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: June 30, 1994
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.)
One Oliver Plaza, Pittsburgh, Pennsylvania 15222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 566-3000
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 July 31, 1994:
Title of Class Shares Outstanding
Common Stock, $1.00 par value 14,863,402
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page No.
Consolidated Balance Sheets at June 30, 1994
and December 31, 1993 3, 4
Consolidated Statements of Operations for the
Quarters ended June 30, 1994 and 1993 5
Consolidated Statements of Operations for the
Six month period ended June 30, 1994 and 1993 6
Consolidated Statements of Cash Flows for the
Six month period ended June 30, 1994 and 1993 7, 8
Notes to Consolidated Financial Statements 9 - 15
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16, 17
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
-2-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,103 $ 808
Accounts receivable, net 45,673 44,225
Notes receivable, net 2,691 3,318
Inventories 54,942 57,536
Other current assets 4,992 2,417
Total current assets 109,401 108,304
Advances to and equity in joint ventures 4,542 4,348
Notes receivable 6,027 6,870
Other assets 20,599 17,729
Deferred tax asset 24,440 24,853
Property, plant and equipment 323,714 311,822
Less: accumulated depreciation and
amortization 204,794 201,854
Net property, plant and equipment 118,920 109,968
Total assets $283,929 $272,072
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term notes $ 4,486 $ 4,488
Accounts payable - trade 35,953 28,622
Income taxes 369 23
Accrued insurance 5,039 3,049
Accrued retirement contribution 3,531 2,101
Net liabilities of discontinued operations 887 2,006
Accrued loss on leases - discontinued
operations 2,353 2,448
Other current liabilities 7,694 6,113
Total current liabilities 60,312 48,850
Long-term notes 92,207 88,520
Other liabilities 3,108 3,033
Net liabilities of discontinued operations 12,564 14,276
Accrued loss on leases - discontinued
operations 6,914 7,854
Redeemable preference stock:
Par value $1, issued 200,000 shares:
Series D, $12.35 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: Series B, $2.475 cumulative,
convertible; issued 30,386 and 32,386 shares
(entitled in liquidation to $1.7 million and
$1.8 million); 30 32
Series D, reported above
Common stock, par value $1, authorized
35,000,000 shares; issued 14,979,407
and 14,967,824 14,979 14,968
Other capital 63,292 63,260
Retained earnings 12,363 13,119
Treasury stock at cost: Common shares - 119,221 (1,840) (1,840)
Total shareholders' equity 88,824 89,539
Total liabilities and shareholders' equity $283,929 $272,072
See accompanying notes to consolidated financial statements.
</TABLE>
-4-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited, $ in 000's, except per share data)
<TABLE>
<CAPTION>
Quarters ended June 30,
1994 1993
<S> <C> <C>
Revenue $ 72,628 $ 70,192
Cost of revenue 59,982 56,269
Gross profit 12,646 13,923
Selling, general and administrative expenses 7,337 8,053
Earnings from operations 5,309 5,870
Other income (expense):
Equity in earnings (loss) of joint ventures 441 (41)
Other income 210 51
Interest income 212 360
Interest expense (2,397) (2,268)
Net other expense (1,534) (1,898)
Earnings before taxes 3,775 3,972
Provision for income taxes 626 277
Net earnings 3,149 3,695
Preference dividends 636 639
Net earnings available for common stock $ 2,513 $ 3,056
Earnings per share:
Operations $ 0.17 $ 0.21
Weighted average shares outstanding 14,923 14,870
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited, $ in 000's, except per share data)
<TABLE>
<CAPTION>
Six months ended June 30,
1994 1993
<S> <C> <C>
Revenue $130,309 $132,003
Cost of revenue 110,089 107,783
Gross profit 20,220 24,220
Selling, general and administrative expenses 14,816 15,996
Earnings from operations 5,404 8,224
Other income (expense):
Equity in earnings of joint ventures 778 7
Other income 616 101
Interest income 344 667
Interest expense (4,638) (4,607)
Net other expense (2,900) (3,832)
Earnings before taxes 2,504 4,392
Provision for income taxes 626 306
Earnings before cumulative effect of
accounting change 1,878 4,086
Cumulative effect of accounting change, net
of tax (1,361) --
Net earnings 517 4,086
Preference dividends 1,273 1,278
Net earnings (loss) available for common stock $ (756) $ 2,808
Earnings (loss) per share:
Operations $ 0.04 $ 0.19
Cumulative effect of accounting change (0.09) --
Total $ (0.05) $ 0.19
Weighted average shares outstanding 14,855 14,864
See accompanying notes to consolidated financial statements.
