10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1994 Commission file number 1-5642 DRAVO CORPORATION A PENNSYLVANIA CORPORATION I.R.S. EMPLOYER IDENTIFICATION NUMBER 25-0447860 3600 ONE OLIVER PLAZA PITTSBURGH, PENNSYLVANIA 15222-2682 TELEPHONE (412) 566-3000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Class: Registered: Common Stock, $1.00 Par Value New York Stock Exchange Preference Stock Purchase Rights New York Stock Exchange 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,and (2) has been subject to such filing requirements for the past 90 days. Yes XX . No_____. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Common shares outstanding as of March 15, 1995: 14,869,834 Aggregate market value of the voting stock held by nonaffiliates of the Registrant as of March 15, 1995: $156,133,257 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report to Shareholders for the year ended December 31, 1994 are incorporated by reference to the extent set forth in Parts I, II and IV of this Report. Portions of the Proxy Statement for Annual Meeting of Shareholders on April 27, 1995 are incorporated by reference to the extent set forth in Part III of this Report. TABLE OF CONTENTS
Page PART I Item 1. Business 3 - 5 Item 2. Properties 6 Item 3. Legal Proceedings 7-8 Item 4. Submission of Matters to a Vote of Security Holders 8 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matter 9 - 15 Item 6. Selected Financial Data 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 8. Financial Statements and Supplementary Data 15 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15 PART III Item 10. Directors and Executive Officers of the Registrant 16 Item 11. Executive Compensation 17 Item 12. Security Ownership of Certain Beneficial Owners and Management 17 Item 13. Certain Relationships and Related Transactions 17 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 18 - 23 Signatures 24 Independent Auditors' Report on Schedules 25 Schedule I. Condensed Financial Information of Registrant 26 - 33 Table of Contents for documents filed herein as Exhibits 3, 4, 10, 11, 13, 21, 23, 24 and 27 34
-2- PART I Item 1. Business (a) General Development of the Business Dravo Corporation (the Registrant) was incorporated in Pennsylvania in 1936 to consolidate several related corporations then operating various elements of a business started in 1891 by F. R. Dravo. Its corporate offices are located at 3600 One Oliver Plaza, Pittsburgh, Pennsylvania 15222-2682, and its telephone number is 412-566-3000. As used herein, the term Dravo includes its consolidated subsidiaries unless otherwise indicated. In December, 1987, Dravo's Board of Directors approved a major restructuring program which concentrated Dravo's future direction exclusively on opportunities involving its natural resources business. The plan included the sale or other disposition of the former Engineering and Construction segment, as well as the sale of the former Materials Handling and Systems segment approved earlier. All units scheduled for sale were sold by the end of 1989. The remainder of these businesses have been presented as discontinued operations in the financial statements. Late in 1994, the company sold substantially all the assets and certain liabilities of Dravo Basic Materials Company, its construction aggregates subsidiary, to Martin Marietta Materials, Inc. (Martin Marietta). As a result, Dravo is now primarily a lime company operating principally in the United States. Activities include the production of lime for utility, metallurgical, pulp and paper, municipal, construction and miscellaneous chemical and industrial applications. Operations are principally carried on by a wholly- owned subsidiary, Dravo Lime Company (Dravo Lime). All of the properties on which the company's reserves are located are physically accessible for purposes of mining and processing limestone into lime. Dravo Lime, one of the nation's largest lime producers, owns and operates three integrated lime production facilities, two in Kentucky and one in Alabama. The Black River plant in Butler, Kentucky is nearing completion of a two kiln expansion. When that expansion is on-line, Dravo Lime's annual quicklime capacity will total approximately three million tons. The Maysville facility, a 1,050,000 ton-per-year plant near Maysville, Kentucky, produces material, marketed under the trade name ThiosorbicR Lime, that has a product chemistry ideally suited for removing sulphur dioxide from power plant stack gases. All of Maysville's output is committed under long- term contracts with utility companies in the Ohio Valley region. All contracts contain provisions for price escalation. Owned reserves at the Maysville site are recovered from a mine 950 feet underground and are considered adequate to sustain the current three kiln production in excess of thirty years. Dravo Lime also holds options on additional limestone reserves to sustain production for an additional thirty year period. With the completion of the current two kiln expansion, Dravo Lime's Black River facility will be an integrated ThiosorbicR and high calcium quicklime, bulk and bagged hydrated lime facility. Located along the Ohio River at Butler, Kentucky, Black River will have an annual quicklime capacity of 1,350,000 tons- per-year. Of that total, in excess of seventy percent is committed to utility companies and steel producers under contracts with price escalation provisions. Limestone -3- reserves at Black River are recovered from a 600-feet-deep underground mine. At Black River's expanded rate of capacity, reserves are considered adequate to sustain production levels for more than seventy-five years. The company's Longview facility, located near Birmingham, Alabama, is an integrated facility as well that produces high calcium quicklime, and bulk and bagged hydrated lime from owned limestone reserves. At this plant, Dravo Lime also produces dolomitic quicklime from limestone purchased from a nearby dolomitic stone quarry. Due to its material handling and storage capabilities and its ability to produce high calcium and dolomitic lime, the Longview facility is able to custom blend quicklime to its customers' chemical specifications. In April, 1991, Longview completed an expansion that increased its annual production capacity to approximately 570,000 tons per year. The additional production has been used to meet the needs of long-term contracts for precipitated calcium carbonate, a product used by the pulp and paper industry. The remainder of Longview's production is marketed to the full range of traditional lime markets. Limestone at the Longview operation comes from an above-ground quarry with recoverable reserves estimated to last in excess of twenty years at the current production rate. Ultimately, Dravo Lime expects to convert Longview to an underground mine, providing access to additional reserves sufficient to support current production rates for over sixty years. In conjunction with the sale of Dravo Basic Materials' assets to Martin Marietta, Dravo Lime entered into agreements appointing Martin Marietta the exclusive distributor of aggregate by-products produced by Dravo Lime during the lime production process. As part of the distributorship agreement covering Dravo Lime's Longview facility, an aggregates processing facility is being constructed that will make available between 500,000 and 1,000,000 tons of aggregates annually for purchase by Martin Marietta. An additional benefit of this installation will be a reduction in the cost Dravo Lime otherwise would have incurred to recover the high calcium limestone reserves that lie below the aggregate quality material. Dravo Lime products are distributed through quicklime distribution terminals in Aliquippa, Butler and Elizabeth, Pennsylvania; Porterfield, Ohio; Brunswick and Savannah, Georgia; and Jacksonville, Fort Lauderdale and Sanford, Florida. At Baton Rouge, Louisiana, Dravo Lime owns and operates a lime hydration and bagging facility from which quicklime, and bulk and bagged hydrated lime products are distributed. (b) Competitive Conditions Dravo encounters competition at all its operations but believes that its experience, its strategically located reserves and its technical expertise in the flue gas desulfurization industry give it certain competitive advantages. Dravo's research and development expenditures were $4.4 million in 1994 and $4.2 million in 1993. Research and development spending in 1995 is expected to exceed $3.2 million. The company expects the research, much of which is being conducted jointly with utility customers, to lower both the capital and operating costs -4- associated with Dravo's proprietary ThiosorbicR scrubbing technology. Other research projects are aimed at developing proprietary reagents for use in reducing stack gas emissions and at recovering and processing saleable by- products. Dravo believes that in this field its long-term contracts, accumulated experience and technical skill represent significant competitive advantages. Several firms with which Dravo competes have comparable resources and income. Dravo competes with other firms for qualified professional personnel, particularly those with technical skills. (c) Corporate Development Dravo's corporate development policy encompasses growth through investment in existing businesses, internal development and acquisition. Additionally, to the extent that business units no longer meet management's long-term profitability performance criteria and business strategies, or do not contribute significantly to corporate objectives, a policy of divestiture is followed. Continuing operations of Dravo Corporation, which are principally domestic in nature, function in one segment, a natural resource business, involved in the production, processing and supply of lime for environmental, metallurgical, pulp and paper, municipal, construction and miscellaneous chemical and industrial applications. Dravo's position as the world's leading producer of lime for flue gas desulfurization applications was enhanced by the passage of the 1990 Clean Air Act Amendments. Further information required by this item is incorporated by reference to the information set forth under the captions indicated below in the 1994 Annual Report to Shareholders which accompanies this report: Caption in Annual Report Page No. Results of Operations 18 - 20 Note 16: Research and Development 38 Employees at Year-End 41 -5- Item 2. Properties The following is a listing of principal offices, plants and mines used in operations: Owned or Use Location Leased Executive and general Pittsburgh, Pennsylvania Leased offices Production facilities Saginaw, Alabama Owned Butler, Kentucky Owned Maysville, Kentucky Owned Distribution sites Ft. Lauderdale, Florida Leased Jacksonville, Florida Leased Sanford, Florida Leased Brunswick, Georgia Leased Savannah, Georgia Leased Baton Rouge, Louisiana Owned Porterfield, Ohio Leased Aliquippa, Pennsylvania Leased Butler, Pennsylvania Leased Elizabeth, Pennsylvania Leased Offices and plants associated with businesses treated herein as discontinued operations have been excluded from this presentation. The following table shows a summary of the company's reserves at December 31, 1994 and tons mined by Dravo Lime in 1994. (Tons in millions) Recoverable 1994 Reserves Production Underground Mines: Owned 445.6 4.8 Quarries and Other: Owned 56.5 1.5 502.1 6.3 Additional information required by this item is incorporated by reference to the information set forth under Item 1(a) "General Development of the Business" on pages 3 through 5 of this Form 10-K. -6- Item 3. Legal Proceedings The company has been notified by the U. S. Environmental Protection Agency (EPA) that the EPA considers the company as a potentially responsible party (PRP) for soil and groundwater contamination at four subsites in or around Hastings, Nebraska. The Colorado Avenue subsite includes property on which the company formerly operated a fabrication facility. For this subsite, the EPA has issued, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, administrative orders to the company and two other PRPs which require them to provide interim remedies for soil and groundwater contamination. The company has been complying with these orders while reserving its right to seek reimbursement from the United States for its costs if it is determined the company is not liable for response costs or if it is required to incur costs because of arbitrary, capricious or unreasonable requirements imposed by EPA. The EPA has taken no legal action with respect to its demand that the company and the other PRPs pay its past response costs. A total of five parties have been named by the EPA as PRPs at this subsite, but two of them have been granted de minimis status. The company believes other persons should also be named as PRPs. The company, along with a number of others, is also considered a PRP with respect to subsites at the municipally owned North and South Landfills in Hastings, Nebraska. The North Landfill closed before the company commenced operations in Hastings, Nebraska. A predecessor may have used this landfill to dispose of waste materials, but there is no evidence known to the company that these materials were hazardous. Moreover, Dravo believes the operations of Dravo's predecessor which might have generated the type of hazardous substances found at this landfill did not begin until after this landfill was closed. On December 31, 1991 the EPA issued a formal demand to the company and other PRPs for reimbursement of costs the EPA has incurred at the North Landfill and has also solicited an offer from the company and the other PRPs to conduct or finance remedial work at this subsite for both soil and groundwater contamination. The company has rejected the EPA's demand to reimburse the EPA for its costs and decided not to submit the offer requested. No PRP at this subsite has agreed to pay the EPA's response costs. Other PRPs, including the local municipality, however, have agreed to perform the remedial investigation and to design soil and groundwater remedies at this subsite. EPA has not completed the remedial investigation with respect to the South Landfill subsite, and it is not evident to the company that remedial work is warranted. In January, 1994 the EPA sent a specific notice to the company that the EPA considered it and three other parties (including the City of Hastings) PRPs at this subsite. At this subsite, the company has preliminarily concluded that the City of Hastings is primarily responsible for a proper closure of the South Landfill pursuant to state landfill closure requirements and that a proper closure might alleviate any release of contaminants from the landfill. The fourth subsite (NAD subsite) is a former naval ammunition depot which was subsequently converted to an industrial park in the 1960s. The company and its predecessor also owned and operated a fabrication facility in this industrial park. To date, the company's investigation indicates that it did not cause the release of hazardous substances at this subsite during the time it owned and operated the facility. The United States Army Corps of Engineers has undertaken to conduct the remediation of this subsite. -7- In addition to subsite cleanup, the EPA is seeking a cleanup of area-wide contamination associated with all of the subsites in and around Hastings, Nebraska. The company, along with other Hastings PRPs, has recommended that the EPA adopt institutional controls as the area-wide remedy in Hastings and the final subsite remedy. EPA has indicated some interest in this proposal but has decided to first conduct an area-wide remedial investigation before choosing a remedy. On August 10, 1992, the company filed suit in the Alabama District Court against its primary general liability insurers, Hartford Accident and Indemnity Company and Liberty Mutual Insurance Company, and one of its predecessor's insurers, Bituminous Casualty Company, seeking a declaratory judgment that the company is entitled to a defense and indemnity under its contracts of insurance (including certain excess policies provided by Hartford). The company has settled its claim against Bituminous, but the company's claims against Hartford and Liberty Mutual are still being litigated. The company has notified its primary and excess general liability carriers, as well as its predecessor's carriers, of the potential claims at the North Landfill, South Landfill and NAD subsites. On February 21, 1990, the company filed suit against Continental Energy Associates (CEA), the owner of a cogeneration facility in Hazleton, Pennsylvania, Continental Cogeneration Corporation (CCC), the owner's general partner, and Swiss Bank Corporation, the project's lender. The company claims damages for breach of contract and unjust enrichment arising out of the termination of the company's contract to construct, as part of the facility, a coal gasification plant. On February 23, 1990, CEA and CCC filed suit against the company which, as amended, seeks damages for breach of contract, negligent misrepresentation, fraud and tortious interference with the contract of surety. The lawsuits have been consolidated in the Court of Common Pleas of Luzerne County, Pennsylvania. On November 14, 1994, during the pendency of discovery in these lawsuits, CEA filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Middle District of Pennsylvania. The company has been identified as an unsecured creditor in that proceeding. On December 2, 1994, CCC also filed for Chapter 11 bankruptcy protection in the same court. The bankruptcy filings of both CEA and CCC have stayed the consolidated Luzerne County lawsuits pursuant to the applicable provisions of the Bankruptcy Code. In January, 1995, the Bankruptcy Court entered an order approving non-binding mediation of these lawsuits with the company. An initial mediation session held in early March, 1995, did not result in resolution of the lawsuits. Other information required by this item is incorporated by reference to the information set forth under the caption Note 8: "Contingent Liabilities" in the Notes to Consolidated Financial Statements on pages 32 through 33 of the 1994 Annual Report to Shareholders which accompanies this report. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders for the three months ended December 31, 1994. -8- PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters Information required by this item is incorporated by reference to the information set forth under the captions indicated below in the 1994 Annual Report to Shareholders which accompanies this report: Caption in Annual Report Page No. Common Stock Market Price 21 Shareholders at year-end 41 Dividends 20, 41 Description of Dravo Capital Stock General Under its Restated Articles of Incorporation ("the Articles"), as amended, Dravo is authorized to issue 1,878,870 shares of preference stock, par value $1.00 per share, and 35,000,000 shares of common stock, par value $1.00 per share. At December 31, 1994 issued preference and common shares were 228,386 and 14,985,839, respectively. The Board of Directors has by resolutions established four series of preference stock: $2.20 Cumulative Convertible Series A Preference Stock ("Series A Preference Stock"), consisting of 26,817 shares, issued on September 1, 1970; $2.475 Cumulative Convertible Series B Preference Stock ("Series B Preference Stock"), consisting of 165,516 shares, issued on June 12, 1973; Series C Preference Stock consisting of 200,000 shares, which are issuable pursuant to the exercise of the rights to purchase stock described below; and Series D Cumulative Convertible Exchangeable Preference Stock ("Series D Preference Stock") consisting of 200,000 shares, issued on September 21, 1988. All of the shares of Series A Preference Stock were converted into shares of common stock on April 2, 1978. Presently there are 28,386 shares of Series B Preference Stock and 200,000 shares of Series D Preference Stock issued and outstanding. No shares of Series C Preference Stock have been issued or are outstanding. Other series of preference stock may be created by resolutions of the Board of Directors with such dividend, liquidation, redemption, sinking fund and conversion rights as shall be specified therein. Dividend Rights The holders of the preference stock are entitled to cumulative dividends, payable quarterly, which must be paid and the next quarterly dividend set apart before any dividends (except dividends in common stock or any other stock ranking after -9- the preference stocks as to dividends and assets) are declared, or paid, or monies set apart for the payment of dividends on any class of stock ranking after the preference stock as to dividends or assets. The rate of dividends payable upon the Series B Preference Stock is $2.475 per annum. The rate of dividends payable upon the Series C Preference Stock is an amount per share (rounded to the nearest cent) equal to the greater of $10.00 or 100 times the aggregate per share amount of all cash and non-cash dividends or other distributions, other than a dividend or distribution payable in shares of common stock, paid on the common stock in the immediately preceding quarter, subject to adjustment in certain events. The rate of dividends payable upon the Series D Preference Stock is 12.35 percent per annum or $12.35 per share, which rate shall be increased by 2 percent per annum if such dividends are not paid on any quarterly dividend payment date until accrued and unpaid dividends on the Series D Preference Stock are paid. The holders of the common stock are entitled to such dividends as may be declared by the Board of Directors out of assets properly available for that purpose. No common stock dividends have been declared since April, 1987. Other information required by this item is incorporated by reference to the information set forth under the caption "Note 5: Notes Payable", in the Notes to Consolidated Financial Statements on pages 30 and 31 of the 1994 Annual Report to Shareholders which accompanies this report. Voting Rights Each share of the common stock and the preference stock is entitled to one vote, which is cumulative in the election of directors. The Board of Directors is divided into three classes, and approximately one third of the directors are elected each year for three year terms. The effect of such classification of the Board is to increase the number of shares, voted cumulatively, necessary to elect directors. If dividends on the preference stock shall be unpaid or in arrears for six quarterly dividend periods, the holders of the preference stock voting as a class shall have the right to elect two additional directors. Liquidation Rights In the event of the voluntary or involuntary liquidation or dissolution of Dravo, or the sale or other disposition of substantially all of its assets, the holders of the Series B Preference Stock shall be entitled to receive the sum of $55 per share plus all accumulated and unpaid dividends thereon; the holders of Series C Preference Stock shall be entitled to receive $100 per share plus all accrued and unpaid dividends plus an amount equal to the holder's pro rata share of the amount that would be available for distribution after payment of all liabilities, -10- liquidation preferences and a distribution on the common stock, if any, as determined according to a formula; and the holders of Series D Preference Stock shall be entitled to receive $100 per share plus all accumulated and unpaid dividends thereon. The holders of any other series of preference stock which may be issued shall be entitled to receive the amounts provided for in the resolutions creating such series. The holders of the common stock shall share ratably in the remaining assets, if any. No Preemptive Rights and Non-assessability No preemptive rights attach to the common stock or the preference stock. Neither the holders of the common stock nor the preference stock are liable to further calls or assessment by Dravo. Redemption and Sinking Fund Provisions There are no redemption provisions with respect to the common stock. The Series B Preference Stock may be redeemed, in whole or in part, at the option of Dravo, on not less than 60 days notice, on any quarterly dividend payment date by the payment of $55 per share and all accumulated and unpaid dividends to the redemption date. The Series C Preference Stock may be redeemed as a whole, but not in part, at the option of Dravo, at any time, at a cash price per share based upon the average market value, as defined and adjusted, of the common stock plus all accrued but unpaid dividends. The Series D Preference Stock may be redeemed in whole or in part at the option of Dravo at any time after September 21, 1996, by the payment of $100 per share and all accumulated and unpaid dividends to the redemption date, so long as the current market price (as defined in the Certificate of Designations, Preferences and Rights for the Series D Preference Stock) of the common stock on the date the Board decides to redeem the shares is at least 175 percent of the then effective conversion price for the Series D Preference Stock. Commencing on the first quarterly dividend payment date after September 21, 1998 and annually thereafter, Dravo is required to redeem 50,000 shares of Series D Preference Stock in cash at the redemption price of $100 per share plus all accumulated and unpaid dividends. Dravo is also required (unless certain conditions are met) to redeem all of the then outstanding shares of Series D Preference Stock in cash at $100 per share plus all accumulated and unpaid dividends (a) if Dravo declares or pays or sets apart for payment any dividends or makes any other distribution in cash or other property on or in respect of the common stock or any other class or series of the capital stock of Dravo ranking junior to the Series D Preference Stock as to payment of dividends ("Junior Dividend Stock"), or sets apart money for any sinking fund or analogous fund for the redemption or purchase of any Junior Dividend Stock and (b) upon any merger or consolidation of Dravo if, in connection therewith, the holders of the common stock receive cash, debt instruments or preference stock of the surviving entity which ranks on a parity with or senior to the Series D Preference stock with respect to liquidation, dissolution or winding up or dividends. There are no sinking fund provisions with respect to the common stock or the Series B Preference Stock, Series C Preference Stock or Series D Preference Stock. -11- Conversion The Series B Preference Stock is presently convertible at any time prior to redemption at the option of the holder into common stock on the basis of 3.216 shares of common stock for each share of Series B Preference Stock, subject to equitable adjustment in the event of certain changes affecting the common stock. The Series D Preference Stock is presently convertible at any time prior to redemption at the option of the holder into common stock on the basis of 8.0 shares of common stock for each share of Series D Preference Stock, subject to adjustment in the event of certain changes affecting the common stock. The Series D Preference Stock is convertible or exchangeable in whole at any time by Dravo for an equal face amount of Dravo Senior Subordinated Convertible Notes due September 21, 2001 containing the same conversion rights, transfer restrictions and other terms (other than voting rights) as the Series D Preference Stock. There are no conversion rights with respect to the Series C Preference Stock or the common stock. Rights to Purchase Series C Preference Stock The Series C Preference Stock is issuable pursuant to the exercise of rights to purchase Series C Preference Stock. On April 4, 1986, the Board of Directors declared a distribution of one right for each outstanding share of common stock to shareholders of record at the close of business on April 17, 1986 (the "Record Date") and with respect to each share of common stock that may be issued by Dravo prior to the Distribution Date described below or the earlier redemption or expiration of the rights. Each right entitles the registered holder, following the occurrence of certain events described below, to purchase from Dravo a unit consisting of one one-hundredth of a share (a "Unit") of Series C Preference Stock at a purchase price of $60 per Unit, subject to adjustment (the "Purchase Price"). The descriptions and terms of the rights are set forth in a rights agreement (the "Rights Agreement") between Dravo and PNC Bank, N. A. (formerly Pittsburgh National Bank), as the rights agent. Initially, the rights will be attached to all common stock certificates representing shares then outstanding, and no separate rights certificates will be distributed. The rights will separate from the common stock and a distribution date will occur upon the earlier of (a) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 20 percent or more of the outstanding shares of common stock of Dravo (the "Stock Acquisition Date"), or (b) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 30 percent or more of such outstanding shares of common stock. Until the distribution date, (i) the rights will be evidenced by the common stock certificates and will be transferred with and only with such common stock certificates, (ii) new common stock certificates issued after the Record Date will contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for transfer of any certificate for common stock outstanding will also constitute the transfer of the rights associated with the common stock represented by such certificate. -12- The rights are not exercisable until the distribution date and will expire at the close of business on April 17, 1996, unless earlier redeemed by Dravo as described below. In the event that, at any time following the distribution date, (a) Dravo is the surviving corporation in a merger with an Acquiring Person and its common stock is not changed or exchanged, (b) an Acquiring Person becomes the beneficial owner of 30 percent or more of the then outstanding shares of common stock, (c) an Acquiring Person engages in one or more "self-dealing" transactions as set forth in the Rights Agreement, or (d) during such time as there is an Acquiring Person, an event occurs which results in such Acquiring Person's ownership interest being increased by more than one percent (e.g., a reclassification of securities, reverse stock split or recapitalization of Dravo), each holder of a right will thereafter have the right to receive, upon exercise, common stock (or, in certain circumstances, cash, property or other securities of Dravo) having a value equal to two times the Purchase Price of the right. Notwithstanding any of the foregoing, (i) rights are not exercisable following the occurrence of any of the events set forth in this paragraph until such time as the rights are no longer redeemable by Dravo as set forth below, and (ii) following the occurrence of any of the events set forth above, all rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. In the event that, at any time following the stock acquisition date, (i) Dravo is acquired in a merger or other business combination transaction in which Dravo is not the surviving corporation (other than a merger described in the preceding paragraph), or (ii) 50 percent or more of Dravo assets or earning power is sold or transferred, each holder of a right (except rights which previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the right. The events set forth in this paragraph and in the preceding paragraph are referred to as the "Triggering Events." The Purchase Price payable, and the number of units of Series C Preference Stock or other securities or property issuable, upon exercise of the rights are subject to adjustment from time to time to prevent dilution. No fractional units may be issued and, in lieu thereof, an adjustment in cash may be made based on the market price of the Series C Preference Stock on the last trading date prior to the date of exercise. At any time until ten days following the stock acquisition date, Dravo may redeem the rights in whole, but not in part, at a price of $.01 per right. Under certain circumstances set forth in the Rights Agreement, the decision to redeem shall require the concurrence of a majority of the continuing directors, as defined. After the redemption period has expired and prior to the occurrence of a Triggering Event, Dravo's right of redemption may be reinstated if an Acquiring Person reduces his beneficial ownership to 10 percent or less of the outstanding -13- shares of common stock in a transaction or series of transactions not involving Dravo. Immediately upon action of the Board of Directors ordering redemption of the rights, with, where required, the concurrence of the continuing directors, the rights will terminate and the only right of the holders of rights will be to receive the $.01 redemption price. Until a right is exercised, the holder thereof, as such, will have no rights as a shareholder of Dravo, including, without limitation, the right to vote or to receive dividends. Other than those provisions relating to the principal economic terms of the rights, any of the provisions of the Rights Agreement may be amended by the Board of Directors of Dravo prior to the distribution date. Thereafter, the provisions of the Rights Agreement may be amended by the Board (in certain circumstances, with the concurrence of the continuing directors) in order to cure any ambiguity, to make changes which do not adversely affect the interests of holders of rights (excluding the interests of any Acquiring Person), to suspend the effectiveness of the provision of the Rights Agreement pursuant to which certain rights become void as described above, or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to adjust the time period governing redemption shall be made at such time as the rights are not redeemable. The rights may have the effect of preventing or discouraging some attempts to acquire control of Dravo. The rights could cause substantial dilution to a person or group that attempts to acquire control of Dravo on terms not approved by its Board of Directors, unless the offer is conditioned on a substantial percentage of rights being tendered to and acquired by the Acquiring Person. The rights should not interfere with any merger or other business combination approved by the Board of Directors prior to the expiration of the redemption period since the rights may be redeemed by Dravo prior to the expiration of such period and Dravo may suspend the provisions that in certain circumstances prevent an Acquiring Person from exercising its rights. The rights could interfere with a negotiated transaction after an acquisition of 20 percent or more voting power if the rights were not redeemed. The rights will not prevent a holder of a controlling interest from exercising control over Dravo. A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Report on Form 8-K. A copy of the Rights Agreement is available free of charge from Dravo upon the request of any shareholder. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement. Other Information Dravo may purchase shares of the preference stock whether or not any dividend arrearage shall exist with respect thereto, and may hold and dispose of such shares in such manner as it may elect. -14- The holders of the preference stock who comply with applicable provisions of law and object to a merger or consolidation involving Dravo shall have all of the legal rights of objecting shareholders in a merger or consolidation whether or not they constitute a class otherwise entitled to such rights. The transfer agent and registrar for the common stock is Continental Stock Transfer & Trust Company, New York, NY. Item 6. Selected Financial Data Information required by this item, with the exception of common stock dividends declared, is incorporated by reference to the information set forth under the caption "Five-Year Summary" on page 41 of the 1994 Annual Report to Shareholders which accompanies this report. Dravo has declared no common stock dividends in the five-year period ending December 31, 1994. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by this item is incorporated by reference to the information set forth under the captions "Overview", "Results of Operations", "Financial Position and Liquidity" and "Outlook" on pages 18 through 21 of the 1994 Annual Report to Shareholders which accompanies this report, to the information set forth under the caption Note 2: "Discontinued Operations" on pages 28 and 29, Note 3: "Dispositions" on pages 29 and 30, Note 7: "Commitments" on pages 31 and 32, Note 8: "Contingent Liabilities" on pages 32 and 33, Note 13: "Income Taxes" on pages 36 through 38 and Note 14: "Extraordinary Item" on page 38 in the Notes to Consolidated Financial Statements of the Annual Report to Shareholders, and to Item 3 - "Legal Proceedings" on pages 7 and 8 of this Form 10-K. Item 8. Financial Statements and Supplementary Data Information required by this item is incorporated by reference to the financial statements and notes thereto set forth on pages 22 through 39, and the Independent Auditors' Report set forth on page 40 of the 1994 Annual Report to Shareholders which accompanies this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. -15- PART III Item 10. Directors and Executive Officers of the Registrant Information required by this Item as to Directors and nominees for Director is incorporated by reference to the information set forth under the caption "Information Concerning Directors and Nominees for Director" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 27, 1995. The following information relates to executive officers of Dravo Corporation who are not directors. Marshall S. Johnson, Age 53, Vice President, Operations and Engineering since December, 1994, Vice President, Operations, Dravo Lime Company from April, 1992 to December 1994; prior thereto Regional Operations Manager, Dravo Lime Company. Ernest F. Ladd III, Age 54, Executive Vice President, Chief Financial Officer since December, 1994, Executive Vice President, Finance and Administration from December, 1989 to December, 1994. John R. Major, Age 50, Vice President, Administration since January, 1989. James J. Puhala, Age 52, Vice President, General Counsel and Secretary since September, 1987. Donald H. Stowe, Jr., Age 43, Vice President Sales and Technology since December 1994, Executive Vice President, Sales and Technology, Dravo Lime Company from March, 1992 to December, 1994; prior thereto Sr. Vice President, Sales and Technology, Dravo Lime Company. Larry J. Walker, Age 42, Controller since December, 1989. Gregory H. Welch, Age 39, Treasurer since January, 1995; Assistant Treasurer from April, 1994 to January, 1995; prior thereto Cash Manager, Dravo Natural Resources Company. -16- Item 11. Executive Compensation Information required by this item is incorporated by reference to the information set forth under the caption "Executive Compensation" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 27, 1995. Item 12. Security Ownership of Certain Beneficial Owners and Management Information required by this item is incorporated by reference to the information set forth under the captions "Security Ownership of Certain Beneficial Owners" and "Ownership by Management of Equity Securities" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 27, 1995. Item 13. Certain Relationships and Related Transactions Information required by this item is incorporated by reference to the information set forth under the caption "Information Concerning Directors and Nominees for Director" in the Registrant's Proxy Statement for the Annual Meeting of Shareholders on April 27, 1995. -17- PART - IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements The following consolidated financial statements of the Registrant are filed pursuant to Item 8 of this Form 10-K and are incorporated herein by reference to the page numbers indicated below in the 1994 Annual Report to Shareholders which accompanies this report.
