directors alleging breaches of the fiduciary duties owed by the
director defendants to the Company and its stockholders. Among other things, the
complaint alleges that the defendants have pursued a corporate policy of
entrenching the Company's controlling stockholder, Thomas B. Crowley, Jr., and
certain members of the Crowley family by allegedly expending corporate funds
improperly. The plaintiffs seek damages and other relief. On February 25, 2005,
the Company and the director defendants filed a motion with the Delaware Court
of Chancery seeking dismissal of the lawsuit. The Company believes that the
lawsuit is without merit.

ENVIRONMENTAL LITIGATION

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

During 2003 and 2002, the Company reached agreements with its insurance
underwriters to settle all costs incurred to date and any future costs related
to environmental remediation resulting from occurrences prior to 1986. The
amounts of the settlements were $1.0 million and $5.3 million, in 2003 and 2002,
respectively, net of unrecoverable amounts due to insolvency of certain
underwriters. Both of these settlements were collected during 2003. The Company
recognized $1.0 million and $2.2 million as a reduction to claims expense in
2003 and 2002, respectively. Please see Note 17 of the Notes to Consolidated
Financial Statements in "Item 8. Financial Statements and Supplementary Data"
for additional information.

ASBESTOS LITIGATION

The Company is currently named as a defendant with other shipowners and
numerous other defendants with respect to approximately 16,000 maritime asbestos
cases and other toxic tort cases, most of which were filed in the Federal Courts
in Cleveland, Ohio and Detroit, Michigan. Each of these cases, filed on behalf
of a seaman or his personal representative, alleges injury or illness based upon
exposure to asbestos or other toxic substances and sets forth a claim based upon
the theory of negligence under the Jones Act and on the theory of
unseaworthiness under the General Maritime Law.

Pursuant to an order issued by the Judicial Panel on Multidistrict
Litigation dated July 29, 1991, all Ohio and Michigan cases were transferred to
the United States District Court for the Eastern Division of Pennsylvania for
pretrial processing. On May 1, 1996, Judge Charles R. Weiner administratively
dismissed the

16

cases subject to reinstatement in the future. At present, it is not known when
or how long the process will require. Approximately 35 of the Ohio and Michigan
claims which name one or more Company entities as defendants have been
reinstated, but the plaintiffs' attorneys are not actively pursuing the cases.
It is not known whether Judge Weiner will be able to develop a plan that will
result in settlement of the cases. If he is unsuccessful, upon reinstatement,
the cases should be remanded to the Ohio and Michigan Federal Courts.

In addition, the Company is a defendant in approximately 110 asbestosis or
other toxic cases pending in jurisdictions other than the Eastern District of
Pennsylvania. These other jurisdictions include state and federal courts located
in Northern California, Oregon, Texas, Louisiana, Florida, Maryland and New
York.

The uncertainties of asbestos claim litigation make it difficult to
accurately predict the ultimate resolution of these claims. By their very
nature, civil actions relating to toxic substances vary according to the fact
pattern of each case, the number of defendants and their relative shares of
liability in each case, the applicable jurisdiction and numerous other factors.
This uncertainty is increased by the possibility of adverse court rulings or new
legislation affecting the asbestos claim litigation or the settlement process.
Accordingly, we cannot predict the eventual number of such cases or their final
resolution. The full impact of these claims and proceedings in the aggregate
continues to be unknown.

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

At December 31, 2004, the Company has accrued $2.7 million as its best
estimate of the potential liability and recorded a receivable from its insurance
companies of $1.2 million related to the asbestos litigation described above.

The Company became aware of asbestos related litigation involving certain
cases filed in Northern California during the first quarter of 2004. These
claims were settled in late May 2004. The Company expensed $2.1 million and $4.2
million related to this litigation in the first and second quarters of 2004,
respectively. Although no insurance receivable has been recorded on these
claims, the Company is aggressively pursuing reimbursement from our insurance
companies. In October 2004, the Company submitted demand letters to its
insurance underwriters for settlement amounts and defense costs paid and in
November 2004, the Company filed suit against the insurance underwriters. The
case is currently in discovery. The Company intends to aggressively pursue the
resolution of these insurance claims.

While it is not feasible to accurately predict or determine the ultimate
outcome of all pending investigations and legal proceedings relating to asbestos
or toxic substances or provide reasonable ranges of potential losses with
respect to these matters, given the large and/or indeterminate amounts sought in
certain of these matters and the inherent unpredictability of litigation, it is
possible that an adverse outcome in some of these cases could have a material
adverse affect on the Company's consolidated financial condition, operating
results or cash flows.