</TABLE>
-6-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited, $ in 000's)
<TABLE>
<CAPTION>
Six months ended June 30,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 517 $ 4,086
Adjustments to reconcile net earnings
to net cash provided (used) by continuing
operations activities:
Depreciation and amortization 8,722 8,921
Cumulative effect of accounting change 1,361 --
Gain on sale of assets (616) (101)
Equity in joint ventures (194) (847)
Changes in assets and liabilities:
Increase in accounts receivable (1,448) (6,347)
Decrease in notes receivable 670 43
Decrease in inventories 2,594 2,435
Increase in other current assets (2,575) (1,230)
Increase in accounts payable
and accrued expenses 12,678 2,244
Increase in other assets (2,870) (3,599)
Decrease in deferred tax asset 413 --
Increase (decrease) in other liabilities (1,286) 207
Net cash provided by continuing
operations activities 17,966 5,812
Decrease in net liabilities of discontinued
operations (3,866) (7,254)
Proceeds from repayment of notes receivable
from sale of discontinued operations 800 1,192
Net cash used by discontinued operations
activities (3,066) (6,062)
Net cash provided (used) by operating
activities 14,900 (250)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 1,021 202
Additions to property, plant and equipment (18,079) (5,376)
Other, net 1 --
Net cash used by investing activities $(17,057) $ (5,174)
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited, $ in 000's)
<TABLE>
<CAPTION>
Six months ended June 30,
1994 1993
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under revolving credit
agreements $ 4,700 $ 8,600
Principal payments under long-term notes (1,016) (982)
Proceeds from long-term notes -- (169)
Proceeds from issuance of common stock 41 --
Dividends on preference stock (1,273) (1,278)
Net cash provided by financing activities 2,452 6,171
Net increase in cash and cash equivalents 295 747
Cash and cash equivalents at beginning of
period 808 970
Cash and cash equivalents at end of period $ 1,103 $ 1,717
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 4,558 $ 4,583
Income tax (133) 534
</TABLE>
See accompanying notes to consolidated financial statements.
-8-
<PAGE>
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).
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:
<TABLE>
<CAPTION>
($ in 000's)
June 30, December 31,
1994 1993
<S> <C> <C>
Finished goods $37,270 $40,660
Work in process 2,815 3,092
Materials and supplies 14,857 13,784
Net inventories $54,942 $57,536
</TABLE>
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.
-9-
<PAGE>
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 clean-up of soil and groundwater
contamination at three subsites in Hastings, Nebraska, 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, after a
limited investigation, has determined that it believes it disposed of no
hazardous substances at the particular site and has so informed the EPA.
On December 31, 1991, the EPA sent a formal demand to the company as well
as other PRPs at this subsite demanding that they reimburse the EPA for
already incurred response costs in the amount of $1.2 million, and
requesting that the PRPs submit a good faith proposal to perform soil and
groundwater remediation at this subsite. The company has rejected the
EPA's demand and decided not to submit the offer requested by the EPA.
No PRP at this subsite has agreed to pay the EPA's response costs. As a
result, statutory interest is being added to the EPA's response costs.
Other PRPs, including the local municipality, have agreed to perform the
remedial investigation and to design soil and groundwater remediation
remedies at this subsite, but no party has agreed to conduct the
remediation.
At the second subsite, the company, again after a limited investigation,
concluded that release of contaminants from this subsite is not sufficient
to warrant the taking of remedial action. In January, 1994 the EPA sent
a specific notice to the company that the EPA considered it and three
other parties PRPs at this subsite. The letter 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 workplan for the RI/FS.
