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: September 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 October 31, 1994.
Title of Class Shares Outstanding
Common Stock, $1.00 par value 14,866,618
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
Page No.
Consolidated Balance Sheets at September 30, 1994
and December 31, 1993 3, 4
Consolidated Statements of Operations for the
Quarters ended September 30, 1994 and 1993 5
Consolidated Statements of Operations for the
Nine month period ended September 30, 1994 and 1993 6
Consolidated Statements of Cash Flows for the
Nine month period ended September 30, 1994 and 1993 7, 8
Notes to Consolidated Financial Statements 9 - 15
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16, 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's)
September 30, December 31,
1994 1993
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 838 $ 808
Accounts receivable, net 47,851 44,225
Notes receivable, net 2,690 3,318
Inventories 50,955 57,536
Other current assets 6,509 2,417
Total current assets 108,843 108,304
Advances to and equity in joint ventures 4,070 4,348
Notes receivable 5,541 6,870
Other assets 24,623 17,729
Deferred tax asset 24,853 24,853
Property, plant and equipment 341,368 311,822
Less: accumulated depreciation and
amortization 206,411 201,854
Net property, plant and equipment 134,957 109,968
Total assets $302,887 $272,072
See accompanying notes to consolidated financial statements.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
($ in 000's)
September 30, December 31,
1994 1993
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term notes $ 4,502 $ 4,488
Accounts payable - trade 35,640 28,622
Income taxes 508 23
Accrued insurance 3,209 3,049
Accrued retirement contribution 6,838 2,101
Net liabilities of discontinued operations 1,913 2,006
Accrued loss on leases - discontinued
operations 2,344 2,448
Other current liabilities 7,940 6,113
Total current liabilities 62,894 48,850
Long-term notes 104,909 88,520
Other liabilities 5,439 3,033
Net liabilities of discontinued operations 11,400 14,276
Accrued loss on leases - discontinued
operations 6,189 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 29,386 and 32,386 shares
(entitled in liquidation to $1.6 million and
$1.8 million); 29 32
Series D, reported above
Common stock, par value $1, authorized
35,000,000 shares; issued 14,982,623
and 14,967,824 14,983 14,968
Other capital 63,290 63,260
Retained earnings 15,594 13,119
Treasury stock at cost: Common shares - 119,221 (1,840) (1,840)
Total shareholders' equity 92,056 89,539
Total liabilities and shareholders' equity $302,887 $272,072
See accompanying notes to consolidated financial statements.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited, $ in 000's, except per share data)
Quarters ended September 30,
1994 1993
Revenue $ 75,305 $ 76,126
Cost of revenue 62,636 62,189
Gross profit 12,669 13,937
Selling, general and administrative expenses 7,379 7,865
Earnings from operations 5,290 6,072
Other income (expense):
Equity in earnings (loss) of joint ventures 689 (42)
Other income (50) 413
Interest income 224 318
Interest expense (2,480) (2,306)
Net other expense (1,617) (1,617)
Earnings before taxes 3,673 4,455
Provision (benefit) for income taxes (194) 224
Net earnings 3,867 4,231
Preference dividends 636 638
Net earnings available for common stock $ 3,231 $ 3,593
Earnings per share:
Operations $ 0.22 $ 0.24
Weighted average shares outstanding 14,927 14,904
See accompanying notes to consolidated financial statements.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited, $ in 000's, except per share data)
Nine months ended September 30,
1994 1993
Revenue $205,614 $208,129
Cost of revenue 172,725 169,972
Gross profit 32,889 38,157
Selling, general and administrative expenses 22,195 23,861
Earnings from operations 10,694 14,296
Other income (expense):
Equity in earnings (loss) of joint ventures 1,467 (35)
Other income 566 514
Interest income 568 985
Interest expense (7,118) (6,913)
Net other expense (4,517) (5,449)
Earnings before taxes 6,177 8,847
Provision for income taxes 432 530
Earnings before cumulative effect of
accounting change 5,745 8,317
Cumulative effect of accounting change, net
of tax (1,361) --
Net earnings 4,384 8,317
Preference dividends 1,909 1,916
Net earnings available for common stock $ 2,475 $ 6,401
Earnings (loss) per share:
Operations $ 0.26 $ 0.43
Cumulative effect of accounting change (0.09) --
Total $ 0.17 $ 0.43
Weighted average shares outstanding 14,932 14,874
See accompanying notes to consolidated financial statements.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited, $ in 000's)
Nine months ended September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,384 $ 8,317
