10-K405

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                      SECURITIES AND EXCHANGE COMMISSION 
                             Washington, DC 20549 
                                    ------ 
                                  FORM 10-K 

(Mark One) 
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange 
Act of 1934 [Fee Required] 

For the Fiscal Year Ended December 31, 1994 
                                      or 
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities 
Exchange Act of 1934 [No Fee Required] 

For the Transition Period from _______ to_________

Commission File Number 1-9063 
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                                MARITRANS INC. 
            (Exact name of registrant as specified in its charter) 


                   DELAWARE                                     51-0343903 
         (State or other jurisdiction of                   (Identification No. 
         incorporation or organization)                      I.R.S. Employer) 
               ONE LOGAN SQUARE  
           PHILADELPHIA, PENNSYLVANIA                             19103
     (Address of principal executive offices)                   (Zip Code) 
Registrant's telephone number, including area code            (215) 864-1200 
     Securities registered pursuant to 
        Section 12(b) of the Act: 
                                                         Name of Each Exchange
          Title of Each Class                             on Which Registered 
 Common Stock, Par Value $.01 Per Share                 New York Stock Exchange 
Preferred Stock, Par Value $.01 Per Share                       None 
  Securities registered pursuant to 
    Section 12(g) of the Act: NONE 


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 the 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 (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 requirements for the past 90 days. 
Yes [X] No [ ] 

As of March 14, 1995, the aggregate market value of the voting stock held by 
non-affiliates of the registrant was $70,811,296. As of March 14, 1995, 
Maritrans Inc. had 12,529,628 shares of common stock outstanding. 

                     Documents Incorporated By Reference 

Part III incorporates information by reference from the Proxy Statement for 
Annual Meeting of Stockholders to be held on May 10, 1995. 

                     Exhibit Index is located on page 33. 

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                                  FORM 10-K 

                               MARITRANS INC. 
                              TABLE OF CONTENTS 

                                    PART I 



                                                                                                      Page 
                                                                                                      ----
                                                                                                 
Item 1.                 Business ...................................................................     1 

Item 2.                 Properties .................................................................     9 

Item 3.                 Legal Proceedings ..........................................................    10 

Item 4.                 Submission of Matters to a Vote of Security Holders ........................    11 

                                                  PART II 

Item 5.                 Market for the Registrant's Common Equity and Related Stockholder Matters ..    12 

Item 6.                 Selected Financial Data ....................................................    13 

Item 7.                 Management's Discussion and Analysis of Financial Condition and Results of 
                        Operations .................................................................    13 

Item 8.                 Financial Statements and Supplemental Data .................................    17 

Item 9.                 Changes in and Disagreements with Accountants on Accounting and Financial 
                        Disclosure  ................................................................    29 

                                                 PART III 

Item 10.                Directors and Executive Officers of the Registrant .........................    29 

Item 11.                Executive Compensation .....................................................    31 

Item 12.                Security Ownership of Certain Beneficial Owners and Management .............    31 

Item 13.                Certain Relationships and Related Transactions  ............................    31 

                                                  PART IV 

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

Signatures              .............................................................................   35 



                                       i


                                    PART I 

ITEM 1. BUSINESS 

GENERAL 

   Maritrans Inc. (the "Corporation" or the "Registrant"), together with its 
predecessor, Maritrans Partners L.P. (the "Partnership"), herein called 
"Maritrans," has historically served the petroleum and petroleum product 
industry by providing marine transportation services along the East and Gulf 
Coasts of the United States utilizing its barges and tugboats. Maritrans has 
recently broadened its participation in the industry it serves by adding 
marine terminal facilities and distribution coordination. 

STRUCTURE 

   Current. The Registrant is a Delaware corporation whose common stock 
("Common Stock") is publicly traded. The Registrant conducts most of its 
marine transportation business activities through Maritrans Operating 
Partners L.P. and Maritrans General Partner Inc., wholly owned subsidiaries 
of the Registrant. Most of the Registrant's terminalling and distribution 
services are conducted through subsidiaries of Maritrans Holdings Inc., a 
wholly owned subsidiary of the Registrant. 

   Direct and indirect subsidiaries of the Registrant, including special 
purpose subsidiaries, are: 

     Maritrans Operating Partners L.P. (the "Operating Partnership") 
     Maritrans General Partner Inc. 
     Maritrans Holdings Inc. 
     Maritrans Distribution Services Inc. 
     Maritrans Barge Co. 
     Response Members Inc. 
     Maritrans Capital Corp. 
     Response Services Inc. 
     CCF Acquisition Corp. 
     Maritank Philadelphia Inc. 
     Inter-Cities Navigation (Texas) Corp. 
     Maritank Maryland Inc. 
     Interstate Towing (Texas) Co. 
     Maritank Inc. 
     Maritank Tampa Inc. 
     Maritrans Eastern Inc. 
     Maritrans Inland Inc. 
     Maritrans Gulf Inc. 

   Historical. Founded in the 1850's and incorporated in 1928 under the name 
Interstate Oil Transport Company, Maritrans' predecessor was one of the first 
tank barge operators in the United States, with a fleet which increased in 
size and capacity as United States consumption of petroleum products 
increased. On December 31, 1980, Maritrans' predecessor operations and its 
tugboat and barge affiliates were acquired by Sonat Inc. ("Sonat"). On April 
14, 1987, Maritrans acquired the tug and barge business and related assets 
from Sonat. On March 31, 1993, the limited partners of the Partnership voted 
on a proposal to convert the Partnership to corporate form (the 
"Conversion"). The proposal was approved, and on April 1, 1993, Maritrans 
Inc., then a newly-formed Delaware corporation, succeeded to all assets and 
liabilities of the Partnership. The holders of general and limited 
partnership interests in the Partnership and in the Operating Partnership 
were issued shares of Common Stock, par value $.01 per share, of the 
Corporation, representing substantially the same percentage equity interest 
in the Corporation as they had in the Partnership, directly or indirectly, in 
exchange for their partnership interest. Each previously held Unit of Limited 
Partnership Interest in the Partnership was exchanged for one share of Common 
Stock of the Corporation. For financial accounting purposes, the conversion 
to corporate form has been treated as a reorganization of affiliated 
entities, with the assets and liabilities recorded at their his- 

                                      1 



toical costs. In addition, the Partnership recognized a net deferred income 
tax liability for temporary differences in accordance with Statement of 
Financial Accounting Standard ("FAS") No. 109, "Accounting for Income Taxes," 
which resulted in a one-time charge to earnings of $16.6 million in the first 
quarter of 1993. 

   Overview. Since 1981, Maritrans and its predecessors have transported 
annually over 200 million barrels of crude oil and refined petroleum 
products. Based on its internal research regarding competition, Maritrans 
believes that it is one of the largest United States marine transporters of 
petroleum and petroleum products in the U.S. Coastwise Jones Act trade (i.e. 
from point-to-point within the United States), excluding affiliates of 
integrated oil companies, and that it owns one of the largest domestic fleets 
of U.S. flag oceangoing tank barges. 

   Maritrans operates a fleet of tank barges and tugboats and two terminal 
facilities. Its largest barge has a capacity of approximately 400,000 
barrels, and its current operating barge fleet capacity aggregates 
approximately 4 million barrels. Operating fleet capacity will increase by 
approximately 300,000 barrels when the Company's most recent acquisition, the 
MARITRANS 300, is placed in service in the second quarter of 1995. Aggregate 
capacity at Maritrans' terminal facilities totals approximately 1.2 million 
barrels. 

   Demand for Maritrans' services is dependent primarily upon general demand 
for petroleum and petroleum products in the geographic areas served by its 
vessels. Management believes that United States petroleum consumption, and 
particularly consumption in New England and Florida, are significant 
indicators of demand for Maritrans' services. Increases in product 
consumption generally increase demand for Maritrans' services; conversely, 
decreases in consumption generally lessen demand for Maritrans' services. 

   Management further believes that the level of domestic consumption of 
imported product is also significant to Maritrans' business. Imported 
petroleum products generally can be shipped on foreign-flag vessels directly 
into United States ports for storage, distribution and eventual consumption. 
These shipments reduce the need for domestic marine transportation service 
providers such as Maritrans to carry products from United States refineries 
to such ports. While Maritrans does benefit somewhat from the increase in 
demand for domestic redistribution services that results from the delivery of 
excess product to terminals by foreign-flag vessels, the overall effect of 
refined product imports on the demand for Maritrans' services is generally 
negative. 

   In June 1991, Maritrans, through a subsidiary, Maritank Philadelphia Inc. 
("MPI"), acquired a one-million barrel, deepwater marine terminal located in 
Philadelphia. This facility is a full-service petroleum product terminal able 
to receive, store and subsequently redistribute product by pipeline, tank 
vessel and truck. This facility is also capable of performing cleaning of 
petroleum carrying vessels. Under current law, a vessel owner is jointly and 
severally liable with the barge cleaning contractor and the waste disposal 
contractor in the event that either such contractor improperly disposes of 
any portion of tank cleaning residues from the vessel which is hazardous. Not 
only have the tank cleaning rates paid by Maritrans to third parties been 
increasing substantially, but, in addition, Maritrans believes that at least 
some of these sources for tank cleaning will not continue to be available in 
the future. Management believes the ability to control the cleaning of its 
vessels lessens its environmental exposure, as discussed above, since it can 
control this activity. Maritrans also believes that this facility provides it 
with a long-term strategic advantage since it is able to assure itself of the 
availability of these services at a reasonable cost and, by controlling the 
facility, it is able to ensure that it can manage vessel turn-around time, 
thereby increasing vessel availability, and that the facility is operated in 
an environmentally sound manner. 

   In January 1992, Maritrans restructured its marine operations into three 
divisions -- Eastern, Inland and Gulf, supported by executive and service 
units. The three divisions also provide marketing, logistical, and 
operational support for Maritrans' vessels, which are assigned to divisions 
based on market conditions. This divisional restructuring was designed to 
move Maritrans closer to its markets and customers, improve productivity and 
efficiency in operations and permit more rapid decisions and responses to 
changing conditions. 

   The Gulf Division, headquartered in Tampa, Florida, provides marine 
transportation services for petroleum products from refineries located in 
Texas, Louisiana and Mississippi to distribution points along the Gulf and 
Atlantic Coasts generally south of Cape Hatteras, North Carolina and 
particularly into Florida. The Eastern Division, supported by a major fleet 
center in Philadelphia, Pennsylvania, transports petroleum products from East 
Coast refineries (primarily located in and near Philadelphia) and pipeline 
terminals located in the New York Harbor area to distribution terminals 
primarily located along the Eastern Seaboard between the Canadian Mari- 

                                      2 



time Provinces and Norfolk, Virginia. Maritrans also provides lightering 
services for large tank ships (a process of off-loading crude oil or 
petroleum products from an inbound tanker into barges, thereby enabling the 
tanker to navigate draft-restricted rivers and ports to discharge cargo at a 
refinery or storage and distribution terminal). The Inland Division is also 
supported by fleet center operations in Philadelphia, Pennsylvania, and 
transports petroleum products and chemicals between refineries and 
distribution points along the Delaware River and in the Chesapeake Bay. In 
1993, the Inland Division and Maritank Maryland Inc., which owns a marine 
terminal in Salisbury, Maryland, began to provide distribution services 
through petroleum exchange agreements with customers requiring both marine 
transportation and terminalling services. The petroleum exchange agreements 
are structured so that Maritrans bears none of the exposure to fluctuations 
in inventory price movements. 

   In early 1993, Maritank Maryland Inc. ("MMI") was established as an 
indirect subsidiary of the Registrant. MMI provides marine terminalling and, 
together with the Inland Division, distribution services in Salisbury, 
Maryland. Maritrans also established an office in Houston, Texas in 1993 in 
conjunction with efforts it is undertaking to expand its distribution 
services. 

   Also, in early 1993, Marispond Inc. ("Marispond") was established as an 
indirect subsidiary of the Registrant. Marispond provides a series of 
services, most of which arise from requirements of the Oil Pollution Act of 
1990 ("OPA"). These services include oil spill contingency planning, response 
management and other services on a contract basis to Maritrans and other 
vessel owners from around the world whose vessels call on United States 
ports. In December of 1994 Marispond was sold to the senior executives of 
Marispond, which will enable Maritrans to focus on its core distribution 
services business. Marispond will continue to provide services to Maritrans 
under a multi-year contract. 

SALES AND MARKETING 

   Maritrans provides marine transportation, storage, and distribution 
coordination services primarily to integrated oil companies, independent oil 
companies, and petroleum distributors in the southern and eastern United 
States. Maritrans relies primarily on direct sales efforts, minimizing its 
use of chartering brokers. Maritrans monitors the supply and distribution 
patterns of its actual and prospective customers and focuses its efforts on 
providing services that are responsive to the current and future needs of 
these customers. 

   Maritrans does business on a spot market basis, a term contract basis and, 
more recently, on a product exchange basis. Maritrans strives to maintain an 
appropriate mix of contracted business, based on current market conditions. 

   In light of the potential liabilities of oil companies and other shippers 
of petroleum products under OPA and analogous state laws, management believes 
that some shippers have begun to select transporters in larger measure than 
in the past on the basis of a demonstrated record of safe operations. 
Maritrans believes that the measures it has implemented in the last five 
years to promote higher quality operations and its longstanding commitment to 
safe transportation of petroleum products benefits its marketing efforts with 
these shippers. 

   In 1994, approximately 80 percent of Maritrans' revenues were generated 
from ten customers. In 1994, contracts with Chevron U.S.A., Inc. (including 
affiliates), Sun Oil Company, BP Oil Shipping Company, USA (including 
affiliates) and Star Enterprise accounted in the aggregate for approximately 
15 percent, 13 percent, 11 percent and 10 percent, respectively, of 
Maritrans' revenues. There could be a material adverse effect on Maritrans if 
any of these customers were to cancel or terminate its various agreements 
with Maritrans. Management believes that cancellation or termination of all 
of its business with any of its larger customers is unlikely. 

