-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KGJD13fBlFITMpXyVto7srhNkYDwkJ3wp8sbvfvki5sIRxI9olnCgFzvcVKLs3+Z OnCtDk1+C9zq01JvTSF+pw== 0000030067-98-000003.txt : 19980514 0000030067-98-000003.hdr.sgml : 19980514 ACCESSION NUMBER: 0000030067-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DRAVO CORP CENTRAL INDEX KEY: 0000030067 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 250447860 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05642 FILM NUMBER: 98618381 BUSINESS ADDRESS: STREET 1: 11 STANWIX ST. STREET 2: 11TH FLOOR CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 412-995-5535 MAIL ADDRESS: STREET 1: 11 STANWIX ST., 11TH FLOOR CITY: PITTSBURGH STATE: PA ZIP: 15222 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: March 31, 1998 Commission File Number: 1-5642 DRAVO CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 25-0447860 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 11 Stanwix Street, Pittsburgh, Pennsylvania 15222 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (412) 995-5500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of each of the registrant's classes of common stock as of April 30, 1998: Title of Class Shares Outstanding Common Stock, $1.00 par value 14,718,509 DRAVO CORPORATION AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION Page No. Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 3, 4 Consolidated Statements of Earnings for the Quarters ended March 31, 1998 and 1997 5 Consolidated Statements of Cash Flows for the Quarters ended March 31, 1998 and 1997 6, 7 Notes to Consolidated Financial Statements 8 - 12 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 14 15 Item 6. Exhibits and Reports on Form 8-K 15 SIGNATURES 16 -2- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets ($ in 000's)
March 31, December 31, 1998 1997 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 4,737 $ 1,477 Accounts receivable, net 20,943 24,995 Notes receivable, net 723 769 Inventories 16,743 17,434 Other current assets 1,018 980 Total current assets 44,164 45,655 Advances to and equity in joint ventures 2,325 2,450 Notes receivable 5,680 6,873 Other assets 27,149 27,627 Deferred income taxes 29,976 29,976 Property, plant and equipment 267,305 263,926 Less: accumulated depreciation and amortization 123,972 121,277 Net property, plant and equipment 143,333 142,649 Total assets $252,627 $255,230
See accompanying notes to consolidated financial statements. -3- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets ($ in 000's)
March 31, December 31, 1998 1997 (unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term notes $ 9,762 $ 9,736 Accounts payable - trade 15,631 17,546 Accrued insurance 1,917 1,482 Net liabilities of discontinued operations 3,056 3,613 Redeemable preference stock 5,000 5,000 Other current liabilities 5,820 4,368 Total current liabilities 41,186 41,745 Long-term notes 70,469 74,396 Net liabilities of discontinued operations 5,008 5,401 Other liabilities 8,959 9,022 Redeemable preference stock: Par value $1, issued 200,000 shares: Series D, $12.35 cumulative, convertible, exchangeable (entitled in liquidation to $20.0 million) 15,000 15,000 Shareholders' equity: Preference stock, par value $1, authorized 1,878,870: Series B, $2.475 cumulative, convertible; issued 16,000 shares and 18,386 shares (entitled in liquidation to $880,000 and 16 18 $1.0 million); Series D, reported above Common stock, par value $1, authorized 35,000,000 shares; issued 15,110,922 and 15,103,249 15,111 15,103 Other capital 66,813 66,819 Retained earnings 35,001 32,662 Treasury stock at cost: Common shares 397,413 (4,936) (4,936) Total shareholders' equity 112,005 109,666 Total liabilities and shareholders' equity $252,627 $255,230
See accompanying notes to consolidated financial statements. -4- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings (unaudited, $ in 000's, except per share data)
Quarters ended March 31, 1998 1997 Revenue $ 42,374 $ 37,624 Cost of revenue 32,366 29,851 Gross profit 10,008 7,773 Selling, general and administrative expenses 4,807 5,284 Earnings from operations 5,201 2,489 Other income (expense): Equity in earnings of joint ventures 195 199 Other income 12 -- Interest income 98 32 Interest expense (1,867) (1,562) Net other expense (1,562) (1,331) Earnings before taxes 3,639 1,158 Provision for income taxes 673 84 Net earnings 2,966 1,074 Preference dividends 627 630 Net earnings available for common shares $ 2,339 $ 444 Earnings per share: Basic $ 0.16 $ 0.03 Diluted $ 0.16 $ 0.03 Weighted average shares outstanding: Basic 14,708 14,769 Diluted 14,749 14,880
See accompanying notes to consolidated financial statements. -5- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited, $ in 000's)