Adjustments to reconcile net earnings
to net cash provided (used) by continuing
operations activities:
Depreciation and amortization 13,139 13,385
Cumulative effect of accounting change 1,361 --
Gain on sale of assets (566) (514)
Equity in joint ventures 278 (1,996)
Changes in assets and liabilities:
Increase in accounts receivable (3,626) (13,358)
Decrease (increase) in notes receivable 757 (46)
Decrease in inventories 6,581 6,655
Increase in other current assets (4,092) (14)
Increase in accounts payable
and accrued expenses 14,227 985
Increase in other assets (6,894) (6,866)
Increase in other liabilities 1,045 428
Net cash provided by continuing
operations activities 26,594 6,976
Decrease in net liabilities of discontinued
operations (4,738) (8,718)
Proceeds from repayment of notes receivable
from sale of discontinued operations 1,200 1,592
Net cash used by discontinued operations
activities (3,538) (7,126)
Net cash provided (used) by operating
activities 23,056 (150)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 1,456 874
Additions to property, plant and equipment (39,018) (8,486)
Net cash used by investing activities $(37,562) $ (7,612)
See accompanying notes to consolidated financial statements.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited, $ in 000's)
Nine months ended September 30,
1994 1993
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under revolving credit
agreements $ 6,900 $ 11,099
Principal payments under long-term notes (1,477) (1,462)
Principal payments under capital lease
obligations -- (257)
Proceeds from long-term notes 10,980 386
Proceeds from issuance of common stock 42 101
Dividends on preference stock (1,909) (1,916)
Net cash provided by financing activities 14,536 7,951
Net increase in cash and cash equivalents 30 189
Cash and cash equivalents at beginning of
period 808 970
Cash and cash equivalents at end of period $ 838 $ 1,159
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 6,970 $ 6,885
Income tax (53) 601
See accompanying notes to consolidated financial statements.
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<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:
($ in 000's)
September 30, December 31,
1994 1993
Finished goods $34,176 $40,660
Work in process 2,730 3,092
Materials and supplies 14,049 13,784
Net inventories $50,955 $57,536
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.
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<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 and another PRP were served
with administrative orders in 1990 and 1993 directing them to undertake
soil remediation and interim groundwater remediation at that subsite. On
October 26, 1994, the EPA amended these administrative orders to add a
third PRP as a respondent. 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, with one of the other PRPs and with
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 State of Nebraska has
indicated it will consider a petition to adopt alternate groundwater
clean-up criteria for this subsite. The EPA is also considering whether
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
it can adopt alternate standards approved by the EPA. If an alternate
groundwater clean-up criteria is approved by the State and the EPA, it
might substantially affect groundwater remediation costs. The company is
considering whether to file such a request with the State of Nebraska.
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. The company
believes other persons should also be named as PRPs.
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.
In addition to subsite clean-up, the EPA is seeking a clean-up of area-
wide contamination associated with various subsites in and around
Hastings, Nebraska, including those subsites at which the company has been
named a PRP. The company, along with other PRPs from this subsite and
various other subsites, has recommended that the EPA adopt institutional
controls as the area-wide remedy. The EPA has decided to conduct an area-
wide remedial investigation utilizing existing information and some
additional data it plans to gather. The EPA has asked all of the Hastings
PRPs to undertake an area-wide feasibility study. The company, along with
seven other PRPs, has indicated to the EPA that it is willing to discuss
this possibility. The State of Nebraska has indicated it is willing to
consider alternate groundwater clean-up levels for the area-wide
groundwater contamination, and the EPA is considering whether it can adopt
such standards for the area-wide groundwater contamination. The PRPs have
not yet decided whether to petition the state to approve alternative
clean-up levels.