Description Page No. Consolidated Balance Sheets at December 31, 1994 and 1993 22, 23 Consolidated Statements of Operations for the years ended December 31, 1994, 1993 and 1992 24 Consolidated Statements of Retained Earnings for the years ended December 31, 1994, 1993 and 1992 25 Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993 and 1992 26, 27 Notes to Consolidated Financial Statements 28 - 39 Independent Auditors' Report 40 2. Financial Statement Schedules The following financial statement schedules of the Registrant are required and are filed pursuant to this item in this Form 10-K. Schedule Page No. Independent Auditors' Report 25 Schedule I. Condensed Financial Information of Registrant 26 - 33
Schedules other than those listed above have been omitted because they are not applicable or because the required information is reported in the financial statements or notes. -18- (a) 3. Exhibits (2) Plan of acquisition, reorganization, arrangement, liquidation or succession (i) Asset Purchase Agreement dated as of January 3, 1995 among Dravo Corporation, Dravo Basic Materials Company, Inc., Atchafalaya Mining Company, Inc. and Martin Marietta Materials, Inc. is incorporated by reference to Exhibit 2 of the January 17, 1995 Form 8-K of the Registrant. (3) Articles of Incorporation and By-laws (i) Articles of Amendment restating Dravo Corporation's Articles of Incorporation in their entirety and all subsequent amendments thereto including but not limited to the Statement with Respect to Shares of Dravo Corporation as filed with the Secretary of the Commonwealth of Pennsylvania on January 27, 1992 are incorporated by reference to Exhibit 3.1 of the February 12, 1992 Form 8-K of the Registrant. (ii) By-laws of the Registrant as amended are filed herein under separate cover. (4) Instruments Defining the Rights of Security Holders, including Indentures (i) Articles of Amendment restating Dravo Corporation's Articles of Incorporation, described in Exhibit (3)(i) in this Form 10-K of the Registrant. (ii) Shareholders' Rights Agreement dated as of April 4, 1986 between Dravo Corporation and PNC Bank, N. A. (formerly Pittsburgh National Bank), as rights agent, incorporated by reference to Exhibit (1) of the April, 1986 Form 8-K of the Registrant. (iii) Statement with Respect to Shares - Domestic Business Corporation amending Section 3(a) of the Certificate of Designations, Preferences and Rights of Series D Cumulative Convertible Exchangeable Preference Stock is incorporated by reference to exhibit (4) (ii) of the June 30, 1990 Form 10-Q of the Registrant. (iv) Form of indemnification agreement between Dravo Corporation and members of its Board of Directors incorporated by reference to Exhibit (10)(xvii) of the December 31, 1987 Form 10-K of the Registrant. (v) Statement with respect to amended rules for Form S-8 is incorporated by reference to Exhibit (4)(x) of the December 31, 1990 Form 10-K of the Registrant. -19- (4)(vi) Credit and Note and Stock Purchase Agreement dated as of September 21, 1988 by and among Dravo Corporation, its wholly- owned subsidiaries, Dravo Lime Company and Dravo Basic Materials Company, Inc. and The Prudential Insurance Company of America and Prudential Interfunding Corp. is incorporated by reference to Exhibit (4)(i) of the September 27, 1988 Form 8-K of the Registrant and amendment dated March 13, 1990 to said agreement is incorporated by reference to Exhibit (4)(v) of the December 31, 1989 Form 10-K of the Registrant. (vii) Registration agreement dated as of September 21, 1988 between Dravo Corporation and The Prudential Insurance Company of America, is incorporated by reference to Exhibit (4)(vi) to the September 27, 1988 Form 8-K of the Registrant. (viii) (a) Revolving Line of Credit Agreement with all attendant schedules and exhibits dated as of September 20, 1990, by and among Dravo Corporation, Dravo Lime Company, Dravo Basic Materials Company, Inc., First Alabama Bank, and PNC Bank, N. A. (formerly Pittsburgh National Bank) is incorporated by reference to Exhibit (4)(i) of the September 30, 1990 Form 10-Q of the Registrant. (b) Amendment dated September 20, 1990 to Credit and Note and Stock Purchase Agreement dated as of September 21, 1988 is incorporated by reference to Exhibit (4) (ii) of the September 30, 1990 Form 10-Q of the Registrant. (c) First amendment to the Companies' Pledge Agreement dated September 20, 1990 of the Credit and Note and Stock Purchase Agreement dated September 21, 1988 is incorporated by reference to Exhibit (4)(iii) of the September 30, 1990 Form 10-Q of the Registrant. (d) First amendment to the Second Intercreditor Agreement dated September 20, 1990 of the Credit and Note and Stock Purchase Agreement dated September 21, 1988 is incorporated by reference to Exhibit (4)(iv) of the September 30, 1990 Form 10-Q of the Registrant. -20- (4) (viii) (e) Intercreditor Agreement dated September 20, 1990 by and among The Prudential Insurance Company of America, First Alabama Bank, PNC Bank, N. A. (formerly Pittsburgh National Bank), Mellon Bank, N. A., and the Royal Bank of Canada is incorporated by reference to Exhibit (4) (v) of the September 30, 1990 Form 10-Q of the Registrant. (ix) (a) Loan Agreement dated as of December 1, 1978 between Dravo Equipment Company and County of Harrison, Ohio. The Registrant hereby agrees to furnish to the Commission upon request a copy of the instrument listed under exhibit (4)(ix). The instrument does not authorize the issuance of securities in excess of 10 percent of total assets of the Registrant and its subsidiaries on a consolidated basis. (x) Override Agreement, dated January 21, 1992, between Dravo Corporation, The Prudential Insurance Company of America, First Alabama Bank, PNC Bank, N. A. (formerly Pittsburgh National Bank) and Continental Bank, N. A. is incorporated by reference to Exhibit 10.1 of the February 12, 1992 Form 8-K of the Registrant. (xi) First Amendment, dated March 10, 1993, to the Override Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xi) of the December 31, 1992 Form 10-K of the Registrant. (xii) Second Amendment, dated March 7, 1994, to the Override Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xii) of the December 31, 1993 Form 10-K of the Registrant. (xiii) First Amendment, dated March 7, 1994, to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is incorporated by reference to Exhibit 4 (xiii) of the December 31, 1993 Form 10-K of the Registrant. (xiv) Four copies of the First Amendment, (one each for The Prudential Insurance Company of America, First Alabama Bank, PNC Bank, N.A. and Continental Bank N.A.), dated March 7, 1994, to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 are incorporated by reference to Exhibit 4 (xiv) of the December 31, 1993 Form 10-K of the Registrant. (xv) Note Purchase Agreement dated August 1, 1994 between Dravo Black River Limited Partnership and the Prudential Insurance Company of America is incorporated by reference to the August 18, 1994 Form 8-K of the Registrant. -21- (xvi) Amendment Agreement dated August 1, 1994 encompassing the Third Amendment to the Override Agreement dated January 21, 1992 and the Second Amendment to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is incorporated by reference to the August 18, 1994 Form 8-K of the Registrant. (xvii) Amendment Agreement dated January 3, 1995 encompassing the Fourth Amendment to the Override Agreement dated January 21, 1992 and the Third Amendment to the Amended and Restated Revolving Credit Agreement dated January 21, 1992 is filed herein under separate cover. (10) Material Contracts (All of the following, except item 10 (xi), are Management Contracts or Compensatory Plans or Arrangements required to be filed as an Exhibit to this Form 10-K.) (i) Dravo Corporation Executive Death and Disability Income Executive Benefits Plan (now Executive Benefit Plan), approved by the Board of Directors on October 23, 1980, incorporated by reference to Exhibit (10)(i) of the December 31, 1980 Form 10-K of the Registrant, and amendment thereto dated July 1, 1984, incorporated by reference to Exhibit (10)(i) of the December 31, 1984 Form 10-K of the Registrant. (ii) Dravo Corporation Stock Option Plan of 1978, as amended, incorporated by reference to Exhibit (10)(vi) of the December 31, 1982 Form 10-K of the Registrant. (iii) Dravo Corporation Long-Term Incentive Award Plan of 1983, as amended, incorporated by reference to Exhibit (10)(iv) of the December 31, 1987 Form 10-K of the Registrant. (iv) Dravo Corporation Incentive Compensation Plan is filed herein under separate cover. (v) Dravo Corporation Employee Stock Option Plan of 1988, incorporated by reference to the Proxy Statement for the Annual Meeting of Shareholders on April 28, 1988. (vi) Agreement dated June 1, 1993 between Dravo Corporation and C. A. Torbert, Jr. is incorporated by reference to Exhibit 10 (vii) of the December 31, 1993 Form 10-K of the Registrant. (vii) Agreement dated June 1, 1993 between Dravo Corporation and Ernest F. Ladd III is incorporated by reference to Exhibit 10 (viii) of the December 31, 1993 Form 10-K of the Registrant. (viii) Agreement dated June 1, 1993 between Dravo Corporation and Carl A. Gilbert is incorporated by reference to Exhibit 10 (ix) of the December 31, 1993 Form 10-K of the Registrant. -22- (10) Material Contracts (ix) Agreement dated June 1, 1993 between Dravo Corporation and John R. Major is incorporated by reference to Exhibit 10 (xi) of the December 31, 1993 Form 10-K of the Registrant. (x) Dravo Corporation Stock Option Plan of 1994 is incorporated by reference to the Proxy Statement for the Annual Meeting of Shareholders on April 28, 1994. (xi) Noncompetition and Nondisclosure Agreement dated January 3, 1995 by and among Dravo Corporation, Dravo Basic Materials Company, Inc., Dravo Lime Company and Martin Marietta Materials, Inc. is incorporated by reference to Exhibit 10.1 of the January 17, 1995 Form 8-K of the Registrant. (xii) Agreement between Dravo Corporation and Carl A. Torbert, Jr. dated December 31, 1994 is filed herein under separate cover. (11) Statement Re Computation of Per Share Earnings filed under this cover. (13) 1994 Annual Report to Shareholders attached to this report under this cover. Except for the pages and information thereof expressly incorporated by reference in this Form 10-K, the Annual Report to Shareholders is provided solely for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of the Form 10-K. (21) Subsidiaries of the Registrant filed under this cover. (23) Consent of Independent Auditors filed under this cover. (24) Powers of Attorney are filed herein under separate cover. (b) Reports on Form 8-K (i) On November 15, 1994 the Registrant filed a Form 8-K reporting on (a) loan documents related to financing provided by The Prudential Insurance Company of America for the expansion of a lime production facility in Carntown, Kentucky and (b) amendments to previously existing financing agreements to allow for the borrowing of funds under the expansion financing documents. (ii) On January 17, 1995 the Registrant filed a Form 8-K reporting on (a) the sale of substantially all the assets of Dravo Basic Materials Company, Inc. (DBM) and (b) a noncompetition and nondisclosure agreement related to the DBM sale. A pro forma balance sheet at September 30, 1994, pro forma statements of operations for the nine months ended September 30, 1994 and 12 months ended December 31, 1993 and explanatory notes to the pro forma financial statements were included in the Form 8-K. -23- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DRAVO CORPORATION March 29, 1995 By:/s/ CARL A. GILBERT Carl A. Gilbert, President and Chief Executive Officer 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 date indicated. Signature Title Date /s/ CARL A. GILBERT President, Chief Executive Carl A. Gilbert Officer and Director March 29, 1995 /s/ ERNEST F. LADD III Executive Vice President, Ernest F. Ladd III Chief Financial Officer March 29, 1995 /s/ LARRY J. WALKER Controller March 29, 1995 Larry J. Walker *E. EUGENE BISHOP Director E. Eugene Bishop March 29, 1995 *ARTHUR E. BYRNES Director March 29, 1995 Arthur E. Byrnes *JACK EDWARDS Director March 29, 1995 Jack Edwards *JAMES C. HUNTINGTON, JR. Director March 29, 1995 James C. Huntington, Jr. *WILLIAM E. KASSLING Director March 29, 1995 William E. Kassling *WILLIAM G. ROTH Director March 29, 1995 William G. Roth *KONRAD M. WEIS Director March 29, 1995 Konrad M. Weis *ROBERT C. WILBURN Director March 29, 1995 Robert C. Wilburn /s/ ERNEST F. LADD III *By Ernest F. Ladd III, Attorney-in-fact -24- INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Dravo Corporation: Under date of February 10, 1995, we reported on the consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1994, and 1993, and the related consolidated statements of operations, retained earnings, and cash flows for each of the years in the three-year period ended December 31, 1994, as contained in the 1994 annual report to shareholders. As discussed in Notes 10 and 13 to the consolidated financial statements, the company adopted the method of accounting for postemployment benefits prescribed by Statement of Financial Accounting Standards No. 112 in 1994 and the methods of accounting for postretirement benefits other than pensions and income taxes prescribed by Statements of Financial Accounting Standard Nos. 106 and 109, respectively, in 1993. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedule as listed in answer to Item 14(a)(2). The financial statement schedule is the responsibility of the company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Our audit report on the consolidated financial statements of Dravo Corporation and subsidiaries referred to above contains an explanatory paragraph that states that a lawsuit and certain claims and assertions have been brought against the company for contract disputes and environmental costs, the outcome of which presently cannot be determined. KPMG PEAT MARWICK LLP New Orleans, Louisiana February 10, 1995 -25- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Balance Sheets
(In thousands) December 31, 1994 1993 ASSETS Current assets: Cash and cash equivalents $ 254 $ 37 Accounts receivable 1,605 569 Notes receivable 1,200 1,200 Current income tax benefit from affiliates 1,941 4,483 Other current assets 1,585 316 Total current assets 6,585 6,605 Investments in affiliates 195,497 193,954 Notes receivable 1,300 2,900 Deferred income tax benefit from affiliates 24,853 24,853 Other assets 19,241 11,450 Property, plant and equipment 6,832 6,832 Less accumulated depreciation and amortization 6,818 6,809 Net property, plant and equipment 14 23 Total assets $247,490 $239,785
See accompanying notes to financial statements. -26- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Balance Sheets
(In thousands) December 31, 1994 1993 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,404 $ 1,529 Accrued insurance 567 1,197 Accrued retirement contribution 2,388 2,101 Net liabilities of discontinued operations 13,547 4,454 Other current liabilities 675 246 Total current liabilities 19,581 9,527 Advances from affiliates 116,818 96,041 Net liabilities of discontinued operations 8,445 22,130 Other liabilities 5,900 2,548 Redeemable preference stock: Par value $1, issued 200,000 shares: Series D, cumulative, convertible, exchangeable (entitled in liquidation to $20.0 million) 20,000 20,000 Shareholders' equity: Preference stock, par value $1, authorized 1,878,870 shares: Series B, $2.475 cumulative, convertible, issued 28,386 and 32,386 shares (entitled in liquidation to $1.6 million and $1.8 million); 28 32 Series D, reported above Common stock, par value $1, authorized 35,000,000 shares; issued 14,985,839 and 14,967,824 shares 14,986 14,968 Other shareholders' equity 61,732 74,539 Total shareholders' equity 76,746 89,539 Total liabilities and shareholders' equity $247,490 $239,785
See accompanying notes to financial statements. -27- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Statements of Operations
Years ended December 31, (In thousands) 1994 1993 1992 General and administrative expenses $ (1,433) $ (1,046) $ (1,750) Interest expense (16) -- -- Interest income 9 49 60 Loss from continuing operations before taxes, affiliate earnings and extraordinary item (1,440) (997) (1,690) Income tax benefit (provision) (4,107) 27,834 448 Earnings (loss) from continuing operations before affiliate earnings and extraordinary item (5,547) 26,837 (1,242) Equity in affiliate earnings 1,544 8,565 11,560 Earnings (loss) from continuing operations before extraordinary item (4,003) 35,402 10,318 Loss from discontinued operations (6,554) (35,303) -- Extraordinary item -- -- 1,573 Net earnings (loss) before cumulative effect of change in accounting principle (10,557) 99 11,891 Cumulative effect of change in accounting for income taxes -- (276) -- Net earnings (loss) $(10,557) $ (177) $ 11,891
See accompanying notes to financial statements. -28- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Statements of Cash Flows
(In thousands) Years ended December 31, 1994 1993 1992 Cash flows from operating activities: Earnings (loss) from continuing operations $ (4,003) $ 35,402 $ 10,318 Adjustments to reconcile earnings (loss) from continuing operations to net cash provided (used) by continuing operations activities: Depreciation and amortization 9 13 14 Equity in earnings of affiliates (1,544) (8,565) (11,560) Cumulative effect of change in accounting principle for income taxes -- (276) -- Changes in assets and liabilities: Decrease (increase) in accounts receivable (1,036) 691 (1,245) Decrease in notes receivable -- -- 450 Decrease (increase) in deferred income tax benefits 2,542 (6,828) 2,631 Decrease (increase) in other current assets (1,269) 334 (160) Decrease (increase) in other assets (7,791) (1,159) 743 Increase (decrease) in accounts payable and accrued expenses 961 (2,012) (5,715) Increase (decrease) in other liabilities 3,352 (224) (26) Net cash provided (used) by continuing operations activities (8,779) 17,376 (4,550) Loss from discontinued operations (6,554) (35,303) -- Increase (decrease) in net liabilities of discontinued operations (4,592) 21,647 (15,009) Proceeds from repayment of notes receivable from sale of discontinued operations 1,600 1,992 2,631 Net cash used by discontinued operations activities (9,546) (11,664) (12,378) Extraordinary item -- -- 1,573 Net cash provided (used) by operating activities $(18,325) $ 5,712 $(15,355)
See accompanying notes to financial statements. -29- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Statements of Cash Flows
(In thousands) Years ended December 31, 1994 1993 1992 Cash flows from investing activities: Increase (decrease) in advances from subsidiaries $ 20,778 $ (2,893) $ 17,900 Other, net 266 (581) 39 Net cash provided (used) by investing activities 21,044 (3,474) 17,939 Cash flows from financing activities: Proceeds from issuance of common stock 42 101 63 Dividends paid (2,544) (2,554) (2,561) Net cash used by financing activities (2,502) (2,453) (2,498) Net increase (decrease) in cash and cash equivalents 217 (215) 86 Cash and cash equivalents at beginning of year 37 252 166 Cash and cash equivalents at end of year $ 254 $ 37 $ 252
See accompanying notes to financial statements. -30- DRAVO CORPORATION (PARENT COMPANY) Schedule I - Condensed Financial Information of Registrant Notes to Financial Statements Notes 1 through 3, 5 through 15, and 17 to Dravo Corporation's Consolidated Financial Statements have relevance to the parent company financial statements and should be read in conjunction therewith. Note 1: Commitments There was no continuing operations rental expense for 1994, 1993 or 1992. The minimum future rentals under noncancelable operating leases and minimum future rental receipts from subleases to third parties as of December 31, 1994 are indicated in the table below. Of the $11.4 million net minimum payments, $7.9 million has been expensed in connection with discontinued operations. (In thousands)
1995 $10,549 1996 10,685 1997 10,828 1998 3,654 1999 -- After 1999 -- Total minimum payments required 35,716 Less: Minimum sublease rental receipts (24,279) Net minimum payments $11,437
Note 2: Income Taxes The company adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109) effective January 1, 1993. The cumulative effect of this change in accounting for income taxes of $276,000 is determined as of January 1, 1993 and is reported separately in the Statements of Operations for the year ended December 31, 1993. Prior years financial statements were not restated to apply the provisions of SFAS 109. Dravo Corporation files a consolidated federal income tax return which includes the parent and consolidated subsidiaries. Dravo Corporation parent company financial statements recognize current income tax benefits to the extent the benefits are offset by current income tax liabilities of the consolidated subsidiaries. Long-term deferred income tax benefits are recognized to the extent that it is more likely than not that the company will generate sufficient consolidated taxable income to utilize net operating loss carryforwards prior to their expiration. -31- Note 2: Income Taxes (continued) The income tax benefit (provision) for the years ended December 31 are comprised of the following:
(In thousands) 1994 1993 Provision to offset tax benefits of subsidiaries $(4,107) $ -- Benefit to offset tax liabilities of subsidiaries -- 2,981 Change in net deferred tax asset -- 24,853 $(4,107) $27,834
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows: (In thousands)
1994 1993 Deferred tax assets: Provision for discontinued operations $ 7,477 $ 9,039 Accounts receivable, principally due to allowance for doubtful accounts -- 126 Net operating loss carryforwards 61,713 59,313 Investment tax credit carryforwards 1,506 1,748 Other 721 2,087 Total gross deferred tax assets 71,417 72,313 Less valuation allowance 41,882 44,813 Net deferred tax assets after valuation allowance 29,535 27,500 Deferred tax liabilities: Pension accrual 4,682 2,647 Total gross deferred tax liabilities 4,682 2,647 Net deferred tax asset $24,853 $24,853
Management believes it is more likely than not that the net deferred tax asset of $24.9 million will be realized through the reversal of temporary differences and through its subsidiaries future income. In order to fully realize the net deferred tax asset, the parent company and its subsidiaries will need to generate future taxable income of approximately $73.2 million prior to the expiration of its net operating loss carryforwards. There can be no assurance, however, that the parent, or its subsidiaries, will generate any earnings or any specific level of continued earnings. -32- Note 3: Dividends Cash dividends paid to the Registrant for the respective years ended December 31: (In thousands)
1994 1993 1992 Consolidated affiliates $ -0- $ -0- $ -0- 50 percent or less owned companies accounted for by the equity method 792 586 612
-33- EXHIBITS Table of Contents
Exhibit (Exhibit No.) Page No. 3. Articles of Incorporation and By-laws (ii) By-laws of the Registrant as amended (3) 1-11 4. Instruments Defining the Rights of Security Holders, Including Indentures (xvii) Amendment Agreement dated January 3, 1995 encompassing the Fourth Amendment to the Override Agreement and the Third Amendment to the Amended and Restated Revolving Credit Agreement. (4) 1-19 10. Material Contracts (iv) Dravo Corporation Incentive Compensation Plan (10iv) 1-5 (xii) Agreement between Dravo Corporation and Carl A. Torbert, Jr. (10xii) 1-10 11. Statement RE Computation of Per Share Earnings (11) 1, 2 13. 1994 Annual Report (13) 18-42 21. Subsidiaries of the Registrant (21) 1 23. Consent of Experts and Counsel (23) 1 24. Powers of Attorney (24) 1-8 27. Financial Data Schedule (EDGAR filing only) (27) 1
-34- EX-3 2 AMENDED BY-LAWS BY-LAWS As Amended January 1, 1995 ARTICLE I Board of Directors SECTION 1. The Board of Directors shall consist of not less than seven and not more than twelve persons to be elected by the shareholders as herein provided, the exact number to be determined from time to time by proper resolution of the Board of Directors. The Directors shall be classified with respect to the time during which they shall severally hold office, by dividing them into three classes, each consisting as nearly as possible of the same number of Directors. At each annual meeting of the shareholders, Directors in the number for those whose terms then expire shall be elected to serve for terms of three years, except that the number of Directors to be elected to such terms shall be adjusted if the number of Directors shall have been decreased as provided herein so as to eliminate the place of a Director whose term then expires. Nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of the Corporation entitled to notice of, and to vote at, any meeting called for the election of Directors. Nominations, other than those made by or on behalf of the Board of Directors of the Corporation, shall be noticed in writing and shall be received by the Secretary of the Corporation not later than (i) with respect to an election of directors to be held at an annual meeting of shareholders, ninety (90) days prior to the anniversary date of the immediately preceding annual meeting, and (ii) with respect to an election of directors to be held at a special meeting of shareholders, the close of business on the fifteenth (15th) day following the date on which notice of such meeting is first given to shareholders or public disclosure of the meeting is made. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and residence address of each proposed nominee and of the notifying shareholder; (b) the principal occupation of each proposed nominee; (c) a representation that the notifying shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (d) the total number of shares of the Corporation that will be voted for each proposed nominee; (e) the total number of shares of the Corporation owned by the notifying shareholder; (f) a description of all arrangements or understandings between the notifying shareholder and each nominee and any other person or persons (naming such person or persons) relating to such nomination or nominations by the notifying shareholder; (g) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed with the Securities and Exchange Commission; and (h) the consent of each nominee to serve as a director of the Corporation if so elected. If the information submitted to the Corporation within the time prescribed above is determined by the Chairman of the Board of the Corporation to be deficient in any manner, the Chairman shall advise the notifying shareholder in writing of such deficiencies not 3-1 Page 2 By-Laws later than the close of business on the fifth (5th) day following the date that the Corporation first received written notice of the nomination made by the notifying shareholder. The notifying shareholder must thereafter cure such deficiencies by sending a revised notification to the Secretary of the Corporation setting forth the required information which must be received by the Secretary in writing not later than the fifth (5th) day following the date that the notifying shareholder received notice from the Corporation of the deficiencies in the notifying shareholder's written nomination. Notwithstanding the above, these nominating procedures shall not apply to any special meeting of the shareholders of the Corporation called for the election of directors for which notice of the meeting was not given to shareholders at least twenty (20) days prior to the meeting. The chairman may disregard and refuse to recognize any nomination determined by him not to have been made in accordance with the foregoing procedures. If a vacancy occurs in the Board of Directors from any cause, including any increase in the number of Directors in the manner prescribed in this Section, a majority of the remaining members of the Board of Directors, though less than a quorum, shall have the power to elect a Director to fill such vacancy to serve for the balance of the unexpired term of the vacating director and until his or her successor has been elected and qualified. In the case of an increase in the number of Directors in the manner specified in this Section, the additional offices so created shall be assigned by the Board of Directors to the appropriate class so that the three classes shall continue to consist, as nearly as possible, of the same number of Directors. At any shareholders' meeting at which Directors are to be elected, separate elections shall be held for the Directors of each class then to be elected. The Directors shall hold office during the terms for which they have been elected and until their successors are elected and qualified. SECTION 2. The Board of Directors may, by resolution adopted by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the Directors of the Corporation. Standing committees shall include the Audit and Finance Committee and the Compensation and Nominating Committee, each of which shall be comprised exclusively of Directors who are not current employees of the Corporation. 