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

No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 2004.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

No established public trading market exists for our common stock. Shares of
our common stock are neither listed on any national securities exchange, nor
presently traded on any public stock exchange or in any

17

other public market and there are no plans, proposals, arrangements or
understandings with any person with regard to the development of a public
trading market in our common stock. Although quotations for shares of our common
stock may be obtained in the Pink Sheets (a centralized quotations service that
collects and publishes market maker quotes for over-the-counter securities),
because secondary market activity for shares of our common stock has been
limited and sporadic, such quotations may not accurately reflect the price or
prices at which purchasers or sellers would currently be willing to purchase or
sell such shares.

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

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

(1) No trades during this quarter

As of March 1, 2005, we had 476 stockholders of record of our voting common
stock and one holder of record of our Class N non-voting common stock.

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

The Company's financing agreements for Title XI borrowings contain
restrictive covenants which require, among other things, annual maintenance of
working capital that is equal to or greater than 50% of the total of charter
hire and other lease obligations with remaining terms in excess of one year. The
amount of minimum working capital so required at December 31, 2004 was $41.9
million. While the Company is prohibited from repurchasing shares of any class
of capital stock or declaring or paying any dividend, it may repurchase common
stock from employee stock ownership plans and pay dividends in any twelve-month
period so long as the combined cost does not exceed $10.0 million. At December
31, 2004, the Company was in compliance with all covenants under its financing
and leasing arrangements.

The Company sponsors the Crowley Maritime Corporation Retirement Stock Plan
("RSP"), which held 9,063 shares of our common stock at December 31, 2004, all
of which are fully vested. Distributions of shares allocated to RSP participants
are made as soon as practicable following the participant's death, disability
retirement or termination of Company employment after attainment of age 65. All
other participants are eligible for distribution on the earlier of: (a) the
third calendar quarter of the third plan year that follows the plan year in
which the participant terminates Company employment; or (b) the attainment of
age 65. All distributions to a participant are in the form of a single, lump sum
distribution consisting of shares of common

18

stock. Upon the date of distribution and for the immediately succeeding ten
days, such shares of common stock are subject to the Company's right to
repurchase them for cash equal to their fair market value (discounted for lack
of marketability), determined as of the calendar year-end that coincides with or
immediately precedes the date of distributions.

The Company also sponsors the Stock Savings Plan ("SSP"), an employee stock
ownership plan which held 4,579 shares of our common stock at December 31, 2004,
all of which are fully vested. Participants in the SSP have the option to sell
their stock to the Company at the common stock's marketable fair value (without
discounting for lack of marketability), determined by an independent appraisal
as of the preceding calendar year-end, upon retirement, death or after a break
in service.

A summary of our common stock purchased by the Company from participants in
the RSP and SSP in the fourth quarter of 2004 is as follows:

ITEM 6. SELECTED FINANCIAL DATA.

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

In February 2004, the Company sold its Logistics operations based in
Venezuela for $1.5 million. In November 2004, the Company sold a vessel that was
a component of the Company, as defined in Statement of Financial Accounting
Standard ("SFAS") 144 Accounting for the Impairment or Disposal of Long-Lived
Assets, for $8.8 million. Accordingly, all financial information in "Item 6.
Selected Financial Data" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" has been restated to present the
discontinued Venezuela operations and discontinued vessel operations separately
from the Company's continuing operations. The balance sheet data for December
31, 2000 through 2003 has been restated for certain working capital
reclassifications to conform with the December 31, 2004 presentation.

19

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

20

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

The following discussion should be read in conjunction with our
consolidated financial statements, accompanying notes thereto and other
financial information appearing elsewhere in this report. As explained in the
beginning of Part I of this report, in addition to historical information, the
following discussion contains forward-looking information that involves risks
and uncertainties.

EXECUTIVE SUMMARY

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

In February 2004, the Company sold its Logistics operations based in
Venezuela for $1.5 million. In November of 2004, the Company sold a vessel that
was a component of the Company, as defined in SFAS 144, for $8.8 million.
Accordingly, all financial information in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" has been restated to
present the discontinued Venezuela operations and the discontinued vessel
operations separately from the Company's continuing operations.