Quarters ended March 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 2,966 $ 1,074 Adjustments to reconcile net earnings to net cash provided by continuing operations activities: Depreciation and amortization 2,820 2,530 Gain on sale of assets (12) -- Equity in joint ventures 125 (291) Changes in assets and liabilities: Decrease in accounts receivable 4,052 1,220 Decrease (increase) in notes receivable 1,239 (454) Decrease (increase) in inventories 691 (784) Decrease (increase) in other current assets (38) 175 Decrease in accounts payable and accrued expenses (628) (947) Increase in taxes payable 602 19 Decrease in other assets 478 180 Increase (decrease) in other liabilities (63) 364 Net cash provided by continuing operations activities 12,232 3,086 Net cash used by discontinued operations activities (950) (787) Net cash provided by operating activities 11,282 2,299 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of assets 12 -- Additions to property, plant and equipment (3,504) (13,484) Other, (net) -- 1 Net cash used by investing activities $(3,492) $(13,483)
See accompanying notes to consolidated financial statements. -6- DRAVO CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited, $ in 000's)
Quarters ended March 31, 1998 1997 CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowing under revolving credit agreements $ 3,000 $ 15,690 Principal payments under long-term notes (6,901) (6,084) Proceeds from issuance of long-term notes -- 1,663 Dividends on preference stock (629) (630) Net cash provided (used) by financing activities (4,530) 10,639 Net increase (decrease) in cash and cash equivalents 3,260 (545) Cash and cash equivalents at beginning of period 1,477 1,600 Cash and cash equivalents at end of period $ 4,737 $ 1,055 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 1,990 $ 1,575 Income taxes 72 89
See accompanying notes to consolidated financial statements. -7- DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Basis of Presentation The accompanying consolidated financial statements include the accounts of Dravo Corporation and its majority-owned subsidiaries (the company). The principal subsidiary is Dravo Lime Company, one of the nation's largest lime producers. Significant intercompany balances and transactions have been eliminated in the consolidation process. These unaudited consolidated financial statements include all adjustments, consisting only of normal, recurring accruals, which management considers necessary for a fair presentation of the company's consolidated financial position, results of operations, and cash flows for the interim periods presented. Certain reclassifications of previously reported balances have been made to conform to the current period's presentation. (2) Inventories Inventories are classified as follows: ($ in 000's)
March 31, December 31, 1998 1997 Materials and supplies $ 13,537 $ 14,615 Finished goods 3,206 2,819 Total inventories $ 16,743 $ 17,434
Finished goods are valued at average production cost or market, whichever is lower, and include raw materials, direct labor, and operating overhead. Materials and supplies are valued at average cost. -8- DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) 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 cleanup of soil and groundwater contamination at four sub-sites in Hastings, NE. 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). Regarding the first sub-site, the company participated in an EPA-initiated allocation proceeding for a municipal landfill sub-site to allocate shares of liability for past response costs and costs of a proposed cap of the landfill. As part of this proceeding, the allocator conducted a mediation session that resulted in a settlement among the EPA and the PRPs. Pursuant to the settlement, the company agreed to pay 14.33 percent of the EPA's past costs and the estimated costs of the cap and its maintenance. A Consent Decree incorporating the settlement and requiring the private parties to pay for, construct and maintain the cap is awaiting the approval of the United States Justice Department and ultimately the Federal District Court. In exchange, the company received contribution protection against third-party claims as well as a covenant from the EPA not to sue for its past and future response costs at this sub-site and matters covered by the settlement. The company has also been notified by the EPA that the EPA considers it a PRP at another municipal landfill in Hastings. At least three other parties (including the City of Hastings) are considered by the EPA to be PRPs at this second sub-site. At this sub-site, the company has concluded that the City of Hastings is primarily responsible for proper closure of the landfill and the remediation of any release of hazardous substances. The EPA has conducted the remedial investigation for this sub-site. The company, along with some of the other PRPs, including the City of Hastings, is considering a proposal from the EPA to conduct the feasibility study. In 1997, the company and the other PRPs at this sub-site received a demand from the EPA that they pay the EPA's response costs at this sub-site through September 30, 1994. The company and some of the other PRPs, including the City of Hastings, intend to examine these costs to determine whether or not they are valid. -9- DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Contingent Liabilities (continued) With respect to the third sub-site, the company and two other PRPs have been served with administrative orders directing them to undertake soil remediation and interim groundwater remediation at that sub-site. 