3-2 Page 3 By-Laws SECTION 3. The Board of Directors, as soon as reasonably possible after each annual meeting of shareholders, shall hold a meeting to organize, elect officers of the Corporation and transact other business. Regular meetings of the Board of Directors may be held without notice at such time and place as shall from time to time be determined by the Board of Directors and may be adjourned by the members present to any other time and place. Special meetings may be called at any time by the chief executive officer or any two members of the Board of Directors upon at least 24 hours' notice, which need not be in writing. A majority of the Directors in office shall constitute a quorum for the transaction of business. If all the Directors shall severally or collectively consent in writing to any action to be taken by the Corporation, such action shall be as valid corporate action as though it had been authorized at a meeting of the Board of Directors. One or more Directors may participate in a meeting of the Board of Directors, or of a committee thereof, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. SECTION 4. The Board of Directors shall have the right to adopt such rules and regulations for the conduct of business, and from time to time alter and amend the same, as to them may seem proper. SECTION 5. The Board of Directors (or the Compensation Committee by delegation from the Board), shall fix the compensation of the officers of the Corporation and such other employees who are designated by the Board of Directors as holding major positions of authority in the Corporation. ARTICLE II Officers SECTION 1. The officers of the Corporation to be elected by the Board of Directors shall consist of a Chairman, one or more Vice Chairman (any one or more of whom may have added to his title another word or words specially designating the further powers and duties assigned to that officer), a President, one or more Vice Presidents (any one or more of whom may be designated an Executive Vice President, Senior Vice President, Group Vice President or have added to his title another word or words specifically designating the further powers and 3-3 Page 4 By-Laws duties assigned to that officer), a Treasurer, a Controller and a Secretary, who shall hold office until their respective successors are duly elected and qualified or until the earlier death, resignation or removal from office of any of them. SECTION 2. Subordinate officers to be appointed by the Board of Directors shall include one or more assistant secretaries and one or more assistant treasurers. ARTICLE III Duties of the Chairman SECTION 1. The Chairman, who shall be elected from among the Directors, shall preside at all meetings of the shareholders and of the Board of Directors at which he shall be present. ARTICLE IV Duties of the Vice Chairmen SECTION 1. The Vice Chairmen, who shall be elected from among the Directors, shall perform such duties as shall be prescribed time to time by the Board of Directors or the chief executive officer. ARTICLE V Duties of the President SECTION 1. The President, who shall be elected from among the Directors, shall be the chief executive officer of the Corporation, and be subject to the control of the Board of Directors, shall be in general and active charge of the business affairs of the Corporation, shall establish the various Divisions and units of the Corporation, and shall appoint and designate the duties of the Managers of Divisions of the Corporation. In the absence or inability to act of the President, the officer or officers designated from time to time by the Board of Directors shall perform the duties pertaining to the office of President. ARTICLE VI Duties of the Vice Presidents SECTION 1. The Vice Presidents shall perform such duties as shall be prescribed from time to time by the Board of Directors or the chief executive officer. 3-4 Page 5 By-Laws ARTICLE VII Duties of the Secretary SECTION 1. The Secretary shall, under the direction of the chief executive officer, record the proceeding of all meetings of the Board of Directors and of the shareholders for presentation in a suitable book. The Secretary shall notify the shareholders of all annual and special meetings and the members of the Board of Directors of all special meetings, have charge of the corporate seal and perform all the duties which are customary and incident to the office of Secretary of like companies. ARTICLE VIII Duties of the Treasurer SECTION 1. The Treasurer shall, under the direction of the Vice President in charge of financial affairs, have general charge of the funds of the Corporation and shall make such reports of the receipts and disbursements in such form and manner as the Board of Directors may direct. He shall if so directed by the chief executive officer, attend any or all meetings of the Board of Directors and report on his activities as the chief executive officer may prescribe. ARTICLE IX Duties of the Controller SECTION 1. The Controller shall, under the direction of the Vice President in charge of financial affairs, maintain adequate records of all assets, liabilities and transactions of the Corporation; cause adequate audits to be currently and regularly made; prepare financial, cost and tax reports and other reports of a financial and accounting nature required by governmental agencies; and in conjunction with other officers and heads of departments initiate and enforce controls and procedures whereby the business of the Corporation shall be conducted with the maximum of efficiency and economy. He shall, if so directed by the chief executive officer, attend any or all meetings of the Board of Directors and report on his activities as the chief executive officer may prescribe. ARTICLE X Checks, Notes and Contracts SECTION 1. All checks drawn upon the funds of the Corporation and all promissory notes, drafts, bills of exchange or other negotiable instruments shall be signed in the name of the Corporation by such person or persons as the Board of Directors may from time to time designate. 3-5 Page 6 By-Laws SECTION 2. All written contracts other than those mentioned in Section 1 of this Article shall be signed in the name of the Corporation by the Chairman or a Vice Chairman or the President or a Vice President, unless otherwise directed by the Board of Directors. ARTICLE XI Elections SECTION 1. In elections of directors by shareholders, voting need not be by ballot unless required by vote of the shareholders before the voting for election of directors begins. Election of officers shall be in such manner as a majority of the Directors present and voting at a duly organized meeting may determine. ARTICLE XII Offices SECTION 1. The registered office of the Corporation shall be in the City of Pittsburgh, County of Allegheny, State of Pennsylvania, but the Board of Directors may establish another office or other offices at any place or places in the state of Pennsylvania or elsewhere. ARTICLE XIII Seal SECTION 1. The seal of the Corporation shall have inscribed thereon the name of the Corporation, the year of its creation, the name of the State under whose laws it was created and the words "Corporate Seal". ARTICLE XIV Meetings of the Shareholders SECTION 1. Meetings of the shareholders may be held at such places within or without the State of Pennsylvania as may be fixed by the Board of Directors. The annual meeting of the shareholders of the Corporation for the election of Directors shall be held on such date and at such time and place as may be fixed from time to time by the Board of Directors, provided, however, that in fixing the date, time and place of said meeting the Board of Directors shall comply with all applicable statutes and regulations as well as the rules of the New York Stock Exchange. 3-6 Page 7 By-Laws SECTION 2. Special meetings of the shareholders may be called at any time by the Board of Directors, the Chairman of the Board or the President of the Corporation. Notice shall be given by the Secretary of the time and place of holding the annual and any special meeting of the shareholders by mailing such notice to the addresses of said shareholders, as shown by the share register or the records of the Corporation, at least five days prior to the date of the meeting, except when a longer period of notice is required by law. SECTION 3. Unless otherwise provided in a resolution of the Board of Directors with respect to any meeting of shareholders and stated in the notice of the meeting, the presence of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter to be acted upon at the meeting shall constitute a quorum for purposes of consideration and action on the matter. If no quorum be present at any meeting so called, the holders of less than a majority of said shares may meet and adjourn the meeting from time to time until a quorum be present or until action may be taken in the absence of a quorum in the manner prescribed by law. ARTICLE XV Share Certificates SECTION 1. Share certificates shall be issued to the shareholders and transfers thereof shall be made by a transfer agent, if one or more transfer agents are appointed by the Board of Directors, otherwise by the Secretary or Assistant Secretary. Transfers shall be made in person or by power of attorney on the books of the Corporation on the surrender of the certificates. The share certificates shall be signed by the Chairman, the President or a Vice President or other officer designated by the Board of Directors, countersigned by the Treasurer or Assistant Treasurer or other officers designated by the Board of Directors and sealed with the seal of the Corporation. One or more transfer agents and registrars of the shares of stock of the Corporation may be appointed by the Board of Directors. The signatures, countersignatures, and seal, or any of them on the share certificates may be executed in facsimile, engraved or printed, provided that the share certificates are signed or countersigned by a corporate transfer agent or by a corporate registrar other than the Corporation itself, appointed by the Board of Directors. ARTICLE XVI Resignations SECTION 1. Any Director or officer may resign his office at any time, such resignation to be in writing and to take effect from the time of its receipt by the corporation, unless some time be fixed in the said resignation, and then from that time. The acceptance of a resignation shall not be required to make it effective. 3-7 Page 8 By-Laws ARTICLE XVII Indemnification SECTION 1. The Corporation shall indemnify every person who is or was a party or is threatened to be made a party to or is involved (as a witness or otherwise) in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether or not by or in the right of the Corporation or otherwise (hereafter a "proceeding"), by reason of the fact that he or she is or was a Director or officer or employee of the Corporation, or is or was serving at the request of the Corporation as a Director, officer or trustee or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, or by reason of any action alleged to have been taken or not taken by him or her while acting in any such capacity, against expenses (including attorneys' fees) and all liability and loss, including judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement (whether with or without court approval), actually and reasonable incurred by him or her in connection with such threatened, pending or completed action, suit or proceeding, except to the extent prohibited by law as the same exists or may hereafter be amended (except in the case of any such amendment which has the effect of narrowing indemnification rights that the Corporation was permitted to provide prior to such amendment); provided, however, that except with respect to claims described in Section 2 hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof), initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Subject to the foregoing indemnification, the right to indemnification conferred in this Section shall include the right to be paid by the Corporation expenses incurred; provided, however, that to the extent required by law, the payment of such expenses in advance of the final disposition of a proceeding shall be made only upon receipt of an undertaking by or on behalf of such person to repay such amounts if it shall ultimately be determined that he or she is not entitled to be indemnified under this Article or otherwise. SECTION 2. If a claim under Section 1 is not paid in full by the Corporation within forty-five (45) days after a written claim has been received by the Corporation, the claimant may, at any time thereafter, bring suit against the Corporation to recover the unpaid amount of the claim. The claimant shall also be entitled to be paid the expenses of prosecuting such claim to the extent he or she is successful in whole or in part on the merits or otherwise in establishing his or her right to indemnification or to the advancement of expenses. 3-8 Page 9 By-Laws SECTION 3. The right to indemnification, including the right to the advancement of expenses, conferred in this Article shall not be exclusive of any other rights to which a person seeking indemnification or advancement of expenses hereunder may be entitled under any by-law, agreement, vote of shareholders, or directors or otherwise, both as to action in his or her official capacity and as to action in any other capacity while holding that office. SECTION 4. The Corporation may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations, including its obligation to advance expenses, whether arising under or pursuant to this Article or otherwise. SECTION 5. The Corporation shall have the express authority to enter into such agreements as the Board of Directors deem appropriate for the indemnification of, including the advancement of expenses to, present or future Directors, officers and employees of the Corporation in connection with their service to, or status with, the Corporation or any other corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, for whom such person is serving at the request of the Corporation. SECTION 6. The right to indemnification, including the right to the advancement of expenses provided herein, shall be a contract right, shall continue as to a person who has ceased to be a director, officer, employee, or to serve in any other of the capacities described herein, and shall inure to the benefit of the heirs, executors and administrators of such person. Notwithstanding any amendment, alteration or repeal of this Article or any of its provisions or the adoption of any provision inconsistent with this Article or any of its provisions, any person who is or was a director, officer or employee or is or was serving at the request of the Corporation as a director, officer, employee, or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be entitled to indemnification, including the right to the advancement of expenses, in accordance with the provisions hereof and thereof with respect to any action taken or omitted prior to such amendment, alteration or repeal or the adoption of such inconsistent provision except to the extent such amendment, alteration, repeal or inconsistent provisions provides broader rights with respect to indemnification, including the advancement of expenses, than the Corporation was permitted to provide prior to the amendment, alteration, repeal, or the adoption of such inconsistent provision or to the extent otherwise prescribed by law. 3-9 Page 10 By-Laws ARTICLE XVIII By-Laws--Adoption, Alteration, Amendment and Repeal SECTION 1. The By-Laws of the Corporation may be adopted, altered, amended or repealed by a majority vote of the shareholders present and voting at any regular or special meeting duly convened after notice to the shareholders of that purpose or by a majority vote of the members of the Board of Directors present and voting at any regular or special meeting, subject always to the power of the shareholders to change any such action taken by the Board of Directors. ARTICLE XIX Limitation on Director Liability SECTION 1. A director of the Corporation shall not be personally liable for monetary damages for any action taken or failure to take any action unless the director has breached or failed to perform the duties of his office under Section 8363 of the Directors' Liability Act and such breach or failure to perform constitutes self-dealing, willful misconduct or recklessness; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director (i) for any responsibility or liability of such director pursuant to any criminal statute, or (ii) for any liability of a director for the payment of taxes pursuant to local, State or Federal law. This Article XIX shall not apply to any actions filed prior to January 27, 1987 or to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. SECTION 2. Notwithstanding any other provision of law, the Articles of Incorporation or the By-Laws of the Corporation, the affirmative vote of shareholders entitled to cast at least a majority of the votes which all shareholders would be entitled to cast in an annual election of directors (or such greater percentage of votes as shall be required by law) shall be required to adopt any amendment, alteration or repeal of, or to adopt any provision inconsistent with, this Article XIX or any of its provision, including this Section 2. Neither the repeal or modification of this Article XIX or any of its provisions nor the adoption of any provision inconsistent with this Article XIX or any of its provisions shall adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification or the adoption of such inconsistent provision. 3-10 Page 11 By-Laws ARTICLE XX Applicability of Certain provisions of the Pennsylvania Business Corporation Law SECTION 1. Subchapters G (relating to Control Share Acquisitions), H (relating to Disgorgement by Certain Controlling Shareholders Following Attempts to Acquire Control), I (relating to Severance Compensation for Employees Terminated Following Certain Control-Share Acquisitions), and J (relating to the Status of Labor Contracts Following Certain Business Combination Transactions) of Chapter 25 of the Pennsylvania Business Corporation Law shall not be applicable to the Corporation. 3-11 EX-4 3 LOAN AMENDMENT EXECUTION COPY AMENDMENT AGREEMENT This AMENDMENT AGREEMENT (this "Agreement" or this "Amendment"), dated as of January 3, 1995, is entered into by and among DRAVO CORPORATION, a Pennsylvania corporation ("Dravo"), DRAVO LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation ("Basic", together with Lime referred to herein as the "Companies"), FIRST ALABAMA BANK ("FAB"), PNC BANK, NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank) ("PNC"), BANK OF AMERICA ILLINOIS (formerly known as Continental Bank) ("BAI"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (acting through Prudential Capital Group, "Prudential"; FAB, PNC, BAI and Prudential herein collectively referred to as "Lenders" and each a "Lender"), and FAB, as agent for the Lenders (in such capacity, together with its successors and assigns, the "Agent"). PRELIMINARY STATEMENTS (1) The Companies, Dravo and the Lenders have entered into an Override Agreement, dated as of January 21, 1992, as amended by the First Amendment to Override Agreement, dated March 10, 1993, the Second Amendment to Override Agreement, dated as of March 7, 1994, and the Amendment Agreement, dated as of August 1, 1994 (as so amended, the "Override Agreement"). In addition, the Companies, the Agent and the Lenders have entered into an Amended and Restated Revolving Credit Agreement, dated as of January 21, 1992, as amended by the First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 7, 1994, and the Amendment Agreement, dated as of August 1, 1994 (as so amended, the "Revolving Credit Agreement"). In addition, Companies and Prudential have entered into an Amended and Restated Note and Stock Purchase Agreement, dated as of January 21, 1992 (the "Note and Stock Purchase Agreement"). Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Override Agreement, as amended hereby. (2) Dravo, Basic and Atchafalaya Mining Company, Inc. ("AMC"), an affiliate of Dravo and Basic, have agreed to sell certain assets of Basic and AMC to Martin Marietta Materials, Inc. ("Martin"), pursuant to that certain Asset Purchase Agreement, of even date herewith (the "Asset Purchase Agreement"). (3) Dravo and Companies have requested that Lenders, as parties to the Override Agreement, Revolving Credit Agreement and other Operative Documents, and Prudential, as a party to the Note and Stock Purchase Agreement, (i) consent to the transactions contemplated by the Asset Purchase Agreement, and (ii) release all liens and security interests held by Lenders and/or Agent on behalf of Lenders and by Prudential in and to the assets and contract rights of Basic that Martin is purchasing pursuant to the terms of the Asset Purchase Agreement. (4) Dravo and Companies have further requested that Lenders waive as to Companies and solely with respect to the period commencing July 1, 1994, and ending March 31, 1995, the 4-1 negative covenant contained in items (1) and (2) of the proviso to Section 5.02(b) of the Override Agreement. (5) Dravo and Companies have further requested that the Lenders, among other things, reduce their revolving loan commitments under the Revolving Credit Agreement by $35,000.00 (from $75,000,000 to $40,000,000) and that Lenders reduce the letter of credit facility commitment by $2,500,000 (from $9,974,600 to $7,474,600) and that Lenders make certain other modifications to the Override Agreement, Revolving Credit Agreement and certain other Operative Documents. (6) Lenders, as parties to the Override Agreement, Revolving Credit Agreement, and Operative Documents, and Prudential, as a party to the Note and Stock Purchase Agreement, consent to the foregoing requests, subject to the satisfaction by Dravo and Companies of the conditions hereinbelow set forth. (7) The parties hereto desire to amend the Override Agreement, the Revolving Credit Agreement and certain other Operative Documents and further desire to set forth the conditions to the foregoing consent of Lenders and Prudential. ARTICLE I FOURTH AMENDMENT TO OVERRIDE AGREEMENT SECTION 1.01 Amendments to Override Agreement. The Override Agreement shall be, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, amended by adding the following new subsections (t), (u), (v) and (w) to Section 4.01 of the Override Agreement at the end thereof: "(t) Note Purchase Agreement Collateral. Upon payment in full of all indebtedness incurred in connection with the Project pursuant to the Note Purchase Agreement and the other Transaction Documents, the Dravo Parties agree, and further agree to cause the Lime SPV, the SPV General Partner and the SPV Limited Partner, to grant to the Lenders a first-priority lien and/or security interest under such security agreements, mortgages and other instruments satisfactory to Lenders, together with such opinions and other requirements deemed necessary by the Lenders, in and to all collateral that is the subject of, and presently secures in favor of PruPower the payment of all indebtedness incurred pursuant to, the Note Purchase Agreement and the other Transaction Documents. (u) Liabilities Assumed in Asset Purchase Agreement. As soon as practicable and at least one (1) business day prior to the closing of the transactions described in the Asset Purchase Agreement, the Dravo Parties shall deliver, or shall have delivered, to each Lender a detailed written report reporting therein the substance of any liabilities, whether actual or contingent, to be assumed or proposed to be assumed by any Dravo Party, including any indemnification provided or to be provided by any Dravo Party in favor of Martin or any Affiliate or Subsidiary of Martin, as a result of the transactions contemplated in the Asset Purchase Agreement. At 4-2 least fifteen (15) days after the closing of the transactions described in the Asset Purchase Agreement, the Dravo Parties shall further deliver to each Lender a detailed written report reporting the substance of any liabilities, whether actual or contingent, assumed by any Dravo Party, including any indemnification provided in favor of Martin or any Affiliate or Subsidiary of Martin, as a result of the transactions described in the Asset Purchase Agreement. Each of the foregoing reports shall contain a good faith estimate on the part of the management of the Dravo Parties of the dollar amount of the liabilities, whether actual or contingent, assumed or to be assumed by any Dravo Party, including any indemnification provided or to be provided by any Dravo Party in favor of Martin or any Affiliate or Subsidiary of Martin, as a result of the transactions contemplated or described in the Asset Purchase Agreement. (v) Use of Proceeds. The net proceeds received by any Dravo Party or by any Affiliate or Subsidiary of any Dravo Party from Martin as a result of the transactions contemplated in the Asset Purchase Agreement shall be simultaneously used or paid by the Dravo Parties for the following purposes, in the order of priority set forth below: (1) The Dravo Parties shall cause the Lime SPV to either (i) pay in full to PruPower all amounts owed PruPower pursuant to the Note Purchase Agreement and the other Transaction Documents cancelling the Note Purchase Agreement and the other Transaction Documents and the commitments arising thereunder, or (ii) deposit in escrow an amount sufficient to permit the Lime SPV to pay to PruPower on or before the "Construction Option Amount Prepayment Date" (as defined in Annex A to the Note Purchase Agreement without amendment thereto) all amounts owed PruPower as of such date pursuant to the Note Purchase Agreement and the other Transaction Documents cancelling the Note Purchase Agreement and the other Transaction Documents and the commitment arising thereunder. If the Dravo Parties elect option (ii) above, (x) the Dravo Parties agree that if the Lime SPV shall, after the effective date hereof, borrow additional funds from PruPower pursuant to the Note Purchase Agreement and the other Transaction Documents, the Dravo Parties shall simultaneously with such borrowing deposit into such escrow an amount equal to the principal amount of such additional funds borrowed by the Lime SPV, plus five percent (5%) of such amount ; (y) the escrow agent selected by the Dravo Parties shall be reasonably acceptable to Lenders; and (z) the terms and conditions of the escrow agreement shall be in form and substance acceptable to each Lender and each Lender's counsel. (2) Basic shall pay to Prudential all amounts owed to Prudential by Basic, solely with respect to the Basic Note Agreement, cancelling the Basic Note Agreement. (3) Lime shall pay to FAB all amounts owed FAB by Lime, solely with respect to the Longview Credit Agreement, wherein FAB loaned Lime $12,900,000.00 for the purpose of assisting Lime construct a lime kiln facility at Saginaw, Alabama, which payment will cancel said loan agreement and related agreements. (4) The Dravo Parties shall pay the amount necessary to purchase a guaranteed investment contract in the amount of $3,920,000.00 to secure the guaranty of Insurance Company of North America in connection with the settlement agreement dated March 15, 1994, 4-3 among the plaintiffs named therein, Dravo, Montenay Pacific Power Corporation, Montenay International Corp. and Insurance Company of North America in order to obtain the release of Insurance Company of North America of the security interests granted pursuant to the General Inducement Agreement, dated as of March 31, 1994, among the Dravo Parties and Insurance Company of North America. (5) The Dravo Parties shall pay to Agent for the benefit of Lenders in payment of the Revolving Loans then outstanding pursuant to the terms of the Revolving Credit Agreement the lesser of (i) such amount as will reduce the then outstanding aggregate balance of the Revolving Loans owed to Lenders to $1,000.00, or (ii) the net proceeds received by any Dravo Parties or by any Affiliate or Subsidiary of any Dravo Party from Martin as a result of the transactions contemplated in the Asset Purchase Agreement remaining after the payments and deposits set forth in clauses (1), (2), (3) and (4) of this subsection (v). (6) Any of the foregoing net proceeds remaining after the payments and deposits set forth in clauses (1), (2), (3), (4) and (5) of this subsection (v) may be used by the Dravo Parties in any manner the Dravo Parties deem appropriate, but subject to the terms of the Override Agreement and other Operative Documents. (w) Negotiations Regarding Covenants. The Dravo Parties agree that as soon as possible and prior to April 30, 1995, they will commence negotiating with Lenders in good faith with respect to resetting the negative covenants and affirmative covenants contained in the Override Agreement and applicable to any Dravo Party." ARTICLE II THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT SECTION 2.01 Amendments to Revolving Credit Agreement. The Revolving Credit Agreement shall be, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, amended as follows: (a) Amendments to Article I. Article I shall be amended as follows: (i) In the first and sixth sentence of Section 1.1, the phrase "SEVENTY FIVE MILLION AND NO/100THS ($75,000,000.00) DOLLARS" is deleted in its entirety and the phrase "FORTY MILLION AND NO/100THS ($40,000,000.00) DOLLARS" is substituted in place thereof. (ii) The fifth sentence of Section 1.1 is amended in its entirety to read as follows: "All sums advanced pursuant to the Revolving Line of Credit shall be payable, as to both principal and interest, and shall bear interest, at the rate and in the manner stated in the Revolving Notes of Borrowers, copies of which are attached hereto, marked 4-4 Exhibits A-1, A-2 and A-3, and expressly made a part hereof as though fully set forth herein (the "Revolving Notes")." (iii) The last sentence of Section 1.3 is amended in its entirety to read as follows: "Any draw made by the beneficiary of any such Letter of Credit shall constitute for all purposes hereunder an advance by the applicable Lender to Borrowers pursuant to the Revolving Line of Credit." (iv) The last sentence of Section 1.5 is amended in its entirety to read as follows: "In addition, the Borrowers agree to pay to each Lender that agrees to extend the Maturity Date pursuant to Section 1.9 an annual renewal fee equal to 0.125% of the amount of such Lender's Revolving Line of Credit, payable on June 30 of the year in which such Lender agrees to such extension." (v) The first sentence of Section 1.6 is amended in its entirety to read as follows: "Borrowers agree to pay to Lenders on a basis proportionate with such respective Lender's Revolving Line of Credit commitment hereunder non-usage fees (the "Non-Usage Fees") in an aggregate amount equal to one- half of one percent (1/2 of 1%) per annum on the unutilized portion of the $40,000,000.00 Revolving Line of Credit payable quarterly in arrears on the fifth business day following each calendar quarter during the term of this Agreement." (b) Amendments to Article IX. The first sentence of Section 9.1(a) of Article IX is amended in its entirety to read as follows: "Lenders agree as between themselves that upon receipt of a request for an advance hereunder by Borrowers (or either of them), and so along as there shall exist no Event of Default or Default, FAB will advance 37.28% of such request, PNC will advance 28.82% of such request, BAI will advance 33.90% of such request (each such percentage referred to herein as such Lender's "Percentage"; provided, however, that in no event shall the aggregate principal amount of the Revolving Line of Credit loans made hereunder by Lenders exceed $40,000,000.00; provided, however, that in no event shall Prudential be required to make Revolving Line of Credit loans hereunder." 