A summary of the Company's consolidated results of operations for the years
ended December 31, 2004, 2003 and 2002 is provided below. A summary of certain
financial information for each of the Company's segments for the years ended
December 31, 2004, 2003 and 2002 is presented in Note 20 of the Notes to
Consolidated Financial Statements in "Item 8. Financial Statements and
Supplementary Data".

We are continually looking for opportunities that will complement or
strengthen our existing businesses. As part of these efforts, we: (1) entered
into a construction contract in June of 2004 for two articulated tug/barge
units; (2) entered into a definitive agreement effective July 20, 2004 to
purchase a fuel distribution

21

business in Alaska; and (3) purchased one transportation management company in
2003. To be certain that we have the financial resources required for any
project that meets our criteria, we maintain a revolving line of credit that may
provide up to $95.0 million. At December 31, 2004, the Company had cash and cash
equivalents of $142.9 million and long-term debt in the amount of $372.4
million.

CRITICAL ACCOUNTING POLICIES

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

LONG-LIVED ASSET DEPRECIATION, AMORTIZATION AND IMPAIRMENT

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

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

GOODWILL

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

REVENUE RECOGNITION

The Company's accounting policies for revenue recognition are predicated on
the type of service provided. The common carrier services included in Liner
Services are recognized ratably over each voyage by load and discharge port. The
Company's logistics services and Ship Assist and Escort Services are recognized
as services are provided. Revenues from the Oil and Chemical Distribution and
Transportation Services and Energy and Marine Services are recognized ratably
over the length of the contract. Estimated losses are provided at the time such
losses become evident. The Company's recognition of revenue includes estimates
of the total costs incurred for each service and the total billings to perform
the service that impacts the estimated

22

operating margin. While the Company has processes in place to assist in
developing these estimates, if the Company experiences significantly higher
costs or a significant decrease in estimated billings, the Company's financial
position, results of operation and cash flows could be materially impacted.

LITIGATION AND ENVIRONMENTAL RESERVES

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

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

RESULTS OF OPERATIONS

The following table sets forth: (a) operating revenues and operating income
for Liner Services, Ship Assist and Escort Services, Oil and Chemical
Distribution and Transportation Services, and Energy and Marine Services for the
years ended December 31, 2004, 2003 and 2002; and (b) other income and expenses
not specifically attributable to these operating segments. Other income and
expenses include interest income, interest expense, and minority interest in
consolidated subsidiaries. The Company evaluates the performance of its
operating segments based upon the operating income of the segment, excluding
interest income and expense and income taxes. See the Company's Consolidated
Financial Statements in "Item 8. Financial Statements and Supplementary Data"
for further information.

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

23

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

COMPARISON OF THE YEAR ENDED DECEMBER 31, 2004 AND 2003

Consolidated operating revenues in 2004 increased $31.6 million, or 3.3%,
to $999.7 million compared with $968.1 million in 2003. This increase was the
result of the following events or circumstances:

- $24.7 million as the result of higher prices for direct sales of fuel;

- $12.8 million generated by the vessel mobilization and transportation of
oil exploration cargo in Far East Russia and Korea;

- $6.0 million generated by increased government and commercial contract
activity in the Gulf of Mexico and United States west coast;

24

- $40.9 million from our scheduled marine transportation services as a
result of an increase in rates and container and noncontainer volume; and

- $9.5 million generated by a transportation management company
specializing in the apparel industry that we acquired in 2003.

These increases were partially offset by decreases in revenues which
resulted from the following events or circumstances:

- $14.6 million in direct fuel sales from a decrease in volume sold;

- $7.4 million as a result of reduced demand for oil transportation
activities on the United States west coast;

- $9.0 million from reduced activity in our Northern Alaskan marine and
land operations; and

- $36.7 million from fewer vessels operating in the Oil and Chemical
Distribution and Transportation Services segment as a result of vessels
being sold or dry-docked.

Consolidated operating expenses increased $32.9 million in 2004, or 3.9%,
to $882.0 million compared with $849.1 million in 2003. This increase in
consolidated operating expenses was primarily caused by:

- $16.9 million associated with higher fuel prices for fuel purchased for
our direct fuel sales;

- $13.8 million increased outfitting and mobilization charges related to
the Russia and Korea projects;

- $13.1 million in vessel-related costs and $19.6 million in non-vessel
costs from our scheduled marine transportation services as a result of an
increase in container and noncontainer volume;

- $10.7 million attributable to the operations of a transportation
management company specializing in the apparel industry that we acquired
in 2003; and

- $6.3 million for a payment made by the Company during the second quarter
of 2004 to settle certain asbestos-related claims.

