________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number 1-8544
AMERICAN PRESIDENT COMPANIES, LTD.
(Exact name of registrant as specified in its charter)
Delaware 94-2911022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Broadway
Oakland, California 94607
(Address of principal executive offices)
Registrant's telephone number: (510) 272-8000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes (X) No ( ).
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 28, 1995
____________________________ ____________________________
Common Stock, $.01 par value 31,447,291
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
_____________________
Item 1. Consolidated Financial Statements
<S> <C>
Statement of Income 3
Balance Sheet 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-14
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 15-24
Part II. OTHER INFORMATION
_________________
Item 1. Legal Proceedings 25-26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
</TABLE>
The consolidated financial statements presented herein include the
accounts of American President Companies, Ltd. and its wholly-owned
subsidiaries (the "company") and have been prepared by the company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. The company believes that the disclosures are adequate to make
the information presented not misleading, although certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. In the opinion of
management, the consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the company's results of operations, financial position and
cash flows. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the company's Annual Report on Form 10-K for the year ended
December 30, 1994 (Commission File No. 1-8544).
<PAGE>
American President Companies, Ltd. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
<CAPTION>
________________________________________________________________________________________________
(In thousands, except Quarter Ended 26 Weeks Ended
per share amounts) June 30 July 1 June 30 July 1
1995 1994 1995 1994
________________________________________________________________________________________________
<S> <C> <C> <C> <C>
REVENUES $ 674,290 $ 653,528 $ 1,414,951 $ 1,356,656
________________________________________________________________________________________________
EXPENSES
Operating, Net of Operating-
Differential Subsidy 606,257 576,994 1,293,659 1,213,058
General and Administrative 18,391 19,666 39,731 39,035
Depreciation and Amortization 24,993 24,395 53,307 52,835
________________________________________________________________________________________________
Total Expenses 649,641 621,055 1,386,697 1,304,928
________________________________________________________________________________________________
OPERATING INCOME 24,649 32,473 28,254 51,728
OTHER INCOME (EXPENSE)
Interest Income 5,369 2,792 11,497 6,061
Interest Expense (7,018) (6,534) (15,041) (13,745)
________________________________________________________________________________________________
Income Before Taxes 23,000 28,731 24,710 44,044
Federal, State and
Foreign Tax Expense 8,740 9,742 9,390 14,887
________________________________________________________________________________________________
NET INCOME $ 14,260 $ 18,989 $ 15,320 $ 29,157
________________________________________________________________________________________________
Less Dividends on Preferred Stock 1,687 1,687 3,375 3,375
NET INCOME APPLICABLE TO
COMMON STOCK $ 12,573 $ 17,302 $ 11,945 $ 25,782
________________________________________________________________________________________________
________________________________________________________________________________________________
EARNINGS PER COMMON SHARE
________________________________________________________________________________________________
Primary Earnings Per Common Share $ 0.45 $ 0.62 $ 0.43 $ 0.91
________________________________________________________________________________________________
Fully Diluted Earnings Per
Common Share $ 0.44 $ 0.60 $ 0.42 $ 0.90
________________________________________________________________________________________________
DIVIDENDS PER COMMON SHARE $ 0.10 $ 0.10 $ 0.20 $ 0.20
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
American President Companies, Ltd. and Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEET (Unaudited)
<CAPTION>
________________________________________________________________________________________________
(In thousands, except share amounts) June 30 December 30
1995 1994
________________________________________________________________________________________________
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 179,467 $ 39,754
Short-Term Investments 31,510 214,898
Trade and Other Receivables, Net 302,819 280,736
Fuel and Operating Supplies 41,576 36,549
Prepaid Expenses and Other 51,813 37,135
________________________________________________________________________________________________
Total Current Assets 607,185 609,072
________________________________________________________________________________________________
PROPERTY AND EQUIPMENT
Ships 770,111 678,453
Containers, Chassis and Rail Cars 796,487 781,100
Leasehold Improvements and Other 268,596 260,699
Construction in Progress 132,754 116,845
________________________________________________________________________________________________
1,967,948 1,837,097
Accumulated Depreciation and Amortization (942,941) (896,802)
________________________________________________________________________________________________
Property and Equipment, Net 1,025,007 940,295
________________________________________________________________________________________________
INVESTMENTS AND OTHER ASSETS 112,167 114,590