COMPETITION AND COMPETITIVE FACTORS 

    Overview. The maritime petroleum transportation industry is highly
competitive. The Jones Act, a federal law, restricts United States
point-to-point maritime shipping to vessels built in the United States, owned by
U.S. citizens and manned by U.S. crews. In Maritrans' market areas, its primary
direct competitors are the operators of U.S. flag oceangoing barges and U.S.
flag tankers. In the Gulf market, the primary competitors are the fleets of both
other independent petroleum transporters and integrated oil companies. In the
Eastern and Inland market, management believes, based on its extensive knowledge
and experience in the industry, that Maritrans primarily competes with other
independent oceangoing barge operators and with the captive fleets of integrated
oil companies and, in lightering operations, competes with foreign-flag


                                      3 



operators which lighter offshore. Some of the integrated oil company fleets with
which Maritrans competes are larger than Maritrans' fleet. Additionally, in
certain geographic areas and in certain business activities, Maritrans competes
with the operators of petroleum product pipelines. Competitive factors which
also affect Maritrans include the output of United States refineries and the
importation of petroleum products.

   The primary competition for Maritrans' marine terminals is proprietary 
storage capacity of integrated oil companies, merchant refiners, and 
independent marine terminal operators. 

   U.S. Flag Barges and Tankers. Maritrans' most direct competitors are the 
other operators of U.S. flag oceangoing barges and tankers. Because of the 
restrictions imposed by the Jones Act, there is a finite number of vessels 
that are currently eligible to engage in U.S. maritime petroleum transport. 
Therefore, the size and capacity of Maritrans' fleet relative to those of 
others in the industry is an important factor in competing for business on 
the basis of safety and service. The number of vessels eligible to engage in 
Jones Act trade has declined significantly over the past several years. The 
gradual implementation of regulations requiring significant capital 
modifications and in some cases loss of vessel capacity, as well as a 
decrease in the number of new vessels constructed since 1982, have been the 
major causes of this decline. Competition in the industry is based upon price 
and service (including vessel availability) and is intense. 

   Maritrans is engaged in several different market activities. A significant 
portion of its revenues in 1994 was generated in the coastal transportation 
of petroleum products from refineries or pipeline terminals in the Gulf of 
Mexico to ports which are not served by pipelines. Management believes that 
the optimal vessel size suited to serve these ports is between 20,000 
deadweight tons ("DWT") (approximately 160,000 barrels) and 40,000 DWT 
(approximately 320,000 barrels). Maritrans currently operates six barges in 
this size range in this market, which comprises a significant number of the 
vessels able to compete in this market. The relatively large size of 
Maritrans' fleet generally provides greater flexibility in meeting customers' 
needs. 

   Maritrans competes with operators of generally smaller vessels in its 
Inland and Eastern transportation activities. In this activity Maritrans is 
competing primarily with other barge operators. This is a diverse market 
allowing a broader size range of vessels to participate than in the Gulf of 
Mexico. 

   Management believes that, for the most part, Maritrans' independent 
competitors do not provide the same level of service, quality performance, or 
attention to safe operations as Maritrans due to its fleet size, maintenance 
and training programs, and spill record. 

   General Agreement on Trade in Services ("GATS") and North American Free 
Trade Agreement ("NAFTA"). 

   The possible inclusion of maritime services within the scope of the GATS 
and the NAFTA was the subject of discussion in the concluded Uruguay Round of 
GATS negotiations and NAFTA negotiations. Maritime services are the subject 
of continuing GATS negotiations. If maritime services were deemed to include 
cabotage (vessel trade or marine transportation between two points within the 
same country) and were included in any of these multi-national trade 
agreements, the result would be to open the Jones Act trade, (i.e., 
transportation of maritime cargo between U.S. ports in which Maritrans and 
other U.S. vessel owners operate) to foreign-flag vessels which would operate 
at lower costs. Maritrans understands that cabotage will not be included in 
the GATS and the NAFTA in the foreseeable future; however, the possibility 
exists that cabotage could be included in the GATS, NAFTA or other 
international trade agreement, in the future. In the meantime, Maritrans and 
the maritime industry will continue to resist vigorously the inclusion of 
cabotage in the GATS, NAFTA and any other international trade agreements. 

   The U.S. Administration recently announced support for a proposal to 
export Alaskan crude oil on U.S. built and manned vessels. The proposal will 
require action by the U.S. Congress before implementation. While Maritrans 
does not believe that this step will materially affect the vessel capacity 
competing against Maritrans in the Jones Act trades, it could have an adverse 
impact on the current status of the Jones Act in the context of future 
international trade developments. 

   Refined Product Pipelines. Existing refined product pipelines generally 
are the lowest incremental cost method for the long-haul movement of 
petroleum and refined petroleum products. Other than the Colonial Pipe- 

                                      4 




line system, which originates in Texas and terminates at New York Harbor, the 
Plantation Pipeline, which originates in Louisiana and terminates in 
Washington D.C., and smaller regional pipelines between Philadelphia and New 
York, there are no pipelines carrying refined petroleum products to the major 
storage and distribution facilities currently served by Maritrans. While the 
Colonial Pipeline system reduces the amount of refined product transported 
into the New York area by ship, it provides an origination point for 
Maritrans' business of transporting such products from New York Harbor to New 
England ports. Management believes that high capital costs, tariff regulation 
and environmental considerations make it unlikely that a new refined product 
pipeline system which would have a material adverse effect on Maritrans' 
business will be built in its market areas in the foreseeable future. It is 
possible, however, that, as noted above, new pipeline segments (including 
pipeline segments that connect with existing pipeline systems) could be built 
or that existing pipelines could be converted to carry refined petroleum 
products, either of which could effectively compete with Maritrans in 
particular locations. 

   Natural Gas Pipelines. In December 1991, a 370 mile natural gas pipeline 
from the Canadian border to the northeastern United States markets was 
completed. The operation of this pipeline increased the amount of natural gas 
supplied to the northeastern United States, thus reducing the demand for 
residual fuel for power generation. This ultimately reduced the demand for 
marine transportation of residual fuel and other petroleum products to and 
within the area negatively affecting Maritrans and other carriers active in 
this trade. The continuation of this reduction will depend on the relative 
prices between residual fuel and natural gas, including transportation costs, 
in the future. 

   Imported Refined Petroleum Products. A significant factor affecting the 
level of Maritrans' business operations is the level of refined petroleum 
product imports, particularly in Florida and New England. Imported refined 
petroleum products may be transported on foreign-flag vessels, which are 
generally less costly to operate than U.S. flag vessels. To the extent that 
there is an increase in the importation of refined petroleum products to any 
of the markets served by Maritrans, there could be a decrease in the demand 
for the transportation of refined products from United States refineries, 
which would likely have an adverse impact upon Maritrans. One possible 
outcome of the Clean Air Act could be the importing of more refined product 
from outside the United States in order to avoid the expense of upgrading 
United States refineries to comply with such Act. In this case, while there 
would still be a need for marine petroleum transportation, the demand would 
decrease, thereby possibly materially adversely affecting the coastwise 
business of Maritrans and its competitors. 

   Delaware River Channel Deepening. Legislation has been approved by the 
United States Congress which authorizes the U.S. Army Corps of Engineers to 
deepen the channel of the Delaware River between the river's mouth and 
Philadelphia from forty to forty-five feet late in the 1990's. If further 
legislation appropriating the funds for this project should become law and 
this project is implemented and used by vessels calling on the Delaware 
Valley refineries, it would have a material adverse effect on Maritrans' 
lightering business which currently transports crude oil which is off-loaded 
from deeply laden tankers from the mouth of the Delaware Bay up the Delaware 
River to the Delaware Valley refineries. 

EMPLOYEES AND EMPLOYEE RELATIONS 

   At December 31, 1994, Maritrans and its subsidiaries employed a total of 
488 persons. Of these employees, 81 are employed at the Philadelphia, 
Pennsylvania headquarters of the Registrant or at the Philadelphia and Tampa 
fleet centers, 382 are seagoing employees who work aboard the tugs and 
barges, and 25 are employed by Maritrans' non-marine affiliates. Maritrans 
and its predecessors have had collective bargaining agreements with the 
Seafarers' International Union of North America, Atlantic, Gulf and Inland 
District, AFL-CIO ("SIU"), and with American Maritime Officers ("AMO"), 
formerly District 2 Marine Engineers Beneficial Association, Associated 
Maritime Officers, AFL-CIO, for approximately 32 years. Approximately 
one-half of the total number of seagoing employees employed are supervisors 
and, hence, as part of management, are not represented by maritime unions. 
The collective bargaining agreement with the SIU covers approximately 131 
employees. The collective bargaining agreement with the AMO covers 
approximately 29 employees. Each expires on May 31, 1996. The employees of 
the subsidiaries of Maritrans Holdings Inc. are not covered by any collective 
bargaining agreement. 

                                      5 


   Management believes that the seagoing supervisory and non-supervisory 
personnel contribute significantly to responsive customer service. Maritrans 
maintains a policy of seeking to promote from within, where possible, and 
generally seeks to draw from its union and non-union personnel to fill 
supervisory and other management positions as vacancies occur. 

   Management believes that an operational audit program (performed by 
Tidewater School of Navigation, Inc.) and an extensive training program is 
essential to insure that its employees are knowledgeable and highly skilled 
in the performance of their duties as well as in their preparedness for any 
unforeseen emergency situations that may arise. Consequently, various 
training sessions and additional skill improvement seminars are held 
throughout the year on subjects including deck officer training, tankerman 
training, substance abuse awareness, fire fighting, emergency response and 
personal professional development. In 1991, Maritrans introduced its Quality 
Improvement Program. All employees participate in quality training seminars 
in addition to the skills improvement training mentioned above. 

REGULATION 

   Marine Transportation -- General. The Interstate Commerce Act exempts from 
economic regulation the water transportation of petroleum cargos in bulk. 
Accordingly, Maritrans' transportation rates, which are negotiated with its 
customers, are not subject to special rate regulation under the provisions of 
such act or otherwise. The operation of tugboats and barges is subject to 
regulation under various federal laws and international conventions, as 
interpreted and implemented by the United States Coast Guard, as well as 
certain state and local laws. Tugboats and barges 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 and safety standards presently established by the United 
States Coast Guard. Maritrans' seagoing supervisory personnel are licensed by 
the United States Coast Guard. Seamen and tankermen are certificated by the 
United States Coast Guard. 

   Jones Act. The Jones Act, a federal law, restricts maritime transportation 
between United States points to vessels built and registered in the United 
States and owned by United States citizens. The entities in the Maritrans 
organizational structure engaged in maritime transportation between United 
States points are subject to the provisions of the law. Therefore, it is the 
responsibility of Maritrans to monitor ownership of these entities and take 
any remedial action necessary to insure that no violation of the Jones Act 
ownership restrictions occurs. In addition, the Jones Act requires that all 
United States flag vessels be manned by United States citizens, which 
significantly increases the labor and certain other operating costs of United 
States flag vessel operations compared to foreign-flag vessel operations. 
Foreign-flag seamen generally receive lower wages and benefits than those 
received by United States citizen seamen. In addition, a significant number 
of foreign governments subsidize, at least to some extent, the wages and/or 
benefits received by the seamen of those nations. Furthermore, certain of 
these foreign governments subsidize those nations' shipyards, resulting in 
lower shipyard costs both for new vessels and repairs, than those paid by 
United States-flag vessel owners such as Maritrans, to United States 
shipyards. Finally, 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 those paid by owners of vessels registered under 
foreign flags of convenience. Because Maritrans transports petroleum and 
petroleum products between United States ports, most of its business depends 
upon the Jones Act remaining in effect. There have been various unsuccessful 
attempts in the past by foreign governments and companies to gain access to 
the Jones Act trade. Management expects that efforts of this type will 
continue. 

ENVIRONMENTAL MATTERS 

   Maritrans' operations present potential environmental risks, primarily 
through the marine transportation or storage of petroleum. Maritrans is 
committed to protecting the environment and complying with applicable 
environmental laws and regulations. Maritrans, as well as its competitors, is 
subject to regulation under federal, state and local environmental laws which 
have the effect of increasing the costs and potential liabilities arising out 
of its operations. 

                                      6 


   Marine Storage Terminal Regulation. Maritrans marine terminal subsidiaries 
are subject to various federal, state and local environmental laws and 
regulations, particularly with respect to air quality, the handling of 
materials removed from the tanks of vessels which are cleaned, and any 
spillage of petroleum products on or adjoining marine terminal premises. 
Management believes that this regulatory scheme will become progressively 
stricter in the future, resulting in greater capital expenditures by 
Maritrans for environmentally related equipment. Also, there are significant 
fines and penalties for any violations of this scheme. Management intends to 
reflect any such additional expenditures, to the extent they are able, in the 
rates which are charged to customers from time to time for services. 

   Oil Pollution Legislation. Many of the states in which Maritrans does 
business have enacted laws providing for strict, unlimited liability for 
vessel owners in the event of an oil spill. In addition, certain states have 
enacted or are considering legislation or regulations involving at least some 
of the following provisions: tank-vessel-free zones, contingency planning, 
state inspection of vessels, additional operating, maintenance and safety 
requirements, and state financial responsibility requirements. As a result of 
this legislation and regulation, Maritrans has curtailed its carriage of 
persistent oils, primarily crude and #6 oil, to or through portions of 
several of these states. Persistent oils are those which continue to exist 
longer in the water when spilled, thus making them more difficult to clean 
up. 

   In August 1990, OPA became law. OPA substantially changes the liability 
exposure of owners and operators of vessels, oil terminals and pipelines from 
that imposed under prior law. Under OPA, each responsible party for a vessel 
or facility from which oil is discharged will be jointly, strictly and 
severally liable for all oil spill containment and clean-up costs and certain 
other damages arising from the discharge. These other damages are defined 
broadly to include (i) natural resource damage (recoverable only by 
government entities), (ii) real and personal property damage, (iii) net loss 
of taxes, royalties, rents, fees and other lost revenues (recoverable only by 
government entities), (iv) lost profits or impairment of earning capacity due 
to property or natural resource damage, and (v) net cost of public services 
necessitated by a spill response, such as protection from fire, safety or 
health hazards. 