These increases were partially offset by decreased expenses of:

- $10.3 million for the cost of fuel from a decrease in volume sold;

- $3.4 million as a result of reduced demand for oil transportation
activities on the United States west coast;

- $7.6 million from reduced activity in our northern Alaskan land and
marine operations; and

- $33.4 million in vessel-related expenses due to fewer vessels operating
in the Oil and Chemical Distribution and Transportation Services as a
result of vessels being sold or dry-docked.

Consolidated general and administrative expenses increased $1.1 million, or
3.5%, to $32.5 million in 2004 compared with $31.4 million in 2003. This
increase is primarily attributable to a $.6 million increase in payroll related
costs and a $.4 million increase in insurance costs related to split-dollar
insurance and director life insurance policies.

Consolidated depreciation and amortization expense increased $4.8 million,
or 8.3%, to $62.6 million in 2004 compared with $57.8 million in 2003. This
increase is the result of an increase in dry-dock amortization in the amount of
$8.4 million and a $.4 million impairment loss recorded on a non-compete
agreement during 2004, which was partially offset by a decrease in depreciation
of $4.2 million. Dry-dock costs for thirteen vessels were amortized in 2004
compared with ten vessels in 2003. The decrease in depreciation was mostly
caused by lower depreciation expense due to a reduction in the number of vessels
in service.

Consolidated asset recoveries, net decreased $.6 million, or 11.1%, to a
recovery of $4.8 million in 2004 compared with a recovery of $5.4 million in
2003. During 2004, gains of $6.1 million resulted from the sale of equipment,
land and seven vessels. These gains were partially offset by impairment charges
of $1.2 million on four vessels which were taken out of service and are held for
sale. During 2003, gains of $5.8 resulted from the

25

sale of equipment, land, land improvements and ten vessels, which was partially
offset by a $.4 million writedown of vessel improvements.

As a result, our consolidated operating income decreased $7.7 million, or
21.9% to $27.5 million in 2004 compared with $35.2 million in 2003.

Due to an increase in the Company's average cash and cash equivalent
amounts on hand and higher interest rates in 2004, interest income increased
$1.6 million to $2.0 million in 2004 compared with $.4 million in 2003.

Interest expense increased $.5 million, or 2.5%, to $20.2 million in 2004
compared with $19.7 million in 2003. This increase was due to a $1.1 million
increase in interest expense incurred for vessel financings which was partially
offset by a decrease of $.4 million in interest expense on our Revolving Credit
Agreement. There were no borrowings under the Revolving Credit Agreement during
2004.

Minority interest in consolidated subsidiaries decreased $1.6 million to
$.1 million in 2004 compared with $1.7 million in 2003. This decrease is due to
the Company's acquisition in December 2003 of the remaining 25% interest in a
joint venture in which it previously owned a 75% interest.

Other income increased $.9 million to $1.0 million in 2004 compared with
$.1 million in 2003 due to income earned on investments of the Company's
deferred compensation plan. The investments are classified as trading securities
in accordance with SFAS 115 Accounting for Certain Investments in Debt and
Equity Securities.

Income tax expense decreased $5.5 million, to $2.1 million in 2004 compared
with $7.6 million in 2003. The effective tax rate was 20.1% for 2004 and 43.0%
for 2003. The decrease in the effective tax rate is due to reduced vessel
repairs which may be capitalized for tax purposes and favorable IRS court case
resolution.

Discontinued operations increased $13.4 million to income of $16.6 million
in 2004 from $3.2 million in 2003. This increase was due to the sale of a vessel
that was considered a component of the Company, as defined by SFAS 144. The
Company received a payment in the amount of $20.8 million pursuant to the
termination of a series of charters for the vessel.

As a result, net income attributable to common shareholders increased $12.1
million to $23.3 million ($172.50 basic and diluted income per common share) in
2004 compared with $11.2 million ($82.87 basic income per common share and
$79.17 diluted income per common share) in 2003.