________________________________________________________________________________________________
Total Assets $ 1,744,359 $ 1,663,957
________________________________________________________________________________________________
________________________________________________________________________________________________
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Portion of Long-Term Debt
and Capital Leases $ 11,863 $ 4,797
Accounts Payable and Accrued Liabilities 397,921 397,969
________________________________________________________________________________________________
Total Current Liabilities 409,784 402,766
________________________________________________________________________________________________
DEFERRED INCOME TAXES 149,721 139,955
________________________________________________________________________________________________
OTHER LIABILITIES 123,801 118,603
________________________________________________________________________________________________
LONG-TERM DEBT 432,262 373,142
CAPITAL LEASE OBLIGATIONS 4,016 13,108
________________________________________________________________________________________________
Total Long-Term Debt and Capital Lease Obligations 436,278 386,250
________________________________________________________________________________________________
COMMITMENTS AND CONTINGENCIES
________________________________________________________________________________________________
REDEEMABLE PREFERRED STOCK, $.01 Par Value,
Stated at $50.00, Authorized-2,000,000
Shares Series C, Shares Issued and Outstanding-
1,500,000 in 1995 and 1994 75,000 75,000
________________________________________________________________________________________________
STOCKHOLDERS' EQUITY
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding-
27,462,000 in 1995 and 27,318,000 in 1994 27,462 27,318
Additional Paid-In Capital 72,639 70,853
Retained Earnings 449,674 443,212
________________________________________________________________________________________________
Total Stockholders' Equity 549,775 541,383
________________________________________________________________________________________________
Total Liabilities, Redeemable Preferred Stock
and Stockholders' Equity $ 1,744,359 $ 1,663,957
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
American President Companies, Ltd. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
<CAPTION>
________________________________________________________________________________________________
(In thousands) 26 Weeks Ended
June 30 July 1
1995 1994
________________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 15,320 $ 29,157
Adjustments to Reconcile Net Income to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 53,307 52,835
Deferred Income Taxes 2,169 4,011
Change in Receivables (22,083) (26,154)
Issuance of Notes Receivable on Sales of Real Estate (7,470)
Change in Fuel and Operating Supplies (5,027) (3,531)
Change in Prepaid Expenses and Other Current Assets (8,648) (2,547)
(Gain) Loss on Sale of Property and Equipment 287 (948)
Change in Accounts Payable and Accrued Liabilities (48) (6,438)
Other 5,724 7,437
________________________________________________________________________________________________
Net Cash Provided by Operating Activities 41,001 46,352
________________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (138,521) (48,185)
Proceeds from Sales of Property and Equipment 901 2,513
Purchase of Short-Term Investments (40,889) (209,381)
Proceeds from Sales of Short-Term Investments 224,277 19,907
Other 1,011 761
________________________________________________________________________________________________
Net Cash Provided by (Used in) Investing Activities 46,779 (234,385)
________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Debt 71,835 147,348
Repayments of Debt (12,762) (12,692)
Repayments of Capital Lease Obligations (2,076) (1,726)
Dividends Paid (8,845) (8,815)
Other 1,917 4,791
________________________________________________________________________________________________
Net Cash Provided by Financing Activities 50,069 128,906
________________________________________________________________________________________________
Effect of Exchange Rate Changes on Cash 1,864 80
________________________________________________________________________________________________
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 139,713 (59,047)
________________________________________________________________________________________________
Cash and Cash Equivalents at Beginning of Period 39,754 84,053
________________________________________________________________________________________________
Cash and Cash Equivalents at End of Period $ 179,467 $ 25,006
________________________________________________________________________________________________
________________________________________________________________________________________________
SUPPLEMENTAL DATA:
________________________________________________________________________________________________
CASH PAID FOR:
Interest, Net of Capitalized Interest $ 15,098 $ 8,659
Income Taxes, Net of Refunds $ 9,292 $ 9,756
________________________________________________________________________________________________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Significant Accounting Policies
Fiscal Year and Quarters
The company's fiscal year ends on the last Friday in December,
resulting in a 52- or 53-week year. In a 52-week year, the first and fourth
quarters are 14 weeks, and the second and third quarters are 12 weeks, which
differs from a 53-week year, in which the fourth quarter is 15 weeks. The
company's 1995 and 1994 fiscal years are 52-week years and 1993 was a 53-week
year.