4-5 (c) Amendments to Article X. Article X shall be amended as follows: (i) The last two sentences of Section 10.2 are hereby deleted. (ii) The last sentence of Section 10.7 is hereby deleted. (d) Amendment to Party Name. All references to the term "Continental" in the Revolving Credit Agreement shall be deleted and substituted in place thereof is the term "BAI". (e) Schedules and Exhibits. Schedules I and II to the Revolving Credit Agreement are deleted in their entirety and Schedules I and II attached hereto are substituted therefor, respectively. Exhibits A-1, A-2 and A-3 to the Revolving Credit Agreement are deleted in their entirety and Exhibits A-1, A-2 and A-3 attached hereto are substituted therefor, respectively. Each respective Lender agrees to cancel and return to Companies marked "paid" the original Revolving Note or Notes of Companies made payable to such Lender, copies of which are attached to the Revolving Credit Agreement as Exhibits A-4, A-5, A-6, A-7 and A-8. (f) Preferential Transfers, Etc. The foregoing notwithstanding, each of the Lenders and Prudential hereby agree that, to the extent that the Borrowers or any other Person liable for all or any part of the Revolving Line of Credit, Letters of Credit or any other obligations arising pursuant to the Revolving Credit Agreement has made any payment prior to this Amendment or makes a payment in connection with the transactions contemplated by this Amendment, which payment or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be paid to a trustee, receiver or any other party under any bankruptcy act, state or Federal law, common law or equitable cause, then to the extent of such payment, each Lender's Percentage and Revolving Line of Credit commitment (including, but not limited to, the Percentage and Revolving Line of Credit commitment of Prudential being cancelled as part of this Amendment) shall be reinstated and revived as to said payment. (g) Lenders' Acknowledgment. Notwithstanding the foregoing amendments to the Revolving Credit Agreement, the Lenders acknowledge that Prudential shall receive payments from Companies on Prudential's Revolving Line of Credit commitment to Companies, reducing the outstanding balance of such Revolving Line of Credit indebtedness to zero. ARTICLE III CONSENT TO SALE; RELEASE OF COLLATERAL; WAIVER SECTION 3.01. Consent to Sale. Subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, the Lenders, as parties to the Override Agreement, Revolving Credit Agreement and other Operative Documents, and Prudential, as a party to the Note and Stock Purchase Agreement, do hereby consent to the sale contemplated in the Asset Purchase Agreement. 4-6 SECTION 3.02 Release of Collateral. Subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, the Lenders, as parties to the Override Agreement, the Revolving Credit Agreement and other Operative Documents, and Prudential, as a party to the Note and Stock Purchase Agreement, do hereby agree to release the collateral that is the subject of Exhibit "I", attached hereto and incorporated herein by reference, from the lien and/or security interest held by Lenders and Prudential pursuant to the Security Documents. Lenders hereby authorize and direct the Agent to execute the original of the UCC-3 Forms and Release of First Mortgage and Security Agreement that comprise Exhibit "I" and deliver same to Companies upon the satisfaction of the conditions precedent set forth in Section 4.01 hereof. Subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, the Lenders release from the lien and/or security interest held by Lenders and Prudential pursuant to the Security Documents the stock certificates (Certificate Nos. 6, 8, 9, 11 and 12) of Dravo Bahama Rock Limited, and Agent is authorized upon satisfaction of such conditions precedent to deliver such stock certificates to the Dravo Parties. Lenders and Prudential further acknowledge that upon satisfaction of the conditions precedent set forth in Section 4.01 hereof Lenders and Prudential shall have no lien or security interest in the assets of Dravo Bahama Rock Limited, and thereafter Lenders and Prudential, upon the request of the Dravo Parties, from time to time, shall execute and deliver, or cause the Agent to execute and deliver, such further documents or instruments, and do or cause to be done such further acts as may be necessary to release the lien or security interest of Lenders and Prudential, or Agent on behalf of Lenders and Prudential, in and to the assets of Dravo Bahama Rock Limited. Notwithstanding anything herein to the contrary, (i) no asset or contract right of any Dravo Party or any Affiliate or Subsidiary of any Dravo Party, except Basic and AMC, and (ii) no asset or contract right other than those comprised in Exhibit "I" shall be released hereunder. SECTION 3.03 Waiver. Subject to the satisfaction of the conditions precedent set forth in Section 4.01 hereof, the Lenders, pursuant to the request of the Dravo Parties, waive as to the Companies and solely with respect to the period commencing July 1, 1994 and ending March 31, 1995, the negative covenant contained in items (1) and (2) of the proviso to Section 5.02(b) of the Override Agreement. ARTICLE IV CONDITIONS PRECEDENT SECTION 4.01 Conditions of Effectiveness. This Amendment shall become effective when, and only when, (a) the Agent shall have received counterparts of this Amendment executed by each of the Dravo Parties and the Lenders, (b) all accrued but unpaid interest, fees and expenses under the terms of the Revolving Credit Agreement, as amended hereby, and all outstanding fees and expenses of counsel to the Agent and the Lenders, shall have been paid in full to the extent due and payable after giving effect to this Amendment, (c) the Agent additionally shall have received all of the following documents, each (unless otherwise indicated) being dated the date of receipt thereof by the Agent (which date shall be the same for all such documents), in form and substance satisfactory to the Agent and the Lenders: 4-7 (i) Copies of (A) all documents evidencing all requisite corporate action of each Dravo Party (including any and all resolutions of the Board of Directors of each Dravo Party) authorizing the execution, delivery and performance of this Amendment and the matters contemplated hereby and thereby, and (B) the Asset Purchase Agreement and each related agreement or instrument, in each case certified by the Secretary or Assistant Secretary of the relevant Dravo Party as being in full force and effect and not having been modified, rescinded or revoked and, in the case of clause (B) above, as being true and correct copies of the Asset Purchase Agreement and each related agreement or instrument, (ii) A certificate of the Secretary or an Assistant Secretary of each Dravo Party certifying the names and true signatures of the officers authorized to sign this Amendment on behalf of such Dravo Party and the amendments to the other Operative Documents, and any other documents to be delivered by such Dravo Party hereunder of thereunder, (iii) Duly executed copies of the Notes, in substantially the forms of Exhibits A-1, A-2 and A-3 attached hereto, (iv) A duly executed copy of the deed conveying all of the real property, including improvements, located in Shelby County, Alabama, and more particularly described on Exhibit "II" attached hereto and incorporated herein by reference, dated on or before the date of this Amendment, from Basic to Lime, and (v) Such other documents, instruments, approvals (and, if required by the Agent, certified duplicates of executed copies thereof) or opinions as the Agent or any Lender may reasonably request, and (d) the representations and warranties contained herein shall be true on and as of the date of this Amendment; there shall exist on the date of this Amendment no Event of Default or Default; and there shall exist no material adverse change in the financial condition, business operation or prospects of any Dravo Party or its Subsidiaries since August 1, 1994. ARTICLE V REPRESENTATIONS AND WARRANTIES SECTION 5.01 Representations and Warranties of the Dravo Parties. (a) Each of the Dravo Parties hereby repeats and confirms each of the representations and warranties made by it in Article VII of the Override Agreement, as amended hereby, as though made on and as of the date hereof, with each reference therein to "this Agreement", the "Operative Documents", "hereof", "hereunder", "thereof", "thereunder" and words of like import being deemed to be 4-8 a reference to the Override Agreement and the Operative Documents, in each case as amended hereby. (b) Each of the Dravo Parties represents and warrants as follows: (i) Such Dravo Party and each of its Subsidiaries (other than Lime SPV) is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified to do business in, and is in good standing in, all other jurisdictions where the nature of its business or the nature of property owned or used by it makes such qualification necessary. (ii) Lime SPV is a limited partnership duly organized, validly existing and in good standing under the laws of the state of its organization and is duly qualified to do business in, and is in good standing in, all other jurisdictions where the nature of its business or the nature of property owned or used by it makes such qualification necessary. (iii) The execution, delivery and performance by such Dravo Party of this Amendment are within its corporate powers, have been duly authorized by all necessary corporate action and do not contravene (A) such Dravo Party's charter or bylaws, (B) any law or governmental regulation, or (C) any legal or contractual restriction binding on or affecting such Dravo Party; and such execution, delivery and performance do not or will not result in or require the creation of any Lien (other than as contemplated hereby) upon or with respect to any of its properties. (iv) No Governmental Approval is required for the due execution, delivery and performance by such Dravo Party of this Amendment, except for such Governmental Approvals as have been duly obtained or made and which are in full force and effect on the date hereof and no subject to appeal. (v) This Amendment constitutes the legal, valid and binding obligations of such Dravo Party enforceable against such Dravo Party in accordance with its terms; subject to the qualifications, however, that the enforcement of the rights and remedies herein is subject to bankruptcy and other similar laws of general application affecting rights and remedies of creditors and that the remedy of specific performance or of injunctive relief is subject to the discretion of the court before which any proceedings therefor may be brought. ARTICLE VI MISCELLANEOUS SECTION 6.01 Reference to and Effect on the Operative Documents. (a) Upon the effectiveness of this Amendment, on and after the date hereof each reference in the Revolving Credit Agreement and the Override Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Revolving Credit Agreement and the Override Agreement, respectively, and each reference in the other Operative Documents to "the Revolving Credit 4-9 Agreement", "the Override Agreement", "thereunder", "thereof" or words of like import referring to the Revolving Credit Agreement and the Override Agreement, shall mean and be a reference to the Revolving Credit Agreement and the Override Agreement, respectively, as amended hereby. (b) Except as specifically amended above, the Revolving Credit Agreement, the Override Agreement and the Notes, and all other Operative Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Security Documents and all of the Collateral described therein do and shall continue to secure the payment of all obligations of the Dravo Parties under the Revolving Credit Agreement, the Notes and the other Operative Documents, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Operative Documents, nor constitute a waiver of any provision of any of the Operative Documents. SECTION 6.02 Costs and Expenses. The Dravo Parties jointly and severally agree to pay on demand all costs and expenses incurred by the Agent and the Lenders in connection with the preparation, execution and delivery of this Amendment and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent and the Lenders with respect thereto and with respect to advising the Agent and the Lenders as to their rights and responsibilities under this Amendment. The Dravo Parties jointly and severally further agree to pay on demand all costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses of counsel), incurred by the Agent and the Lenders in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment, the Asset Purchase Agreement and the other documents to be delivered hereunder and thereunder, including, without limitation, counsel fees and expenses in connection with the enforcement of rights under this Section 6.02. SECTION 6.03 Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. SECTION 6.04 Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 6.05 Further Assurances. Each of the Dravo Parties will, upon the reasonable request of Lenders or Agent, from time to time, execute and deliver or cause to be executed and delivered such further instruments, and do and cause to be done such further acts, as may be necessary or proper to carry out more effectively the provisions of this Amendment. [SIGNATURES ON THE FOLLOWING PAGE] 4-10 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. FIRST ALABAMA BANK By: PETER P. GAILLARD Name: Peter P. Gaillard Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION By: RICHARD D. RODGERS Name: Richard D. Rogers Title: Vice President BANK OF AMERICA ILLINOIS By: MICHAEL J. MCKENNEY Name: Michael J. McKenney Title: Vice President THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: CATHERINE A. CATES Name: Catherine A. Cates Title: Vice President DRAVO CORPORATION By: ERNEST F. LADD III Name: Ernest F. Ladd, III Title: Executive Vice President DRAVO LIME COMPANY By: ERNEST F. LADD III Name: Ernest F. Ladd, III Title: Executive Vice President DRAVO BASIC MATERIALS COMPANY, INC. By: ERNEST F. LADD III Name: Ernest F. Ladd, III Title: Executive Vice President 4-11 EXHIBIT A-1 EXHIBIT A-1 TO REVOLVING CREDIT AGREEMENT THIS REVOLVING NOTE IS ISSUED IN SUBSTITUTION FOR, AND NOT IN REPAYMENT OF, THE AMENDED AND RESTATED REVOLVING NOTE, DATED AUGUST 1, 1994, ISSUED BY THE BORROWERS (AS DEFINED BELOW) TO THE LENDER (AS DEFINED BELOW) IN THE AGGREGATE PRINCIPAL AMOUNT OF $22,000,00.00. AMENDED AND RESTATED REVOLVING NOTE $14,912,000.00 January 3, 1995 FOR VALUE RECEIVED, DRAVO LIME COMPANY, a Delaware corporation, and DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation (herein called the "Borrowers"), jointly and severally, promise to pay to the order of FIRST ALABAMA BANK (herein called "Lender") at the offices of First Alabama Bank at 106 St. Francis Street, Post Office Box 2527, Mobile, Alabama 36622 (or such other place or as the holder hereof shall designate from time to time by written notice to the Borrowers) the principal sum of FOURTEEN MILLION NINE HUNDRED TWELVE THOUSAND AND NO/100THS DOLLARS ($14,912,000.00) or, if less, the aggregate principal amount of all Revolving Line of Credit loans made by Lender to Borrowers pursuant to Article I and Section 11.2 of the Revolving Credit Agreement referred to below, in lawful money of the United States of America in immediately available funds, by wire transfer, on or before April 30, 1996, together with interest thereon and certain fees and other amounts due the Lender as set forth in the Revolving Credit Agreement referred to below. Borrowers also, jointly and severally, promise to pay to Lender, in like money at such office, interest monthly in arrears, computed on the basis of actual days elapsed and a year of 360 days, on the first business day of each month beginning on the 1st day of February, 1995, on the unpaid average daily principal balance during such period outstanding hereunder from the date hereof until the principal indebtedness is paid in full at the rate per annum equal to the "Commercial Base Rate" as hereinafter defined plus one and one-quarter percent (1.25%). The term "Commercial Base Rate" is defined as a per annum rate of interest announced or established from time to time by Regions Financial Corp. as its base lending rate for domestic commercial loans, it being understood that Commercial Base Rate is one of the basic rates from time to time announced or established which serves as a basis upon which effective rates of interest are calculated for those loans that make reference thereto. The Commercial Base Rate from day to day outstanding, plus one and one-quarter percent (1.25%), shall be the effective per annum rate of interest for each day during the duration of this loan and shall be adjusted and changed each day that a change in the Commercial Base Rate occurs. This Revolving Note is issued in substitution for, and amends and restates, the Amended and Restated Revolving Note, dated August 1, 1994, issued by the Borrowers to the Lender in the aggregate principal amount of $22,000,000.00. This Revolving Note shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. 4-12 Borrowers expressly waive any presentment, demand, protest or notice in connection with this Revolving Note, now or hereafter, required by applicable law, and further waive as to this debt all right of exemption under the Constitution and laws of the State of New York, or any other state or commonwealth. This Revolving Note is referred to in and issued subject to that certain Revolving Credit Agreement, dated as of January 21, 1992, as amended by the First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 7, 1994, the Amendment Agreement, dated as of August 1, 1994, and the Amendment Agreement, dated as of January 3, 1995 (as so amended, and as it may be further amended, modified or supplemented from time to time, the "Revolving Credit Agreement"), among the Borrowers, Lender, PNC Bank, National Association, Bank of America Illinois, The Prudential Insurance Company of America, and First Alabama Bank, as Agent, to which reference is made for a statement of the terms and conditions under which the principal hereof, accrued interest thereon and other amounts due thereunder is secured, may become or may be declared to be forthwith due and payable and is subject to prepayment. This Revolving Note shall be binding upon the Borrowers and their respective successors and assigns and shall inure to the benefit of Lender and its respective successors and assigns. Borrowers agree to pay, and save the holders hereof harmless against, any costs or liability for expenses (including reasonable attorneys' fees) arising in connection with the enforcement by the holders hereof of any of the holders' rights under this Revolving Note or the Revolving Credit Agreement. In case a Default or Event of Default, as defined in the Revolving Credit Agreement, shall occur and be continuing, the principal of this Revolving Note may be declared due and payable in the manner and with the effect provided in the Revolving Credit Agreement. DRAVO LIME COMPANY ATTEST: JAMES J. PUHALA Name: ERNEST F. LADD III Its: Secretary Title: Executive Vice President DRAVO BASIC MATERIALS COMPANY, INC. ATTEST: JAMES J. PUHALA Name: ERNEST F. LADD III Its: Secretary Title: Executive Vice President 4-13 EXHIBIT A-2 EXHIBIT A-2 TO REVOLVING CREDIT AGREEMENT THIS REVOLVING NOTE IS ISSUED IN SUBSTITUTION FOR, AND NOT IN REPAYMENT OF, THE AMENDED AND RESTATED REVOLVING NOTE, DATED AUGUST 1, 1994, ISSUED BY THE BORROWERS (AS DEFINED BELOW) TO THE LENDER (AS DEFINED BELOW) IN THE AGGREGATE PRINCIPAL AMOUNT OF $17,000,00.00. AMENDED AND RESTATED REVOLVING NOTE $11,528,000.00 January 3, 1995 FOR VALUE RECEIVED, DRAVO LIME COMPANY, a Delaware corporation, and DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation (herein called the "Borrowers"), jointly and severally, promise to pay to the order of PNC BANK, NATIONAL ASSOCIATION (herein called "Lender") at the offices of First Alabama Bank at 106 St. Francis Street, Post Office Box 2527, Mobile, Alabama 36622 (or such other place or as the holder hereof shall designate from time to time by written notice to the Borrowers) the principal sum of ELEVEN MILLION FIVE HUNDRED TWENTY-EIGHT THOUSAND AND NO/100THS DOLLARS ($11,528,000.00) or, if less, the aggregate principal amount of all Revolving Line of Credit loans made by Lender to Borrowers pursuant to Article I and Section 11.2 of the Revolving Credit Agreement referred to below, in lawful money of the United States of America in immediately available funds, by wire transfer, on or before April 30, 1996, together with interest thereon and certain fees and other amounts due the Lender as set forth in the Revolving Credit Agreement referred to below. Borrowers also, jointly and severally, promise to pay to Lender, in like money at such office, interest monthly in arrears, computed on the basis of actual days elapsed and a year of 360 days, on the first business day of each month beginning on the 1st day of February, 1995, on the unpaid average daily principal balance during such period outstanding hereunder from the date hereof until the principal indebtedness is paid in full at the rate per annum equal to the "Commercial Base Rate" as hereinafter defined plus one and one-quarter percent (1.25%). The term "Commercial Base Rate" is defined as a per annum rate of interest announced or established from time to time by Regions Financial Corp. as its base lending rate for domestic commercial loans, it being understood that Commercial Base Rate is one of the basic rates from time to time announced or established which serves as a basis upon which effective rates of interest are calculated for those loans that make reference thereto. The Commercial Base Rate from day to day outstanding, plus one and one-quarter percent (1.25%), shall be the effective per annum rate of interest for each day during the duration of this loan and shall be adjusted and changed each day that a change in the Commercial Base Rate occurs. This Revolving Note is issued in substitution for, and amends and restates, the Amended and Restated Revolving Note, dated August 1, 1994, issued by the Borrowers to the Lender in the aggregate principal amount of $17,000,000.00. This Revolving Note shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. 4-14 Borrowers expressly waive any presentment, demand, protest or notice in connection with this Revolving Note, now or hereafter, required by applicable law, and further waive as to this debt all right of exemption under the Constitution and laws of the State of New York, or any other state or commonwealth. This Revolving Note is referred to in and issued subject to that certain Revolving Credit Agreement, dated as of January 21, 1992, as amended by the First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 7, 1994, the Amendment Agreement, dated as of August 1, 1994, and the Amendment Agreement, dated as of January 3, 1995 (as so amended, and as it may be further amended, modified or supplemented from time to time, the "Revolving Credit Agreement"), among the Borrowers, Lender, First Alabama Bank, Bank of America Illinois, The Prudential Insurance Company of America, and First Alabama Bank, as Agent, to which reference is made for a statement of the terms and conditions under which the principal hereof, accrued interest thereon and other amounts due thereunder is secured, may become or may be declared to be forthwith due and payable and is subject to prepayment. This Revolving Note shall be binding upon the Borrowers and their respective successors and assigns and shall inure to the benefit of Lender and its respective successors and assigns. Borrowers agree to pay, and save the holders hereof harmless against, any costs or liability for expenses (including reasonable attorneys' fees) arising in connection with the enforcement by the holders hereof of any of the holders' rights under this Revolving Note or the Revolving Credit Agreement. In case a Default or Event of Default, as defined in the Revolving Credit Agreement, shall occur and be continuing, the principal of this Revolving Note may be declared due and payable in the manner and with the effect provided in the Revolving Credit Agreement. DRAVO LIME COMPANY ATTEST: JAMES J. PUHALA Name: ERNEST F. LADD III Its: Secretary Title: Executive Vice President DRAVO BASIC MATERIALS COMPANY, INC. ATTEST: JAMES J. PUHALA Name: ERNEST F. LADD III Its: Secretary Title: Executive Vice President 4-15 EXHIBIT A-3 EXHIBIT A-3 TO REVOLVING CREDIT AGREEMENT THIS REVOLVING NOTE IS ISSUED IN SUBSTITUTION FOR, AND NOT IN REPAYMENT OF, THE AMENDED AND RESTATED REVOLVING NOTE, DATED AUGUST 1, 1994, ISSUED BY THE BORROWERS (AS DEFINED BELOW) TO THE LENDER (AS DEFINED BELOW) IN THE AGGREGATE PRINCIPAL AMOUNT OF $20,000,00.00. AMENDED AND RESTATED REVOLVING NOTE $13,560,000.00 January 3, 1995 FOR VALUE RECEIVED, DRAVO LIME COMPANY, a Delaware corporation, and DRAVO BASIC MATERIALS COMPANY, INC., an Alabama corporation (herein called the "Borrowers"), jointly and severally, promise to pay to the order of BANK OF AMERICA ILLINOIS (formerly Continental Bank) (herein called "Lender") at the offices of First Alabama Bank at 106 St. Francis Street, Post Office Box 2527, Mobile, Alabama 36622 (or such other place or as the holder hereof shall designate from time to time by written notice to the Borrowers) the principal sum of THIRTEEN MILLION FIVE HUNDRED SIXTY THOUSAND AND NO/100THS DOLLARS ($13,560,000.00) or, if less, the aggregate principal amount of all Revolving Line of Credit loans made by Lender to Borrowers pursuant to Article I and Section 11.2 of the Revolving Credit Agreement referred to below, in lawful money of the United States of America in immediately available funds, by wire transfer, on or before April 30, 1996, together with interest thereon and certain fees and other amounts due the Lender as set forth in the Revolving Credit Agreement referred to below. Borrowers also, jointly and severally, promise to pay to Lender, in like money at such office, interest monthly in arrears, computed on the basis of actual days elapsed and a year of 360 days, on the first business day of each month beginning on the 1st day of February, 1995, on the unpaid average daily principal balance during such period outstanding hereunder from the date hereof until the principal indebtedness is paid in full at the rate per annum equal to the "Commercial Base Rate" as hereinafter defined plus one and one-quarter percent (1.25%). The term "Commercial Base Rate" is defined as a per annum rate of interest announced or established from time to time by Regions Financial Corp. as its base lending rate for domestic commercial loans, it being understood that Commercial Base Rate is one of the basic rates from time to time announced or established which serves as a basis upon which effective rates of interest are calculated for those loans that make reference thereto. The Commercial Base Rate from day to day outstanding, plus one and one-quarter percent (1.25%), shall be the effective per annum rate of interest for each day during the duration of this loan and shall be adjusted and changed each day that a change in the Commercial Base Rate occurs. This Revolving Note is issued in substitution for, and amends and restates, the Amended and Restated Revolving Note, dated August 1, 1994, issued by the Borrowers to the Lender in the aggregate principal amount of $20,000,000.00. This Revolving Note shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. 