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. In 1997, the company and the other PRPs at this sub-site received a demand from the EPA that they pay the EPA's response costs at this sub-site through September 30, 1994. The company and some of the other PRPs intend to examine these costs to determine whether or not they are valid. A total of five parties have been named by the EPA as PRPs at this sub-site, but two of them have been granted de minimis status. The company believes other persons should also be named as PRPs. The fourth sub-site is a former naval ammunition depot that was subsequently converted to an industrial park. The company and its predecessor owned and operated a manufacturing facility in this industrial park. To date, the company's investigation indicates that it did not cause the release of hazardous substances at this sub-site during the time it owned and operated the facility. The United States has undertaken to conduct the remediation of this sub-site. In addition to sub-site cleanup, the EPA is seeking remediation of area-wide contamination associated with all of the sub-sites in and around Hastings. The company, along with other Hastings PRPs, has recommended that the EPA adopt institutional controls as the area-wide remedy in Hastings. The EPA has completed an area-wide remedial investigation and has asked the PRPs to agree to perform a feasibility study to determine whether institutional controls or another remedial alternative should be undertaken. The company, along with eight to ten other PRPs, is considering this proposal. An acceptable area-wide remediation plan could result in interim remedies at the sub-sites becoming final remedies. In 1997, the company and the other area-wide PRPs received a demand from the EPA that they pay the EPA's area-wide response costs through September 30, 1994. The company and some of the other area-wide PRPs intend to examine these costs to determine whether or not they are valid. -10- DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Contingent Liabilities (continued) 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 sub-site. On motion of the defendant insurance carriers, the suit was transferred to the District Court for the Western District of Pennsylvania on October 31, 1996. The company has settled the claim against its predecessor's insurer regarding the third sub-site, 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 handling the company's claim. A tentative trial date has been set for early 1999. 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 second and fourth sub-sites. Estimated future cleanup costs at the third sub-site, including capital outlays and maintenance costs for soil and groundwater remediation of approximately $6.2 million, are based on independent engineering studies. Included in the discontinued operations provision is the company's estimate that it will participate in 33 percent of these remediation costs and a pro rata share of the EPA's past response costs. The company's estimated share of the costs is based on its assessment of the total cleanup costs, its potential exposure, and the viability of other named PRPs. These estimates are, by their nature, uncertain and dependent upon numerous factors, any of which could cause actual results to differ materially from projected amounts. Other claims and assertions made against the company will be resolved, in the opinion of management, without material additional charges to earnings. -11- DRAVO CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (4) Discontinued Operations Discontinued operations' assets and liabilities at March 31, 1998 and December 31, 1997 relate to non-cancelable leases, insurance, environmental, legal and other matters associated with exiting the engineering and construction business and are presented below:
($ in 000's) March 31, December 31, 1998 1997 Current assets: Accounts and retainers receivable $ 140 $ 209 Total assets $ 140 $ 209 Current liabilities: Accounts and retainers payable $ -- $ 135 Accrued loss on leases 379 1,026 Insurance 410 405 Environmental 1,783 1,684 Other 624 572 Total current liabilities 3,196 3,822 Insurance 2,669 2,706 Environmental 1,107 1,286 Other 1,232 1,409 Total liabilities $ 8,204 $ 9,223 Net liabilities and accrued loss on leases of discontinued operations $ (8,064) $ (9,014)