Liner Services

Operating revenues from our Liner Services segment increased $53.7 million,
or 9.3%, to $632.3 million in 2004 compared with $578.6 million in 2003. The
increase is primarily attributable to a 3.0% increase in container and
noncontainer volume, an 8.1% increase in average revenue, and an increase of
40.4% in other logistical service revenues. The Company's container and
noncontainer volume increased to 599,693 TEU's during 2004 from 581,955 TEU's
during 2003 due to: (a) a service from the United States to Haiti which
commenced operation during the third quarter of 2003; and (b) growth in our
Central America-Gulf service. The average revenue increase was a result of: (a)
rate increases for our services between the United States and Puerto Rico and
between the United States and certain Caribbean Islands and the Bahamas; and (b)
increases in fuel surcharges. An increase in other logistical service revenues
resulted from: (a) an increase of $2.3 million generated by our expanding
warehousing and distribution operations in Central America; and (b) $9.5 million
of revenue generated by a transportation management company specializing in the
apparel industry that we purchased in July 2003.

Operating expenses increased $50.9 million, or 9.7%, to $578.1 million in
2004 compared with $527.2 million in 2003. An increase in container and
noncontainer volume and growth in our service to Haiti and our Central
America-Gulf service generated an increase of $13.1 million in vessel and $19.6
million in non-vessel-related expenses. Vessel-related expenses consist
primarily of fuel, vessel maintenance and repairs, crew and charter costs, while
non-vessel expenses consist primarily of costs for labor, facilities, purchased
transportation, terminal, port charges, equipment, and equipment maintenance and
repairs. An increase of

26

$10.7 million in other logistical service expenses was due to expenses incurred
by a transportation management company specializing in the apparel industry
purchased in July 2003. Allocation of certain costs arising from the settlement
in 2004 of certain asbestos-related claims resulted in an increase of $4.3
million of operating expenses in 2004 compared to 2003.

Depreciation and amortization increased $2.5 million, or 24.3%, to $12.8
million in 2004 compared with $10.3 million in 2003. The increase was directly
attributable to a $2.0 million increase in dry-dock amortization and a $.4
million impairment loss recorded on a non-compete agreement during 2004. Liner
Services amortized dry-dock costs for nine vessels during the year ended
December 31, 2004 compared with six vessels during the year ended December 31,
2003.

Asset recoveries, net decreased $.4 million to $.6 million in 2004 compared
with $1.0 million in 2003. The gains of $.6 million resulted from disposals of
equipment during the year ended December 31, 2004 and the gains of $1.0 million
resulted from the disposals of two vessels and equipment during the year ended
December 31, 2003.

As a result, the operating income from Liner Services decreased $1.2
million to $19.7 million in 2004 compared with $20.9 million in 2003.

Ship Assist and Escort Services

Operating revenues from our Ship Assist and Escort Services segment
increased $1.3 million, or 1.8%, to $75.0 million in 2004 compared with $73.7
million for 2003. The increase was directly attributable to: (a) a $2.1 million
increase in rates, most of which was attributable to a fuel surcharge to cover
rising fuel prices; and (b) $1.0 million of revenues from operations in Oakland,
California which commenced during the second quarter of 2004. This increase was
partially offset by a decrease in tug volumes which resulted in a $1.8 million
reduction in revenues. The decrease is largely a result of decreased tanker
volumes in the Puget Sound, Washington. Overall vessel utilization rates
remained constant at 72% during 2004 and 2003.

Operating expenses increased $1.4 million, or 2.3%, to $63.2 million in
2004 compared with $61.8 million during 2003. Vessel-related costs, such as
crew, fuel and repairs and maintenance costs, increased by $2.0 million, of
which $.8 million was attributed to labor and fuel costs associated with the
operations in Oakland, California which commenced during the second quarter of
2004. Non-vessel expenses decreased $1.3 million due to a $2.6 million decrease
in property taxes which was partially offset by a $.9 million increase in
subcontracting costs.

Asset recoveries, net increased $.7 million to a recovery of $.7 million
during the year ended December 31, 2004 related to the disposal of one vessel.

As a result, operating income from Ship Assist and Escort Services
increased $.5 million to $10.2 million in 2004 compared with $9.7 million in
2003.

Oil and Chemical Distribution and Transportation Services

Operating revenues from our Oil and Chemical Distribution and
Transportation Services segment decreased $32.2 million, or 13.1%, to $213.4
million in 2004 compared with $245.6 million for 2003. The decrease is directly
attributable to: (a) a $14.6 million decrease in revenues from the direct sale
of fuel caused by a decrease in sales volume due to the loss of a large customer
in Petroleum Services offset by the addition of several customers; (b) a $7.4
million decrease in revenues caused by reduced demand for oil transportation
services on the United States west coast; and (c) a $36.7 million decrease in
revenues caused by the absence of cert