   The owner or operator of a vessel from which oil is discharged will be 
liable under OPA unless it can be demonstrated that the spill was caused 
solely by an act of God, an act of war, or the act or omission of a third 
party unrelated by contract to the responsible party. Even if the spill is 
caused solely by a third party, the owner or operator must pay all removal 
cost and damage claims and then seek reimbursement from the third party or 
the trust fund established under OPA. 

   OPA establishes a federal limit of liability of the greater of $1,200 per 
gross ton or $10 million per tank vessel. A vessel owner's liability is not 
limited, however, if the spill results from a violation of federal safety, 
construction or operating regulations. In addition, OPA does not preclude 
states from adopting their own liability laws. Numerous states in which 
Maritrans operates have adopted legislation imposing unlimited strict 
liability for vessel owners and operators. Management believes that the 
liability provisions of OPA and similar state laws have greatly expanded 
Maritrans' potential liability in the event of an oil spill, even where 
Maritrans is not at fault. 

   OPA requires all vessels to maintain a certificate of financial 
responsibility for oil pollution in an amount equal to the greater of $1,200 
per gross ton per vessel, or $10 million per vessel in conformance with U.S. 
Coast Guard regulations. Additional financial responsibility in the amount of 
$300 per gross ton is required under U.S. Coast Guard regulations under the 
Comprehensive Environmental Response Compensation and Liability Act 
("CERCLA"), the federal Superfund law. The previous requirement was $150 per 
gross ton per vessel, or $250,000, whichever is larger. Owners of more than 
one tank vessel, such as Maritrans, however, are only required to demonstrate 
financial responsibility in an amount equal to cover the vessel having the 
greatest maximum liability (approximately $40 million in Maritrans' case). 
Maritrans has acquired such certificates through filing required financial 
information with the U.S. Coast Guard. 

   OPA requires all newly constructed petroleum tank vessels engaged in 
marine transportation of oil and petroleum products in the U.S. to be 
double-hulled and all such existing single-hulled vessels to be retrofitted 
with double hulls or phased out of the industry beginning January 1, 1995, in 
order to comply with new standards for such vessels. Because of the age and 
size of Maritrans' individual barges, the first of its operating vessels will be

                                      7 




required to be retired or retrofitted by January 1, 2003, and most of its large
ocean-going, single-hulled vessels will be similarly affected on January 1,
2005. Management believes that it would, for example, cost approximately $20
milion to build a 20,000 DWT double-hulled barge. The cost of retrofitting an
existing 20,000 DWT barge with a double hull may be somewhat less than the cost
of a new barge, but the retrofitting cost would depend upon a variety of
construction and engineering factors. Therefore, retrofitting may not be a
viable economic alternative to the purchase of a new double-hulled barge. The
prices of retrofitting and constructing new vessels may increase materially as a
result of increased demand for shipyard capacity arising from OPA. Also as a
result of this legislation, the expected lives of some of Maritrans' barges have
been shortened, thus forcing Maritrans to accelerate the depreciation of these
vessels. This change in depreciation calculation began in September 1990 and
caused an increase of Maritrans' annual depreciation expense by approximately
$1.4 million.

   The double-hulled or double-bottomed tank barges currently owned by 
Maritrans account for approximately 23 percent of its fleet capacity. 
Maritrans understands that these vessels are grandfathered under the interim 
final rule promulgated by the U.S. Coast Guard. 

   OPA further required all tank vessel operators to submit, by February 18, 
1993, for federal approval, detailed vessel oil spill contingency plans 
setting forth their capacity to respond to a worst case spill situation. 
Maritrans filed its plans prior to that deadline. Several states have similar 
contingency or response plan requirements. Because of the large number of 
ports served by Maritrans, the cost of compliance may be substantial, and, 
while Maritrans is presently in compliance, there is no assurance that 
Maritrans will be able to remain in compliance with all the federal 
requirements or those of one or more states. 

   OPA is expected to have a continuing adverse effect on the entire U.S. oil 
and petroleum marine transportation industry, including Maritrans. The 
effects on the industry could include, among others, (i) increased 
requirements for capital expenditures, which the independent marine 
transporters of petroleum may not be able to finance, to fund the cost of 
double-hulled vessels, (ii) increased maintenance, training, insurance and 
other operating costs, (iii) civil penalties and liability, (iv) decreased 
operating revenues as a result of a further reduction of volumes transported 
by vessels and (v) increased difficulty in obtaining sufficient insurance, 
particularly oil pollution coverage. These effects could adversely affect 
Maritrans' profitability and liquidity. 

   The following table sets forth Maritrans' quantifiable oil spill record 
for the period January 1, 1990 through December 31, 1994: 



                                                                         Gallons Spilled 
                              No. of         No. of         No. of         Per Million 
         Period            Gals. Carried     Spills     Gals. Spilled     Gals. Carried 
----------------------   ---------------   --------    ---------------   --------------- 
                               (000)                        (000) 
                                                                  
1/1/1990 -- 12/31/1990      12,222,000         20           189.37            15.494 
1/1/1991 -- 12/31/1991      10,710,000         18             1.28              .119 
1/1/1992 -- 12/31/1992      10,272,000          8              .02              .002 
1/1/1993 -- 12/31/1993*     10,433,000          4              .02              .002 
1/1/1994 -- 12/31/1994       9,954,000          4              .07              .007 



------ 
* Results for 1993 exclude the product lost, mostly burned, in the collision 
of Maritrans' barge, the OCEAN 255, with vessels owned by others off the 
coast of Florida in August 1993. Management believes that Maritrans was not 
at fault in this incident. 

   Maritrans believes that its spill ratio compares favorably with the other 
independent, coastwise operators in the Jones Act trade. 

   Water Pollution Regulations. The Federal Water Pollution Control Act of 
1972 ("FWPCA"), as amended by the Clean Water Act of 1977, imposes strict 
prohibitions against the discharge of oil (and its derivatives) and hazardous 
substances into navigable waters of the United States. FWPCA provides civil 
and criminal penalties for any discharge of petroleum products in harmful 
quantities and imposes substantial liability for the clean-up costs of 
removing an oil spill. State laws for the control of water pollution also 
provide varying civil and criminal penalties and clean-up cost liabilities in 
the case of a release of petroleum or its derivatives into surface waters. In 

                                      8 




the course of its vessel operations, Maritrans engages contractors, in addition
to Maritank Philadelphia Inc., to remove and dispose of waste material,
including tank residue. In the event that any of such waste is deemed
"hazardous," as defined in FWPCA or the Resource Conservation and Recovery Act,
and is disposed of in violation of applicable law, Maritrans could be jointly
and severally liable with the disposal contractor for the clean-up costs and any
resulting damages. The United States Environmental Protection Agency ("EPA")
previously determined not to classify most common types of "used oil" as a
"hazardous waste," provided that certain recycling standards are met. While it
is unlikely that used oil will be classified as hazardous, the management of
used oil under EPA's proposed regulations will increase the cost of disposing of
or recycling used oil from Maritrans' vessels. Some states in which Maritrans
operates, however, have classified "used oil" as hazardous. Maritrans has found
it increasingly expensive to manage the wastes generated in its operations.

   Air Pollution Regulations. The 1990 amendments to the Clean Air Act give 
the EPA and the states the authority to regulate emissions of volatile 
organic compounds ("VOCs") and any other air pollutant from tank vessels in 
all ports served by Maritrans and storage terminals. Several states with 
ports served by Maritrans already have established regulations to require the 
installation of vapor recovery equipment on petroleum-carrying vessels to 
reduce the emissions of VOCs. Compliance with these federal and state 
regulations has required material capital expenditures for the retrofitting 
of Maritrans' barges and has increased operating costs. Similarly, various 
states require vapor recovery equipment at storage terminals for the loading 
of petroleum into vessels and tank trucks. MPI and MMI are equipped with 
vapor recovery capabilities for the loading of tank trucks. They do not 
currently load petroleum into vessels and therefore have not acquired vapor 
recovery capabilities for that activity. The EPA also has the authority to 
regulate emissions from marine vessel engines; however, with the possible 
exception of the use of low sulfur fuels, direct regulation of marine engine 
emissions is not likely in the near future in ports served by Maritrans. 
However, it is possible that the EPA and/or various state environmental 
agencies ultimately may require that additional air pollution abatement 
equipment be installed in tug boats, including those owned by Maritrans. Such 
a requirement could result in a material expenditure by Maritrans, which 
could have an adverse effect on Maritrans' profitability if it is not able to 
recoup these costs through increased charter rates. 

   Port and Tanker Safety Act. The Port and Tanker Safety Act of 1978 
("PTSA") requires certain oil-carrying tankships to be fitted with 
segregated ballast tanks. PTSA requires self-propelled vessels to be 
retrofitted to meet these standards. Barges are not generally affected by 
such requirements. However, if the environmental standards of PTSA were to be 
made applicable to the large barges operated by Maritrans, Maritrans would be 
required to make significant capital expenditures to retrofit such barges, 
and the cargo-carrying capacity of such barges would also be decreased. There 
have been no recent regulatory efforts to apply the PTSA standards to large 
barges such as those operated by Maritrans. 

   User Fees and Taxes. The Water Resources Development Act of 1986 permits 
local non-federal entities to recover a portion of the costs of new port and 
harbor improvements from vessel operators with vessels benefitting from such 
improvements. Management does not believe that Maritrans' vessels currently 
benefit from such improvements. However, there can be no assurance that such 
entities will not seek to recover a portion of such costs from Maritrans. 
Federal legislation has been enacted imposing user fees on vessel operators 
such as Maritrans to help fund the United States Coast Guard's regulatory 
activities. Other federal, state and local agencies or authorities could also 
seek to impose additional user fees or taxes on vessel operators or their 
vessels. The Coast Guard collects fees for vessel inspection and 
documentation, licensing and tank vessel examinations. These fees have not 
been material to Maritrans. There can be no assurance that additional user 
fees, which could have a material adverse effect upon the financial condition 
and results of operations of Maritrans, will not be imposed in the future. 

ITEM 2. PROPERTIES 

   Vessels. The Registrant's subsidiaries owned, at December 31, 1994, a 
fleet of 61 vessels, of which 35 are barges and 26 are tugboats. Three 
additional tugs and one barge are chartered under long-term leases. 

   In December of 1994, Maritrans increased its double-hull and double-bottom 
vessel capacity to over one million barrels by purchasing the MARITRANS 300, 
an oceangoing, double-hulled petroleum tank barge with a capacity of 
approximtely 300,000 barrels. After undergoing modifications, this vessel is 
expected to be placed in service in the second quarter of 1995. 

                                      9 



   The barge fleet consists of a variety of vessels falling within six 
different barge classifications. The largest vessels in the fleet are the 14 
superbarges ranging in capacity from 188,065 to 400,000 barrels. The oldest 
vessel in that class is the OCEAN 250 which was constructed in 1970, while 
the largest and most recently reconstructed vessel is the OCEAN 400, for 
which modifications were completed as recently as 1990. For the most part, 
however, the bulk of the superbarge fleet was constructed during the 1970's 
and early 1980's. 

   The fleet's next ten largest barges range in capacity from 61,638 barrels 
to 165,881 barrels and were constructed or substantially renovated between 
1967 and 1981. The remainder of the barge fleet is comprised of three vessels 
falling in the 50,000 barrel class, six vessels in the 30,000 barrel class 
and one vessel in the small barge classification and two specially equipped 
chemical barges. The majority of these vessels were constructed between 1961 
and 1977. 

   The tugboat fleet is comprised of one 11,000 horsepower class vessel, 
eleven 5,600 horsepower class vessels, three 4,000 horsepower class vessels, 
five 3,200 horsepower class vessels, six 2,200 horsepower class vessels, two 
pusher class vessels and one chartered 15,000 horsepower class vessel. The 
year of construction or substantial renovation of these vessels ranges from 
1962 to 1990 with the bulk of the tugboats having been constructed sometime 
between 1967 and 1981. 

   Substantially all of the vessels in the fleet are subject to first 
preferred ship mortgages to secure payment of the notes of the Operating 
Partnership. These mortgages require the Operating Partnership to maintain 
the vessels at a high standard and continue a life-extension program for 
certain of its larger barges. At December 31, 1994 Maritrans is not in 
violation of the Operating Partnership's mortgage covenants. At December 31, 
1994 Maritrans owns five barges which were not in a state of operational 
readiness. Most of these vessels were too small to achieve satisfactory 
returns in current market conditions, or were purchased as non-operating 
hulls for potential refurbishment in the event market conditions were to 
improve sufficiently to merit additional expenditures. Maritrans does not 
believe market conditions in 1995 will merit such refurbishments. 

   Marine Terminals. MPI owns 35 acres on the west bank of the Schuylkill 
River in Philadelphia where twelve storage tanks with a total capacity of 
1,040,000 barrels, truck loading racks, office space and related equipment 
used in MPI's marine terminal and tank cleaning operations are located. In 
early 1993, MMI acquired 25 acres on the Wicomico River in Salisbury, 
Maryland where fourteen storage tanks with a total capacity of 170,000 
barrels, truck loading racks, office space and related equipment used in 
MMI's marine terminal operations are located. 

   Other Real Property. The Registrant's operations are headquartered in 
Philadelphia, Pennsylvania, where it leases office space, expiring in 1998. 
Eastern fleet operations are located on the west bank of the Schuylkill River 
in Philadelphia, Pennsylvania where the Operating Partnership owns 
approximately six acres of improved land. In addition, it also leases a 
bulkhead of approximately 430 feet from the federal government for purposes 
of mooring vessels adjacent to the owned land. This lease was renewed in 1993 
and expires in 1998. The Inland Division leases space from MPI. In the 
Philadelphia area, the Operating Partnership has several short term (one year 
or less) leases for nearby pier space for the purpose of mooring vessels and 
warehouse space for the purpose of storage and shop facilities. The Operating 
Partnership also leases four acres of Port Authority land in Tampa, Florida 
for use as its Gulf Division fleet center, which expires in 2004, with three 
renewal options of ten years each and a limited amount of office space in 
Wilmington, Delaware for itself and its affiliated entities. The Operating 
Partnership also has an office space agreement in Houston, Texas for its 
distribution services business. 