(5) Comprehensive Income In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 requires the reporting of changes in equity during the period from nonowner sources, such as minimum pension liability adjustments. There were no items of comprehensive income in equity at March 31, 1998 or December 31, 1997. -12- DRAVO CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue and earnings for the first quarter of 1998 increased substantially over 1997's results. Increased demand from Ohio Valley coal-fired power plant customers enabled the company's two production sites located in northern Kentucky to produce at higher, more cost efficient levels. The higher production levels utilized a portion of the surplus capacity created when a fourth kiln at Maysville, Kentucky was completed last summer. Commercial market demand in the Southeast region, served by the Longview facility located near Birmingham, Alabama, also remained strong. A comparison between this year's earnings of $.16 per common share and last year's earnings of $.03 per share is affected by two factors. First, unprecedented flooding conditions in northern Kentucky last year severely depressed earnings. Second, the company's net earnings for reporting purposes reflects an effective tax rate of 19 percent this year versus 7 percent last year. This change in tax rate is the result of the reassessment of the recoverability of the deferred tax asset during last year's fourth quarter as required by Statement of Financial Accounting Standard No. 109. The effective tax rate is used for financial reporting purposes only and will not affect actual taxes paid, which will remain low due to net operating loss utilization. Net cash provided from operating activities for the quarter improved $9 million from the prior year period on higher earnings, working capital reductions and collection of $1.4 million on a note receivable. Cash and marketable securities increased by $3.3 million over year-end levels while the company's overall debt level decreased $3.9 million. As previously reported, construction of a new kiln and ancillary equipment is planned at Longview over the next 18 months. The new capacity will allow the company to meet additional lime requirements for a new long-term contract with SMI for precipitated calcium carbonate satellite production facilities. The company is currently finalizing funding options with its existing creditor group. -13- DRAVO CORPORATION AND SUBSIDIARIES PART II - Other Information Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of shareholders was held on April 23, 1998 in Birmingham, Alabama. Listed below are the proposals submitted to shareholders in the company's Proxy Statement dated March 27, 1998 and the results of the shareholder votes. Election of two directors for a three year term: For Withheld Carl A. Gilbert 13,525,515 430,828 William G. Roth 13,516,308 440,035
Following the election, the company's Board of Directors consisted of Mr. Arthur E. Byrnes, Mr. James C. Huntington, Jr., Mr. Gilbert, Mr. William E. Kassling, Mr. Peter T. Kross, and Mr. Roth. Election of Certified Public Accountants: For Against Abstain KPMG Peat Marwick LLP 13,827,404 80,647 48,292 Proposal to hold the Annual Meeting in the city where the greatest percentage of common shares is held by investors: For Against Abstain Broker Non-Votes 1,788,325 8,070,967 105,392 4,964,825 Proposal to adopt a corporate-wide cost-reduction program with fixed targets of 10% in 1998, 5% in 1999 and 5% in 2000: For Against Abstain Broker Non-Votes 2,040,120 7,802,159 122,405 4,964,825 -14- DRAVO CORPORATION AND SUBSIDIARIES PART II - Other Information Item 4. Submission of Matters to a Vote of Security Holders (continued) Proposal to set a moratorium on all new expansion in excess of $5,000,000 until gross profit margins are at or exceed 30% for at least thirty months: For Against Abstain Broker Non-Votes 1,494,523 8,328,545 141,616 4,964,825 Item 6. Exhibits and Reports on Form 8-K Exhibits The following is filed as an exhibit to Part I of this Form 10-Q: Exhibit No. 11 - Statement re computation of per share earnings. (b)Reports on Form 8-K The company filed no reports on Form 8-K for the quarter ended March 31, 1998. -15- SIGNATURES Pursuant to the requirements 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 (Registrant) Date: May 13, 1998 /s/EARL J. BELLISARIO Earl J. Bellisario Senior Vice President, Chief Financial Officer and Secretary Date: May 13, 1998 /s/LARRY J. WALKER Larry J. Walker Vice President and Controller (Principal Accounting Officer) -16- EX-11 2 EARNINGS PER SHARE Exhibit 11. Statement Re Computation of Per Share Earnings
(In 000's, except per share data) Quarters ended March 31, 1998 1997 Basic earnings per share: Net earnings $ 2,966 $ 1,074 Deduct dividends on preference stock 627 630 Net earnings applicable to common stock $ 2,339 $ 444 Shares: Weighted average number of common shares outstanding 14,708 14,769 Basic earnings per share $ 0.16 $ 0.03 Diluted earnings per share: Net earnings applicable to common stock $ 2,339 $ 444 Shares: Weighted average number of common shares outstanding 14,708 14,769 Dilutive effect of outstanding options and rights (as determined by the application of the treasury stock method at the average market price for the period) 41 111 Weighted average number of shares outstanding, as adjusted 14,749 14,880 Diluted earnings per share $ 0.16 $ 0.03
-17- EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRAVO CORPORATION'S MARCH 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 MAR-31-1998 4737 0 22366 700 16743 44164 267305 123972 252627 41186 0 15111 15000 16 96878 252627 42374 42374 32366 32366 0 0 1867 3639 673 2966 0 0 0 2339 .16 .16
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