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
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
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.
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.
In June 1994, the company received two general notices of liability 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. These
notices contain an offer from the EPA to enter into negotiations with
potentially responsible parties to conduct necessary response actions at
the site. The company believes that similar notices were sent to 200
other parties. The company has decided not to enter into negotiations
with the EPA to conduct response actions.
The company does not believe that it transported cargo or waste of any
kind to the site. The only transactions involving the site of which the
company has any knowledge involve equipment repairs that did not involve
cleaning, sandblasting or other activities which might have generated
hazardous substances.
The company has notified its primary liability insurers of the receipt of
these notices. They are investigating the matter and have not yet advised
the company of their coverage positions.
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
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Contingent Liabilities (continued)
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.
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.
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 did not specify
damages to be paid but rather identified certain categories of damages to
which Caldera and Melaport are entitled. The amount of damages in these
categories 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. 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 company also requested a
determination that any judgment in the Venezuelan proceedings could not
be enforceable against the company.
By agreement dated September 7, 1994, the parties agreed to settle all
disputes related to these matters in exchange for the payment by the
company of $4.5 million. Both the Venezuelan and U.S. lawsuits have since
been dismissed.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Discontinued Operations
In December, 1987, Dravo's Board of Directors approved a major
restructuring program which concentrated the company's future direction
exclusively on opportunities involving its natural resources business.
The plan included the sale or other disposition of the former Engineering
and Construction segment.
No provision has been made, except as noted, for the ultimate outcome of
the matters in litigation which are disclosed in Note 3: Contingent
Liabilities, because the outcome of these matters cannot be predicted or
reasonably estimated. A ruling by the courts or a settlement of the
disputes that is adverse to Dravo's position, or other unforeseen
developments, could require a future additional provision for losses on
discontinued operations.
The remaining assets and liabilities at September 30, 1994 and December
31, 1993 of the discontinued operations relate to certain remaining
unresolved construction contract issues, accrued losses on leases and
various insurance, environmental, and other matters associated with
exiting the engineering and construction business and are presented below:
($ in 000's) September 30, December 31,
1994 1993
Current assets:
Accounts and retainers receivable $ 24 $ 23
Other 6,400 3,512
Total current assets 6,424 3,535
Accounts and retainers receivable 444 472
Other 1,852 309
Total assets $ 8,720 $ 4,316
Current liabilities:
Accounts and retainers payable $ 130 $ 178
Accrued loss on leases 2,344 2,448
Other 8,207 5,363
Total current liabilities 10,681 7,989
Accounts and retainers payable -- 45
Accrued loss on leases 6,189 7,854
Other 13,696 15,012
Total liabilities $ 30,566 $ 30,900
Net liabilities and accrued loss
on leases of discontinued operations $(21,846) $(26,584)
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<PAGE>
(5) Notes Payable
In August, the company entered into an arrangement with Prudential Power
Funding Associates, a unit of The Prudential Insurance Company of
America, to finance an expansion project at the company's Black River
lime facility located in Carntown, Kentucky. The company may borrow up
to $50 million during construction on Senior Secured Construction Notes
bearing interest at 10.13 percent per annum. After substantial
completion of the project, but no later than September 30, 1995, the
Construction Notes will be paid in full and Prudential will purchase
Senior Secured Term Notes due August 1, 2010, in the maximum principal
amount of $50 million. The Term Notes will bear interest at 10.13
percent per annum and have semi-annual payments of principal and interest
starting in February, 1996.