ITEM 3. LEGAL PROCEEDINGS 

   Maritrans is a party to routine, marine-related claims, lawsuits and labor 
arbitrations arising in the ordinary course of its business. The claims made 
in connection with Maritrans' marine operations are covered by marine 
insurance, subject to applicable policy deductibles which are not material as 
to any type of insurance coverage. Management believes, based on its current 
knowledge, that such lawsuits and claims, even if the outcomes were to be 
adverse, would not have a material adverse effect on Maritrans' financial 
condition. 

   In connection with the sale of Main Iron Works, Inc. ("MIW"), Maritrans' 
predecessor agreed to reimburse MIW for certain ongoing workmen's 
compensation claims arising prior to the sale of MIW, and retained an 
assignment of the shipyard's rights against its former workmen's compensation 
insurance carrier, which has been in liquidation proceedings. Due to the size

                                      10 


and complexity of the liquidation proceeding, it is unlikely that this matter
will be resolved for several years. Maritrans assumed its predecessor's
reimbursement obligations to MIW and obtained an assignment of the predecessor's
rights against the workmen's compensation insurance carrier. As a result of this
assignment, Maritrans has received to date $0.3 million in reimbursement of
payments made. Maritrans' predecessor originally accrued a liability of $1.3
million for claim payments pursuant to such reimbursement agreement with MIW.
Management believes, based on its current knowledge, that such accrual will be
adequate. However, there is a possibility that future claims could exceed such
amount. Management believes, based on its current knowledge, that the ultimate
resolution of these claims, even if in excess of the amount accrued, would not
have a material adverse effect on Maritrans' financial condition.

   Maritrans' has been sued by 20 individuals, alleging unspecified damages 
for exposure to asbestos and in at least 12 such cases for exposure to 
tobacco smoke. Although Maritrans believes these claims are without merit, it 
is impossible at this time to express a definitive opinion on the final 
outcome of any such suit. Management believes that any liability would not 
have a material adverse effect as it would be adequately covered by 
applicable insurance. 

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

   No matters were submitted to a vote of the Registrant's security holders, 
through the solicitation of proxies or otherwise, during the last quarter of 
the year ended December 31, 1994. 

                                      11 



                                   PART II 

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

   Market Information and Holders 
   ------------------------------
   Maritrans Inc. Common Shares (and prior to April 1, 1993, Maritrans 
Partners L.P. Depositary Units) trade on the New York Stock Exchange under 
the symbol "TUG." The following table sets forth, for the periods indicated, 
the high and low sales prices per share/unit as reported by the New York 
Stock Exchange. 

 QUARTERS ENDING IN 1993:        HIGH         LOW 
------------------------     ---------   --------- 
March 31, 1993                 $4.125      $2.500 
June 30, 1993                   4.250       3.375 
September 30, 1993              4.250       3.250 
December 31, 1993               4.250       3.625 

QUARTERS ENDING IN 1994:         HIGH         LOW 
------------------------     ---------   --------- 
March 31, 1994                 $5.500      $4.000 
June 30, 1994                   5.125       4.375 
September 30, 1994              5.375       4.375 
December 31, 1994               6.125       5.000 


   As of January 31, 1995, the Registrant had 12,529,628 Common Shares 
outstanding and approximately 1,157 shareholders of record. 

   Dividends 
   ---------
   For the year ended December 31, 1994, Maritrans Inc. paid the following 
cash dividends to stockholders: 

           PAYMENTS IN 1994:                 PER SHARE 
          ------------------                 --------- 
          December 12, 1994                    $.02 


   For the year ended December 31, 1993, Maritrans Inc. paid no dividends to 
stockholders. 

   While dividend policy is determined at the discretion of the Board of 
Directors of Maritrans Inc., management believes that it is likely Maritrans 
will pay quarterly cash dividends during 1995. 

                                      12 



ITEM 6. SELECTED FINANCIAL DATA ($000) 



                                                                      MARITRANS INC. 
                                           ------------------------------------------------------------------ 
                                                                 JANUARY 1 TO DECEMBER 31 
                                               1994          1993           1992         1991          1990 
                                           ----------   -------------    ----------   ----------   ---------- 
                                                                                      
CONSOLIDATED INCOME STATEMENT DATA: 
  Revenues ..............................    $124,846      $ 132,539      $133,051     $146,560      $152,368 
  Operating income before depreciation 
    and amortization  ...................      34,250         24,509        25,576       23,394        31,725 
  Depreciation and amortization .........      15,797         15,868        15,578       15,962        13,747 
  Operating income (excludes interest 
    expense)  ...........................      18,453          8,641         9,998        7,432        17,978 
  Interest expense, net .................       9,934         10,373        10,958       10,890        10,299 
  Income (loss) before income taxes and 
    extraordinary item  .................      10,355          5,186         3,419       (1,576)       10,031 
  Provision for income taxes ............       3,823         16,975(1)         --           --            -- 
  Extraordinary item ....................          --             --            --           --         1,784 
  Net income (loss) .....................       6,532        (11,789)(1)     3,419       (1,576)       11,815 
CONSOLIDATED BALANCE SHEET DATA (at period end):
  Total assets ..........................    $257,609      $ 253,038      $251,344     $258,957      $258,481 
  Long-term debt ........................     113,008        110,556       116,866      120,423       114,000 
  Partnership equity ....................          --             --        86,571       90,339       106,290 
  Stockholders' equity ..................      81,173         74,874            --           --            -- 


------ 
(1) Maritrans Inc., the successor to Maritrans Partners L.P. effective April 
    1, 1993, is subject to income taxation. See notes 1 and 4 to Financial 
    Statements. 

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

   The following is a discussion of the consolidated financial condition and 
results of operations of Maritrans Inc. (the "Corporation"), and, together 
with its subsidiaries and Maritrans Partners L.P. (the "Partnership"), herein 
called "Maritrans." 

OVERVIEW 

   Historically, Maritrans has served the petroleum and petroleum product 
distribution industry by using tugs and barges to provide marine 
transportation services along the East and Gulf Coasts of the United States. 
Since 1991, Maritrans has been broadening its participation in the industry 
it serves by adding marine terminal facilities. 

   In June 1991, Maritrans purchased a one-million barrel, deepwater marine 
terminal located on the Schuykill River in Philadelphia. This facility 
provides terminalling and vessel-cleaning services. The facility was 
purchased for $12 million, mainly with the proceeds of a bank loan. In 1992, 
more than $2 million was spent to increase vessel-cleaning capability. 

   In February 1993, Maritrans purchased adjoining terminals in Salisbury, 
Maryland, to provide marine terminalling services. The facilities, which have 
a storage capacity of 170,000 barrels, were purchased for less than $2 
million. Maritrans now operates the merged facilities as a single terminal 
and has distribution services agreements with several oil companies. 

   Maritrans increased its vessel capacity in 1990, when it placed its 
largest barge, the OCEAN 400, in service. This vessel is an oceangoing, 
double-hulled petroleum tank barge with a capacity of approximately 400,000 
barrels. In 1993, Maritrans reduced owned capacity, disposing of vessels 
which, due to their sizes and operating characteristics, Maritrans considered 

                                      13 



excess to its long-term business needs. In addition, a barge involved in a
collision off the coast of Florida in August 1993 was declared a constructive
total loss. Claims related to this incident have been, and are expected to be,
covered by insurance.

   During most of 1993, Maritrans had one or more large barges out of service 
for improvements in vessel performance. In December 1994, Maritrans increased 
its double-hull and double-bottom vessel capacity to over one million barrels 
by purchasing the MARITRANS 300, an oceangoing, double-hulled petroleum tank 
barge with a capacity of approximately 300,000 barrels. After undergoing 
modifications, this vessel is expected to be placed in service in the second 
quarter of 1995. 

   Between 1990 and 1994, Maritrans transported at least 237 million barrels 
annually. The high was 291 barrels in 1990, and the low was 237 million 
barrels in 1994. Many factors affect the number of barrels transported, 
including average trip length, U.S. oil consumption (particularly in Florida 
and the northeastern U.S.), oil company sourcing decisions, and fleet size. 
Overall U.S. oil consumption during 1990-1994 fluctuated between 16.7 
thousand and 17.6 thousand barrels a day. Excluding the MARITRANS 300, which 
had not yet been placed in service at year-end 1994, the operating fleet 
owned by Maritrans was approximately 17 percent smaller in barrel capacity 
than it had been at year-end 1990. 

   Over the last several years, Maritrans has been taking steps to become 
more customer-oriented and more competitive. These steps have included 
measures to increase responsiveness to customers, reduce the risk of oil 
spills and lower costs. A corporate streamlining announced in the fourth 
quarter of 1993 cut costs by approximately $5 million in 1994, as forecasted 
by management when the streamlining was announced. The streamlining resulted 
in a $2 million charge in the fourth quarter of 1993. These efforts, along 
with a significant decline in the cost of chartering vessels from others, 
produced a material improvement in operating income in 1994. 

   Factors that will affect future results of Maritrans include domestic oil 
consumption, particularly in Florida and the northeastern U.S., environmental 
laws and regulations, oil companies' operating and sourcing decisions, 
competition, labor and training costs and liability insurance costs. 
Maritrans' recent broadening of its participation in the industry it serves 
through the addition of marine teminals will also affect results. 

LEGISLATION 

   The enactment of the Oil Pollution Act of 1990 ("OPA") significantly 
increased the liability exposure of marine transporters of petroleum in the 
event of an oil spill. In addition, most of the states in which Maritrans 
operates have enacted legislation increasing the liability for oil spills in 
their waters; the remaining states may enact such legislation. Maritrans 
maintains oil pollution liability insurance of $700 million on its vessels. 
This is generally the maximum amount of oil spill liability insurance carried 
by marine transporters of petroleum. There can be no assurance that such 
insurance will be adequate to cover potential liabilities in the event of a 
catastrophic spill, that additional premium costs will be recoverable through 
increased rates, or that such insurance will continue to be available in 
satisfactory amounts. 

   Moreover, this legislation has increased other operating costs as 
Maritrans has taken steps to minimize the risk of spills. Among such costs 
are those for additional training, safety and contingency programs; these 
expenses have not yet been fully recovered through increased rates. 
Additionally, management believes that the legislation has effectively 
reduced the total volume of waterborne petroleum transportation as shippers 
of petroleum have tried to limit their exposure to OPA. This legislation has 
had a material adverse effect on Maritrans' operations, financial performance 
and expectations. 

   OPA is expected to continue having negative effects on the entire U.S. oil 
and marine petroleum transportation industry, including Maritrans. These 
effects could include: (i) increased capital expenditures to cover the cost 
of double-hulled vessels -- expenditures that the independent marine 
transporters of petroleum may not be able to finance, (ii) continued 
increased maintenance, training, insurance and other operating costs, (iii) 
increased liability and exposure to civil penalties, (iv) decreased operating 
revenues as a result of further reductions in volumes transported on vessels 
and (v) increased difficulty in obtaining sufficient insurance, particularly 
oil pollution coverage. These effects could adversely affect Maritrans' 
profitability and liquidity. 

   OPA will require the retirement or retrofitting of most of Maritrans' 
existing barges. The first of the affected barges will have to be retired or 
retrofitted by 2003. However, most of Maritrans' large oceangoing, 
single-hulled barges will not be affected until 2005. Some of Maritrans' barges

                                      14 


 

are not scheduled for retirement until 2015. A small number of barges may be
treated as meeting the double-hull requirements and, therefore, may be allowed
to continue operating without modification. If Maritrans were to rebuild its
entire barge capacity with double hulls, the estimated cost would be
approximately $500 million. This estimate could be higher as shipyard costs
increase.

   An investment banking firm was retained in 1991 to assist in evaluating 
Maritrans' financial strategies and structure in light of strategic 
considerations at that time. In April 1992, the Board of Directors of the 
managing general partner of the Partnership (a master limited partnership) 
decided to seek unitholder approval to convert from a master limited 
partnership to a corporation. On April 1, 1993, after a vote of the 
unitholders, the Partnership was converted to Maritrans Inc., a corporation. 

RESULTS OF OPERATIONS 

 Year Ended December 31, 1994 Compared with Year Ended December 31, 1993

   Revenues for 1994 were $124.8 million, a $7.7 million (5.8 percent) 
decline from 1993's $132.5 million. This decline accompanied a 4.5 percent 
drop in the number of barrels transported -- to 237.1 million from 248.4 
million in 1993. Maritrans operated a smaller fleet in 1994; however, the 
fleet was more profitable in 1994 than in 1993. Revenue from sources other 
than marine transportation -- primarily terminalling operations -- increased 
to 5.5 percent of total revenue in 1994 from 4.9 percent in 1993. 

   Operating expenses decreased $17.5 million (14.1 percent) to $106.4 
million in 1994 from $123.9 million in 1993. Charter hire expense (the cost 
of utilizing vessels chartered from others) decreased by $5.5 million as a 
result of a decline in the amount of time Maritrans vessels were out of 
service for performance improvements. Such improvements were substantially 
completed in 1993. In addition, the corporate streamlining measures begun in 
the fourth quarter of 1993 at a cost of $2 million produced savings of 
approximately $5 million in 1994. Fuel expense decreased by $1.9 million due 
to a decline in fuel cost per gallon and the number of gallons consumed. 
Lower insurance and maintenance expenses also contributed to the overall 
decline in operating expenses for 1994. 

   Other income in 1994 was primarily interest income, whereas in 1993 other 
income was primarily gains on the sale and liquidation of vessels. 