Allowance for Doubtful Accounts
At June 30, 1995 and December 30, 1994 the allowance for doubtful
accounts, included in Trade and Other Receivables on the accompanying
Consolidated Balance Sheet, amounted to $21.0 million and $21.9 million,
respectively.
Capitalized Interest
Interest costs relating to cash paid for the construction of vessels
were capitalized in 1995 and 1994. These costs totaled $2.4 million and $5.0
million for the second quarter and the 26-week period ending June 30, 1995,
respectively, and $1.3 million and $2.9 million for the second quarter and the
26-week period ending July 1, 1994, respectively.
Income Taxes
The provision for income taxes has been calculated using the
effective tax rate estimated for the respective years. The tax rates were
38% and 34% for the and first half of 1995 and 1994, respectively. The 1994
estimated effective tax rate includes the effect of revisions of prior years'
estimated tax liabilities.
Note 2. United States Maritime Administration Agreements
Operating-Differential Subsidy Agreement
The company and the United States Maritime Administration ("MarAd")
are parties to an Operating-Differential Subsidy ("ODS") agreement expiring
December 31, 1997, which provides for payment by the U.S. government to
partially compensate the company for the relatively greater expense of
vessel operation under United States registry. The ODS amounts for the
quarters ending June 30, 1995 and July 1, 1994, were $14.1 million and $13.6
million, respectively, and for the 26-week periods ending June 30, 1995 and
July 1, 1994, were $30.5 million and $30.0 million, respectively, and have
been included as a reduction of operating expenses.
In June 1992, the Bush Administration announced that no new ODS
agreements would be entered into and existing ODS agreements would be
allowed to expire. The Clinton Administration and Congress have been
reviewing U.S. maritime policy. Proposed maritime support legislation
introduced in 1994, referred to as the Maritime Security Program, was not
enacted. The Administration's 1995 budget includes a proposal for a 10-year
subsidy program with $100 million in annual payments to be requested and
appropriated on a year-to-year basis. Maritime support legislation
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 2. United States Maritime Administration Agreements (continued)
Operating-Differential Subsidy Agreement (continued)
incorporating the Administration's program was introduced in the U.S. House
of Representatives in March 1995, and it is expected that similar
legislation will be introduced in the U.S. Senate shortly. The company is
not able to predict whether or when maritime support legislation will be
enacted or what terms such legislation may have, if enacted.
While the company continues to encourage efforts to enact maritime
support legislation, prospects for passage of a program acceptable to the
company are unclear. Accordingly, in July 1993, the company filed
applications with MarAd to operate under foreign flag its six C11-class
containerships, when delivered to the company upon completion of
construction, and to transfer to foreign flag seven of the 15 U.S.-flag
containerships in its trans-Pacific fleet. On November 15, 1994, MarAd
issued a waiver to allow the company to operate its C11-class vessels, the
first of which was delivered in May 1995, under foreign registry on the
condition that the vessels be returned to U.S.-flag in the event the
Maritime Security Program or an acceptable equivalent support program is
enacted. The remaining application is still pending and no assurances can
be given as to whether, or when, the authority will be granted.
Management of the company believes that, in the absence of ODS or an
equivalent government support program, it will be generally no longer
commercially viable to own or operate containerships in foreign trade under
the U.S. flag because of the higher labor costs and the more restrictive
design, maintenance and operating standards applicable to U.S.-flag liner
vessels. The company continues to evaluate its strategic alternatives in
light of the pending expiration of its ODS agreement and the uncertainties
as to whether an acceptable new U.S. government maritime support program
will be enacted, whether sufficient labor efficiencies can be achieved
through the collective bargaining process, and whether the company's
remaining application to flag its vessels under foreign registry will be
approved. While no assurances can be given, management of the company
believes that it will be able to structure its operations to enable it to
continue to operate on a competitive basis without direct U.S. government
support.