With respect to the third subsite, the company, along with one other PRP,
has been served with administrative orders directing it 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 issuance of the order concerning interim
groundwater remediation followed many months of unresolved negotiations
with the EPA, the other PRP and the company's insurers with respect to the
EPA's demands that the company and the other PRP either finance or
voluntarily undertake the interim groundwater remediation as well as their
liability to complete the soil remediation and to pay for past response
costs. The EPA has taken no legal action with respect to its demand that
the company and the other PRP pay its past response costs. A third PRP
has been notified by the EPA that the EPA regards it as potentially liable
-10-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
under Section 107(a) of CERCLA for costs the EPA has incurred or will
incur in responding to the release and threat of release at this subsite.
A total of five parties have been named by the EPA as PRPs at this
subsite.
The company may proceed against other parties at the subsite who have not
been named by the EPA as PRPs or who have not contributed to the company's
cost in complying with the EPA's administrative orders.
The company, along with other PRPs from various other subsites, has
recommended that the EPA adopt area-wide institutional controls as the
permanent remedy at the site. No formal response to this proposal has
been received by the PRPs. However, EPA has solicited a proposal from the
PRPs to perform a remedial investigation of area-wide contamination.
The company notified its primary and excess general liability insurance
carriers of the claims by the EPA at the first and third subsites.
Although one primary carrier agreed to pay for a part of the company's
defense, it has not done so and has refused to pay for expenses the
company has already incurred. The company's other primary carrier has
declined coverage altogether. On August 10, 1992 the company filed suit
in the Alabama District Court against its primary liability insurance
carriers 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). This
complaint is limited to the EPA's claims at the third subsite. The suit
has been amended to include as a defendant the excess liability carrier
of the company's predecessor at the site. An investigation of the
coverage provided by the primary carrier of the company's predecessor is
also underway. An award of punitive damages is being sought against two
of these carriers for their bad faith in failing to investigate the
company's claim and/or denying the company's claim. The case is
proceeding in accordance with a case management order issued by the
District Court Magistrate assigned to handle pretrial matters. 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 subsite.
Estimated total cleanup costs, including capital outlays and future
maintenance costs for soil and groundwater remediation of approximately
$17 million, are based on independent engineering studies. The company
has assumed that it will participate in 33 percent of the costs.
-11-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
Included in the discontinued operations provision is the company's
estimate of its share of the likely cost of soil and groundwater
remediation at these three subsites. 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.
On May 27, 1993, the company was also notified by the EPA that the company
might be liable for costs incurred by the United States in responding to
a release or threatened release of hazardous substances at a non-operating
research facility in Golden, Colorado. The notice, which was received
without any advance indicating that the EPA regarded the company as a
potentially responsible party, asked the company and other responsible
parties to conduct or participate in response actions at the site.
On June 8, 1993, the company responded to the EPA's notice of potential
liability by stating that it does not believe it is a responsible party
at the site. In June, 1994, the company, along with other qualifying
potentially responsible parties, was offered a de minimis settlement by
EPA of their liability for response costs at this site. The company has
accepted the de minimis settlement. The settlement requires the company
to pay EPA $1,700. In return for this payment, the company will receive
a release from liability for incurred response costs at the site up to $20
million and protection from contribution claims from third parties. In
accepting the de minimis settlement offer, the company expressly retains
the right to maintain that it has no liability for response costs at this
site. The company's decision to accept the de minimis settlement was
based solely on its conclusion that the costs of defending itself in this
matter far outweighed the costs of the de minimis settlement.
There are no reliable estimates of the cost of remediation at this site.
In June, 1994, the company received two notices from EPA advising the
company that it is potentially liable for the cost of responding to the
release or threat of a release of hazardous substances at a site located
in Slidell, St. Tammany Parish, Louisiana. The notice, which was sent to
approximately 200 other parties, also contains an offer to enter into
negotiations with potentially responsible parties to conduct necessary
response actions at the site.