   Net income for 1994 was $6.5 million compared to a net loss in 1993 of 
$11.8 million. The improvement in net income was primarily due to two 
factors: (i) the impact on 1993 net income of the deferred tax provision 
recorded in that year, as discussed below in "Year Ended December 31, 1993 
Compared With Year Ended December 31, 1992" and (ii) the decline in operating 
expenses in 1994. Although this decline in operating expenses was partially 
offset by the decrease in revenues, it contributed to significant improvement 
in operating income in 1994, which was more than two times the operating 
income of 1993. 

 Year Ended December 31, 1993 Compared with Year Ended December 31, 1992 

   Revenues of $132.5 million for 1993 decreased by $0.6 million, or less 
than one percent, from $133.1 million for 1992. Barrels of cargo transported 
increased by 3.8 million barrels, from 244.6 million to 248.4 million. Severe 
price competition for oil transportation services has existed in the markets 
served by Maritrans in recent years, and is expected to continue. In 1993, 
more barrels were transported shorter distances, lowering the fleet's average 
revenue per barrel. Revenue from sources other than marine transportation 
increased from 2.8 percent of total revenue in 1992 to 4.9 percent in 1993, 
due to additional terminalling operations, contingency management activities, 
and other services supplied to third-party vessel owners. 

   Operating expenses of $123.9 million for 1993, increased by $0.8 million, 
or less than one percent, from operating expenses of $123.1 million for 1992. 
Lower vessel activity levels, due in part to time out of service for vessel 
improvements, and improvements in maintenance processes have decreased 
operation and maintenance expense levels. During most of 1993, Maritrans 
utilized vessels chartered from others while one or more of its large barges 
were out of service for vessel performance improvements and maintenance. Crew 
costs were lower as a result of lower activity levels, including shipyarding 
periods, and the previously described disposal of equipment throughout the 
year. Fuel expense decreased due to a decline in price per gallon and fewer 
gallons consumed. General and administrative costs decreased from the comparable


                                      15 



prior period when general and administrative costs included the early
termination of a lease for office space and costs related to the transaction to
convert from partnership to corporate form. In 1993, general and administrative
costs and operation expense each included a charge of $1 million (for a total of
$2 million) for corporate streamlining costs, most of which related to severance
costs and other continuation benefits for terminating and retiring employees. A
charge of $0.6 million was recorded in 1992 for workforce reduction related
costs.

   In 1993, Maritrans recorded $5.9 million in gains on the sales and 
liquidation of fixed assets as part of other income. In 1992, $3 million was 
recorded in other income as a result of a settlement of outstanding 
litigation against the Partnership's former law firm and a partner of that 
firm. 

   The adoption of Statement of Financial Accounting Standards No. 109, 
"Accounting for Income Taxes," caused the Partnership to recognize a net 
deferred income tax provision of $16.6 million in the first quarter of 1993. 
The adoption of this accounting rule was prescribed by the conversion of the 
Partnership to corporate status, which occurred April 1, 1993. 

   The net loss for 1993 was $11.8 million as compared with net income of 
$3.4 million for 1992. The loss was the result of the previously noted 
provision of $16.6 million for income taxes. Income before income taxes for 
the period increased to $5.2 million from $3.4 million in the comparable 
period in 1992. While the change in operating income reflected the small 
decline in revenues and small increase in operating expenses, the most 
significant factors affecting income before income taxes were the gains on 
sales/liquidation of vessels in 1993 and the settlement receipts from 
litigation in 1992. 

LIQUIDITY AND CAPITAL RESOURCES 

   In 1994, funds provided by operating activities were sufficient to fully 
meet debt service obligations and loan agreement restrictions (including $6.5 
million in required long-term debt repayments) and allowed Maritrans to pay a 
dividend of $.02 per common share in the fourth quarter. Proceeds from the 
issuance of long-term debt were used to purchase an oceangoing, double-hulled 
petroleum tank barge with a capacity of 300,000 barrels. 

   Maritrans believes that in 1995, funds provided by operating activities, 
augmented by financing transactions and investing activities, will be 
sufficient to finance operations, anticipated capital expenditures, lease 
payments and required debt repayments. Dividend payments are expected to 
continue quarterly in 1995. 

   Maritrans believes capital expenditures in 1995 for improvements to its 
current fleet of vessels and existing marine terminals will be approximately 
$11 million. However, Maritrans will continue to evaluate potential purchases 
of marine storage terminals and other investments consistent with its 
long-term strategic interests. It will also evaluate the potential sources of 
funds for such investments. No material commitments existed at December 31, 
1994, for capital expenditures. 

WORKING CAPITAL AND OTHER BALANCE SHEET CHANGES 

   Working capital increased $13.6 million from December 31, 1993 to December 
31, 1994. Current assets increased $9.8 million during the same period. The 
improvement was due primarily to the increases in cash and investments 
held-to-maturity, partially offset by the decreases in all other current 
assets. The decrease in trade receivables was due in part to the decline in 
revenues and improved cash-collection efforts. Payments received from 
insurance carriers for claims submitted caused the decline in other 
receivables. Current liabilities decreased $3.8 million. The ratio of current 
assets to current liabilities increased to 2.56 at December 31, 1994 from 
1.94 at December 31, 1993. 

DEBT OBLIGATIONS AND BORROWING FACILITY 

   At December 31, 1994, Maritrans had $120.7 million in total outstanding 
debt, secured by mortgages on substantially all of the fixed assets of the 
subsidiaries of the Corporation. The current portion of this debt at December 
31, 1994, was $7.7 million. Maritrans has a $10 million working capital 
facility, secured by its marine receivables and inventories, which expires 
June 30, 1995 and which it expects to renew. This facility was not used in 
1994. 

                                      16 



ITEM 8. FINANCIAL STATEMENTS & SUPPLEMENTAL DATA 

                        REPORT OF INDEPENDENT AUDITORS 

Stockholders and Board of Directors 
Maritrans Inc. 

We have audited the accompanying consolidated balance sheets of Maritrans 
Inc. as of December 31, 1994 and 1993, and the related consolidated 
statements of income and cash flows for each of the three years in the period 
ended December 31, 1994. Our audits also included the financial statement 
schedule listed in the Index at Item 14(A). These financial statements and 
schedule are the responsibility of the management of Maritrans Inc. Our 
responsibility is to express an opinion on these financial statements and 
schedule based on our audits. 

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

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated financial position of Maritrans Inc. 
at December 31, 1994 and 1993, and the consolidated results of its operations 
and its cash flows for each of the three years in the period ended December 
31, 1994 in conformity with generally accepted accounting principles. Also, 
in our opinion, the related financial statement schedule, when considered in 
relation to the basic financial statements taken as a whole, present fairly 
in all material respects the information set forth therein. 

                                                             ERNST & YOUNG LLP 
Philadelphia, Pennsylvania 
January 20, 1995 

                                      17 


                                MARITRANS INC. 
                         CONSOLIDATED BALANCE SHEETS 

                                    ($000) 



                                                                            December 31, 
                                                                          ----------------- 
                                                                          1994         1993 
                                                                          ----         ----
                                                                               
ASSETS  
Current assets:  
  Cash and cash equivalents ........................................    $ 33,824     $ 22,422 
  Investments held-to-maturity .....................................       8,000           -- 
  Trade accounts receivable (net of allowance for doubtful accounts 
   of $453 and $605, respectively)  ................................      11,974       14,094 
  Other accounts receivable ........................................       6,833        9,748 
  Inventories ......................................................       3,669        4,968 
  Deferred income tax benefit ......................................       1,181        3,396 
  Prepaid expenses .................................................       4,970        6,061
                                                                        --------    --------- 
       Total current assets ........................................      70,451       60,689 
Vessels terminals and equipment  ...................................     270,553      262,176 
  Less accumulated depreciation ....................................      91,761       78,966 
                                                                        --------    --------- 
       Net vessels terminals and equipment .........................     178,792      183,210 
Other  .............................................................       8,366        9,139 
                                                                        --------    --------- 
       Total assets ................................................    $257,609     $253,038 
                                                                        ========    =========
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities: 
  Debt due within one year .........................................    $  7,654     $  6,311 
  Trade accounts payable ...........................................       1,733        3,492 
  Accrued interest .................................................       2,298        2,382 
  Accrued shipyard costs ...........................................       5,550        6,562 
  Accrued wages and benefits .......................................       5,928        5,649 
  Other accrued liabilities ........................................       4,343        6,954 
                                                                        --------     --------
       Total current liabilities ...................................      27,506       31,350 
Long-term debt  ....................................................     113,008      110,556 
Deferred shipyard costs  ...........................................       8,325        9,843 
Other liabilities  .................................................       5,161        5,353 
Deferred income taxes  .............................................      22,436       21,062 
Stockholders' equity: 
  Preferred stock, $.01 par value, authorized 5,000,000 shares; none 
   issued  .........................................................          --           -- 
  Common stock, $.01 par value, authorized 30,000,000 shares; 
   issued: 1994 -- 12,526,692 shares, 1993 -- 12,523,000 shares  ...         125          125 
  Capital in excess of par value ...................................      74,332       74,315 
  Retained earnings ................................................       6,716          434 
                                                                        --------     -------- 
       Total stockholders' equity ..................................      81,173       74,874 
                                                                        --------     -------- 
       Total liabilities and stockholders' equity ..................    $257,609     $253,038 
                                                                        ========     ========  


See accompanying notes. 

                                      18 


                                MARITRANS INC. 
                      CONSOLIDATED STATEMENTS OF INCOME 

                     ($000 EXCEPT PER SHARE/UNIT AMOUNTS) 



                                                                   January 1 to December 31, 
                                                                   -------------------------
                                                               1994           1993           1992 
                                                               ----           ----           ----  
                                                                              
Revenues  .............................................. $   124,846    $   132,539    $   133,051 
Costs and expenses:  
  Operation expense ....................................      62,488         75,196         70,485 
  Maintenance expense ..................................      20,355         21,062         23,662 
  General and administrative ...........................       7,753         11,772         13,328 
  Depreciation and amortization ........................      15,797         15,868         15,578 
                                                          ----------    -----------    -----------
                                                             106,393        123,898        123,053 
                                                          ----------    -----------    -----------
Operating income  ......................................      18,453          8,641          9,998 
Interest expense  ......................................      (9,934)       (10,373)       (10,958) 
Other income, net  .....................................       1,836          6,918          4,379 
                                                          ----------    -----------    ----------- 
Income before income taxes  ............................      10,355          5,186          3,419 
  Income tax provision .................................       3,823            407             -- 
  Deferred income taxes-resulting from Conversion ......          --         16,568             -- 
                                                          ----------    -----------    -----------
Net income (loss)  .....................................  $    6,532    $   (11,789)   $     3,419 
                                                          ==========    ===========    =========== 
Net income allocated to General Partners  ..............         n/a            n/a    $        69 
Net income allocated to Limited Partners  ..............         n/a            n/a          3,350 
Net income allocated to Limited Partners per Limited 
  Partner unit .........................................         n/a            n/a            .27 
Pro forma loss per share  ..............................         n/a    $      (.94)           n/a 
Earnings per share  .................................... $      0.52         n/a            n/a 
Average common shares/Limited Partner units outstanding   12,524,861     12,523,000     12,250,000 


See accompanying notes. 

                                      19 


                                MARITRANS INC. 
                    CONSOLIDATED STATEMENTS OF CASH FLOWS 
               INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 

                                    ($000) 



                                                                January 1 to December 31, 
                                                                ------------------------- 
                                                             1994         1993          1992 
                                                             ----         ----          ---- 
                                                                             
Cash flows from operating activities: 
  Net income (loss) ...................................    $  6,532     $(11,789)     $  3,419 
  Adjustments to reconcile net income (loss) to net 
   cash provided by (used in) operating activities: 
   Depreciation and amortization  .....................      15,797       15,868        15,578 
   Deferred income taxes  .............................       3,589       16,975            -- 
   Changes in receivables, inventories and prepaid 
     expenses  ........................................       7,425      (11,314)          900 
   Changes in current liabilities other than debt  ....      (5,187)         686          (178) 
   Non-current changes, net  ..........................      (1,316)        (982)        4,531 
   (Gain) loss on sale of equipment  ..................         249       (5,910)         (694) 
                                                           --------     --------      --------
Total adjustments to net income (loss)  ...............      20,557       15,323        20,137 
                                                           --------     --------      --------
  Net cash provided by (used in) operating activities .      27,089        3,534        23,556 
Cash flows from investing activities:  ................ 
  Acquisition of investments held-to-maturity .........      (8,000)          --            -- 
  Cash proceeds from sale of marine vessels and 
   equipment  .........................................       2,985       19,287         1,803 
  Purchase of marine vessels and equipment ............     (14,217)     (17,541)      (10,120) 
                                                           --------     --------      -------- 
   Net cash provided by (used in) investing activities      (19,232)       1,746        (8,317) 
Cash flows from financing activities:  ................ 
  Proceeds from issuance of long-term debt ............      10,250           --         2,000 
  Payment of long-term debt ...........................      (6,455)      (6,032)       (3,100) 
  Proceeds from issuance of short-term debt ...........          --           --         5,500 
  Payment of short-term debt ..........................          --           --       (12,500) 
  Dividends/distributions declared and paid ...........        (250)          --        (7,187) 
                                                           --------     --------      --------
   Net cash provided by (used in) financing activities        3,545       (6,032)      (15,287) 
Net increase (decrease) in cash and cash equivalents  .      11,402         (752)          (48) 
Cash and cash equivalents at beginning of period  .....      22,422       23,174        23,222 
                                                           --------     --------      -------- 
Cash and cash equivalents at end of period  ...........    $ 33,824     $ 22,422      $ 23,174 
                                                           ========     ========      ======== 
Supplemental Disclosure of Cash Flow Information: 
Interest paid  ........................................    $  9,917     $ 10,355      $ 10,888 
Income taxes paid  ....................................    $    250     $    300      $     -- 


                           See accompanying notes. 