Capital Construction Fund
The company also has an agreement with MarAd pursuant to which the
company has established a Capital Construction Fund ("CCF") to which the
company makes contributions to provide funding for certain U.S.-built assets
and for the repayment of certain vessel acquisition debt. In 1994, the
company made a deposit of $36.9 million to its CCF and sold an undivided
interest in $40 million of its trade accounts receivable to its CCF for
$36.9 million in cash. At June 30, 1995 and December 30, 1994, the CCF
totaled $39.3 million and $37.8 million, respectively, and is included in
Investments and Other Assets on the accompanying Consolidated Balance Sheet.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 3. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at June 30, 1995 and December
30, 1994, were as follows:
<TABLE>
<CAPTION>
________________________________________________________________________________________________
(In thousands) June 30 December 30
1995 1994
________________________________________________________________________________________________
<S> <C> <C>
Accounts Payable $ 67,886 $ 54,009
Accrued Liabilities 247,897 259,933
Current Portion of Accrued Claims 19,673 24,468
Income Taxes Payable 609 2,883
Unearned Revenue 61,856 56,676
________________________________________________________________________________________________
Total Accounts Payable and Accrued Liabilities $ 397,921 $ 397,969
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
Note 4. Long-Term Debt
Long-Term Debt at June 30, 1995 and December 30, 1994 consisted of the
following:
<TABLE>
<CAPTION>
________________________________________________________________________________________________
(In thousands) June 30 December 30
1995 1994
________________________________________________________________________________________________
<S> <C> <C>
Vessel Mortgage Note Due Through 2007 (1) $ 71,835
8% Senior Debentures $150 million Face Amount
Due on January 15, 2024 (2) 147,156 $ 147,144
7 1/8% Senior Notes $150 million Face Amount
Due on November 15, 2003 (2) 148,144 148,065
Series I 8% Vessel Mortgage Bonds
Due Through 1997(3) 45,264 57,176
8% Refunding Revenue Bonds Due on November 1, 2009 12,000 12,000
Refunding Revenue Bonds, at Various Rates Not to
Exceed 12%, Due on November 1, 2009 6,495 6,495
Note Payable at 9% Due Through 1997 1,785 2,591
Notes Payable at Prime plus 1% 528 572
Note Payable at 10% Due Through 1998 190 184
________________________________________________________________________________________________
Total Debt 433,397 374,227
Current Portion (1,135) (1,085)
________________________________________________________________________________________________
Long-Term Debt $ 432,262 $ 373,142
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
(1) In May 1995, the company took delivery of the first of six new C11-class
vessels. To finance a portion of the purchase of this vessel the
company borrowed approximately $72 million under its loan agreement with
European banks pursuant to a Vessel Mortgage Note due through 2007.
Principal payments are due in semiannual installments over a 12-year
period commencing six months after the delivery of the vessel. The
interest rate is based upon various margins over LIBOR or the banks'
cost of funds, as elected by the company. Until the sixth anniversary
of the delivery date, the company may defer up to a total of four
principal payments. If the company defers less than two principal
payments in the first six years, it may defer up to two principal
payments during the remaining term. Deferred payments are due
sequentially in semiannual payments at the end of the term of the note.
Principal payments on this debt are classified as long-term on the basis
that the company has the ability to defer up to four payments. The note
issued under this loan agreement is collateralized by the C11-class
vessel.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt (continued)
On July 6, 1995, the company entered into an interest rate swap
agreement to exchange the variable interest rate on the Vessel Mortgage
Note for a fixed rate for a ten-year period. The swap is effective
after the first principal payment on the Note, which is at an interest
rate of 6.985%. As a result of the swap, the effective interest rate is
7.461% for the first five years and 7.586% for the remaining term of the
swap. Net payments or receipts under the agreement will be included in
interest expense.
(2) In November 1993, the company filed a shelf registration statement
covering the issuance from time to time of up to $400 million of debt
securities of varying terms and amounts. Pursuant to this registration
statement, the company issued 7 1/8% Senior Notes and 8% Senior
Debentures in November 1993 and January 1994, respectively. Interest
payments are due semiannually. The Senior Notes had an effective
interest rate of 7.325%, and an unamortized discount of $1.9 million at
June 30, 1995 and December 30, 1994. The Senior Debentures had an
effective interest rate of 8.172%, and an unamortized discount of $2.8
million and $2.9 million at June 30, 1995 and December 30, 1994
, respectively.