The company has requested and received the information from EPA which
forms the basis for EPA's decision to send the company notices of
potential liability. The company is currently investigating whether it
has any liability for response costs at this site and is preparing a
response to information requested by EPA concerning the nature of the
company's business.
-12-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
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 Turnkey 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.
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 June 8, 1993. The court ruling does not
specify damages to be paid but does identify certain categories of damages
to which Caldera and Melaport are entitled: (1) the losses suffered by
Melaport from the time it commenced operations in 1974 to 1978; (2) the
value of certain equipment and other assets which had been pledged by
Melaport to secure borrowing in connection with the project; (3) the value
of approximately 540 acres of land which a corporation controlled by
Caldera had mortgaged to secure the borrowings. The amount of damages in
these three categories will be established by an appraisal process
conducted by the trial court. Damages will be adjusted for inflation
since the counterclaim was filed in 1985 and for interest at 12 percent
per year.
While the opposing counsel has asserted that the damages are in excess of
$35 million, the company at this time cannot predict the result of the
appraisal proceedings. The company has no assets in Venezuela and will
challenge the enforcement in the United States if a judgment is finally
issued by the Venezuelan courts. On November 2, 1993, the company filed
suit against Melaport and Caldera in the United States District court for
the Western District of Pennsylvania, seeking an injunction and a
declaratory judgment with respect to the proceedings in Venezuela. The
-13-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
company is requesting a determination that any judgment in the Venezuelan
proceedings is not enforceable against the company and is also seeking
indemnification for all costs, expenses, losses and damages incurred and
which may be incurred by the company in the Venezuelan proceedings and the
costs and expenses of the United States District Court action. On
February 25, 1994, Melaport and Caldera filed a motion asking the Court
to dismiss the suit based on the lack of personal jurisdiction over the
defendants and based on the doctrines of forum non conveniens, res
judicata and judicial estoppel. It also asked the Court to dismiss, as
premature, the company's demand for injunction and declaratory relief.
If the ruling of the Venezuelan Courts is successfully enforced against
the company in the United States, the liability would be material to the
company.
If these lawsuits, claims and assertions, discussed above, are sustained
against the company, material charges would be recorded in the company's
financial statements. However, in some instances, it is not possible to
determine the outcome of these matters or to estimate with any degree of
certainty the range of potential costs which may be involved. In other
instances, based upon the knowledge the company has of these lawsuits,
claims and assertions, management believes the ultimate disposition of
these matters 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, both in lawsuits and in administrative
proceedings for contract adjustments under various contracts, which
management believes to be meritorious, but no estimate can be made at
present of the timing or the amount of recovery.
-14-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) 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.
The plan included the sale or other disposition of the former Engineering
and Construction segment.
No provision has been made, except as noted, for the ultimate outcome of
the matters in litigation which are disclosed in Note 3: Contingent
Liabilities, because the outcome of these matters cannot be predicted or
reasonably estimated. 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 losses on
discontinued operations.
The remaining assets and liabilities at June 30, 1994 and December 31,
1993 of the discontinued operations relate to certain remaining unresolved
construction contracts, accrued losses on leases and various insurance,
environmental, and other matters associated with exiting the engineering
and construction business and are presented below:
<TABLE>
<CAPTION>
($ in 000's) June 30, December 31,
1994 1993
<S> <C> <C>
Current assets:
Accounts and retainers receivable $ 24 $ 23
Other 3,512 3,512
Total current assets 3,536 3,535
Accounts and retainers receivable 444 472
Other 513 309
Total assets $ 4,493 $ 4,316
Current liabilities:
Accounts and retainers payable $ 151 $ 178
Accrued loss on leases 2,353 2,448
Other 4,272 5,363
Total current liabilities 6,776 7,989
Accounts and retainers payable -- 45
Accrued loss on leases 6,914 7,854
Other 13,521 15,012
Total liabilities $ 27,211 $ 30,900
Net liabilities and accrued loss
on leases of discontinued operations $(22,718) $(26,584)
</TABLE>
-15-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Earnings for the quarter were $3.1 million, or 17 cents per common share,
compared to $3.7 million, or 21 cents per share, in the year ago quarter.