4-16 Borrowers expressly waive any presentment, demand, protest or notice in connection with this Revolving Note, now or hereafter, required by applicable law, and further waive as to this debt all right of exemption under the Constitution and laws of the State of New York, or any other state or commonwealth. This Revolving Note is referred to in and issued subject to that certain Revolving Credit Agreement, dated as of January 21, 1992, as amended by the First Amendment to Amended and Restated Revolving Credit Agreement, dated as of March 7, 1994, the Amendment Agreement, dated as of August 1, 1994, and the Amendment Agreement, dated as of January 3, 1995 (as so amended, and as it may be further amended, modified or supplemented from time to time, the "Revolving Credit Agreement"), among the Borrowers, Lender, First Alabama Bank, PNC Bank, National Association, The Prudential Insurance Company of America, and First Alabama Bank, as Agent, to which reference is made for a statement of the terms and conditions under which the principal hereof, accrued interest thereon and other amounts due thereunder is secured, may become or may be declared to be forthwith due and payable and is subject to prepayment. This Revolving Note shall be binding upon the Borrowers and their respective successors and assigns and shall inure to the benefit of Lender and its respective successors and assigns. Borrowers agree to pay, and save the holders hereof harmless against, any costs or liability for expenses (including reasonable attorneys' fees) arising in connection with the enforcement by the holders hereof of any of the holders' rights under this Revolving Note or the Revolving Credit Agreement. In case a Default or Event of Default, as defined in the Revolving Credit Agreement, shall occur and be continuing, the principal of this Revolving Note may be declared due and payable in the manner and with the effect provided in the Revolving Credit Agreement. DRAVO LIME COMPANY ATTEST: JAMES J. PUHALA Name: ERNEST F. LADD III Its: Secretary Title: Executive Vice President DRAVO BASIC MATERIALS COMPANY, INC. ATTEST: JAMES J. PUHALA Name: ERNEST F. LADD III Its: Secretary Title: Executive Vice President 4-17 SCHEDULE I SCHEDULE I TO REVOLVING CREDIT AGREEMENT Financing Commitments FIRST ALABAMA BANK Revolving Line of Credit and Letters of Credit Facilities Combined $14,912,000.00 PNC BANK, NATIONAL ASSOCIATION Revolving Line of Credit and Letters of Credit Facilities Combined $11,528,000.00 BANK OF AMERICA ILLINOIS Revolving Line of Credit and Letters of Credit Facilities Combined $13,560,000.00 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Revolving Line of Credit and Letters of Credit Facilities Combined -0- TOTAL $40,000,000.00 4-18 SCHEDULE II SCHEDULE II TO REVOLVING CREDIT AGREEMENT Maximum Stated Amount of Letters of Credit To be Issued (or Cause To Be Issued) By Lenders Stated Amount Lender's Percentage FIRST ALABAMA BANK $2,786,530.88 37.28% PNC BANK, NATIONAL ASSOCIATION $2,154,179.72 28.82% BANK OF AMERICA ILLINOIS $2,533,889.40 33.90% THE PRUDENTIAL INSURANCE COMPANY OF AMERICA -0- -0- TOTAL $7,474,600.00 100.00% 4-19 EX-10 4 INCENTIVE COMPENSATION PLAN Dravo Corporation Incentive Compensation Plan (Revised January 1995) The Dravo Corporation Incentive Compensation Plan provides senior managers and other key employees the opportunity to earn incentive income each year by achieving or surpassing predetermined, preapproved objectives. Objectives The objectives of the Incentive Compensation Plan are to: * Promote individual ownership and accountability in the ongoing success of the corporation, while focusing team efforts on overall corporate earnings objectives. * Encourage and reward management achievements that contribute to the value of the corporation. * Communicate key corporate and divisional priorities through the plan. * Provide senior managers and other key employees with a competitive compensation opportunity. Plan Summary The Dravo Corporation Incentive Compensation Plan (ICP) is a target incentive plan that provides for the establishment of target, threshold and optimum incentive awards based upon performance against specific predetermined performance objectives. Prior to the beginning of each plan year, target, threshold and optimum performance levels will be established and approved for Corporate and Dravo Lime divisional performance. Those employees who function across divisional locations will have a single Corporate component (100%). Those who are assigned to an individual operating unit will have both a Corporate component (70%) and a Divisional component (30%). At the beginning of each year each participant will be provided with a Participant's Guide, which will give them an overview of the plan and specify their target award and award components. 10(iv)-1 Shareholder Protection Provisions To assure that ICP awards are related to acceptable corporate earnings, the following shareholder protection provisions will apply: * In developing each year's Plan, the sum of all projected ICP awards will not be allowed to exceed 8% of projected after tax earnings from continuing operations. If the total of all projected ICP awards exceeds 8% of the projected after tax earnings from continuing operations, then either the number of participants and/or the individual target percentages are to be reduced until the total is 8% or less. * If the Corporation fails to achieve threshold EPS performance, no incentive awards will be made under the plan at any level for any component for any participant. Eligibility Participation in the plan may be extended to Corporate and Dravo Lime senior managers and other key employees. Prior to the beginning of each plan year, eligible participants are recommended by the President and Chief Executive Officer (CEO) and approved by the Compensation Committee of the Board of Directors (Committee). Individual Target Awards Target awards are established so as to pay competitive levels of incentive compensation for achievement of the targeted performance levels. Target awards will equal a specified percentage of the Midpoint salary of the job grade for each participant in the plan. Percentages may vary within the job grade based on accountability of the job as recommended by the CEO and approved by the Committee each year. Range of Awards The target award will be paid at the targeted level of performance on any component of the plan. The threshold award, equal to 50 percent of the target award, will be paid at the threshold level of performance on any component of the plan. If performance fails to meet the threshold, no award will be made for that component. The optimum award, equal to 150 percent of the target award, will be paid for performance equal to or above the optimum level of performance on any component of the Plan. 10(iv)-2 Allocation of Awards Among Components Awards will be allocated to reflect the organizational level where the participant has the greatest level of influence on business results. For all participants awards the greatest weight will be given to corporate performance. For participants assigned to a specific operating division, a portion of their award will be allocated to reflect the performance of their respective division. Corporate Component All participants at the Corporate level, and those participants who are not assigned to a specific operating division will receive 100% of their award through the Corporate component. Employees who are assigned to a specific operating division location will receive 70% of their award through the Corporate component. The performance measure for the Corporate component is Earnings Per Share (EPS) from continuing operations. The CEO will recommend to the Committee for approval threshold, target and optimum levels of EPS performance for the Plan Year for use in determining awards. Performance at the threshold level will result in an award of 50% of the target for this component. At the target level of performance, the target award will be made and at the optimum level, the optimum award of 150% of target will be made. For intermediate results, awards will be interpolated. The Corporate component may be adjusted, with the approval of the Committee, to reflect the impact of extraordinary events on Corporate EPS. Divisional Component Participants employed in the various operating divisions (for example: Black River, Maysville and Longview) will receive 30% of their awards through a Divisional component that is based upon the results attained by their respective operating division. The performance measure for the Divisional component is earnings before interest and taxes (EBIT). The CEO will recommend to the Committee for approval threshold, target and optimum levels of EBIT performance for each operating division for the plan year for use in determining awards. The relationship of actual results to awards is determined in the same way as described above for the Corporate component. 10(iv)-3 The Divisional component may be adjusted, with the approval of the Committee, to reflect the impact of extraordinary events on an operating division's EBIT. Restricted Stock For participants in job grade level 24 and above having a target percentage of 15% or more, the ICP award may be paid in a combination of cash and restricted stock. The maximum percentage of restricted stock will be specified for each applicable job grade. The actual amount of the award paid in restricted stock will be recommended by the CEO and approved by the Committee. Restricted stock is a grant and the stock must be held by the individual for a period of two years after which time the restriction will be lifted. The individual must be actively employed on the date on which the restriction is lifted in order to assume full ownership of the stock, unless their leaving the company is as a result of lay off, change of control termination, retirement, disability, or death, in which case the lifting of the restriction will be accelerated. Partial Year Payments A new employee, hired into an approved ICP position, will have his target percentage and component allocation established in accordance with the Plan. The employee's award will be calculated at the end of the year along with other participants, but the award will be prorated based on the number of months of employment. Terminations Employees who terminate from the company prior to December 31 of the plan year for any reason, with the exception of lay off, change of control termination, retirement, disability, or death, will forfeit their incentive compensation for that year. Employees who leave the company prior to December 31 due to lay off, change of control termination, retirement, disability, or in the event of death, will receive a prorated incentive for those months actually worked. Employees who leave the company after December 31 will be paid their award, if any, when other ICP payments are distributed. Promotions Employees promoted into an ICP position from a non-ICP position, or employees who are promoted into a position having a higher salary grade, target percentage and/or different component allocation, will receive an award prorated for the number of months spent in the new position. If an ICP award has been earned in their previous position, that award will be prorated by the number of months spent in the previous position. 10(iv)-4 Plan Administration The plan is administered by the Compensation Committee of the Board of Directors. The Committee is authorized to interpret the plan, to establish and amend rules for its administration and to make discretionary adjustments in awards due to extraordinary events. Recommendations as to the operation of the plan, eligible participants, target percentages, component allocations, type (cash and/or restricted stock) and amount of awards, performance criteria, and extraordinary adjustments may be made to the Committee by the CEO. 10(iv)-5 EX-10 5 TORBERT AGREEMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 31st day of December, 1994, by and between CARL A. TORBERT, JR., presently residing at 16015 Scenic Highway 98, Point Clear, Alabama 36564 (hereinafter referred to as "Torbert"), and DRAVO CORPORATION, having its principal place of business at One Oliver Plaza, Pittsburgh, Pennsylvania 15222 (hereinafter referred to as "Dravo"), WITNESSETH: WHEREAS, Torbert is presently employed by Dravo as Chairman and Chief Executive Officer of Dravo and contemplates completing the sale of substantially all of the assets of Dravo Basic Materials Company, Inc. under favorable financial terms on or about December 31, 1994; and WHEREAS, Torbert desires to reduce his executive responsibilities with Dravo after December 31, 1994 until December 31, 1996 and to act as Executive Consultant to Dravo during this period; and WHEREAS, Dravo concurs in the reduction of responsibilities of Torbert and wishes to have Torbert as an Executive Consultant to Dravo subsequent to December 31, 1994, NOW, THEREFORE, the parties hereto, in consideration of the mutual promises hereinafter made and intending to be legally bound hereby, do covenant, stipulate, warrant and agree as follows: 10(xii)-1 1. Torbert and Dravo agree that Torbert shall resign effective December 31, 1994 as Chairman and Chief Executive Officer of Dravo, and Dravo agrees to employ Torbert as an Executive Consultant for a period of two years until December 31, 1996 at a monthly salary of $25,000.00 per month ($300,000.00 per year), payable in accordance with Dravo's regular salary payment procedures. 2. For the period from December 31, 1994 until December 31, 1996, Torbert shall continue to participate in employee benefit plans sponsored by Dravo in which senior executives generally participate, including, without limitation, the following: a. Group Health coverage for Torbert and his eligible dependents. b. Group Dental coverage for Torbert and his eligible dependents. c. Company paid life insurance in the amount of $300,000.00. d. Accidental Death and Dismemberment Insurance. e. Participation in the Company 401(k) savings plan. f. Supplemental Executive Retirement Plan ("SERP"). g. Executive Benefit Plan. 3. Upon his retirement from Dravo effective January 1, 1997, Torbert shall receive the following retirement benefits: (a) For 1997, Torbert shall receive pension benefits equivalent to $217,797.00 on a "single life" basis, reduced to reflect whatever form of benefit (e.g., 50% joint and survivor annuity) Torbert elects in accordance with the terms of the relevant retirement plan. Such amount shall be paid in equal monthly installments and shall be paid in its entirety from the SERP 10(xii)-2 and/or the Executive Benefit Plan, in accordance with the terms of such plans. (b) For 1998 and subsequent years, Torbert shall receive pension benefits equivalent to $206,457.00 on a "single life" basis, reduced to reflect whatever form of benefit (e.g., 50% joint and survivor annuity) Torbert elects in accordance with the terms of the relevant retirement plans. Such amount shall be paid in equal monthly installments and shall be paid from the Retirement Plan for Employees of Dravo Corporation and Subsidiary, Salaried Employees, the SERP and the Executive Benefit Plan in accordance with the terms of such plans. (c) Torbert's account balance in the Dravo Savings Plan will be distributed in accordance with the terms thereof. (d) Torbert and his eligible dependents shall be eligible for the same coverage under the Dravo retiree medical and life insurance programs as other eligible retirees. 4. In the event of Torbert's death during either 1995 or 1996, (i) the consulting payments described in Section 1 above shall be discontinued and (ii) Torbert's designated beneficiary will receive the proceeds from the group life policy maintained by Dravo as part of Torbert's benefits. In addition, if Torbert's wife is still living at the time of Torbert's death, then Torbert's wife will receive, for the remainder of her life, the surviving spouse benefit provided under the Executive Benefit Plan, as in effect on December 31, 1994, which will be 45% of his earnings (a benefit equal to $135,000 per year). 10(xii)-3 5. The Change-In-Control Agreement between Torbert and the Corporation made as of the 1st day of June, 1993 shall continue to apply in accordance with the terms thereof. For purposes of said Agreement, Torbert's office shall be deemed to be in Mobile, Alabama. 6. (a) Torbert will, upon request of the Chief Executive Officer of Dravo, provide his services on an as needed and as available basis and shall perform such services as the parties may mutually agree. Such services shall be rendered by Torbert at such time as are mutually convenient to the parties. While it is anticipated that the services of Torbert hereunder will be performed in the United States, such services may be performed for limited periods of time in those foreign countries that are mutually agreeable to the parties. Torbert's status will be that of an Executive Consultant and not an independent contractor furnishing services on an established fee basis. As such, Torbert will be considered an employee of Dravo. (b) There shall be no obligation on the part of Torbert, his Executors or Administrators to repay any portion of said compensation irrespective of whether or not Dravo utilizes the services of Torbert hereunder or whether Torbert dies at any time during the term hereof. 7. Except as Dravo may otherwise provide, Torbert shall not have, nor shall Torbert represent himself as having, any authority to (i) make proposals or contracts in the name of Dravo or any of its subsidiaries or affiliated companies, (ii) bind Dravo, it subsidiaries or affiliated companies in any matter, (iii) pledge Dravo's credit, or that of its subsidiaries or affiliates, (iv) 10(xii)-4 extend credit in Dravo's name, or in the name of its subsidiaries or affiliates or (v) deal in any manner whatsoever with regard to the services or equipment of Dravo, its subsidiaries or affiliates other than within the scope of the services provided hereunder. 8. In addition to the aforesaid compensation, Dravo will reimburse Torbert for all reasonable expenses in accordance with the Dravo standard policy for extended use of personal car, public transportation, food and lodging, as authorized by Dravo and incurred in connection with services furnished under this Agreement. Torbert shall submit monthly invoices with supporting receipts to Dravo for expenses incurred hereunder during the preceding month and Dravo shall pay the amounts due Torbert on said invoices within thirty (30) days after receipt thereof. 9. (a) Information which is considered by Dravo to be of a confidential or proprietary nature, whether of a business, cost or technical nature, may be disclosed to, or developed by, Torbert in the course of his consulting work. Torbert acknowledges his obligation to hold such confidential or proprietary information in trust and confidence and not to disclose such information to any person, in accordance with applicable common law. These restrictions shall not apply to any information which is rightfully in the public domain prior to, or subsequent to, the time it was disclosed, or information which is independently developed by sources other than Dravo. Upon written request by Dravo, Torbert shall return to Dravo all written or descriptive matter, including, but not limited to, sales scriptions, or other papers and documents which contain such confidential or proprietary information. 10(xii)-5 (b) Any documents, forms or any other written matter, programs, methods or procedures which may be developed by Dravo and/or Torbert through December 31, 1996 within the scope of the services set forth herein shall be and remain the property of Dravo and shall be deemed to be Dravo's confidential or proprietary information for all purposes of this paragraph. 10. Dravo shall be entitled to any information beneficial to the purposes of this Agreement and any ideas, inventions and discoveries conceived, made or reduced to practice by Torbert either alone or with others, within the scope of the services of Torbert hereunder, during the consulting term arising out of any investigation or work by Torbert during the consulting term. If any such ideas, inventions or discoveries can be made the subject of patent applications and patents in the United States or elsewhere, Dravo shall have the right, but only at its expense, to prepare, prosecute, procure and maintain such patent applications and patents, and Torbert will, upon the request of Dravo, execute any and all documents and perform all such other lawful acts that Dravo may deem necessary or desirable to establish and perfect Dravo's ownership with respect to any such ideas, inventions and discoveries and such patent applications and patents. 11. In consideration of the mutual promises recited herein, Torbert agrees that Torbert shall not for himself or for any other person, partnership or corporation ("Firm") compete with Dravo by entering into the lime business within the market area served by any such business presently being conducted by Dravo. Further, Torbert agrees that he shall not participate or consult with any Firm in establishing a new or revised business organization which will compete with Dravo in any of its present businesses or locations 10(xii)-6 in the area of lime sales or facilities therefor within such restricted area. Torbert and Dravo agree that the above provisions shall be effective through December 31, 1996. 12. As long as this Agreement remains in effect, it is agreed that Dravo may freely use Torbert's name, refer to his professional qualifications and experience, include his name in listings of its consultants and describe Torbert as a consultant to it within the scope of services described herein, and that Torbert may likewise refer to himself as an Executive Consultant to Dravo within the scope of services described herein. 13. Either party hereto, in the event of default by the other party of any of the terms and conditions herein set forth to be performed or undertaken by such party, may, provided such defaulting party has not remedied such default within thirty days after notice thereof given by the non-defaulting party, in addition to any remedies available to it in law or in equity, declare this Agreement to be ended and of no further force or effect. 14. Dravo relies upon the personal skill, experience and abilities of Torbert in performing the services provided in this Agreement. Therefore, Torbert shall not assign this Agreement in whole or in part. 15. As a material inducement to Dravo to enter into this Agreement, Torbert hereby irrevocably and unconditionally releases, acquits and forever discharges Dravo and each of its owners, stockholders, predecessors, successors, assigns, agents, directors, members, officers, employees, representatives, attorneys, divisions, groups, subsidiaries and affiliates (and agents, directors, officers, employees, representatives and attorneys of 10(xii)-7 Dravo and such divisions, groups, subsidiaries and affiliates), and all persons acting by, through, under or in concert with any of them (collectively, "Releasees"), or any of them, from any and all complaints, claims, liabilities, causes of action, and expenses (including attorney fees, costs actually incurred and liquidated damages), known or unknown, which he may now, at any time heretofore or hereafter, have or claim to have against each or any of the Releasees arising from any alleged violation through the date of this Agreement by Dravo or any affiliate of the Age Discrimination in Employment Act, as amended. Similarly, Dravo releases and waives any and all claims or causes of action it may have against Torbert which exist up through the date of this Agreement. Nothing in this Agreement shall be deemed to waive any of Torbert's rights under ERISA to participate in Dravo's benefit plans for which he is otherwise eligible to participate or to receive benefits from those plans which he is eligible to receive in accordance with the plan provisions. 16. Torbert represents and acknowledges that in executing this Agreement he does not rely, and has not relied, upon any representation or statement made by any of the Releasees' agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise. 17. Torbert acknowledges that he has been advised in writing to discuss or review the contents of this Agreement with a lawyer of his choosing and that he has been given up to twenty-one (21) days in which to consider the terms of this Agreement. Torbert acknowledges that if he signs this Agreement prior to the expiration of the full twenty-one day period, he has done so voluntarily. Torbert further acknowledges that he has consulted 10(xii)-8 with his attorney prior to entering into this Agreement, and that he has entered into this Agreement voluntarily and of his own free will. 18. Torbert shall have seven (7) days following the execution of this Agreement to revoke it. Should Torbert wish to revoke this Agreement, he must notify John R. Major, Vice President - Administration, Dravo Corporation, One Oliver Plaza, Suite 3600, Pittsburgh, Pennsylvania 15222, and such notice must be received within seven (7) days from his signature. 19. This Agreement shall be binding upon Torbert and upon his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of Releasees and each of them, and to their heirs, administrators, representatives, executors, successors and assigns. 20. Should any provisions of this Agreement be declared or be determined by any court to be illegal or invalid, the validity to the remaining parts, terms or provisions shall not be affected thereby, and said illegal or invalid part, term, or provision shall be deemed not to be a part of this Agreement. 21. Except as otherwise provided herein, this Agreement sets forth the entire agreement between the parties hereto and fully supersedes any and all prior agreements or understandings between the parties hereto pertaining to the subject matter hereof. This Agreement may not be modified except in writing signed by both parties. 22. This Agreement is deemed to be made under, and shall be construed according to, the laws of the State of Alabama. 10(xii)-9 23. Unless otherwise notified in writing, each party shall send notices and other communications to the other party at the address shown below: If to Torbert: Carl A. Torbert, Jr. Post Office Box 1009 Point Clear, Alabama 36564-1009 If to Dravo: John R. Major Vice President - Administration Dravo Corporation One Oliver Plaza, Suite 3600 Pittsburgh, Pennsylvania 15222 PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE AS HEREIN PROVIDED OF CERTAIN KNOWN AND UNKNOWN CLAIMS. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on the day, month and year first above written. ATTEST: DRAVO CORPORATION JAMES J. PUHALA By:C. A. GILBERT J.J. Puhala C.A. Gilbert Vice President - General Counsel President & Secretary WITNESS: BARBARA D. NELSON CARL A. TORBERT, JR. CARL A. TORBERT, JR. 10(xii)-10 EX-11 6 EARNINGS PER SHARE CALCULATION Exhibit 11. Statement Re Computation of Per Share Earnings ($ in thousands, except per share amounts) Years ended December 31, 1994 1993 1992
Primary Earnings: Earnings from continuing operations before extraordinary item $ 4,930 $ 35,126 $ 10,318 Deduct dividends on preferred stock 2,544 2,554 2,561 Earnings from continuing operations applicable to common stock 2,386 32,572 7,757 Loss from discontinued operations (6,554) (35,303) -- Earnings (loss) from extraordinary item (7,572) -- 1,573 Cumulative accounting change (1,361) -- -- Net earnings (loss) applicable to common stock $(13,101) $ (2,731) $ 9,330 Shares: Weighted average number of common shares outstanding 14,859 14,835 14,820 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the average market price for the year) -- (1) -- (1) 13 Weighted average number of shares outstanding, as adjusted 14,859 14,835 14,833 Primary earnings (loss) per share: Continuing operations $ 0.16 $ 2.20 $ 0.52 Discontinued operations (0.44) (2.38) -- Extraordinary item (0.51) -- 0.11 Cumulative accounting change (0.09) -- -- Net earnings (loss) per share $ (0.88) $ (0.18) $ 0.63 Fully Diluted Earnings: Net earnings (loss) $(10,557) $ (177) $ 11,891 Deduct dividends on preferred stock (2) 2,544 2,554 2,561 Net earnings (loss) applicable to common stock $(13,101) $ (2,731) $ 9,330 Shares: Weighted average number of common shares outstanding 14,859 14,835 14,820 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the higher of the ending or average market price for the year) -- (1) -- (1) 25
11-1