(3) Principal payments are due in equal semiannual installments. The
company has the option to issue Series II Bonds due sequentially in
semiannual payments at the end of the term of the Series I Bonds in lieu
of up to five of the remaining cash payments, which it has not yet
exercised. Principal payments are classified as long-term debt based on
the company's ability to issue Series II Bonds totaling up to $23.8
million per year in lieu of semiannual cash payments.
The company has a credit agreement with a group of banks which
provides for an aggregate commitment of up to $200 million through March 1999.
The credit agreement, as amended in 1995, contains, among other things,
various financial covenants that require the company to meet certain levels of
interest and fixed charge coverage, leverage and net worth. The borrowings
bear interest at rates based upon various indices as elected by the company.
There have been no borrowings under this agreement.
As an alternative to borrowing under its credit agreement, the company
has an option under that agreement to sell up to $150 million of certain of
its accounts receivable to the banks. This alternative is subject to less
restrictive financial covenants than the borrowing option.
Note 5. Redeemable Preferred Stock
On July 14, 1995 the company issued a notice of redemption for all $75
million of its 9% Series C Cumulative Convertible Preferred Stock ("Series C
Preferred Stock"). On July 28, 1995, at the option of its stockholders, the
1,500,000 shares of Series C Preferred Stock were converted into 3,961,498
shares of common stock, or 2.641 shares of common stock for each share of
Series C Preferred Stock (a conversion price of $18.93 per share of common
stock).
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Stockholders' Equity
Common Stock Repurchase
On July 21, 1995, the Board of Directors authorized the repurchase of
up to six million shares of the company's common stock. The form and timing
of the repurchase and the exact number of shares to be repurchased will depend
upon market conditions, and will be primarily funded from cash on hand.
Earnings Per Common Share
Primary earnings per share for the periods presented were computed by
dividing net income, reduced by the amount of the preferred stock dividends,
by the weighted average number of common shares and common equivalent shares
outstanding. Fully diluted earnings per share, except for the 26 weeks ended
June 30, 1995, were computed based on the assumption that the Series C
Preferred Stock was converted. Fully diluted earnings per share for the 26
weeks ended June 30, 1995 were computed based upon the assumption that the
Series C Preferred Stock was not converted, as the result would be
antidilutive. The number of shares used in these computations were as
follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________________________
Weighted Average Number of Common and Common Equivalent Shares
_________________________________________________________________________________________________
(In millions) Quarter Ended 26 Weeks Ended
June 30 July 1 June 30 July 1
1995 1994 1995 1994
_________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Primary 28.1 27.8 28.0 28.4
Fully Diluted 32.1 31.8 28.1 32.4
_________________________________________________________________________________________________
_________________________________________________________________________________________________
</TABLE>
Supplementary Earnings Per Share Data
The effect of the conversion of the Series C Preferred Stock on
primary and fully diluted earnings per share, assuming the conversion occurred
at the beginning of each period, is as follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________________________
Quarter Ended 26 Weeks Ended
June 30 July 1 June 30 July 1
1995 1994 1995 1994
_________________________________________________________________________________________________
Primary Earnings per Common Share
_________________________________________________________________________________________________
<S> <C> <C> <C> <C>
As Stated $ 0.45 $ 0.62 $ 0.43 $ 0.91
Assuming Shares Converted at
the Beginning of the Period $ 0.44 $ 0.60 $ 0.48 $ 0.90
_________________________________________________________________________________________________
Fully Diluted Earnings per Common Share
_________________________________________________________________________________________________
As Stated (1) $ 0.44 $ 0.60 $ 0.42 $ 0.90
Assuming Shares Converted at
the Beginning of the Period $ 0.44 $ 0.60 $ 0.48 $ 0.90
_________________________________________________________________________________________________
_________________________________________________________________________________________________
</TABLE>
(1)Fully diluted earnings per share "As Stated" reflects the conversion of the
Series C Preferred Stock as though such conversion occurred at the beginning
of each period, except for the 26 weeks ended June 30, 1995 which does not
reflect such conversion, as the result would be antidilutive.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Stockholders' Equity (continued)
Cash Dividends
On July 21, 1995, the Board of Directors declared a quarterly cash
dividend of $0.10 per share of common stock, payable on August 31, 1995 to
common stockholders of record on August 15, 1995.