Year-to-date earnings before cumulative effect of an accounting change are
$1.9 million, or $2.2 million less than last year. The lower earnings for
the quarter and six months resulted from price competition in the utility
lime market and increased production costs. Higher production costs were
incurred at lime and aggregate facilities located in the Ohio River Valley
as a result of unusually bad weather in the first quarter and adverse
river conditions which continued through April. Selling, general and
administrative expenses were down $716,000 for the quarter and $1.2
million year-to-date, primarily from a cost reduction program. Earnings
from joint ventures are significantly higher than last year due to strong
demand for phosphorus produced by an Idaho joint venture mining operation
and improved results by a Louisiana shell dredging joint venture.
The company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS 112) during the
first quarter. A $1.4 million charge for the cumulative effect of a
change in accounting principle was taken to recognize the company's
liability under SFAS 112.
Two significant changes on the company's balance sheet since December 31,
1993 are an increase in property, plant and equipment and accounts
payable. Property, plant and equipment increased primarily due to
construction-in-progress associated with a $61 million expansion at the
company's Black River lime facility. Accounts payable are higher due to
seasonal fluctuations and payments associated with the Black River
construction.
The company has substantially completed a $50 million 15-year term debt
financing arrangement with Prudential Power Funding Associates, a unit of
The Prudential Insurance Company of America, for the Black River
expansion. Finalization of the 10.13 percent loan is pending final
satisfaction of closing conditions.
An agreement was reached with Ohio Edison Company's Pennsylvania Power
Company subsidiary on a 13-year renewal of a lime supply contract for the
Bruce Mansfield Station in Shippingport, Pennsylvania. Shipments are
expected to be in the range of 450,000 tons annually, representing nearly
40 percent of existing utility lime business. Prices under the renewal
agreement, which became effective May 1, 1994, are lower than the contract
that it replaces. Future sales prices will be subject to escalation. The
total income to be derived from the extension of the Ohio Edison contract
will far outweigh the impact lower prices will have on profit margins.
The company is currently negotiating the terms of another long-term lime
supply contract that is approaching expiration.
-16-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The company announced on April 28, 1994 that it is exploring strategic
alternatives which include joint venture opportunities, the sale of parts
or all of one of its business segments, or the sale of the company as a
whole. Discussions with various interested parties have taken place but
no conclusive decisions have been made at this time.
-17-
<PAGE>
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 28, 1994 in
Pittsburgh, Pennsylvania. Listed below are the proposals
submitted to shareholders in the company's Proxy Statement dated
March 16, 1994 and the results of the shareholder votes.
Election of three directors for a three year term:
<TABLE>
<CAPTION>
For Withheld
<S> <C> <C>
Jack Edwards 13,310,016 519,875
William E. Kassling 13,319,064 510,827
Konrad M. Weis 13,319,386 510,505
Jack W. Forrest 949,800 --
</TABLE>
<TABLE>
Election of one director for a two year term:
<CAPTION>
For Withheld
<S> <C> <C>
Arthur E. Byrnes 13,783,352 56,139
</TABLE>
<TABLE>
Election of Certified Public Accountants:
<CAPTION>
For Against Abstain
<S> <C> <C> <C>
KPMG Peat Marwick 13,882,801 37,313 20,376
</TABLE>
<TABLE>
Proposal to approve the Dravo Corporation Stock Option
Plan of 1994:
<CAPTION>
Broker
For Against Abstain Non-vote
<C> <C> <C> <C>
8,372,806 3,507,046 164,208 2,514,431
</TABLE>
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) 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 June 30, 1994.