Years ended December 31, 1994 1993 1992 Fully Diluted (continued) Shares (continued): Shares issuable from assumed exercise of convertible preference stock (2) -- -- -- Weighted average number of shares outstanding, as adjusted 14,859 14,835 14,845 Fully diluted earnings (loss) per share: Continuing operations $ 0.16 $ 2.20 $ 0.52 Discontinued operations (0.44) (2.38) -- Extraordinary item (0.51) -- 0.11 Cumulative accounting change (0.09) -- -- Earnings (loss) per share $ (0.88) $ (0.18) $ 0.63 Additional Fully Diluted Computation (3) Earnings: Net earnings (loss) $(10,557) $ (177) $ 11,891 Shares: Weighted average number of common shares outstanding 14,859 14,835 14,820 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the higher of the ending or average market price for the year) 87 66 25 Shares issuable from assumed exercise of convertible preference stock 1,697 1,710 1,682 Weighted average number of shares outstanding, as adjusted 16,643 16,611 16,527 Fully diluted earnings (loss) per share $ (0.63) $ (0.01) $ 0.72
(1) The inclusion of outstanding options and rights in this computation would have an anti-dilutive effect on earnings per share. (2) The inclusion of preference stock in the fully dilutive computation would have an anti-dilutive effect on earnings per share. (3) This calculation is submitted in accordance with Securities Exchange Act of 1934 Regulation S-K, paragraph 229.601 (b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-dilutive result in 1994, 1993 and 1992. 11-2 EX-13 7 1994 ANNUAL REPORT FINANCIAL REVIEW OVERVIEW Two milestone events during 1994 will determine to a great extent Dravo Corporation's future. The first was the completion late in the year of negotiations to sell substantially all the assets of Dravo Basic Materials, the company's construction aggregates business. The aggregates operations comprised more than half of the company's assets and generated over half of its revenues. During the past few years, however, the return on investment from this business had fallen below acceptable levels. The opportunity to sell the business in excess of book value allowed the company to exit a business currently earning marginal returns while significantly strengthening the balance sheet. The result is a highly focused, conservatively financed lime company. The second 1994 milestone directly involved the lime business: a 700,000-ton- per-year expansion of the company's Black River lime production facility neared completion. Production from this expansion will be used to meet the 450,000-ton-per-year scrubber lime requirement of American Electric Power's Gavin station, and also to supply the Henderson Municipal Power and Light Station operated by Big Rivers Electric Cooperative. The company will provide the Gavin station lime tonnage under a 15-year contract. The extension of three long-term supply commitments totaling almost 700,000 tons annually, and the increase in lime utilization expected at existing customer locations as utilities boost their levels of sulfur-dioxide removal, underpin revenues from the utility segment of Dravo's lime operations into the next decade. The Dravo Basic Materials sales transaction was not completed until year-end; therefore, the consolidated financial results for 1994 reflect both the lime and construction aggregates operations for the entire year. Continuing operations pre-tax earnings of $5.5 million were notably lower than the $10.5 million posted in 1993, primarily because of price reductions given to secure renewal of long-term lime supply contracts, unusually high weather-related costs, and startup costs associated with the Black River expansion. Earnings from continuing operations after tax were $4.9 million, or $.16 per share. Dravo reported a net loss for 1994 of $10.6 million, or $.88 per share. A charge for discontinued operations of $6.5 million was recorded in 1994 for expected legal fees for two ongoing lawsuits and to provide for settlement of a lawsuit brought in Venezuela for contract services provided in the mid- 1970s. Also, an extraordinary charge of $7.6 million, $.51 per share, was recorded to reflect the write-off of fees associated with debt instruments that were prepaid or substantially altered as a result of the Dravo Basic Materials asset sale. A one-time charge of $1.4 million, $.09 per share, reflects the cumulative accounting effect of the adoption of Statement of Financial Accounting Standards No. 112, "Employers Accounting for Postemployment Benefits." In 1993, earnings from continuing operations were $35.1 million, or $2.20 per share. Included in the earnings results was a $24.9 million deferred tax benefit. Loss on discontinued operations was $35.3 million, or $2.38 per share. In 1992, earnings from continuing operations were $10.3 million, or $.52 per share. Under rules in effect in 1992 governing accounting for income taxes, an extraordinary credit of $1.6 million, or $.11 per share, resulted from the use of loss carryforwards to offset current tax expense. RESULTS OF OPERATIONS CONTINUING OPERATIONS Revenue: Revenue of $278.1 million during 1994 was up slightly over 1993's level. Construction aggregates revenue was higher due to continued strong demand in the Cincinnati and West Virginia areas and a much improved market in the Southeast and Gulf Coast areas. Lime revenue of $125.7 million was down due to price concessions granted in return for multi-year extensions of long- term lime supply contracts and weather-related problems in the first quarter. The impact of these items was partially mitigated, however, by very strong demand for non-utility lime. Demand was especially strong for metallurgical lime used in making steel and aluminum. Revenue in 1993 of $277.6 million was up $4.6 million over 1992. The increase was attributable to high demand for construction aggregates in the metropolitan Cincinnati area and West Virginia. Competition along the Mississippi River and Gulf Coast was very intense and the company was unable to increase revenues in those areas. Lime revenue was up due to strong non- utility demand and increased utility shipments. Costs and Expenses: Gross profit of $44.0 million was down $5.3 million from last year. Dravo Lime's gross profit of $30.4 million was down $4.6 million while Dravo Basic Materials' gross profit of $13.2 million was down $644,000 from a year ago. Lime and aggregates operations located in the Ohio River Valley were negatively affected by a severe winter that caused operating difficulties during the first quarter. Price concessions on long-term lime supply contracts impacted gross profit, as did an unscheduled seven-week outage at one of the company's electric utility customer's generating stations. Production costs at the Black River operation were higher as personnel were added in preparation for expanded underground mining and startup of the two new lime kilns. Also, the write-off of equipment being 13-18 replaced as part of the plant expansion and modernization project affected profit margins. The expansion and upgrades currently being completed at Black River are expected to reduce production costs significantly. Gross profit was $2.4 million lower in 1993 than 1992. An unusual number of significant operating problems at Black River increased production costs. Operating problems occurred at the Longview facility also, although not to the same extent as Black River, and the company had to occasionally purchase lime from outside sources to fill orders. Selling expense of $7.1 million was lower than both 1993 and 1992 levels of $7.6 million and $7.3 million, respectively. Selling expense fluctuates primarily due to amounts of research and development expense that can be billed to third parties. These research activities involve a variety of lime- related technologies, with particular emphasis on air pollution control. Depending on the project, reimbursement may be made by governmental agencies, public utilities or private groups for all or a portion of project costs. General and administrative expenses were reduced by more than six percent from 1993 and ten percent from 1992. The reduction reflects lower staffing levels, employee and retiree medical expenses, and travel expenses, as well as lower charges related to the amortization of a non-cancelable lease obligation on a downtown Pittsburgh office building. The decrease from 1992 to 1993 was due primarily to lower amortization charges on the non-cancelable lease and lower medical expenses. Equity in earnings of joint ventures includes the company's share in three 50- percent owned joint ventures: a shell dredging operation located off the Louisiana coast, a contract phosphate rock mining operation in Idaho and a small contract coke operation in Wyoming. Results for the shell dredging operation were significantly improved over last year due to a major highway project and a contract with a state agency to place shell in water bottoms to improve oyster habitat. The phosphate mining operation, whose profitability varies depending on mining conditions and customer requirements, had strong demand and improved results over 1993. The shell dredging joint venture was sold as part of the Dravo Basic Materials asset sale. Other income reports the gain on the sale of property, plant and equipment. The $1.1 million gain in 1994 includes the sale of the company's airplane, $324,000, and $487,000 from the sale, after accrued expenses, of Dravo Basic Materials' assets. See Note 3, Dispositions, in the Notes to Consolidated Financial Statements for a further discussion of the Dravo Basic Materials sale transaction. In 1993, a gain was recognized on the sale of property in Baton Rouge, Louisiana and excess floating equipment, mainly barges. Other income in 1992 of $1.7 million resulted primarily from the sale of assets related to the asphalt and Calcilox businesses. A gain was also recorded when the lessee of 34 hopper barges and covers exercised an option to purchase the equipment. The decline in interest income over the last two years reflects a lower level of funds available for investment and lower interest rates. Interest expense of $12.4 million was $3.2 million higher than 1993. The higher expense was due to higher interest rates on a prime rate-based line of credit and fees paid to a prospective lender on the Black River financing package whose participation was terminated by the company. Interest expense was 13 percent lower in 1993 than 1992. The decrease was due to lower average debt outstanding and the positive impact of an interest rate swap agreement. Income tax expense of $597,000 includes an accrual of $300,000 for federal alternative minimum tax from the sale of Dravo Basic Materials' assets. In 1993, a benefit for income taxes of $24.9 million was recorded under the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Management believes that, due to the large proportion of revenue generated by long-term supply contracts, income can be reasonably projected for purposes of determining whether the realization of the asset resulting from the utilization of NOLs in future years is more likely than not. The amount of the net deferred tax asset was not adjusted in 1994 due to remaining uncertainties associated with discontinued operations. In conjunction with the sale of Dravo Basic Materials' assets, existing loan agreements were substantially altered, including a $35 million reduction in the amount available under a revolving credit facility. Also, while negotiating a $50 million financing agreement with Prudential Power Funding for the Black River expansion, the company purchased a call option that enabled it to prepay on May 17, 1995, without penalty, amounts outstanding under the financing agreement. At December 31, 1994, $19.9 million was borrowed under the agreement. Cash received from the Dravo Basic Materials asset sale equalling the outstanding principal on the Prudential Power Funding facility, interest through May 16, 1995 and an exit fee was placed in escrow. The company agreed that any additional drawings on the facility would also be escrowed. No additional drawings were made and, with Prudential Power Funding's consent, the entire amount borrowed was prepaid on February 10, 1995. The fees associated with these agreements were written off as extraordinary items. 13-19 Effects of inflation: Inflation rates have been low over the past three years and as a result have not had a significant impact on the company's operations. In addition, Dravo Lime's long-term lime supply contracts provide for price increases for specific production expenses, such as labor, fuel and electricity. DISCONTINUED OPERATIONS The provision for discontinued operations was increased $6.6 million in 1994. The charge was taken to cover a $4.5 million settlement involving an alleged breach of contract by the company for work performed between 1973 and 1978 in Venezuela. Because of the uncertainty surrounding this matter, no amount was provided previously. Opposing counsel had alleged damages in excess of $35 million. The balance of the provision is, for the most part, estimated legal fees for two ongoing lawsuits: Continental Energy Associates and the company's assertion that it is entitled to a defense and indemnity under its contracts of insurance for environmental clean-up costs in Hastings, Nebraska. See Note 8, Contingent Liabilities, in the Notes to Consolidated Financial Statements for a further discussion of these matters. In 1993, a $35.3 million charge was recorded. The provision was primarily to cover a settlement agreement with the City of Long Beach, Calif., which included the company giving up its claim to unpaid receivables and interest totalling $18 million. The provision also recognized an increase in the estimated environmental clean-up costs at the Hastings superfund site, write- off of a note receivable due to an unfavorable court ruling and additional legal fees. FINANCIAL POSITION AND LIQUIDITY The company completed negotiations on December 30, 1994 for the sale of substantially all of the assets and certain liabilities of Dravo Basic Materials to Martin Marietta Materials, Inc. (Martin Marietta) effective January 3, 1995. The balance sheet at December 31, 1994 reflects the effect of the sale transaction, in that the assets and liabilities sold have been removed and a $120.5 million receivable from Martin Marietta recorded. On January 3, 1995, cash was received for the assets. Also on January 3, the company prepaid $65.6 million of debt, including the revolving line of credit balance of $55.8 million. On February 10, 1995 the Prudential Power Funding loan balance of $19.9 million was prepaid. Accordingly, these amounts are presented as current liabilities on the December 31, 1994 balance sheet. The company's total debt outstanding after prepaying these loans was $42.4 million and it had available $32.5 million under a revolving credit/letter of credit facility. All known outstanding discontinued operations items have been classified as current or long-term based on the estimated timing of future cash receipts and disbursements. Despite the size of the discontinued operations liabilities, they do not pose a threat to liquidity because cash payments needed to satisfy them will be spread over several years. The company has on hand and access to sufficient funds to meet its anticipated operating and capital needs. To minimize interest charges, cash balances are kept low through a banking arrangement that uses excess cash held in the company's accounts to reduce the amount of overnight borrowing on a revolving credit agreement Cash received from the Dravo Basic Materials transaction, after payment of debt and expenses, is being invested in short-term interest bearing instruments. In January, 1995 the Board of Directors approved a program whereby the company is authorized to purchase up to 250,000 shares of its common stock on the open market. The repurchased shares will be held in the treasury and will be used for general corporate purposes. A $40 million revolving credit/letter of credit facility is provided by a consortium of lenders that includes First Alabama Bank; PNC Bank, N.A. and Bank of America Illinois (formerly Continental Bank, N.A.). Interest on the revolver is equal to First Alabama Bank's base lending rate plus 1.25 percent. The credit facility expires April 30, 1996 but the company expects it to be extended. Obligations under the company's revolving credit facility and senior term notes are secured by a pledge of the stock of Dravo Lime Company and Dravo Basic Materials Company along with their accounts receivable and finished goods inventories. Additionally, certain contract rights, patents and mortgages on the company's Maysville, Black River and Longview plants have been pledged as collateral. The agreements contain uniform restrictive covenants that require the company on a consolidated basis, and Dravo Lime and Dravo Basic Materials on a combined basis, to maintain minimum working capital levels; restrict incurrence of debt, liens and lease obligations; restrict the sale of significant assets; and as to Dravo Lime and Dravo Basic Materials, limit payment of dividends or making of loans to the company. At December 31, 1994, approximately $155 million of Dravo Lime and Dravo Basic Materials net assets were restricted as to payment of dividends or loans to the company. These restrictions are not expected to have an adverse impact on the company's ability to meet its cash obligations. DIVIDENDS The company may not declare common stock dividends until cumulative earnings from continuing operations after September 30, 1991 exceed $40 million, excluding gains from the sale of capital assets and the income 13-20 impact of recording a net deferred tax asset, or cumulative losses from discontinued operations after September 30, 1991, whichever is higher, and then only to the extent of 50 percent of such earnings. At December 31, 1994, cumulative losses from discontinued operations of $52.3 million exceeded cumulative earnings from continuing operations, both since September 30, 1991, by $25.7 million. Dividends on the $3.0875 cumulative, convertible, exchangeable, Series D Preference Stock were declared quarterly throughout 1994, 1993 and 1992. Quarterly dividends were also declared on the $2.475 cumulative convertible Series B Preference Stock in each of the last three years. All declared preference dividends have been paid on a timely basis. COMMON STOCK MARKET PRICE The principal market on which Dravo's common stock is traded is the New York Stock Exchange under the symbol, DRV. The high and low common stock sales prices for each quarterly period in 1994 and 1993 as reported for New York Stock Exchange composite transactions were: 1994 1993
Quarter High Low High Low First 13 3/8 10 1/4 10 1/4 8 3/4 Second 12 1/4 10 11 3/4 8 3/4 Third 12 5/8 9 1/2 12 3/8 9 3/8 Fourth 12 9 3/4 12 1/2 10 1/8
OUTLOOK Continuing operations: Dravo Corporation is now a company focused on one business, lime. Five years ago Congress passed amendments to clean air standards mandating reduced emissions from coal-fired power plants. The effective date for the first phase of these mandated emission reductions was January 1, 1995. In January, 1995 Dravo shipped lime to American Electric Power's Gavin station under a 15-year supply contact. This marked the beginning of a major expansion in the company's utility lime operations directly attributable to the new federal clean air standards. Demand from the steel, paper and water purification markets has exceeded the company's non- utility lime production capacity. Additional expansions to supply this increase in demand are anticipated. In total, Dravo now has nearly 70 percent of its total production capacity committed under long-term utility and merchant contracts. The company's research and development organization is recognized as a leading source of technical services to lime users and a major developer of lime- related environmental technologies. The company leverages this competitive advantage in seeking additional lime and lime-related businesses and also is committed to commercializing and marketing its patented technologies. Administrative costs were significantly reduced as part of the corporate reorganization that followed the sale of Dravo Basic Materials' assets. A much smaller corporate staff is being consolidated at Dravo's Pittsburgh headquarters location to better support and complement Dravo Lime's activities. Ongoing reductions in overhead expenses are a management priority. Discontinued operations: The company formerly operated a metal fabrication facility in Hastings, Nebraska. The federal Environmental Protection Agency (EPA) has notified the company it believes the company is a potentially responsible party (PRP) for the clean-up of soil and groundwater contamination at four subsites in the Hastings area. The company held talks with the EPA in 1992 as to the scope of clean-up required and to determine if the EPA would be willing to accept an amount, to be paid by the company, other PRPs and the company's insurance carriers, over time, that would discharge the company from any further clean-up at the Colorado Avenue subsite. The company discontinued the discussions with the EPA when its insurance carriers refused coverage responsibility. The company has since brought legal action against its insurance carriers whom it believes had coverage responsibility for the time the company owned the Hastings facility. Two insurance carriers have approached the company concerning a settlement. The one carrier, whom the company considered having the least exposure, settled in 1994 for $500,000. The company intends to pursue a settlement of this matter which will involve a group of named PRPs and insurance carriers. See Note 2, Discontinued Operations, in the Notes to Consolidated Financial Statements for further discussion of the company's estimate of total clean-up costs and its share of those costs. A mediation session was held in early March, 1995 between the company and Continental Energy Associates regarding disputes arising from the construction of a coal gasification facility in Hazleton, Pennsylvania. Although the session did not resolve this matter, the company is hopeful that the dialogue will continue and ultimately lead to a fair settlement acceptable to the company. See Note 8, Contingent Liabilities, in the Notes to Consolidated Financial Statements for a further discussion of these discontinued operations matters. Management believes the provision for losses on discontinued operations is adequate at this time. However, in establishing the provision and monitoring it, management has estimated the cost of exiting discontinued businesses and pursuing the company's rights through litigation. A ruling by the courts or a settlement of the disputes that is adverse to Dravo's position, or other unforeseen developments, could require a future additional provision for discontinued operations. 13-21 DRAVO CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
December 31, (In thousands) 1994 1993 ASSETS Current assets: Cash and cash equivalents $ 2,027 $ 808 Receivable from sale of Dravo Basic Materials Company (Note 3) 120,464 -- Accounts receivable, net of allowance for uncollectibles of $108 and $897 20,138 44,225 Notes receivable (Note 15) 2,803 3,318 Inventories (Note 4) 12,638 57,536 Other current assets 2,067 2,417 Total current assets 160,137 108,304 Advances to and equity in joint ventures 2,536 4,348 Notes receivable (Note 15) 5,061 6,870 Other assets 21,281 17,729 Deferred income taxes (Note 13) 24,853 24,853 Property, plant and equipment: Land 6,127 23,673 Mine development 8,376 8,148 Building and improvements 9,722 22,830 Floating equipment -- 36,972 Machinery and other equipment 171,108 220,199 195,333 311,822 Less accumulated depreciation and amortization 101,872 201,854 Net property, plant and equipment 93,461 109,968 Total assets $307,329 $272,072
See accompanying notes to consolidated financial statements. 13-22 DRAVO CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
December 31, (In thousands) 1994 1993 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term notes (Notes 5 and 15) $ 85,077 $ 4,488 Accounts payable - trade 36,257 28,622 Accrued insurance 2,265 3,049 Accrued retirement contribution 2,388 2,101 Net liabilities of discontinued operations (Note 2) 13,547 4,454 Other current liabilities 14,264 6,136 Total current liabilities 153,798 48,850 Long-term notes (Notes 5 and 15) 42,440 88,520 Other liabilities 5,900 3,033 Net liabilities of discontinued operations (Note 2) 8,445 22,130 Redeemable preference stock (Notes 6 and 15): Par value $1, issued 200,000 shares: cumulative, convertible, exchangeable Series D (entitled in liquidation to $20.0 million) 20,000 20,000 Shareholders' equity (Notes 6 and 12): Preference stock, par value $1, authorized 1,878,870 shares: Series B, $2.475 cumulative, convertible, issued 28,386 and 32,386 shares (entitled in liquidation to $1.6 million and $1.8 million); Series D, reported above 28 32 Common stock, par value $1, authorized 35,000,000 shares: issued 14,985,839 and 14,967,824 shares 14,986 14,968 Other capital 63,554 63,260 Retained earnings 18 13,119 Treasury stock at cost; common shares 119,221 (1,840) (1,840) Total shareholders' equity 76,746 89,539 Total liabilities and shareholders' equity $307,329 $272,072
See accompanying notes to consolidated financial statements. 13-23 DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations
Years ended December 31, (In thousands, except per share data) 1994 1993 1992 Revenue $278,052 $277,590 $272,979 Cost of revenue 234,018 228,266 221,232 Gross profit 44,034 49,324 51,747 Selling expenses 7,116 7,602 7,258 General and administrative expenses 22,497 24,058 24,914 Earnings from operations 14,421 17,664 19,575 Other income (expense): Equity in earnings (loss) of joint ventures 1,672 (18) 411 Other income 1,088 692 1,683 Interest income 754 1,327 1,598 Interest expense (12,408) (9,194) (10,548) Net other expense (8,894) (7,193) (6,856) Earnings before taxes from continuing operations 5,527 10,471 12,719 Income tax expense (benefit) (Note 13) 597 (24,655) 2,401 Earnings from continuing operations 4,930 35,126 10,318 Loss on discontinued operations (Note 2) 6,554 35,303 -- Earnings (loss) before extraordinary item and cumulative accounting change (1,624) (177) 10,318 Extraordinary item (Notes 13 and 14) (7,572) -- 1,573 Cumulative effect of accounting change (Note 10) (1,361) -- -- Net earnings (loss) (10,557) (177) 11,891 Preference dividends 2,544 2,554 2,561 Net earnings (loss) available for common stock $(13,101) $ (2,731) $ 9,330 Weighted average shares outstanding 14,859 14,835 14,833 Primary earnings (loss) per share: Continuing operations $ 0.16 $ 2.20 $ 0.52 Discontinued operations (0.44) (2.38) -- Extraordinary item (0.51) -- 0.11 Cumulative effect of accounting change (0.09) -- -- Net earnings (loss) $ (0.88) $ (0.18) $ 0.63
See accompanying notes to consolidated financial statements. 13-24 DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Retained Earnings
Years ended December 31, (In thousands, except per share data) 1994 1993 1992 Retained earnings at beginning of year $ 13,119 $ 15,850 $ 6,520 Net earnings (loss) (10,557) (177) 11,891 2,562 15,673 18,411 Dividends declared: 1994 1993 1992 Series B preference stock $ 2.475 $ 2.475 $ 2.475 74 84 91 Series D preference stock 12.350 12.350 12.350 2,470 2,470 2,470 2,544 2,554 2,561 Retained earnings at end of year $ 18 $13,119 $15,850
See accompanying notes to consolidated financial statements. 13-25 DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows
(In thousands) Years ended December 31, 1994 1993 1992 Cash flows from operating activities: Earnings from continuing operations $ 4,930 $ 35,126 $ 10,318 Adjustments to reconcile earnings from continuing operations to net cash provided by continuing operations activities: Depreciation and amortization 17,626 17,985 18,595 Change in accounting principle (1,361) -- -- Gain on sale of assets (1,088) (692) (1,683) Equity in joint ventures (116) (2,155) 49 Changes in assets and liabilities, net of effects from DBM disposition: Decrease (increase) in accounts receivable (143) (5,410) 1,638 Decrease (increase) in notes receivable 464 1,008 (647) Decrease (increase) in inventories 3,909 6,311 (4,197) Decrease (increase) in other current assets (869) 721 (400) Increase in other assets (6,302) (2,373) (680) Increase in deferred income taxes -- (24,853) -- Increase (decrease) in accounts payable and accrued expenses 7,873 947 (5,322) Increase (decrease) in income taxes payable 329 (20) (575) Increase in other liabilities 3,178 71 329 Total adjustments 23,500 (8,460) 7,107 Net cash provided by continuing operations activities 28,430 26,666 17,425 Loss from discontinued operations (6,554) (35,303) -- Decrease in net liabilities of discontinued operations (4,592) 21,647 (15,009) Proceeds from repayment of notes receivable from sale of discontinued operations 1,600 1,992 2,631 Net cash used by discontinued operations activities (9,546) (11,664) (12,378) Net cash provided (used) by extraordinary item (7,572) -- 1,573 Net cash provided by operating activities 11,312 15,002 6,620 Cash flows from investing activities: Proceeds from sale of assets 2,148 1,249 5,591 Additions to property, plant and equipment (44,757) (13,646) (8,454) Other, net 509 (553) (363) Net cash used by investing activities $(42,100) $(12,950) $ (3,226)