The principal security for the financing is a long-term lime supply
contract with Ohio Power Company, a ground lease with Dravo Lime Company
and the physical assets of the expansion project, including two new lime
kilns.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Quarterly earnings were $3.9 million, 22 cents per share, compared to $4.2
million, 24 cents per share, in last year's third quarter. Income from
the company's aggregate operations decreased marginally due to flat sales
tonnage and revenue. An increase in lime sales tonnage helped to
partially offset the income decline experienced because of price
concessions given as part of the company's efforts to renew long-term lime
supply contracts that were approaching expiration. Earnings from joint
ventures were improved over 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.
Year-to-date earnings of $4.4 million reflect a $1.4 million first quarter
expense resulting from the adoption of a change in accounting for
postemployment benefits. Excluding the impact of the accounting change,
earnings are $2.6 million less than last year due to 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. Partially
offsetting the gross profit shortfall in the lime and aggregate operations
were lower selling, general and administrative expenses, primarily from
a cost reduction program, and higher earnings from the phosphorus ore
mining and shell joint ventures.
In the third quarter a settlement agreement was reached for $4.5 million
resolving litigation in which a Venezuelan client of our discontinued
engineering and construction operations had claimed damages in excess of
$35 million. The uncertainty associated with this dispute having been
eliminated, previously accrued 1994 federal income tax expense was
reversed, thus restoring to its original amount a tax asset recorded in
1993. The company has net operating loss carryforwards in excess of the
recorded tax asset and has the ability to implement the same tax planning
strategy that resulted in booking the 1993 tax asset.
In August, the company finalized a $50 million debt financing arrangement
with Prudential Power Funding Associates, a unit of The Prudential
Insurance Company of America. Borrowings under the 15-year, 10.13 percent
fixed rate loan are being used to finance an increase in production
capacity at the Black River lime facility located in Carntown, Kentucky.
Start-up of the expanded facility is expected early in 1995. At September
30, 1994, $11.0 million was borrowed under the financing agreement.
The company reached an agreement in principle with Allegheny Power System,
Inc. (APS) to renew a long-term supply agreement for APS's Pleasants
Station. Under this agreement, the company will supply approximately
175,000 tons of lime annually for ten years. Prices under the renewal
agreement are lower than the contract that it replaces. Future sales
prices will be subject to escalation.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations
On September 26, 1994, the company signed a letter of intent with Martin
Marietta Materials, Inc. (MMM) whereby MMM would purchase for cash the
assets of the company's construction aggregates business. It is
anticipated that the assets, including accounts receivable and
inventories, will be purchased for a price between $125 and $135 million.
The company would retain substantially all of the liabilities associated
with the aggregates business. The transaction is expected to close in
December, 1994 following completion of due diligence investigations and
a Hart-Scott-Rodino antitrust review. The company anticipates using the
net proceeds from the sale to reduce short-term and long-term debt.
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<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
PART II - Other Information
Item 1. Legal Proceedings
On October 17, 1994, the Fifth Civil, Mercantile and Traffic Court of
First Instance for the Judicial District of Metropolitan Caracas,
Venezuela accepted the settlement negotiated between the company and
Meladuras Portugesa and the heirs of its principal, Alberto Caldera.
On October 28, 1994, the United States District Court for the Western
District of Pennsylvania entered a dismissal of the related lawsuit
brought by the company against Meladuras Portugesa.
Additional information relating to this matter can be found in Note
3, Contingent Liabilities.