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<PAGE>
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: August 12, 1994 /s/ERNEST F. LADD III
Ernest F. Ladd III
Executive Vice President,
Finance and Administration
Date: August 12, 1994 /s/LARRY J. WALKER
Larry J. Walker
Controller
(Principal Accounting Officer)
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<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
(In 000's, except per share data)
Quarters ended June 30,
1994 1993
<S> <C> <C>
Primary
Earnings:
Net earnings $ 3,149 $ 3,695
Deduct dividends on preference stock 636 639
Net earnings applicable to common stock $ 2,513 $ 3,056
Shares:
Weighted average number of common
shares outstanding 14,858 14,828
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) 65 42
Weighted average number of shares
outstanding, as adjusted 14,923 14,870
Primary earnings per share $ 0.17 $ 0.21
Fully diluted
Earnings:
Net earnings $ 3,149 $ 3,695
Deduct dividends on preference stock (1) 636 639
Net earnings applicable to common stock $ 2,513 $ 3,056
Shares:
Weighted average number of common
shares outstanding 14,858 14,828
Dilutive effect of outstanding
options and rights (as determined
by the application of the treasury
stock method at the higher of the
closing or the average market price
for the period) 65 73
Weighted average number of shares
outstanding, as adjusted 14,923 14,901
Fully diluted earnings per share $ 0.17 $ 0.21
</TABLE>
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<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings (continued)
<TABLE>
<CAPTION>
(In 000's, except per share data)
Quarters ended June 30,
1994 1993
<S> <C> <C>
Additional Fully Diluted Computation (2)
Earnings:
Net earnings $ 3,149 $ 3,695
Shares:
Weighted average number of common shares
outstanding 14,858 14,828
Dilutive effect of outstanding options and
rights (as determined by the application of
the treasury stock method at the higher of
the closing or average market price for
the period) 65 73
Shares issuable from assumed exercise of
convertible preference stock 1,699 1,710
Weighted average number of shares
outstanding, as adjusted 16,622 16,611
Fully diluted earnings per share $ 0.19 $ 0.22
</TABLE>
(1) The inclusion of preference stock in the fully Dilutive computation would
have an anti-Dilutive effect on earnings per share.
(2) 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-Diltive result.
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<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
(In 000's, except per share data)
Six months ended June 30,
1994 1993
<S> <C> <C>
Primary
Earnings:
Earnings before cumulative effect
of accounting change $ 1,878 $ 4,086
Deduct dividends on preference stock 1,273 1,278
Earnings before cumulative effect of accounting
change applicable to common stock 605 2,808
Cumulative effect of accounting change (1,361) --
Net earnings (loss) applicable to common stock $ (756) $ 2,808
Shares:
Weighted average number of common
shares outstanding 14,855 14,827
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) (1) -- 37
Weighted average number of shares
outstanding, as adjusted 14,855 14,864
Primary earnings (loss) per share:
Operations $ 0.04 $ 0.19
Cumulative effect of accounting change (0.09) --
Net earnings (loss) per share $ (0.05) $ 0.19
Fully diluted
Earnings:
Net earnings $ 517 $ 4,086
Deduct dividends on preference stock (2) 1,273 1,278
Net earnings (loss) applicable to common
stock $ (756) $ 2,808
Shares:
Weighted average number of common
shares outstanding 14,855 14,827
Dilutive effect of outstanding
options and rights (as determined
by the application of the treasury
stock method at the higher of the
closing or the average market price
for the period) (1) -- 73
Weighted average number of shares
outstanding, as adjusted 14,855 14,900
</TABLE>
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<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings (continued)
<TABLE>
<CAPTION>
(In 000's, except per share data)
Six Months ended June 30,
1994 1993
<S> <C> <C>
Fully diluted earnings (loss) per share:
Operations $ 0.04 $ 0.19
Cumulative effect of accounting change (0.09) --
Net earnings (loss) per share $ (0.05) $ 0.19
Additional Fully Diluted Computation (3)
Earnings:
Net earnings $ 517 $ 4,086
Shares:
Weighted average number of common shares
outstanding 14,855 14,827
Dilutive effect of outstanding options and
rights (as determined by the application of
the treasury stock method at the higher of
the closing or average market price for
the period) 76 73
Shares issuable from assumed exercise of
convertible preference stock 1,700 1,710
Weighted average number of shares
outstanding, as adjusted 16,631 16,610
Fully diluted earnings per share $ 0.03 $ 0.25
</TABLE>
(1) The inclusion of outstanding options and rights in the 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.
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<PAGE>