See accompanying notes to consolidated financial statements. 13-26 DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows
(In thousands) Years ended December 31, 1994 1993 1992 Cash flows from financing activities: Net borrowing under revolving credit agreements $ 19,300 $ 4,600 $ 3,700 Principal payments under long-term notes (4,736) (4,446) (5,702) Principal payments under capital lease obligations -- (306) (142) Proceeds from issuance of long-term notes 19,945 391 122 Proceeds from borrowing under capital lease obligations -- -- 388 Proceeds from issuance of common stock 42 101 63 Dividends (2,544) (2,554) (2,561) Net cash provided (used) by financing activities 32,007 (2,214) (4,132) Net increase (decrease) in cash and cash equivalents 1,219 (162) (738) Cash and cash equivalents at beginning of year 808 970 1,708 Cash and cash equivalents at end of year $ 2,027 $ 808 $ 970 Supplemental disclosures of cash flow information: Cash paid (received) during the year for: Interest (net of amount capitalized) $ 12,408 $ 9,195 $ 10,722 Income tax (143) 487 1,333
See accompanying notes to consolidated financial statements. 13-27 DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Description of Business: The consolidated financial statements include the accounts of Dravo Corporation and its majority-owned subsidiaries (the company). The principal subsidiaries are Dravo Lime Company, one of the nation's largest lime producers, and Dravo Basic Materials Company, Inc. (DBM). The company completed a transaction on December 30, 1994 in which it sold substantially all the assets and certain liabilities of DBM. The assets and liabilities sold have been removed from the company's December 31, 1994 balance sheet. The December 31, 1994 statement of operations includes the results of DBM for the entire year. Principles of Consolidation: Significant intercompany balances and transactions have been eliminated in the consolidation process. Cash and Cash Equivalents: For purposes of reporting cash flows, the company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Inventories: Inventories are valued at average production cost or market, whichever is lower. The cost of products produced includes raw materials, direct labor and operating overhead. Property, Plant, Equipment and Depreciation: Property, plant and equipment are stated at cost. The cost of buildings, equipment and machinery is depreciated over estimated useful lives on a straight-line basis. For income tax purposes, depreciation is calculated principally on an accelerated basis. Expenditures for maintenance and repairs which do not materially extend the lives of assets are expensed currently. The asset cost and accumulated depreciation are removed from the accounts for assets sold or retired, and any resulting gain or loss is included in other income and expense. Intangible Assets: Intangible assets include agreements, goodwill, and unrecognized prior service cost on the company's pension plans. Amortization is on a straight line basis, generally five to ten years, over estimated useful lives, or in the case of unrecognized prior service costs, the average future service period. Income Taxes: Effective January 1, 1993, the company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The statement requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Prior to 1993, provisions were made for deferred income taxes where differences existed between the time transactions affected taxable income and the time those transactions entered into the determination of income for financial statement purposes. Earnings Per Share: Primary earnings per share are based on net earnings less preference dividends declared in the year, divided by the weighted average sum of common shares outstanding during the year and common share equivalents. Shares exercisable as employee stock options and stock appreciation rights are considered common share equivalents except when their inclusion would be anti- dilutive. Primary common share equivalents are calculated based on the average common stock price for the year. Fully diluted earnings per share are based on net earnings, divided by the sum of the weighted average number of common shares outstanding during the year, weighted average number of shares resulting from the assumed conversion of issued preference shares to common shares and common share equivalents. Fully diluted common share equivalents are calculated based on the higher of the average or ending common stock price for the year. Fully diluted earnings per share are anti-dilutive in 1994, 1993 and 1992 and are not presented. Note 2: Discontinued Operations In December, 1987, Dravo's Board of Directors approved a major restructuring program which concentrated the company's future direction exclusively on opportunities involving its natural resources business. An additional charge of $6.5 million was taken in 1994 for discontinued operations. The company filed an action in 1981 to collect on a promissory note issued by Meladuras Portuguesa, C. A. (Melaport) and its principal, Alberto Caldera (Caldera). In 1985, Melaport and Caldera filed a counterclaim for damages alleging the company breached a contract between Melaport and the company relating to engineering and procurement services rendered between 1973 and 1978 for a sugar cane processing facility. A local Venezuelan court ruled partially in favor of Melaport's counterclaim. The ruling was upheld by a Venezuelan appeals court on September 25, 1992 and by the Venezuelan Supreme Court on July 8, 1993. The court ruling did not specify damages to be paid but rather identified three categories of damages to which Caldera and Melaport would be entitled. The amount of damages was to have been established by an appraisal process conducted by the trial court. Opposing counsel asserted that the damages would be in excess of $35 million. The 1994 discontinued operations provision includes $4.5 million for the settlement amount agreed to by the parties to conclude all disputes related to the Venezuelan matter. 13-28 Also, an additional amount was provided for estimated legal fees anticipated to pursue various lawsuits and claims, the most significant of which are the Hastings insurance litigation and Continental Energy Associates (CEA) matters discussed in Note 8, Contingent Liabilities. No loss provision has been made for the CEA dispute because it is not possible to determine the outcome of this matter or to estimate with any degree of probability the range of potential costs which may be involved. Claims against the company, which management believes are grossly overstated, exceed $10 million. A $35.3 million provision for discontinued operations expenses was recorded in 1993. The provision covered the write-off of receivables and accrual of a settlement relating to a resource recover facility built in Long Beach, Calif.; updated estimates of the potential costs to clean up soil and groundwater contamination at a former operation located in Hastings, Nebraska; write-down of a receivable from a Portland, Maine utility to reflect a jury award; and estimated legal fees. The company received cash proceeds of $1.6 million in 1994, $2.0 million in 1993 and $2.6 million in 1992 from the repayment of notes received from the previous sales of discontinued businesses. The remaining discontinued operations' assets and liabilities for the respective years ended December 31 relate to non-cancelable leases, environmental, insurance, legal and other matters associated with exiting the engineering and construction business and are presented below:
(In thousands) 1994 1993 Current assets: Accounts and retainers receivable $ 24 $ 23 Other -- 3,512 Total current assets 24 3,535 Accounts and retainers receivable 444 472 Other 5,121 309 Total assets $ 5,589 $ 4,316 Current liabilities: Accounts and retainers payable $ 63 $ 178 Accrued loss on leases 2,315 2,448 Other 11,193 5,363 Total current liabilities 13,571 7,989 Accounts and retainers payable -- 4,745 Accrued loss on leases 5,632 7,854 Other 8,378 10,312 Total liabilities $ 27,581 $ 30,900 Net liabilities and accrued loss on leases of discontinued operations $(21,992) $(26,584)
Note 3: Dispositions The company completed a transaction on December 30, 1994 in which it sold to Martin Marietta Materials, Inc. (Martin Marietta), effective January 3, 1995, substantially all the assets of its construction aggregates business. Assets sold included the assets, properties and leases of Dravo Basic Materials Company, Inc. (DBM), a wholly-owned subsidiary of the company, and Atchafalaya Mining Company, Inc. (AMC), a wholly-owned subsidiary of DBM, used in the production, marketing, distribution and sale of various aggregate products. Also sold was the capital stock of Dravo Bahama Rock Limited (DBR), a wholly- owned foreign subsidiary of DBM. The significant terms of the transaction called for Martin Marietta to purchase substantially all of DBM's and AMC's assets at their December 31, 1994 book value plus a premium of $2.0 million. Assets excluded from the sale included cash in banks; the capital stock of two subsidiary companies, Dravo Natural Resources Company and Tideland Industries, Inc.; amounts due from affiliated companies; notes receivable and certain properties located near Cincinnati, Ohio and Lake Charles, Louisiana. The company is required to buy back accounts receivable that are unpaid at May 3, 1995. Martin Marietta also paid the company $8.0 million in consideration of (i) a non-competition and non-disclosure agreement and (ii) distributorship agreements for crushed limestone aggregates produced at Dravo Lime's Maysville, Black River and Longview facilities. The company, DBM and AMC retained substantially all obligations and liabilities which arose from or in connection with operations prior to the sales transaction. The sales price was reduced for liabilities assumed by Martin Marietta which included accrued vacations and wages for transferred employees, liabilities of DBR and land reclamation obligations. Actual and estimated expenses related to the sale totaled $9.5 million and included transaction costs, benefit plan curtailment expenses, environmental clean-up costs, severance pay and various wind-down costs. A net $487,000 pre-tax gain on the transaction was recorded in other income. The assets and liabilities sold to Martin Marietta have been removed from the company's December 31, 1994 balance sheet and a corresponding receivable from the sale of DBM of $120.5 million has been recorded. The December 31, 1994 statement of operations includes the results of DBM for the entire year. Pro forma data is provided below for comparative purposes only and does not purport to be indicative of the 13-29 results which actually would have been obtained if the disposition had been effected on the pro forma dates, or of the results which may be obtained in the future. The following pro forma statement of operations presents the results of operations assuming the disposition had been completed as of the beginning of 1994. Adjustments have been made to exclude the results of DBM, to decrease interest expense for loans prepaid in early 1995 from the sale proceeds, and to record interest income at overnight investment rates for cash received in excess of liabilities paid. (Unaudited, in thousands, except earnings per share)
December 31, 1994 Historical Pro Forma Revenue $ 278,052 $ 125,661 Gross profit 44,034 30,802 Selling expenses 7,116 4,530 General and administrative expenses 22,497 12,872 Other income 3,514 3,041 Interest expense (12,408) (5,717) Earnings before taxes 5,527 10,724 Income tax expense 597 489 Earnings from continuing operations 4,930 10,235 Earnings per share, continuing operations 0.16 0.52
Cash from the sale of DBM's assets was received on January 3, 1995 and certain debt obligations were prepaid from the proceeds. The following pro forma balance sheet is presented to show the financial condition of the company at December 31, 1994 if these transactions had occurred at the balance sheet date.
(Unaudited, in thousands) December 31, 1994 Historical Pro Forma Cash and cash equivalents $ 2,027 $ 15,502 Receivable from sale of DBM 120,464 -- Accounts receivable, net 20,138 20,280 Other current assets 17,508 17,508 Total current assets 160,137 53,290 Long-term assets 147,192 147,192 Total assets $ 307,329 $ 200,482 Current portion of long-term notes 85,077 112 Accounts payable - trade 36,257 19,638 Net liabilities of discontinued operations 13,547 9,340 Other current liabilities 18,917 18,036 Total current liabilities 153,798 47,126 Long-term notes $ 42,440 $ 42,265 Net liabilities of discontinued operations 8,445 8,445 Other liabilities 5,900 5,900 Redeemable preference stock 20,000 20,000 Shareholders' equity 76,746 76,746 Total liabilities and shareholders' equity $ 307,329 $ 200,482
In March, 1992, the company sold its asphaltic concrete operation in Loxley, Alabama to Mobile Asphalt Company (MAC). During the second quarter of 1992, MAC completed the terms of the sales agreement by purchasing certain assets related to the company's asphalt operation in Mobile, Alabama. A pre-tax gain of $894,000 was recognized for these transactions. Note 4: Inventories Inventories for the respective years ended December 31 are classified as follows:
(In thousands) 1994 1993 Finished goods $ 1,834 $40,660 Work in process -- 3,092 Materials and supplies 10,804 13,784 Net inventories $12,638 $57,536
Note 5: Notes Payable Notes payable at December 31 include the following:
(In thousands) 1994 1993 Short-term: Current portion of long-term notes $ 85,077 $ 4,488 Total short-term 85,077 4,488 Long-term: Variable rate revolving line of credit 55,800 36,500 Variable rate note 6,297 8,139 9.95% notes 2,800 5,200 10.13% notes 19,944 -- 11.21% notes, payable through 2002 41,800 41,800 Other notes, payable through 2000 876 1,369 127,517 93,008 Deduct: Current portion of notes 85,077 4,488 Total $ 42,440 $ 88,520
The following is a description of the terms and conditions of the company's major debt instruments: The $55.8 million note payable was borrowed under a $75.0 million revolving credit/letter of credit facility with First Alabama Bank; PNC Bank, N.A.; Bank of America Illinois (formerly Continental Bank, N.A.) and The Prudential Insurance Company of America. Interest on the revolver equals First Alabama Bank's base lending rate plus 1.25 percent. The entire amount borrowed under the revolving line of credit was repaid on January 3, 1995 from the Dravo Basic Materials asset sale proceeds. On the same date, the total amount available for revolving credit/letter of credit requirements under the facility was reduced to $40.0 million. The interest rate remained unchanged. Participating institutions in the revised revolving credit/letter of credit facility are First Alabama Bank; 13-30 PNC Bank, N.A. and Bank of America Illinois. The facility expires April 30, 1996 but the company expects it to be extended. The variable rate note and 9.95 percent promissory notes were prepaid on January 3, 1995. The 10.13 percent construction notes provided for borrowing up to $50 million for the Black River plant expansion. An amount sufficient to retire these notes was escrowed from a portion of the Dravo Basic Materials sale proceeds. The notes were prepaid on February 10, 1995. The 11.21 percent term notes require quarterly interest payments and annual principal repayments in the amount of $6.0 million beginning January, 1996. Obligations under the revised revolving credit/letter of credit facility and the 11.21 percent term notes are secured by a pledge of the stock of Dravo Lime Company and Dravo Basic Materials Company along with their accounts receivable and finished goods inventories. Additionally, certain contract rights, patents and mortgages on the company's Maysville, Black River and Longview plants have been pledged as collateral. The agreements contain uniform restrictive covenants that require the company on a consolidated basis, and Dravo Lime and Dravo Basic Materials on a combined basis, to maintain minimum working capital levels; restrict incurrence of debt, liens and lease obligations; restrict the sale of significant assets and as to Dravo Lime and Dravo Basic Materials, limit payment of dividends or making of loans to the company. The company may not declare common stock dividends until cumulative earnings from continuing operations after September 30, 1991 exceed $40.0 million, excluding gains from the sale of capital assets and the income impact of recording a net deferred tax asset, or cumulative losses from discontinued operations after September 30, 1991, whichever is higher, and then only to the extent of 50 percent of such earnings. At December 31, 1994, cumulative losses from discontinued operations of $52.3 million exceeded cumulative earnings from continuing operations, both since September 30, 1991, by $25.7 million. At December 31, 1994, approximately $155 million of Dravo Lime and Dravo Basic Materials' net assets were restricted as to payment of dividends or loans to the company. Assets pledged under certain notes and leases had a book value of $228.2 million at December 31, 1994. In February, 1993, the company entered into an interest rate swap agreement with Continental Bank, N.A. on the $41.8 million fixed rate long-term notes payable. The transaction was accounted for as a hedge of those notes. On December 30, 1994, the company paid $1.4 million to unwind the swap agreement. Amounts payable on long-term debt due in 1995 and thereafter are: 1995, $29.3 million; 1996, $6.2 million; 1997, $6.2 million; 1998, $6.1 million; 1999, $6.0 million; and after 1999, $17.9 million. Note 6: Redeemable Preference Stock The company has outstanding 200,000 shares of cumulative, convertible, exchangeable, Series D Preference Stock. Cumulative dividends of $3.0875 per share are payable quarterly. Each share of preference stock may be converted, at the option of the holder, into 8.0 shares of common stock. The stock is also exchangeable, at the option of the company, for 12.35 percent Senior Subordinated Convertible notes due September 21, 2001. The 12.35 percent senior subordinated notes would contain the same conversion rights, restrictions and other terms as the preference stock. The company may redeem the stock, in whole or in part, after January 21, 1996 for $100 per share plus accrued dividends, provided that the market price of common stock as of the date of the decision to redeem the shares, as defined in the Certificate of Designations, Preferences and Rights for the Series D Preference Stock, shall be at least equal to 175 percent of the conversion price for the preference stock. Mandatory annual redemption of the lesser of 50,000 shares or the number of shares then outstanding begins September 21, 1998 at $100 per share plus accrued dividends. In the event of liquidation of the company, the holders of outstanding Series D Preference Stock shall be entitled to receive a distribution of $100 per share plus accrued dividends. The company had outstanding 28,386 and 32,386 shares of cumulative, convertible Series B Preference Stock on December 31, 1994 and 1993, respectively. Cumulative annual dividends of $2.475 per share are payable quarterly. Each share of Series B Preference Stock may be converted at the option of the holder to 3.216 shares of common stock. In the event of the company's liquidation, the holders of the Series B Preference Stock are entitled to $55 per share plus all accumulated and unpaid dividends. Note 7: Commitments Total rental expenses for 1994, 1993 and 1992 were $35.2 million, $34.4 million and $33.1 million, respectively. The minimum rentals under non- cancelable operating leases for these years were $17.3 million, $17.5 million and $18.9 million, respectively. The minimum future rentals under non- cancelable operating leases and future rental receipts from subleases to third parties as of December 31, 1994 are indicated in the following table. Of the $15.9 million net minimum payments, $7.9 million has been expensed in connection with discontinued operations. 13-31 Minimum Future Rentals and Rental Receipts
(In thousands) 1995 $ 12,619 1996 12,104 1997 11,746 1998 3,701 1999 -- After 1999 -- Total minimum payments required 40,170 Less: Sublease rental receipts (24,279) Net minimum payments $ 15,891
At December 31, 1994 and 1993, the company had outstanding letters of credit totaling $7.5 million and $10.0 million, respectively. Note 8: Contingent Liabilities The company has been notified by the federal Environmental Protection Agency (EPA) that the EPA believes the company is a potentially responsible party (PRP) for the clean-up of soil and groundwater contamination at four subsites in Hastings, Nebraska. The Hastings site is one of the EPA's priority sites for taking remedial action under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). At one of these subsites, a municipal landfill, the company believes it could not have disposed of hazardous wastes at the particular subsite because the landfill was closed prior to the time the company and its predecessor initiated the operation which generated the type of hazardous substances found at this subsite. Other PRPs, including the local municipality, have agreed to perform the remedial investigation and to design soil and groundwater remedies at this subsite. The company has also been notified by EPA that EPA considers it a PRP at another municipal landfill in Hastings. At least three other parties (including the City of Hastings) are considered by EPA to be PRPs at this second subsite. At this subsite, the company has concluded that the City of Hastings is responsible for a proper closure of the landfill and the remediation of any release of hazardous substances. In January, 1994, EPA invited the company and the other PRPs to make an offer to conduct a remedial investigation and feasibility study (RI/FS) of this subsite and stated that the EPA was in the process of preparing a work plan for the RI/FS. None of the PRPs has volunteered to undertake the RI/FS. With respect to the third subsite, the company and two other PRPs have been served with administrative orders directing them to undertake soil remediation and interim groundwater remediation at that subsite. The company is currently complying with these orders while reserving its right to seek reimbursement from the United States for its costs if it is determined it is not liable for response costs or if it is required to incur costs because of arbitrary, capricious or unreasonable requirements imposed by the EPA. The EPA has taken no legal action with respect to its demand that the company and the other PRPs pay its past response costs. A total of five parties have been named by the EPA as PRPs at this subsite, but two of them have been granted de minimis status. The company believes other persons should also be named as PRPs. The fourth subsite is a former naval ammunition depot which was subsequently converted to an industrial park. The company and its predecessor owned and operated an HVAC facility in this industrial park. To date the company's investigation indicates that it did not cause the release of hazardous substances in this subsite during the time it owned and operated the facility. The United States has undertaken to conduct the remediation of this subsite. In addition to subsite clean-up, the EPA is seeking a clean-up of area-wide contamination associated with all of the subsites in and around Hastings, Nebraska. The company, along with other Hastings PRPs, has recommended that the EPA adopt institutional controls as the area-wide remedy in Hastings. EPA has indicated some interest in this proposal but has decided to first conduct an area-wide remedial investigation before choosing a remedy. On August 10, 1992 the company filed suit in the Alabama District Court against its primary liability insurance carriers and one of its predecessor's insurers, seeking a declaratory judgment that the company is entitled to a defense and indemnity under its contracts of insurance (including certain excess policies provided by one of the primary carriers) with regard to the third Hastings subsite. The company recently settled the claim against its predecessor's insurer, but the case against the company's insurers is still in litigation. An award of punitive damages is also being sought against the company's insurers for their bad faith in failing to investigate the company's claim and/or denying the company's claim. The company has notified its primary and excess general liability carrier, as well as the excess carrier of its predecessor, of the receipt of its notice of potential liability at the first, second and fourth subsites. Estimated total clean-up costs, including capital outlays and future maintenance costs for soil and groundwater remediation of approximately $18 million, are based on independent engineering studies. Included in the discontinued operations provision is the company's estimate that it will participate in 33 percent of these remediation costs. The company's estimated share of the costs is based on its assessment of the total clean- up costs, its potential exposure, and the viability of other named PRPs. 13-32 In 1990, the company filed an action now pending in Luzerne County, Pennsylvania alleging breach of contract and unjust enrichment arising out of the termination of a construction contract for the Hazleton Gasification Facility Expansion. The suit named as defendants Continental Energy Associates (CEA), the project owner; Continental Cogeneration Corporation (CCC), the general partner of CEA; and Swiss Bank Corporation, the project lender. CEA and CCC filed a separate suit against the company which, as amended, seeks damages for breach of contract, negligent design and construction, negligent misrepresentation, fraud and tortious interference with the contract of surety. The two suits, along with a third action commenced by CEA and CCC against the company's surety, the Insurance Company of North America, have been consolidated. Documents produced by CEA and CCC during the course of discovery allege claims at an amount from approximately $10 million to approximately $35 million. However, the construction contract contains a provision limiting damages to the value of the contract (a net of approximately $10 million) which the company would seek to have specifically enforced. The company continues to vigorously assert its claims and to deny any liability. In late 1994, both CEA and CCC filed for protection from creditors under Chapter 11 of the United States Bankruptcy Code. In January 1995, the Bankruptcy Court entered an order approving non-binding mediation of the dispute with the company. An initial mediation session held early in March, 1995 did not resolve the dispute. If the lawsuit discussed above is sustained against the company, material charges would be recorded in the company's financial statements. However, based upon the knowledge the company has of the lawsuit, management believes the ultimate disposition of this matter will not result in material charges to earnings in excess of amounts recorded in the financial statements. Other claims and assertions made against the company will be resolved, in the opinion of management, without material additional charges to earnings. The company has asserted claims that management believes to be meritorious, but no estimate can be made at present of the timing or the amount of recovery. Note 9: Retirement Plans The company has several defined benefit plans covering substantially all employees. Benefits for the salaried plan are based on salary and years of service, while hourly plans are based on negotiated benefits and years of service. The company's funding policy is to make contributions as are necessary to provide assets sufficient to meet the benefits to be paid to plan members in accordance with the requirements of the Employee Retirement Income Security Act of 1974. Plan assets are composed primarily of government securities and corporate debt and equities. The status of combined employee pension benefit plans as of December 31, 1994 and 1993 is shown below:
1994 1993 Plans which have Plans which have Plans which have Plans which have funded assets in accumulated funded assets in accumulated (In thousands) excess of benefit excess of benefit accumulated obligations accumulated obligations benefit in excess of benefit in excess of obligations funded assets obligations funded assets Actuarial present value of projected benefit obligation: Vested employees $147,801 $ 21,567 $161,662 $ 22,109 Non-vested employees 284 1,710 397 2,859 Accumulated benefit obligation 148,085 23,277 162,059 24,968 Effect of projected future salary increases 2,130 398 4,241 1,051 Total projected benefit obligation 150,215 23,675 166,300 26,019 Plan assets 148,303 18,357 168,699 20,360 Assets in excess of (less than) projected benefit obligation (1,912) (5,318) 2,399 (5,659) Unamortized net (asset) liability existing at transition date (687) 367 (1,375) 897 Unrecognized net loss from actuarial experience 20,888 2,755 8,836 4,186 Adjustment to recognize minimum liability -- (2,922) -- (4,225) Prepaid (accrued) pension expense $ 18,289 $ (5,118) $ 9,860 $ (4,801)