Note 7. Commitments and Contingencies
Commitments
Ship Purchases and Related Financing
In May 1993, the company entered into contracts for the construction
and purchase of six new C11-class containerships from Howaldtswerke-Deutsche
Werft AG, of Germany ("HDW") (three ships) and Daewoo Shipbuilding and Heavy
Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated
project cost for the construction of these vessels is $535 million. The
company has made payments of $174 million for the purchase of the C11s to date
from the inception of the construction contracts, including payments of $91
million in the first half of 1995. The amount paid in the first half of 1995
includes the final payment on the first HDW vessel, which was delivered in May
1995. The delivery dates for the other five vessels are scheduled between
late August and December 1995. The remaining 80% of each vessel's purchase
price is due upon delivery of the vessel. In March 1994, the company entered
into a loan agreement with European banks to finance approximately $400
million of the purchase price of the six C11-class vessels. Principal
payments on draw-downs are due in semiannual installments over a 12-year
period commencing six months after the delivery of each vessel. Interest
rates are based upon various margins over LIBOR or the banks' cost of funds as
elected by the company. In May 1995, $72 million was drawn down pursuant to
this loan agreement to finance a portion of the purchase price of the first
HDW vessel.
In connection with the construction and purchase of the ships from
HDW, the company entered into foreign currency contracts to buy Deutsche marks
in the future to lock in the U.S. dollar cost of the Deutsche-mark denominated
price of the vessels. Gains or losses on these contracts are deferred and
recognized as adjustments to the cost basis of the ships when the related
payments are made. At June 30, 1995, the company had contracts to purchase
$143.6 million in Deutsche marks.
In January 1995, the company and Columbia Shipmanagement Ltd., a
Cyprus company ("Columbia"), entered into an agreement under which Columbia
has agreed to provide crewing, maintenance, operations and insurance for the
company's six C11-class vessels for a per diem fee per vessel. The agreement
may be terminated at any time by either party with notice.
In December 1993, the company entered into contracts with Daewoo for
the construction and purchase of three diesel-powered K10-class containerships
to be delivered in 1996. The total estimated cost for construction of these
vessels is $195 million. The company is engaged in efforts related to the
possible sale of the K10 construction contracts to third party investors. In
July 1995, the company, Mitsui OSK Lines, Ltd. ("MOL"), Orient Overseas
Container Line ("OOCL") and Nedlloyd Lines B.V.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7. Commitments and Contingencies (continued)
Commitments (continued)
Ship Purchases and Related Financing (continued)
("NLL") obtained a commitment from a European bank, subject to certain
conditions, to finance the purchase of the K10 contracts, and a portion of the
purchase price to be paid for the vessels, by such third party investors. The
company, MOL, OOCL and NLL also entered into an agreement to form a joint
venture company to charter-back these vessels from such investors for use in
the Asia-Europe trade, subject to, among other things, the sale of the
construction contracts to such investors. The sale of the K10 construction
contracts is expected to becompleted by the end of the third quarter of 1995
if negotiations are successfully completed. No assurances can be given that
these negotiations will be successfully completed. The company has made
progress payments of $24 million as of June 30, 1995 for these vessels,
including a payment of $6 million in the first half of 1995. Remaining
installments totaling $30 million are due in 1995, and the final 70% is due
upon delivery of the vessels in 1996.
Alliances
The company and OOCL are parties to agreements enabling them to
exchange vessel space and coordinate vessel sailings through 2005. Currently,
each party is guaranteed vessel space and buys extra space as needed. Since
December 1993, the company has been required to purchase additional vessel
space from OOCL and to compensate OOCL for this space at a rate currently
calculated at $6.6 million per year, accrued ratably over each year. This
commitment will be eliminated with the increase in the capacity the company
can exchange with OOCL, expected with the scheduled delivery of the second C11-
class vessel in late August 1995.
In September 1994, the company, MOL, and OOCL signed an agreement to
exchange vessel space, coordinate vessel sailings and cooperate in the use of
port terminals and equipment for ocean transportation services in the Asia-
U.S. West Coast trade through 2005. The carriers currently expect to commence
service under this agreement in late 1995 or early 1996.
