Domestic waterways are vital to the U.S. freight distribution system. Approximately 3.76 trillion ton-miles of cargo were hauled by the U.S. freight industry in 2001, of which 17%, or 621.7 billion ton-miles, was on U.S. waterways. Approximately half of the cargo transported on U.S. waterways, or 294.9 billion ton-miles, was transported on the Inland Waterways in 2001. According to the American Trucking Association, U.S. freight transportation was a $702 billion market by revenue in 2003, the most recent date for which data is available. It is believed that marine freight transportation is well-positioned to absorb surplus freight demand from the truck and rail industries. As manufacturing continues to move offshore, the level of imports flowing into the United States is expected to grow. It is believed that increasing port congestion along the western coast of the United States, along with capacity and service issues within the rail industry and driver shortages and new work rules within the trucking industry, all put considerable strain on the capacity of the domestic transportation infrastructure to carry existing and future demand. Given the size of the truck and rail industries, a relatively small shift in market share away from truck or rail could translate into substantial revenue growth for the marine transportation industry.

It is believed barge transportation offers several advantages over other modes of transportation. It is one of the most cost-efficient, safest and cleanest methods of moving bulk commodities in the United States. One barge has the carrying capacity of approximately 15 railcars or approximately 58 tractor-trailer trucks and is able to move 514 ton-miles per gallon of fuel compared to 202 ton-miles per gallon of fuel for rail transportation or 59 ton-miles per gallon of fuel for tractor-trailer transportation. On a cost per ton-mile basis, rail transportation is 3.1 times more expensive and truck transportation is 37.0 times more expensive than barge transportation. In addition, when compared to inland barges, trains and trucks produce 3.5 times and 19 times, respectively, the amount of certain smog-causing chemicals when moving equivalent amounts of freight over equivalent distances. According to the U.S. Bureau of Transportation Statistics, barge transportation is also the safest mode of U.S. freight transportation, based on the percentage of fatalities and the number of hazardous materials incidents, fatalities and injuries from 1999 through 2002.

The Company operates its business through its domestic barge transportation services, manufacturing and international subsidiaries. The Company transported approximately 45 million tons of cargo in 2004 to domestic markets. The Company’s barging operations are complemented by its marine repair, maintenance and port services (e.g., fleeting, shifting, repairing and cleaning of barges and towboats), its coal transfer terminal located on the Mississippi River in St. Louis, Missouri and its liquid terminal located in Memphis, Tennessee. In addition, the Company provides logistics services in partnership with its customers to supplement its sizeable and diverse barging operations. The Company’s operations are tailored to service a wide variety of shippers and freight types.

The Company’s barges transport, among other things, grain, coal, steel and other bulk commodities, and liquids, including chemicals, petroleum and edible oils, in both unit and integrated tow configurations. In terms of tonnage and revenue, grain and coal are the Company’s largest two transport commodities with steel/other bulk commodities and liquids third and fourth, respectively.

The Company’s Jeffboat facility, located in Jeffersonville, Indiana, is a large inland single-site shipyard and repair facility, occupying approximately 86 acres of land and approximately 5,600 feet of frontage on the Ohio River. The Company designs and manufactures barges and other vessels for third-party customers and for its barging business, primarily for inland river service. The Company also manufactures equipment for coastal and offshore markets and has long employed advanced inland marine technology. In addition, the Company provides complete dry-docking capabilities and full machine shop facilities for repair and storage of towboat propellers, rudders and shafts. The Company’s waterfront facility offers technically advanced marine design and manufacturing capabilities for both inland and ocean service vessels. The Jeffboat yard utilizes sophisticated computer-aided design and manufacturing systems to develop, calculate and analyze all manufacturing and repair plans.

Consolidated operating expense for the quarter ended March 31, 2005 decreased 1.6% to $146.0 million from $148.3 million for the quarter ended April 2, 2004.

Interest expense for the quarter ended March 31, 2005 increased to $10.4 million from $10.1 million for the quarter ended April 2, 2004.

Other income increased to $1.3 million in the quarter ended March 31, 2005 from $0.5 million in the quarter ended April 2, 2004.