                                      20 



                          NOTES TO THE CONSOLIDATED 
                             FINANCIAL STATEMENTS 

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 

 Organization 

   Maritrans Inc. owns Maritrans Operating Partners L.P. (the "Operating 
Partnership") and Maritrans Holdings Inc. (collectively, the "Company"). 
These subsidiaries, directly and indirectly, own and operate tugs and barges 
principally used in the transportation of oil and related products, and own 
and operate petroleum storage facilities. 

   On March 31, 1993, the limited partners of Maritrans Partners L.P. (the 
"Partnership") voted on a proposal to convert the Partnership to corporate 
form (the "Conversion"). The proposal was approved, and on April 1, 1993, 
Maritrans Inc., then a newly-formed Delaware corporation (the "Corporation") 
succeeded to all assets and liabilities of the Partnership. The holders of 
general and limited partnership interests in the Partnership and the 
Operating Partnership were issued shares of common stock, par value $.01 per 
share ("Common Stock"), of the Corporation, representing substantially the 
same percentage equity interest in the Corporation as they had in the 
Partnership, directly or indirectly, in exchange for their partnership 
interest. Each previously held unit of limited partnership interest in the 
Partnership was exchanged for one share of Common Stock of the Corporation. 
For financial accounting purposes, the conversion to corporate form has been 
treated as a reorganization of affiliated entities, with the assets and 
liabilities recorded at their historical costs. In addition, the Partnership 
recognized a net deferred income tax liability for temporary differences in 
accordance with Statement of Financial Accounting Standard ("FAS") No. 109, 
Accounting for Income Taxes, which resulted in a one-time charge to earnings 
of $16.6 million in the first quarter of 1993. 

 Principles of Consolidation 

   The consolidated financial statements include the accounts of Maritrans 
Inc. and subsidiaries, all of which are wholly owned. Prior to the 
Conversion, the financial statements included the accounts of the 
Partnership, the Operating Partnership and subsidiaries. All significant 
intercompany transactions and accounts have been eliminated in consolidation. 

 Marine Vessels and Equipment

   Equipment, which is carried at cost, is depreciated using the 
straight-line method. Vessels are depreciated over a period of up to 30 
years. Certain electronic equipment is depreciated over periods of 7 to 10 
years. Petroleum storage tanks are depreciated over periods of up to 25 
years. Other equipment is depreciated over periods ranging from 3 to 20 
years. Gains or losses on dispositions of fixed assets are included in other 
income in the accompanying consolidated statements of income. 

   The Oil Pollution Act, passed in 1990, requires all newly constructed 
petroleum tank vessels engaged in marine transportation of oil and petroleum 
products in the U.S. to be double hulled and all such existing single- hulled 
vessels to be retrofitted with double hulls or phased out of the industry 
beginning January 1, 1995. Because of the age and size of Maritrans' 
individual barges, the first of its operating vessels will be required to be 
retired or retrofitted by January 2003, and most of its large oceangoing, 
single-hulled vessels will be similarly affected on January 1, 2005. During 
1990, the depreciable lives of certain marine vessels and equipment were 
revised to reflect more closely expected remaining lives. 

 Maintenance and Repairs 

   Provision is made for the cost of upcoming major periodic overhauls of 
vessels and equipment in advance of performing the related maintenance and 
repairs. The current portion of this estimated cost is included in accrued 
shipyard costs while the portion of this estimated cost not expected to be 
incurred within one year is classified as long-term. Both the provisions for 
major periodic overhauls as well as non-overhaul maintenance and repairs are 
expensed as incurred. 

                                      21 



                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS  - (Continued) 

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES  - (Continued) 

 Inventories 

   Inventories, consisting of materials, supplies and fuel, are carried at 
specific cost which does not exceed net realizable value. 

 Income Taxes 

   Deferred income taxes reflect the net tax effects of temporary differences 
between the amount of assets and liabilities for financial reporting purposes 
and the amount used for income tax purposes. 

 Significant Customers 

   During the years ended December 31, 1994, 1993 and 1992, the Company 
derived revenues of $18,483,000, $22,232,000 and $24,169,000 from one 
customer aggregating 15 percent, 17 percent and 18 percent of total revenues, 
respectively. Also during 1994, 1993 and 1992, the Company derived revenues 
of $13,581,000, $19,720,000 and $19,855,000 from another customer aggregating 
11 percent, 15 percent and 15 percent of total revenues. In addition, during 
1994 two other customers accounted for $16,845,000 and $12,957,000 of 
revenues aggregating 13 percent and 10 percent, respectively. Credit is 
extended to various companies in the petroleum industry in the normal course 
of business. This concentration of credit risk within this industry may be 
affected by changes in economic or other conditions and may, accordingly, 
affect overall credit risk of the Company. 

 Related Parties 

   The Company obtained protection and indemnity insurance coverage from a 
mutual insurance association, whose chairman is also the chairman of 
Maritrans Inc. The related insurance expense was $2,501,000, $2,472,000 and 
$3,365,000 for the years ended December 31, 1994, 1993 and 1992, 
respectively. 

 Earnings Per Common Share/Limited Partner Unit 

   Earnings per common share/Limited Partner unit are based on the average 
number of common shares or Limited Partner units outstanding. The potential 
effect of outstanding stock options is not dilutive. 

 Adoption of Authoritative Statements 

   Effective January 1, 1994, the Company adopted FAS No. 115, Accounting for 
Certain Investments in Debt and Equity Securities. FAS 115 established the 
accounting and reporting requirements for investments in equity securities 
that have readily determinable fair values and for all investments in debt 
securities. All affected investment securities must be classified as either 
held-to-maturity, trading or available-for-sale. Held-to-maturity securities 
are carried at amortized cost. Trading securities are carried at fair value 
with unrealized holding gains and losses reported in the income statement. 
Available-for-sale securities are carried at fair value with unrealized 
holding gains and losses reported as a component of stockholders' equity. 

   Investments held-to-maturity, which consist of debt securities, are 
carried at cost. The Company has both the ability and positive intent to hold 
these securities until maturity. Held-to-maturity securities had a carrying 
value of $8 million at December 31, 1994, which approximates market value. 
The securities all mature within one year. 

2. CASH AND CASH EQUIVALENTS 

   Cash and cash equivalents at December 31, 1994, and 1993 consisted of cash
and commercial paper, the carrying value of which approximates fair value. For
purposes of the consolidated financial statements, short- term highly liquid
debt instruments with maturities of three months or less are considered to be
cash equivalents.

                                      22 


                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS  - (Continued) 

3. PARTNERSHIP AND STOCKHOLDERS' EQUITY 

   Changes in partnership equity prior to the Conversion are summarized 
below: 



                                                        General     Limited 
                                                       Partners     Partners       Total 
                                                       --------     --------     -------- 
                                                         ($000 except per unit amounts) 
                                                                        
Balance at January 1, 1992  .......................     $(304)      $ 90,643     $ 90,339 
Net income, January 1, 1992 to December 31, 1992  .        69          3,350        3,419 
Distributions declared and paid ($0.575 per 
  Limited Partner unit) ...........................      (144)        (7,043)      (7,187) 
                                                        -----       --------     -------- 
Balance at December 31, 1992  .....................      (379)        86,950       86,571 
Net loss, January 1, 1993 to March 31, 1993  ......      (244)       (11,979)     (12,223) 
                                                        -----       --------     -------- 
Balance at March 31, 1993  ........................     $(623)      $ 74,971     $ 74,348 
                                                        =====       ========     ======== 



   Consolidated income statement data for the period January 1 to March 31, 
1993 (prior to the Conversion) and for the period April 1 to December 31, 
1993 (after the Conversion) is as follows: 



                                                     Maritrans Partners L.P.    Maritrans Inc. 
                                                         January 1, 1993       April 1, 1993 to 
                                                        to March 31, 1993      December 31, 1993 
                                                    -----------------------   ------------------ 
                                                                       ($000) 
                                                                             
Revenues  ........................................          $ 32,217               $100,322 
Costs and expenses:  ............................. 
   Operation expense  ............................            17,968                 57,228 
   Maintenance expense  ..........................             4,964                 16,098 
   General and administrative  ...................             2,609                  9,163 
   Depreciation and amortization  ................             3,954                 11,914 
                                                           ---------              ---------     
                                                              29,495                 94,403 
                                                           ---------              ---------     
Operating income  ................................             2,722                  5,919 
Interest expense  ................................            (2,672)                (7,701) 
Other income, net  ...............................             4,295                  2,623 
                                                           ---------              ---------     
Income before income taxes  ......................             4,345                    841 
  Income tax provision  ..........................                --                    407 
  Deferred income taxes-resulting from Conversion             16,568                     -- 
                                                           ---------              ---------     
Net income (loss)  ...............................         $ (12,223)             $     434 
                                                           =========              =========    



                                      23 


                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS  - (Continued) 

3. PARTNERSHIP AND STOCKHOLDERS' EQUITY  - (Continued) 

   Changes in stockholders' equity since the Conversion are summarized below: 



                                                Common        Capital in 
                                              Stock, $.01      excess of      Retained 
                                               Par Value       Par Value      Earnings      Total 
                                            -------------   -------------    ----------   --------- 
                                                                     ($000) 
                                                                                 
April 1, 1993, Conversion to Corporate 
  Form ...................................       $125          $74,315(1)        --      $74,440 
Net income, April 1, 1993 to December 31, 
  1993 ...................................         --               --       $  434          434 
                                                -----          -------     --------      ------- 
Balance at December 31, 1993  ............        125           74,315          434       74,874 
Net income January 1, 1994 to December 
  31, 1994 ...............................         --               --        6,532        6,532 
Dividends declared and paid ($0.02 per 
  share of Common Stock) .................         --               --         (250)        (250) 
Directors compensation  ..................                          17           --           17 
                                                -----          -------      -------      ------- 
Balance at December 31, 1994  ............       $125          $74,332       $6,716      $81,173 
                                                =====          =======      =======      ======= 



------ 
(1) Includes $92,000 related to grant of shares. 

   Maritrans Inc. established a stock incentive plan (the "Plan") concurrent 
with the Conversion whereby key employees may be granted stock, stock options 
and, in certain cases receive cash under the Plan. Any outstanding options 
granted under the Plan are exercisable at a price not less than market value 
on the date of grant. There are 1,250,000 shares of Common Stock authorized 
for issuance under the Plan, of which 23,000 shares were issued in 1993. 
Compensation expense equal to the fair market value on the date of the grant 
is included in general and administrative expense in the consolidated 
statement of income. At December 31, 1994 and 1993, 654,491 and 803,597 
remaining shares were reserved for grant. 

   Information on stock options for 1994 follows: 

                                      Exercise      Number of 
                                       Price         Shares 
                                     ---------     --------- 
Outstanding at beginning of year       $4.00         423,403 
Granted  ........................    $4.75-5.00      168,727 
Exercised  ......................        --             -- 
Cancelled  ......................        --             -- 
Expired  ........................      $4.00          23,313 
Outstanding at end of year  .....    $4.00-5.00      568,817 
Exercisable at end of year  .....    $4.00-5.00       79,676 


   Outstanding options are exercisable in installments over two to four years 
and expire in 2002. 

4. INCOME TAXES 

   In connection with the Conversion to corporate form, the Partnership
recognized a net deferred income tax liability for temporary differences in
accordance with FAS No. 109, "Accounting for Income Taxes", which resulted in a
one-time charge to earnings of $16.6 million in the first quarter of 1993. Prior
to the Conversion, Maritrans Partners L.P. and Maritrans Operating Partners
L.P., as partnerships, were not subject to income taxation at the partnership
level. However, income taxes, which were not significant, were provided for the
incorporated subsidiaries of the partnerships prior to the Conversion.

                                      24 


                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS  - (Continued) 

4. INCOME TAXES  - (Continued) 

   The income tax provision consists of: 

                                             1994        1993 
                                            ------      ------ 
                                                  ($000) 
    Current:  .......................... 
       Federal  ........................    $  123          -- 
       State  ..........................       111          -- 
    Deferred:  ......................... 
       Federal  ........................     3,493     $   291 
       State  ..........................        96         116 
    Deferred-resulting from Conversion          --      16,568 
                                            ------     ------- 
                                            $3,823     $16,975 
                                            ======     ======= 


   The differences between the federal income tax rate of 35 percent in 1994 
and 34 percent in 1993 and the effective tax rates were as follows: 

                                                             1994        1993 
                                                            ------     ------- 
                                                                  ($000) 
[S]                                                         [C]        [C]
Statutory federal tax provision  .......................    $3,624     $ 1,764 
State income taxes, net of federal income tax benefit  .       135         116 
Partnership income for the first quarter, not subject 
  to income tax ........................................        --      (1,388) 
Recognition of tax liability for cumulative temporary 
  differences ..........................................        --      16,568 
Non-deductible items  ..................................        27          -- 
Other  .................................................        37         (85) 
                                                            ------    -------- 
                                                            $3,823     $16,975 
                                                            ======    ======== 



   Principal items comprising deferred income tax liabilities and assets as 
of December 31, 1994 and 1993 are: 

                                          1994         1993 
                                         ------       ------ 
                                               ($000) 
    Deferred tax liabilities:  ....... 
       Tax over book depreciation  ...    $29,567     $28,519 
       Prepaids  .....................      2,365          -- 
       Other  ........................        449       1,203 
                                          -------     ------- 
                                           32,381      29,722 
                                          -------     ------- 
    Deferred tax assets:  ............ 
       Reserves and accruals  ........      6,890       8,092 
       Net operating loss 
         carryforwards  ..............      4,236       3,116 
       Other  ........................         --         848 
                                          -------     ------- 
                                           11,126      12,056 
                                          -------     ------- 
    Net deferred tax liabilities  ....    $21,255     $17,666 
                                          =======     ======= 


   At December 31, 1994, Maritrans Inc. has net operating loss carry forwards 
of approximately $25.7 million for income tax reporting purposes which expire 
in the year 2005 and thereafter. 