The three carriers and NLL signed a separate agreement to exchange
vessel space, coordinate vessel sailings and cooperate in the use of port
terminals and equipment in an all-water service in the Asia-U.S. East Coast
trade via Panama for a minimum of three years. The four carriers initiated
service under this agreement in March 1995, and weekly service is currently
expected to commence in late August 1995.
Additionally, in September 1994, the four carriers and Malaysian
International Shipping Corporation BHD signed an agreement to exchange vessel
space, coordinate vessel sailings and cooperate in the use of port terminals
and equipment for ocean transportation services in the Asia-Europe trade
through 2001. The carriers currently expect to commence service under the
agreement in January 1996. The company entered the Asia-Europe trade in March
1995 by chartering vessel space through MOL.
The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe
alliance agreements are all expected to be fully implemented by late 1995 or
early 1996. Under the terms of the three agreements, alliance partners
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7. Commitments and Contingencies (continued)
Commitments (continued)
Alliances (continued)
contribute and are allocated vessel space, which may be adjusted from time to
time. The value of vessel space provided by the company to the alliance is
less than the value of the total capacity allocated to it through the
alliance, resulting in an annual net cash purchase commitment from the company
to its alliance partners currently estimated to be $29 million, beginning in
1996. For 1995, the company currently estimates its net purchase commitment
to its alliance partners for vessel space in the Asia-U.S. East Coast and Asia-
Europe trades to be approximately $35 million. Agreements covering terminal
and equipment sharing among the alliance partners have not been finalized, and
the company's net cash commitment, if any, to the alliance partners for these
services cannot be determined at this time.
Facilities, Equipment and Services
At June 30, 1995, the company has outstanding purchase commitments to
acquire cranes, facilities, equipment and services totaling $77.4 million. In
addition, the company has commitments to purchase terminal services for its
major Asian operations. These commitments range from one to ten years, and
the amounts of the commitments under these contracts are based upon the actual
services performed. At June 30, 1995, the company had outstanding letters of
credit totaling $11.1 million, which guarantee the company's performance under
certain of its commitments.
In June 1995, the company and Burlington Motor Carriers, Inc. ("BMC")
signed an agreement whereby the company's U.S. trucking operations, including
related employees and leased equipment and facilities, were transferred to BMC
in consideration of BMC's sublease of such equipment and facilities. In
connection with the transfer, the company entered into a service agreement
with BMC, expiring in December 1997, whereby BMC agreed to provide trucking
services to the company and the company agreed to provide certain minimum
cargo volumes to BMC through October 1, 1997. The transaction did not have a
material affect on the company's other operations or operating results.
Employment Agreements
The company has entered into employment agreements with certain of its
executive officers. The agreements provide for certain payments to each
officer upon termination of employment, other than as a result of death,
disability in most cases, or justified cause, as defined. The aggregate
estimated commitment under these agreements was $17.6 million at June 30,
1995.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7. Commitments and Contingencies (continued)
Contingencies
The company is a party to various legal proceedings, claims and
assessments arising in the course of its business activities. Based upon
information presently available, and in light of legal and other defenses and
insurance coverage and other potential sources of payment available to the
company, management does not expect these legal proceedings, claims and
assessments, individually or in the aggregate, to have a material adverse
impact on the company's consolidated financial position or operations.
<PAGE>
American President Companies, Ltd. and Subsidiaries
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Second Quarter Year to Date
(In millions) 1995 1994 Change 1995 1994 Change
________________________________________________________________________________________________
Revenues
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
International Transportation $ 495 $ 462 7% $ 1,022 $ 970 5%
North America Transportation 179 181 (1%) 393 371 6%
Real Estate 11 (100%) 16 (100%)
________________________________________________________________________________________________
Operating Income $ 24 $ 33 (24%) $ 28 $ 52 (45%)
________________________________________________________________________________________________
Pretax Income $ 23 $ 29 (20%) $ 25 $ 44 (44%)
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
Operating income for the second quarter and first half of 1995 was $24
million and $28 million, respectively, compared with operating income of $33
million and $52 million in the second quarter and first half of 1994,
respectively. Included in operating income in the second quarter and first
half of 1994 were $1 million and $9 million, respectively, from the collection
of Desert Storm detention charges. In addition, contributions to operating
income from real estate sales amounted to $6 million and $9 million in the
second quarter and first half of 1994, respectively. There was no collection
of Desert Storm detention charges or contribution from real estate sales in
1995.