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 September 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: November 11, 1994 /s/ERNEST F. LADD III
Ernest F. Ladd III
Executive Vice President,
Finance and Administration
Date: November 11, 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
(In 000's, except per share data)
Quarters ended September 30,
Primary 1994 1993
Earnings:
Net earnings $ 3,867 $ 4,231
Deduct dividends on preference stock 636 638
Net earnings applicable to common stock $ 3,231 $ 3,593
Shares:
Weighted average number of common
shares outstanding 14,863 14,838
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) 64 66
Weighted average number of shares
outstanding, as adjusted 14,927 14,904
Primary earnings per share $ 0.22 $ 0.24
Fully diluted
Earnings:
Net earnings $ 3,867 $ 4,231
Deduct dividends on preference stock (1) 636 638
Net earnings applicable to common stock $ 3,231 $ 3,593
Shares:
Weighted average number of common
shares outstanding 14,863 14,838
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) 101 64
Weighted average number of shares
outstanding, as adjusted 14,964 14,902
Fully diluted earnings per share $ 0.22 $ 0.24
-20-
<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings (continued)
(In 000's, except per share data)
Quarters ended September 30,
Additional Fully Diluted Computation (2) 1994 1993
Earnings:
Net earnings $ 3,867 $ 4,231
Shares:
Weighted average number of common shares
outstanding 14,863 14,838
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 64
Shares issuable from assumed exercise of
convertible preference stock 1,695 1,708
Weighted average number of shares
outstanding, as adjusted 16,623 16,610
Fully diluted earnings per share $ 0.23 $ 0.25
(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-dilutive result.
-21-
<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings
(In 000's, except per share data)
Nine months ended September 30,
Primary 1994 1993
Earnings:
Earnings before cumulative effect
of accounting change $ 5,745 $ 8,317
Deduct dividends on preference stock 1,909 1,916
Earnings before cumulative effect of accounting
change applicable to common stock 3,836 6,401
Cumulative effect of accounting change (1,361) --
Net earnings applicable to common stock $ 2,475 $ 6,401
Shares:
Weighted average number of common
shares outstanding 14,858 14,831
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) 74 43
Weighted average number of shares
outstanding, as adjusted 14,932 14,874
Primary earnings per share:
Operations $ 0.26 $ 0.43
Cumulative effect of accounting change (0.09) --
Net earnings per share $ 0.17 $ 0.43
Fully diluted
Earnings:
Net earnings $ 4,384 $ 8,317
Deduct dividends on preference stock (1) 1,909 1,916
Net earnings applicable to common stock $ 2,475 $ 6,401
Shares:
Weighted average number of common
shares outstanding 14,858 14,831
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) 101 48
Weighted average number of shares
outstanding, as adjusted 14,959 14,879
-22-
<PAGE>
Exhibit 11. Statement Re Computation of Per Share Earnings (continued)
(In 000's, except per share data)
Nine months ended September 30,
1994 1993
Fully diluted earnings (loss) per share:
Operations $ 0.26 $ 0.43
Cumulative effect of accounting change (0.09) --
Net earnings per share $ 0.17 0.43
Additional Fully Diluted Computation (2)
Earnings:
Net earnings $ 4,384 $ 8,317
Shares:
Weighted average number of common shares
outstanding 14,858 14,831
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) 70 48
Shares issuable from assumed exercise of
convertible preference stock 1,698 1,711
Weighted average number of shares
outstanding, as adjusted 16,626 16,590
Fully diluted earnings per share $ 0.26 $ 0.50
(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-dilutive result.
-23-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRAVO
CORPORATION'S 10-Q DATED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 838
<SECURITIES> 0
<RECEIVABLES> 49,033
<ALLOWANCES> 1,182
<INVENTORY> 50,955
<CURRENT-ASSETS> 108,843
<PP&E> 341,368
<DEPRECIATION> 206,411
<TOTAL-ASSETS> 302,887
<CURRENT-LIABILITIES> 62,894
<BONDS> 0
<COMMON> 14,983
20,000
29
<OTHER-SE> 77,044
<TOTAL-LIABILITY-AND-EQUITY> 302,887
<SALES> 205,614
<TOTAL-REVENUES> 205,614
<CGS> 172,725
<TOTAL-COSTS> 172,725
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 189
<INTEREST-EXPENSE> 7,118
<INCOME-PRETAX> 6,177
<INCOME-TAX> 432
<INCOME-CONTINUING> 5,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,361)
<NET-INCOME> 4,384
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