                                      25 




                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS  - (Continued) 

5. RETIREMENT PLANS 

   Most of the shoreside employees and substantially all of the seagoing
supervisors participate in a qualified defined benefit retirement plan of
Maritrans Inc. Net periodic pension costs were $1,362,000, $1,232,000 and
$1,400,000 for the years ended December 31, 1994, 1993 and 1992, respectively,
and were determined under the projected unit credit actuarial method. Pension
benefits are primarily based on years of service and begin to vest after two
years. Employees covered by collective bargaining agreements and employees of
Maritrans Holdings Inc. or its subsidiaries are not eligible to participate in
the qualified defined benefit retirement plan of Maritrans Inc. 
   The weighted average discount rate, used to determine the actuarial present 
value of the projected benefit obligation, and the expected long-term rate of 
return on plan assets for the period were each 6.75 percent in 1994 and 
7 percent in 1993 and 1992. The weighted average assumed rate of compensation 
increase used to determine the actuarial present value of the projected benefit
obligation was 5 percent for all periods. 
   Net periodic pension costs included the following components for the 
respective periods:



                                                    1/1 to       1/1 to       1/1 to 
                                                   12/31/94     12/31/93     12/31/92 
                                                   --------     --------     -------- 
                                                                 ($000) 
                                                                     
Service cost of current period  ...............    $ 1,568      $ 1,625       $1,628 
Interest cost on projected benefit obligation        1,119          906          887 
Actual (gain) loss on plan assets  ............        352       (1,165)        (938) 
Net (amortization) and deferral  ..............     (1,677)        (134)        (177) 
                                                   -------      -------       ------ 
Net pension cost  .............................    $ 1,362      $ 1,232       $1,400 
                                                   =======      =======       ====== 



   The following table sets forth the plan's funded status at December 31, 
1994 and 1993: 



                                                                   December 31, 
                                                                  -------------
                                                                1994         1993 
                                                                ----         ---- 
                                                                      ($000) 
                                                                     
Actuarial present value of benefit obligations:  .......... 
Accumulated benefit obligation, including vested benefits 
  of $14,557 and $10,449, respectively ....................    $15,466     $11,534 
Projected benefit obligation for service rendered to date        3,695       3,851 
                                                               -------     -------- 
Projected benefit obligation  .............................     19,161      15,385 
Plan assets at fair value, primarily publicly traded 
  stocks and bonds ........................................     16,567      16,110 
                                                               -------     ------- 
Plan assets greater than (less than) projected benefit 
  obligation ..............................................     (2,594)        725 
Unrecognized net gain (loss) on plan's assets  ............       (256)      2,723 
Net assets being amortized over 15 years  .................      1,413       1,616 
                                                               -------     ------- 
Accrued pension cost recognized in the financial 
  statements ..............................................    $ 3,751     $ 3,614 
                                                               =======     ======= 



   Substantially all of the shoreside employees and seagoing supervisors also 
participate in a qualified defined contribution plan. Contributions under the 
plan are determined annually by the Board of Directors of Maritrans Inc. The 
cost of the plan was $742,000, $685,000 and $609,000 for the years ended 
December 31, 1994, 1993 and 1992, respectively. 

   Contributions to industry-wide, multi-employer seamen's pension plans, 
which cover substantially all seagoing personnel covered under collective 
bargaining agreements, were approximately $399,000, $423,000 and 

                                      26 


                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS  - (Continued) 

5. RETIREMENT PLANS  - (Continued) 

$515,000 for the years ended December 31, 1994, 1993 and 1992, respectively. 
These contributions include funding for current service costs and 
amortization of prior service costs of the various plans over periods of 30 
to 40 years. The pension trusts and union agreements provide that 
contributions be made at a contractually determined rate per man-day worked. 
Maritrans Inc. and its subsidiaries are not administrators of the multi- 
employer seamen's pension plans. 

6. DEBT 

   At December 31, 1994, total outstanding debt of the subsidiaries of Maritrans
Inc. is $120.7 million, $113.0 million of which is long-term. At December 31,
1993, total outstanding debt was $116.9 million, $110.6 million of which was
long-term. The debt is secured by mortgages on substantially all of the fixed
assets of those subsidiaries. The debt consists of several series -- $0.6
million maturing through 1995, $30.0 million maturing through 1997, $10.1
million maturing through 2005, and $80 million maturing from 1998 through 2007.
The weighted average interest rate on this indebtedness is 8.91 percent. Terms
of the indebtedness require the subsidiaries to maintain their properties in a
specific manner, maintain specified insurance on their properties and business,
and abide by other covenants which are customary with respect to such
borrowings. At December 31, 1993, the total outstanding debt consisted of $1.7
million maturing through 1995, $35.2 million maturing through 1997, and $80
million maturing from 1998 through 2007. 
   The Operating Partnership has a $10 million working capital facility secured
by its receivables and inventories. There were no borrowings under this 
facility during fiscal 1994. 
   Based on the borrowing rates currently available for loans with similar terms
and maturities, the fair value of long term debt was $120.6 million and $122.1 
million at December 31, 1994 and 1993, respectively. The maturity schedule for 
outstanding indebtedness under existing debt agreements at December 31, 1994, 
is as follows:

                                               ($000) 
                                              -------- 
               1995  ....................     $  7,654 
               1996  ....................        8,671 
               1997  ....................       15,613 
               1998  ....................        8,558 
               1999  ....................        8,608 
               2000 -- 2007 .............       71,558 
                                              -------- 
                                              $120,662 
                                              ======== 


7. COMMITMENTS AND CONTINGENCIES 

   Minimum future rental payments under noncancellable operating leases at
December 31, 1994, are as follows:



                                             ($000) 
                                            ------- 
                                         
               1995  ....................   $ 2,357 
               1996  ....................     2,291 
               1997  ....................     2,113 
               1998  ....................     2,030 
               1999  ....................     1,863 
               2000 -- 2005 .............    11,236 
                                            -------    
                                            $21,890 
                                            =======    



                                      27 



                          NOTES TO THE CONSOLIDATED 
                     FINANCIAL STATEMENTS -- (Continued) 

7. COMMITMENTS AND CONTINGENCIES  -- (Continued) 

   The indenture governing the Operating Partnership's long-term debt permits 
cash distributions by Maritrans Operating Partners L.P. to Maritrans Inc. so 
long as no default exists under the indenture and provided that such 
distributions do not exceed contractually prescribed amounts. 

   On August 10, 1993, one of the Company's tug/barge units was involved in a 
collision off the coast of Florida. Claims resulting from this incident have 
been and are expected to be covered by insurance. In 1993, Maritrans received 
insurance proceeds in excess of the barge's net book value for the 
constructive total loss of the barge. 

   In November 1992, the Partnership dismissed its suit against its former 
law firm and a partner of that firm pursuant to a settlement agreement among 
the parties. As part of the settlement, the Partnership received a payment of 
$3 million and the trial court dissolved the preliminary injunction which 
previously barred the defendants from representing certain of Maritrans' 
economic competitors in labor negotiations. The payment received is reflected 
in other income for the year ended December 31, 1992. 

   In the ordinary course of its business, claims are filed against the 
Company for alleged damages in connection with its operations. Management is 
of the opinion that the ultimate outcome of such claims at December 31, 1994, 
will not have a material adverse effect on the consolidated financial 
statements. 

8. QUARTERLY FINANCIAL DATA (UNAUDITED) 



                                         First      Second        Third       Fourth         Total 
                                        Quarter     Quarter      Quarter      Quarter        Year 
                                       ---------   ---------    ---------   ----------     --------- 
                                                    ($000, except per share/unit amounts) 
                                                                           
1994  
Revenue  ...........................   $ 33,098     $29,522      $30,106     $32,120       $124,846 
Operating income  ..................      5,583       3,264        4,392       5,214       $ 18,453 
Net income  ........................   $  2,026     $ 1,016      $ 1,482     $ 2,008       $  6,532 
Earnings per share  ................   $   0.16     $  0.08      $  0.12     $  0.16       $   0.52 
1993  
Revenues  ..........................   $ 32,217     $33,603      $31,044     $35,675       $132,539 
Operating income  ..................      2,722       2,572        1,222       2,125          8,641 
Provision for (benefit from) income 
  taxes ............................     16,568         533           14        (140)        16,975 
Net income (loss)  .................   $(12,223)    $   639      $    24     $  (229)      $(11,789) 
Per unit effect of income tax 
  provision-resulting from 
  Conversion .......................   $  (1.32)        n/a          n/a         n/a       $  (1.32) 
Income (loss) per share/unit  ......   $  (0.98)    $  0.05      $  0.00     $ (0.02)      $  (0.94) 


                                      28 


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

   None. 

                                   PART III 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 

   Information with respect to directors of the Registrant, and information 
with respect to compliance with Section 16(a) of the Securities Exchange Act 
of 1934, is incorporated herein by reference to the Registrant's definitive 
Proxy Statement to be filed with the Securities and Exchange Commission not 
later than 120 days after the close of the year ended December 31, 1994, 
under the captions "Information Regarding Nominees For Election As Directors 
And Regarding Continuing Directors" and "Section 16 Requirements." 

   The individuals listed below are directors and executive officers of 
Maritrans Inc. or its subsidiaries. 



              Name                Age(1)                              Position 
             -----                ------                              --------
                                    
Stephen A. Van Dyck (4)  ......     51    Chairman of the Board of Directors and Chief Executive Officer 

Dr. Robert E. Boni (2)(3)(4)  .     67    Director 

Dr. Craig E. Dorman (3)  ......     54    Director 

Bruce C. Lindsay (2)(3)(4)(5)       53    Director 

James H. Sanborn  .............     57    Director 

Edward R. Sheridan  ...........     56    President, Distribution Services Division --
                                          Operating Partnership 

Brian J. Telford  .............     48    President, Gulf Division -- Operating Partnership 

John C. Newcomb  ..............     56    Vice President, General Counsel and Secretary 

Gary L. Schaefer  .............     45    Vice President, Chief Financial Officer and 
                                          Treasurer of Maritrans Inc. and President of Maritank Inc. 

Charles R. Ward  ..............     43    President, Eastern Division -- Operating Partnership 

Robert B. York  ...............     39    President, Inland Division -- Operating Partnership 

Walter T. Bromfield  ..........     39    Controller 



------ 
(1) As of March 1, 1995 
(2) Member of the Compensation Committee 
(3) Member of the Audit Committee 
(4) Member of the Finance Committee 
(5) Mr. Lindsay's term of office as director expires in 1995 and he is not 
standing for reelection. 

                                      29 




   Mr. Van Dyck has been Chairman of the Board and Chief Executive Officer of 
the Company and its predecessor since April 1987. For the previous year, he 
was a Senior Vice President -- Oil Services, of Sonat Inc. and Chairman of 
the Boards of the Sonat Marine Group, another predecessor, and Sonat Offshore 
Drilling Inc. For more than five years prior to April 1986, Mr. Van Dyck was 
the President and a director of the Sonat Marine Group and Vice President of 
Sonat Inc. Mr. Van Dyck is also the Chairman of the Board and a director of 
the West of England Ship Owners Mutual Insurance Association (Luxembourg), a 
mutual insurance association. He is a member of the Company's Finance 
Committee of the Board of Directors. See "Certain Transactions." 

   Dr. Boni retired as Chairman of Armco Inc., a steel, oil field equipment 
and insurance corporation on November 30, 1990. Dr. Boni became Chief 
Executive Officer of Armco Inc. in 1985 and Chairman in 1986. He also served 
as Non-Executive Chairman of the Board of and consultant for Alexander & 
Alexander Services Inc., an insurances services company, in 1994 and he 
continues to serve on that Board of Directors. He is a member of the 
Company's Compensation (Chairman), Audit and Finance Committees of the Board 
of Directors. 

   Dr. Dorman is serving as Deputy Director Defense Research and Engineering 
for Laboratory Management, U.S. Department of Defense on an Intergovernmental 
Personnel Act assignment from the Woods Hole Oceanographic Institution. He 
was Director and Chief Executive Officer of Woods Hole Oceanographic 
Institution from 1989 until 1993. From 1962 to 1989, Dr. Dorman was an 
officer in the U.S. Navy, most recently Rear Admiral and Program Director for 
Anti-Submarine Warfare. He is a member of the Company's Audit Committee of 
the Board of Directors. 

   Mr. Lindsay has been Managing Director of Brind-Lindsay & Co. Inc., an 
investment corporation, since 1986. From 1983 through 1986, Mr. Lindsay was 
Group Vice President, Industrial Services, of Sun Company, Inc., an 
integrated oil corporation. During that time, he also served as a director 
and officer of various subsidiaries of Sun Company, Inc. He is a director of 
several closely-held corporations. He is a member of the Company's Audit 
(Chairman), Finance (Chairman) and Compensation Committees of the Board of 
Directors. 

   Mr. Sanborn is a principal in Polaris Associates, maritime consultants. He 
was Executive Vice President of the Company and its predecessor since April 
1987, until his retirement in December 1993. Prior to April 1987, he was 
President of the Sonat Marine Group, another predecessor, a position he held 
since April 1986. Prior to this position, he served as Vice 
President-Operations and Vice President - East Coast Group of the Sonat 
Marine Group. Mr. Sanborn was employed in various capacities by the Company 
and its predecessors since 1978. 

   Mr. Sheridan was named President of the Distribution Services Division of 
the Operating Partnership in February 1993. He previously held various 
positions with Star Enterprise and Texaco since 1963. 

   Mr. Telford was named President of the Gulf Division of the Operating 
Partnership in September 1992. He previously held various positions with 
Stolt-Nielson Inc. from 1988 to 1992. 

   Mr. Newcomb has been Vice President, General Counsel and Secretary of 
Maritrans Inc. since April 1993, and previously held these titles with 
Maritrans GP Inc. since 1987. He held a similar position with the Sonat 
Marine Group since 1983. Mr. Newcomb has been employed in various capacities 
by Maritrans or its predecessors since 1975. 