13-33 The sale of Dravo Basic Materials' assets resulted in the termination of employment for essentially all Dravo Basic Materials employees and certain executive and administrative employees of a subsidiary company. As a result, the company recognized a charge in 1994 for pension curtailment and special termination benefits expense. The components of 1994, 1993 and 1992 net periodic pension (income) expense are as follows:
(In thousands) Years ended December 31, 1994 1993 1992 Service cost of benefits earned during the year $ 1,023 $ 901 $ 900 Interest cost on projected benefit obligation 13,981 14,431 14,101 Actual (return) loss on plan assets 14,570 (30,951) (12,540) Net amortization (deferral) (29,521) 15,566 (3,028) Curtailment and special termination benefits expense 921 -- -- Net pension (income) expense for year $ 974 $ (53) $ (567)
The following assumptions were used for the valuation of the pension obligations as of December 31:
1994 1993 1992 Discount rate 8.55% 7.5% 8.5% Expected long-term rate of return on assets 8.0% 8.0% 9.0% Rate of increase in compensation levels 5.0% 5.0% 6.0%
Note 10: Postretirement and Postemployment Benefits The company and certain subsidiaries provide health care and life insurance benefits for retired employees. Employees may become eligible for certain benefits if they meet eligibility qualifications while working for the company. Currently, the company pays all cost increases for employees who retired prior to 1985 and who have not elected to participate in a plan in which they pay cost increases, in exchange for expanded benefits, in excess of a specified amount. For employees retiring after 1984, the company's liability is limited to a fixed contribution amount for each participant or dependent. This amount is reduced significantly when the participant becomes eligible for Medicare coverage. The company has made no commitment to adjust the amount of its contributions. The company adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106) effective January 1, 1993. The statement requires that an accrual be made for the expected cost of providing postretirement benefits to the employee and the employee's beneficiaries and covered dependents during the years that an employee renders employment services. Prior to adoption of SFAS 106, the company expensed postretirement benefits on a pay-as-you-go basis. The cost of postretirement benefits other than pensions was $5.0 million in 1994, $4.9 million in 1993 and $4.5 million in 1992. Expense in 1994 includes a $471,000 curtailment loss resulting from the termination of essentially all Dravo Basic Materials employees and certain executive and administrative employees of a subsidiary company due to the Dravo Basic Materials asset sale. No funds are segregated for future postretirement obligations. The company is amortizing its accumulated postretirement benefit obligation (APBO) over a 20 year period. The APBO was calculated using a discount rate of 8.55 percent and a health care cost trend rate of 9.5 percent in 1995, gradually declining to 6.5 percent in 2001. An increase in the health care cost trend rate of one percent would increase the APBO at December 31, 1994 by $1.1 million and the total service and interest rate components of the 1994 postretirement benefit cost by $109,000. Postretirement benefit cost for 1994 and 1993 includes the following components:
(In thousands) 1994 1993 Service cost - benefits earned during the period $ 105 $ 177 Interest cost on accumulated postretirement benefit obligation 2,659 2,887 Amortization of accumulated postretirement benefit obligation 1,789 1,789 Curtailment loss 471 -- Postretirement benefit cost $ 5,024 $ 4,853
The postretirement benefit plans funded status reconciled with the amount included in the company's consolidated balance sheets at December 31 is as follows:
(In thousands) 1994 1993 Accumulated postretirement benefit obligation: Retirees and related beneficiaries $ 30,248 $ 34,190 Other fully eligible participants 1,601 888 Other active participants not fully eligible 747 4,887 Accumulated postretirement benefit obligation 32,596 39,965 Unrecognized transition obligation (30,822) (33,994) Unrecognized loss (134) (5,136) Accrued postretirement benefit liability $ 1,640 $ 835
13-34 The company adopted the provisions of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS 112) effective January 1, 1994. SFAS 112 requires accrual of the estimated cost of benefits provided by the employer to former or inactive employees, including their beneficiaries and covered dependents, after employment but before retirement. A charge of $1.4 million was recorded in the first quarter as a cumulative effect for a change in accounting principle to recognize the company's estimated liability for postemployment benefits covered by SFAS 112. Note 11: Stock Options, Stock Appreciation Rights and Performance Shares Prices per share of outstanding common stock options and stock appreciation rights (collectively, rights) at December 31, 1993 were $5.94 to $19.31. During 1994 grants were awarded at a price of $11.69, rights were exercised at $7.94 and $11.25 and rights were forfeited at $11.25. Rights outstanding at December 31, 1994 are exercisable at prices ranging from $5.94 to $19.31 per share. Under the 1978, 1988 and 1994 Plans for executives and key employees, options may be granted either alone or in tandem with related stock appreciation rights, or stock appreciation rights may be granted separately. The 1983 Plan provides for the granting of options, stock appreciation rights (either separate or in tandem with a related option) and performance shares. The price of stock options and the basis of stock appreciation rights so granted is the fair market value on the date of grant. Rights cannot be exercised until one year after the grant date and expire ten years from date of grant. Any incremental value of stock appreciation rights and performance shares granted is recognized as expense, while a decline in the market value of the stock is recognized as a reduction in expense to the extent previously recognized. There was no change in the incremental value during the last three years. The exercise of options does not necessitate a charge or credit to income. No additional grants can be made from the 1978 or 1983 Plans, both of which have expired. There were no performance shares outstanding at December 31, 1994 and 1993. The following summary shows the changes in outstanding rights:
1978 1983 1988 1994 Plan Plan Plan Plan Total Outstanding at December 31, 1993 53,200 258,450 987,300 -- 1,298,950 Granted -- -- -- 12,000 12,000 Exercised -- (6,300) (5,000) -- (11,300) Forfeited -- (13,100) -- -- (13,100) Outstanding at December 31, 1994 53,200 239,050 982,300 12,000 1,286,550 Rights exercisable: December 31, 1993 53,200 188,450 836,800 -- 1,078,450 December 31, 1994 53,200 239,050 919,800 -- 1,212,050 Shares available for future grant: December 31, 1993 -- -- -- -- -- December 31, 1994 -- -- -- 988,000 988,000
13-35 Note 12: Shareholders' Equity Shareholders' equity at December 31 is presented below:
Preference Common Other Treasury (In thousands) Stock Stock Capital Shares Balance, January 1, 1992 $ 39 $14,933 $65,930 $(1,904) Common shares issued through: Retirement of Series B preference stock (12,864) (4) 12 (9) Common stock options exercised (4,000) 64 Recognition of minimum liability on pension plan 39 Balance, December 31, 1992 $ 35 $14,945 $65,960 $(1,840) Common shares issued through: Retirement of Series B preference stock (9,648) (3) 10 (7) Common stock options exercised (12,700) 13 88 Recognition of minimum liability on pension plan (2,781) Balance, December 31, 1993 $ 32 $14,968 $63,260 $(1,840) Common shares issued through: Retirement of Series B preference stock (12,864) (4) 13 (9) Common stock options exercised (5,151) 5 37 Recognition of minimum liability on pension plan 266 Balance, December 31, 1994 $ 28 $14,986 $63,554 $(1,840)
Note 13: Income Taxes Income before taxes and provisions for income tax expense (benefit) from continuing operations at December 31 are:
(In thousands) 1994 1993 1992 Income before taxes $ 5,527 $ 10,471 $12,719 Current federal income taxes $ 350 $ -- $5,237 Deferred federal income taxes -- (24,853) (3,664) Current state income taxes 247 198 828 Total $ 597 $(24,655) $2,401
The actual income tax expense attributable to earnings from continuing operations for the years ended December 31, 1994, 1993 and 1992 differed from the amounts computed by applying the U. S. federal tax rate of 34 percent to pretax earnings from continuing operations as a result of the following:
(In thousands) 1994 1993 1992 Computed "expected" tax expense $ 1,879 $ 3,560 $ 4,325 Alternative minimum tax 300 -- -- Percentage depletion (1,880) (3,374) (2,641) State income taxes, net of federal income tax benefit 163 131 546 Other items 135 (119) 171 Benefit of operating loss carryforwards -- (24,853) -- Provision (benefit) for income tax $ 597 $(24,655) $ 2,401
The significant components of the deferred income tax benefit attributable to income from continuing operations for the years ended December 31 are as follows:
(In thousands) 1994 1993 Deferred tax expense (exclusive of the effects of other components listed below) $ 1,340 $(2,431) Decrease in balance of the valuation allowance for deferred tax assets (1,340) (22,422) Total $ -- $(24,853)
For the year ended December 31, 1992, a deferred income tax benefit of $3,664 results from timing differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of those timing differences are presented below:
(In thousands) 1992 Book depreciation in excess of tax depreciation $(4,783) Differences in book and tax basis for inventories 695 Pension contribution in excess of book expense 755 State income taxes 177 Expenses allowable for taxes when paid (589) Other 81 Total $(3,664)
13-36 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31 are as follows:
1994 1993 Deferred tax assets: Provision for discontinued operations $ 7,477 $ 9,039 Accounts receivable, principally due to allowance for doubtful accounts 296 439 Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986 215 214 Compensated absences, principally due to accrual for financial reporting purposes 745 758 Net operating loss carryforwards 61,713 59,313 Investment tax credit carryforward 2,543 2,992 Other 721 2,025 Total gross deferred tax assets 73,710 74,780 Less valuation allowance (30,323) (31,663) Net deferred tax assets 43,387 43,117 Deferred tax liabilities: Properties and equipment, principally due to depreciation 13,682 15,603 Pension accrual 4,682 2,647 Other 170 14 Total gross deferred tax liabilities 18,534 18,264 Net deferred tax asset $ 24,853 $24,853
The net change in the total valuation allowance for the years ended December 31, 1994 and 1993 was a decrease of $1.3 million and $22.4 million, respectively. The company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS 109) effective January 1, 1993. The statement requires that deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their bases for financial reporting purposes. In addition, SFAS 109 requires the recognition of future tax benefits, such as net operating loss carryforwards (NOLs), to the extent that realization of such benefits are more likely than not. There was no cumulative effect of this accounting change at the time of adoption. The company had NOLs of approximately $181.5 million at December 31, 1994 because of losses associated with discontinued businesses. These carryforwards, which management expects will be fully utilized, expire as follows:
(In thousands) 2002 $ 18,039 2003 76,662 2004 39,012 2005 17,428 2006 7,336 2007 2,744 2008 13,228 2009 7,061
Under the provisions of SFAS 109, NOLs represent temporary differences that enter into the calculation of deferred tax assets and liabilities. At January 1, 1993, primarily as a result of the NOLs, the company was in a net deferred tax asset position under SFAS 109. The full amount of the deferred tax asset was offset by a valuation allowance due to uncertainties associated with unresolved issues related to discontinued operations. In the fourth quarter of 1993, the company reduced its valuation allowance resulting in a net deferred tax asset of $24.9 million. Two factors contributed to the reduction in the valuation allowance. First was the resolution of long-standing litigation between the company and the City of Long Beach, Calif. regarding a waste-to-energy plant the company built for the city and the ability to quantify, relying upon advice of legal counsel, the potential financial impact of the remaining uncertainties associated with previously discontinued operations. Second, the company was awarded a contract to supply American Electric Power's Gavin plant with 450,000 tons of lime annually for 15 years commencing in 1995. In addition, the company had pending the renewal of existing contracts which were finalized in 1994 and raised utility lime sales backlog to $800 million. With these contracts in place, nearly 65 percent of the company's annual revenue will be generated by long-term contracts. As a result, the company believes that revenues and income from its lime subsidiary can be reasonably projected over the life of its long-term contracts for purposes of determining whether the realization of the asset resulting from the utilization of NOLs in future years is more likely than not. Income projections for the contract lime business were based on historical information adjusted for contract terms. In 1993, the company projected future income for its aggregates business based on the previous three year's results, a period of low profitability for Dravo Basic Materials. The aggregates business assets were sold in 1994. In assessing the valuation allowance, estimates were made as to the potential financial impact on the company should adverse judgments be rendered in the remaining substantive uncertainties associated with discontinued operations. The significant uncertainties involve the 13-37 CEA litigation related to contract claims and environmental matters and are discussed more fully in Note 8, Contingent Liabilities. Management's position in these cases is to vigorously pursue its claims and to contest the asserted contract claims and liability for environmental clean-up. In determining the appropriate valuation allowance, however, management has used the upper limit of the potential financial impact estimated for these matters. The claims against the company in the CEA matter, which management believes are grossly overstated, exceed $10 million. Supported by the company's forecast that it will generate sufficient future taxable income to realize the entire deferred tax asset prior to expiration of any NOLs results in the assessment that the realization of a $24.9 million net deferred tax asset is more likely than not. In order to fully realize the net deferred tax asset, the company will need to generate future taxable income of approximately $73.2 million prior to the expiration of the NOLs. Historically, Dravo Lime's cumulative taxable earnings for the past five years total $64.8 million. There can be no assurance, however, that the company will generate any earnings or any specific level of continuing earnings. The amount of the net deferred tax asset was not adjusted in 1994 due to remaining uncertainties associated with the discontinued operations. Resolution of the Melaport litigation should, however, positively impact the realization of the net deferred tax asset. Tax benefits of $7.5 million for investment tax credits expiring in 1995 and later are also being carried forward. The company recorded an extraordinary credit of $1.6 million for the year ended December 31, 1992, representing the recognition of income tax benefits resulting from the utilization of net operating loss carryforwards for financial reporting purposes. Note 14: Extraordinary Item In conjunction with the sale of Dravo Basic Materials' assets, existing loan agreements were substantially altered, including a $35 million reduction in the amount available under a revolving credit facility. Also, while negotiating a $50 million financing agreement with Prudential Power Funding for the Black River expansion, the company purchased a call option that enabled it to prepay on May 17, 1995, without penalty, amounts outstanding under the financing agreement. At December 31, 1994, $19.9 million was borrowed under the agreement. Cash received from the Dravo Basic Materials asset sale equalling the outstanding principal on the Prudential Power Funding facility, interest through May 16, 1995 and an exit fee was placed in escrow. The company agreed that any additional drawings on the facility would also be escrowed. No additional drawings were made and, with Prudential Power Funding's consent, the entire amount borrowed was prepaid on February 10, 1995. The fees associated with these agreements were written off as extraordinary items. Note 15: Fair Value of Financial Instruments The fair value of financial instruments without extended maturities equals their carrying values. The estimated fair value of financial instruments with extended maturities at December 31 are presented below: (In thousands) 1994 1993
Carrying Fair Carrying Fair Value Value Value Value Notes payable $127,517 $126,220 $93,008 $95,659 Series D Preference Stock 20,000 21,347 20,000 23,544 Off-balance sheet financial instrument: Interest rate swap --- --- --- 123
The carrying amounts of notes receivable approximate fair value. The fair value of notes payable and the Series D Preference Stock is based upon the amount of future cash flows associated with each instrument discounted using the company's estimated borrowing rate for similar debt instruments of comparable maturity. The Preference Stock fair value also includes an estimated factor to value the conversion feature. The fair value of the interest rate swap at December 31, 1993 is the estimated amount the company would have received if it had terminated the agreement on that date. The swap was terminated in December, 1994. The company does not intend to enter into hedging transactions in the future. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Note 16: Research and Development Research and development activity for the years ended December 31 is as follows:
(In thousands) 1994 1993 1992 Total research and development expense $4,393 $4,166 $3,833 Billings to third parties 2,361 1,915 1,804 Net research and development expense $2,032 $2,251 $2,029
13-38 Note 17: Interim Financial Information
(Unaudited, in millions, First Second Third Fourth except earnings per share) Quarter Quarter Quarter Quarter 1994 Revenue $57.7 $72.6 $75.3 $72.5 Gross profit 7.6 12.6 12.7 11.1 Earnings before taxes from continuing operations (1.3) 3.8 3.7 (0.7) Provision (benefit) for income taxes -- 0.6 (0.2) 0.2 Earnings from continuing operations (1.3) 3.2 3.9 (0.9) Discontinued operations -- -- -- (6.5) Earnings (loss) before extraordinary item and cumulative accounting change (1.3) 3.2 3.9 (7.4) Extraordinary item -- -- -- (7.5) Cumulative effect of accounting change (1.4) -- -- -- Net earnings (loss) (2.7) 3.2 3.9 (14.9) Earnings (loss) per share: Continuing operations (0.13) 0.17 0.22 (0.10) Discontinued operations -- -- -- (0.44) Extraordinary item -- -- -- (0.51) Cumulative accounting change (0.09) -- -- -- Net earnings (loss) (0.22) 0.17 0.22 (1.05) 1993 Revenue $61.8 $70.2 $76.1 $69.5 Gross profit 10.3 13.9 13.9 11.2 Earnings before taxes from continuing operations 0.4 4.0 4.5 1.6 Provision (benefit) for income taxes -- 0.3 0.2 (25.1) Earnings from continuing operations 0.4 3.7 4.3 26.7 Discontinued operations -- -- -- (35.3) Net earnings (loss) 0.4 3.7 4.3 (8.6) Earnings (loss) per share: Continuing operations (0.02) 0.21 0.24 1.77 Discontinued operations -- -- -- (2.38) Net earnings (loss) (0.02) 0.21 0.24 (0.61)
13-39 Management's Report The consolidated financial statements and other financial information appearing in this Annual Report were prepared by the management of Dravo Corporation, which is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with generally accepted accounting principles and include amounts that are based on informed judgments and estimates of the expected effects of events and transactions. Dravo maintains a system of internal controls to provide reasonable assurance as to the reliability of the financial records and the protection of assets. This internal control system is supported by written policies and procedures that communicate the details of the control system, by careful selection and training of qualified personnel, and by a broad program of internal audits. In addition, the company's business ethics policy requires employees to maintain the highest level of ethical standards in the conduct of the company's business and their compliance is regularly monitored. The company's financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. As stated in their report, their audit was made in accordance with generally accepted auditing standards and included such study and evaluation of the company's system of internal accounting controls as they considered necessary to determine the nature, timing and extent of the auditing procedures required for expressing an opinion on the company's financial statements. The Board of Directors, acting through its Audit Committee composed exclusively of outside directors, reviews and monitors the company's financial reports and accounting practices. The Board of Directors, upon the recommendation of the Audit Committee, appoints the independent certified public accountants subject to ratification by the shareholders. The Audit Committee meets periodically with management, the internal auditors and the independent auditors. These meetings include discussions of internal accounting control, results of audit work and the quality of financial reporting. Financial management as well as the internal auditors and independent auditors have full and free access to the Audit Committee. Independent Auditors' Report The Board of Directors and Shareholders Dravo Corporation: We have audited the accompanying consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, retained earnings and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Dravo Corporation and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Notes 10 and 13 to the consolidated financial statements, the company adopted the method of accounting for postemployment benefits prescribed by Statement of Financial Accounting Standards No. 112 in 1994 and the methods of accounting for postretirement benefits other than pensions and income taxes prescribed by Statements of Financial Accounting Standards Nos. 106 and 109, respectively, in 1993. As discussed in Note 8 to the consolidated financial statements, a lawsuit and certain claims and assertions have been brought against the company for contract disputes and environmental costs, the outcome of which presently cannot be determined. KPMG Peat Marwick LLP New Orleans, Louisiana February 10, 1995 13-40 Five-Year Summary
(Amounts in millions, except per share Years ended December 31, data and average mineral resource prices) 1994 1993 1992 1991 1990 Summary of operations: Revenue $278.1 $277.6 $273.0 $295.7 $295.9 Gross profit 44.0 49.3 51.7 57.7 59.3 Interest expense 12.4 9.2 10.5 11.2 9.8 Depreciation expense 17.6 18.0 18.6 17.7 16.2 Earnings before taxes from continuing operations 5.5 10.5 12.7 16.1 19.7 Provision (benefit) for income taxes 0.6 (24.6) 2.4 3.9 3.9 Earnings from continuing operations 4.9 35.1 10.3 12.2 15.8 Loss from discontinued operations, net of income taxes (6.5) (35.3) -- (38.5) -- Extraordinary item (7.5) -- 1.6 -- 3.9 Cumulative accounting change (1.4) -- -- -- -- Net earnings (loss) (10.5) (0.2) 11.9 (26.3) 19.7 Preferred dividends declared 2.5 2.6 2.6 2.6 2.6 Capital expenditures 44.8 13.6 8.5 19.7 34.1 Employees at year-end 768 1,416 1,421 1,556 1,713 Summary of financial position: Total assets $307.3 $272.1 $268.5 $271.8 $299.8 Working capital 6.3 59.5 60.1 45.6 10.0 Long-term obligations and redeemable preference stock 62.4 108.5 108.1 109.7 74.7 Total debt and redeemable preference stock 147.5 113.0 112.8 114.4 128.7 Property, plant and equipment, net 93.5 110.0 114.9 128.5 127.9 Shareholders' equity 76.7 89.5 95.0 85.5 114.3 Per common share data: Earnings from continuing operations $ 0.16 $ 2.20 $ 0.52 $ 0.65 $ 0.90 Loss from discontinued operations (0.44) (2.38) -- (2.60) -- Extraordinary item (0.51) -- 0.11 -- 0.26 Cumulative accounting change (0.09) -- -- -- -- Net earnings (loss) (0.88) (0.18) 0.63 (1.95) 1.16 Book value 5.06 6.15 6.27 5.63 7.57 Shareholders at year end 3,192 3,442 3,736 3,893 4,079 Mineral resources (in millions of tons): Proven and probable reserves Total reserves 502.1 1,121.2 1,142.1 1,074.7 1,102.7 Tons mined 23.2 22.8 25.4 24.7 26.6 Average market price $ 5.80 $ 6.01 $ 5.85 $ 6.31 $ 6.01
13-41 Board of Directors Principal Executives Carl A. Gilbert Carl A. Gilbert President and Chief Executive President and Officer, Chief Executive Officer Dravo Corporation E. Eugene Bishop Ernest F. Ladd III Chairman of the Board, Executive Vice President, Morrison Restaurants, Inc. Chief Financial Officer Arthur E. Byrnes Marshall S. Johnson Chairman, Vice President, Deltec Asset Management Corporation Operations and Engineering Jack Edwards John R. Major Senior Partner, Vice President, Hand, Arendall, Bedsole, Greaves Administration & Johnston James C. Huntington, Jr. James J. Puhala Retired Senior Vice President, Vice President, American Standard, Inc. General Counsel and Secretary Willard L. Hurley Donald H. Stowe, Jr Retired Chairman and Vice President, Chief Executive Officer, Sales and Technology First Alabama Bancshares, Inc. William E. Kassling Larry J. Walker Chairman, Chief Executive Officer Controller and President, Westinghouse Air Brake Company Gregory H. Welch Treasurer William G. Roth Retired Chairman, Dravo Corporation Konrad M. Weis Retired President and Chief Executive Officer, Bayer USA, Inc. Robert C. Wilburn President and Chief Executive Officer, The Colonial Williamsburg Foundation 13-42 EX-21 8 SUBSIDIARIES OF REGISTRANT Exhibit 21. Subsidiaries of the Registrant
Percentage State or country of voting in which securities incorporated owned Registrant: Dravo Corporation Pennsylvania -- Subsidiaries of Dravo Corporation: Dravo Basic Materials Company, Inc. Alabama 100% Dravo Equipment Company Delaware 100 Dravo Lime Company Delaware 100 Princeton Ridge, Inc. New Jersey 100 Subsidiaries of Dravo Basic Materials Company, Inc.: Dravo Natural Resources Company Delaware 50 Subsidiaries of Dravo Lime Company: Dravo Natural Resources Company Delaware 50
21-1 EX-23 9 ACCOUNTANT'S CONSENT Exhibit 23. Consents of Experts and Counsel CONSENT OF INDEPENDENT AUDITORS The Board of Directors Dravo Corporation: We consent to incorporation by reference in the registration statements No. 33-23632 on Form S-8, No. 33-17356 on Form S-3, No. 2-84462 on Form S-8, Amendment No. 1 to No. 2-87555 on Form S-8/S-3, No. 2-64137 and 33-54179 on Form S-8 and No. 2-71993 on Form S-16 amended by Form S-3 of Dravo Corporation, of our report dated February 10, 1995 relating to the consolidated balance sheets of Dravo Corporation and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of operations, retained earnings, and cash flows and related schedules for each of the years in the three-year period ended December 31, 1994 which report appears in, or is incorporated by reference in, the December 31, 1994 annual report on Form 10-K of Dravo Corporation. Our report refers to the adoption of the methods of accounting for postretirement benefits other than pensions, income taxes and postemployment benefits prescribed by Statements of Financial Accounting Standards Nos. 106, 109 and 112, respectively. Our report dated February 10, 1995 contains an explanatory paragraph that states that a lawsuit and certain claims and assertions have been brought against the company for contract disputes and environmental costs, the outcome of which presently cannot be determined. KPMG PEAT MARWICK LLP New Orleans, Louisiana March 29, 1995 23-1 EX-24 10 POWERS OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. E. EUGENE BISHOP 24-1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. ARTHUR E. BYRNES 24-2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. JACK EDWARDS 24-3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. JAMES C. HUNTINGTON, JR. 24-4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. WILLIAM E. KASSLING 24-5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. WILLIAM G. ROTH 24-6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. KONRAD M. WEIS 24-7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Carl A. Gilbert, Ernest F. Ladd III and James J. Puhala, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Dravo Corporation), to sign the Form 10-K Annual Report of Dravo Corporation for the year ended December 31, 1994 and any and all amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. WITNESS the due execution hereof this 26th day of January, 1995. ROBERT C. WILBURN 24-8 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRAVO CORPORATION'S FORM 10-K DATED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1994 DEC-31-1994 2,027 0 20,138 108 12,638 160,137 195,333 101,872 307,329 153,798 0 14,986 20,000 28 61,732 307,329 278,052 278,052 234,018 234,018 0 0 12,408 5,527 597 4,930 (6,554) (7,572) (1,361) (10,557) (.88) (.88)