   Mr. Schaefer has been Vice President, Chief Financial Officer and 
Treasurer of Maritrans Inc. since April 1993, and previously held these 
titles with Maritrans GP Inc. since January 1990. Additionally, since August 
1994, Mr. Schaefer has served as President of Maritank Inc. and its operating 
affiliates MPI and MMI. Prior to January 1990, Mr. Schaefer was Vice 
President, Controller and Treasurer of Maritrans GP Inc. He held a similar 
position with the Sonat Marine Group since 1986. Prior to this position, Mr. 
Schaefer was Assistant Vice President and Controller. Mr. Schaefer has been 
employed in various capacities by Maritrans or its predecessors since 1976. 

   Mr. Ward was named President of the Eastern Division of the Operating 
Partnership in May 1993. Previously, Mr. Ward was President of the Inland 
Division of the Operating Partnership since February 1992 and prior to that 
was Manager, Traffic, a position he held since September 1990. Mr. Ward was 
East Coast Chartering Manager from June 1989 to September 1990. Prior to that 
position, Mr. Ward was Traffic Manager -- Black Oil. He held a similar 
position with the Sonat Marine Group. Mr. Ward has been employed in various 
capacities by Maritrans or its predecessors since 1975. 

                                      30 



                         
   Mr. York was named President of the Inland Division of the Operating 
Partnership in May 1993. Previously, Mr. York was continuously employed since 
1985 by the Company or its predecessors in various capacities including 
Manager, Market Planning; Manager, Corporate Planning; and Business Leader 
(Information Services). 

   Mr. Bromfield has been Controller of Maritrans Inc. since April 1993, and 
previously held that title with Maritrans GP Inc. since February 1992. 
Previously, Mr. Bromfield was Assistant Controller. He held a similar 
position with the Sonat Marine Group since October 1986. Mr. Bromfield has 
been employed in various capacities by Maritrans or its predecessors since 
1981. 

ITEMS 11, 12 AND 13. 

   The information required by Item 11, Executive Compensation, by Item 12, 
Security Ownership of Certain Beneficial Owners and Management, and by Item 
13, Certain Relationships and Related Transactions, is incorporated herein by 
reference to the Company's definitive Proxy Statement to be filed with the 
Commission not later than 120 days after the close of the fiscal year ended 
December 31, 1994, under the headings "Compensation of Directors and 
Executive Officers", "Security Ownership of Certain Beneficial Owners and 
Management" and "Certain Transactions". 

                                      31 




                                   PART IV 



                                                                                              Page 
                                                                                              ----
Item 14.     EXHIBITS, FINANCIAL STATEMENT 
             SCHEDULES AND REPORTS ON FORM 8-K 
                                                                                        
(a) (1)      Financial Statements 
             Report of Independent Auditors                                                    17 
             Maritrans Inc. Consolidated Balance Sheets at December 31, 1994, and 
             December 31, 1993.                                                                18 
             Maritrans Inc. Consolidated Statements of Income for the years ending 
             December 31, 1994, 1993, and 1992.                                                19 
             Maritrans Inc. Consolidated Statements of Cash Flows for the years ending 
             December 31, 1994, 1993, and 1992.                                                20 
             Notes to the Consolidated Financial Statements.                                   21 
    (2)      Financial Statement Schedules 
             Schedule II Maritrans Inc. Valuation Account for the years ended December 
             31, 1994, 1993, and 1992.                                                         36 

             All other schedules called for under Regulation S-X are not submitted because 
             they are not applicable, not required, or because the required information is 
             not material, or is included in the financial statements or notes thereto. 

(b)          Reports on Form 8-K 
             No reports on Form 8-K were filed during the quarter ended December 31, 1994. 



                                      32 



(c) Exhibits 




                                             Exhibit Index                                                 Page 
                                             -------------                                                 ----
                                                                                                    
3.1#           Certificate of Incorporation of the Registrant, as amended. 

3.2#           By Laws of the Registrant. 

4.1            Certain instruments with respect to long-term debt of the Registrant or Maritrans 
               Operating Partners L.P. or Maritrans Barge Company which relate to debt that does not 
               exceed 10 percent of the total assets of the Registrant are omitted pursuant to Item 
               601(b) (4) (iii) (A) of Regulation S-K. Maritrans hereby agrees to furnish 
               supplementally to the Securities and Exchange Commission a copy of each such 
               instrument upon request. 

10.1*          Amended and Restated Agreement of Limited Partnership of Maritrans Operating Partners 
               L.P., dated as of April 14, 1987 (Exhibit 3.2). 

10.2+          Certificate of Limited Partnership of Maritrans Operating Partners L.P., dated 
               January 29, 1987 (Exhibit 3.4). 

10.3*          Form of Maritrans Capital Corporation Note Purchase Agreement, dated as of March 15, 
               1987 (Exhibit 10.6). 

10.3(a)*       Indenture of Trust and Security Agreement, dated as of March 15, 1987 from 
               Maritrans Operating Partners L.P. and Maritrans Capital Corporation to The Wilmington 
               Trust Company (Exhibit 10.6(a)). 

10.3(b)*       Form of First Preferred Ship Mortgage, dated April 14, 1987 from Maritrans 
               Operating Partners L.P., mortgagor, to The Wilmington Trust Company, mortgagee 
               (Exhibit 10.6(b)). 

10.3(c)*       Guaranty Agreement by Maritrans Operating Partners L.P. regarding $35,000,000 Series A 
               Notes Due April 1, 1997 and $80,000,000 Series B Notes Due April 1, 2007 of Maritrans 
               Capital Corporation (Exhibit 10.6(c)). 

               Executive Compensation Plans and Arrangements 

10.4^          Agreement, dated October 4, 1993 between Maritrans Inc. and John C. Newcomb. 

10.5^          Agreement, dated October 4, 1993 between Maritrans Inc. and Gary L. Schaefer. 

10.6^          Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and 
               Stephen A. Van Dyck. 

10.7^          Mutual Separation Agreement and General Release, dated November 22, 1993 between 
               Maritrans Inc. and Craig N. Johnson. 
 
10.8^         Retirement Agreement, dated November 22, 1993 between Maritrans Inc. and James H. 
              Sanborn. 

10.9^         Employment Agreement, dated November 15, 1993 between Maritrans Holdings Inc. and 
              Edward J. Flood.
 
10.10^        Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and 
              Charles R. Ward. 

10.11^        Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and 
              Brian J. Telford. 

10.12^        Employment Agreement, dated October 5, 1993 between Maritrans General Partner Inc. and 
              Edward R. Sheridan. 



                                      33 






                                             Exhibit Index                                                 Page 
                                             -------------                                                 ----
                                                                                                    
10.13^         Profit Sharing and Savings Plan of Maritrans Inc. as amended and restated effective 
               November 1, 1993. 

10.14@         Executive Award Plan of Maritrans GP Inc. (Exhibit 10.31).
 
10.15@         Excess Benefit Plan of Maritrans GP Inc. as amended and restated effective January 1, 
               1988 (Exhibit 10.32). 

10.16@         Retirement Plan of Maritrans GP Inc. as amended and restated effective January 1, 1989 
               (Exhibit 10.33). 

10.17^         Performance Unit Plan of Maritrans Inc. effective April 1, 1993. 

10.18&         Executive Compensation Plan as amended and restated effective January 27, 1994. 

11.1           Computation of Earnings Per Share. 

21.1           Subsidiaries of Maritrans Inc.                                                               1
                                                      
27             Financial Data Schedule 



*  Incorporated by reference herein to the Exhibit number in parentheses filed
   on March 24, 1988 as Amendment No. 1 to Maritrans Partners L. P. Form 10-K
   Annual Report, dated March 3, 1988, for the fiscal year ended December 31,
   1987.

+  Incorporated by reference herein to the Exhibit number in parentheses filed
   with Maritrans Partners L. P. Form S-1 Registration Statement No. 33-11652
   dated January 30, 1987 or Amendment No. 1 thereto dated March 20, 1987.

#  Incorporated by reference herein to the Exhibit of the same number filed with
   the Registrant's Post-Effective Amendment No. 1 to Form S-4 Registration
   Statement No. 33-57378 dated January 26, 1993.

&  Incorporated by reference herein to Exhibit A of the Registrant's definitive
   Proxy Statement to be filed with the Commission not later than 120 days after
   the close of the fiscal year ended December 31, 1993.

@  Incorporated by reference herein to the Exhibit number in parentheses filed
   with Maritrans Partners L. P. Form 10-K Annual Report, dated March 29, 1993
   for the fiscal year ended December 31, 1992.

^  Incorporated by reference herein to the Exhibit of the same number filed with
   Maritrans Inc. Form 10-K Annual Report, dated March 30, 1994 for the fiscal
   year ended December 31, 1993.

                                      34 





                                  SIGNATURES 

   Pursuant to the requirements of Section 13 or 15(d) the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be signed 
on its behalf by the undersigned, thereunto duly authorized. 
                                     MARITRANS INC. 
                                     (Registrant) 

By:  /s/ Stephen A. Van Dyck 
    ------------------------                             Dated: March 30, 1995 
    Stephen A. Van Dyck 
    Chairman of the Board 

   Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated. 



                                                              
 By: /s/ Stephen A. Van Dyck
  --------------------------   Chairman of the Board                 Dated: March 30, 1995
       Stephen A. Van Dyck     and Chief Executive Officer 
                               (Principal Executive Officer)          

By: /s/ Dr. Robert E. Boni
  --------------------------   Director                              Dated: March 30, 1995 
      Dr. Robert E. Boni 
          

By: /s/ Dr. Craig E. Dorman
  --------------------------   Director                              Dated: March 30, 1995
    Dr. Craig E. Dorman
            

By: /s/ Bruce C. Lindsay
  --------------------------   Director                              Dated: March 30, 1995
      Bruce C. Lindsay 
             

By: /s/ James H. Sanborn
  --------------------------   Director                              Dated: March 30, 1995 
      James H. Sanborn
              

By: /s/ Gary L. Schaefer
  --------------------------   Vice President, Chief Financial       Dated: March 30, 1995
       Gary L. Schaefer        Officer and Treasurer 
                               (Principal Financial Officer)          

By: /s/ Walter T. Bromfield
  --------------------------   Controller                            Dated: March 30, 1995
     Walter T. Bromfield       (Principal Accounting Officer)      
           



                                      35 




                                MARITRANS INC. 
                       SCHEDULE II -- VALUATION ACCOUNT 
                                    ($000) 



                                                    CHARGED 
                                     BALANCE AT     TO COSTS                     BALANCE 
                                     BEGINNING        AND                         AT END 
           DESCRIPTION               OF PERIOD      EXPENSES      DEDUCTIONS     OF PERIOD
          ------------               ----------     --------      ----------    ----------- 
                                                                  
JANUARY 1 TO DECEMBER 31, 1992 
Allowance for doubtful accounts        $702          $ 60         $221(a)         $541 

JANUARY 1 TO DECEMBER 31, 1993 
Allowance for doubtful accounts        $541          $136         $ 72(a)         $605 

JANUARY 1 TO DECEMBER 31, 1994  
Allowance for doubtful accounts        $605          $123         $275(a)         $453 



------ 

(a) Deductions are a result of write-offs of uncollectible accounts receivable
    for which allowances were previously provided.

                                      36 

EX-11.1

                                                                  EXHIBIT 11.1 

                                MARITRANS INC. 
                   COMPUTATION OF EARNINGS PER COMMON SHARE 
                           YEARS ENDED DECEMBER 31* 



                                                                1994            1993 
                                                           -----------    --------------  
                                                                    
Primary: 
   Income (loss):  ...................................... 
       Net income (loss) ................................   $ 6,532,000     $(11,789,000) 
                                                            ===========     ============   
   Shares:  
       Weighted average number of common shares 
        outstanding  ....................................    12,524,861       12,523,000 
                                                            ===========     ============   
Primary income (loss) per common share  .................   $     .5215     $     (.9414) 
                                                            ===========     ============   

Assuming full dilution:   
   Income (loss):  
       Net income (loss) ................................   $ 6,532,000     $(11,789,000) 
                                                            ===========     ============   
   Shares: 
       Weighted average number of common shares 
         outstanding  ....................................   12,524,861       12,523,000 
       Assuming exercise of options reduced by the number 
         of shares which could have been purchased with 
         the proceeds from the exercise of such options  .       80,842            3,474 
                                                             ----------      -----------       
       Weighted average number of common shares 
         outstanding as adjusted  ........................   12,605,703       12,526,474 
                                                             ==========      ===========    
Net income (loss) per common share  

Fully diluted income (loss) per common share  ...........        $.5182#     $    (.9411)** 
                                                             ==========      ===========    



------ 
 * See notes 1 and 3 of the notes to the consolidated financial statements. 

** This calculation is submitted in accordance with Regulation S-K item
   601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
   because it produces an anti-dilutive result.

#  This calculation is submitted in accordance with Regulation S-K item
   601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
   No. 15 because it results in dilution of less than 3 percent.

EX-27

 

<ARTICLE>    5 
       
                    


<CIK>                                       0000810113
<NAME>                        Maritrans, Inc
<MULTIPLIER>                      1,000
<FISCAL-YEAR-END>                          DEC-31-1994
<PERIOD-START>                             JAN-01-1994 
<PERIOD-END>                               DEC-31-1994
<PERIOD-TYPE>                                   12-MOS
<CASH>                                          33,824
<SECURITIES>                                     8,000
<RECEIVABLES>                                   11,974
<ALLOWANCES>                                       453
<INVENTORY>                                      3,669
<CURRENT-ASSETS>                                70,451
<PP&E>                                         270,553
<DEPRECIATION>                                  91,761
<TOTAL-ASSETS>                                 257,609
<CURRENT-LIABILITIES>                           27,506
<BONDS>                                        113,008
<COMMON>                                           125
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<OTHER-SE>                                      81,048
<TOTAL-LIABILITY-AND-EQUITY>                   257,609
<SALES>                                              0
<TOTAL-REVENUES>                               124,846
<CGS>                                                0
<TOTAL-COSTS>                                  106,393
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               9,934
<INCOME-PRETAX>                                 10,355
<INCOME-TAX>                                     3,823
<INCOME-CONTINUING>                              6,532
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     6,532
<EPS-PRIMARY>                                      .52
<EPS-DILUTED>                                      .52