The company's earnings in the second quarter and first half of 1995
were impacted by a decline in U.S. import volumes, particularly in the second
quarter, as compared with the same periods in 1994. The company's operating
expenses also increased in 1995 due to the weakness of the U.S. dollar
relative to the Japanese yen, and a substantial increase in fuel oil prices.
These factors were partially offset by an increase in U.S. export volumes for
the second quarter and first half compared with the same periods in 1994, and
rate increases in the second quarter of 1995 in the company's international
markets.
<TABLE>
INTERNATIONAL TRANSPORTATION (1)
(Volumes in thousands of FEUs)
<CAPTION>
Second Quarter Year to Date
1995 1994 Change 1995 1994 Change
________________________________________________________________________________________________
Import
<S> <C> <C> <C> <C> <C> <C>
Volumes 46.6 52.4 (11%) 99.0 102.2 (3%)
Average Revenue per FEU $ 4,303 $ 4,129 4% $ 4,179 $ 4,089 2%
________________________________________________________________________________________________
Export
Volumes 40.8 36.6 12% 85.0 79.1 7%
Average Revenue per FEU $ 3,236 $ 3,128 3% $ 3,201 $ 3,107 3%
________________________________________________________________________________________________
Intra-Asia
Volumes 43.8 43.3 1% 89.8 93.4 (4%)
Average Revenue per FEU $ 1,989 $ 1,868 6% $ 1,992 $ 1,898 5%
________________________________________________________________________________________________
Asia-Europe
Volumes 4.2 4.5
Average Revenue per FEU $ 2,424 $ 2,444
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
(1) Volumes and average revenue per FEU data are based upon shipments
originating during the period, which differs from the percentage-of-
completion method used for financial reporting purposes.
<PAGE>
The company's U.S. import volumes declined in the second quarter and
first half of 1995 compared with the same periods last year due to increased
competitive pressure from non-conference carriers in the second quarter.
Volumes of the company's U.S. export cargo increased in the second quarter and
first half of 1995 compared with the second quarter and first half of 1994,
primarily due to increased shipments of cotton from the U.S. as a result of
poor cotton harvests in India and Pakistan, and an increase in shipments of
refrigerated cargo. These increases were partially offset by a decrease in
military shipments due to the loss of the company's position as preferred
carrier of military cargo in June 1994. The company's intra-Asia volumes
increased in the second quarter of 1995 compared with last year's second
quarter as a result of increased shipments of refrigerated cargo. The
company's intra-Asia volumes decreased in the first half of 1995 compared with
last year's first half as a result of decreased shipments to and from Kobe,
Japan caused by the earthquake in January 1995, the poor cotton harvests in
India and Pakistan, and efforts by the company to reduce its shipments of
lower-margin cargo in this market. Utilization of the company's containership
capacity in the first half of 1995 was 81% and 99% for U.S. import and U.S.
export shipments, respectively, compared with 84% and 96%, respectively, in
1994. Changes in utilization rates from last year are related to changes in
volumes carried by the company in these markets.
Average revenue per FEU for the company's U.S. import shipments
increased in the second quarter and first half of 1995 compared with the
second quarter and first half of 1994 due to a general rate increase
established by conference carriers that became effective May 1, 1995. Average
revenue per FEU in the company's U.S. export market increased in the second
quarter and first half of 1995 from last year's second quarter and first half
due to rate increases and an increase in the proportion of higher-rated cargo
carried by the company. Average revenue per FEU in the company's intra-Asia
market increased in the second quarter and first half of 1995 compared with
the second quarter and first half of 1994, attributable to a general rate
increase and an increase in the proportion of higher-rated refrigerated cargo
carried by the company.
Asia-Europe service by the company began in mid-March with shipments to
Denmark, the United Kingdom and the Netherlands primarily from Hong Kong, the
People's Republic of China and Taiwan. Shipments from the Netherlands, Belgium
and Germany to Asia began in mid-April.
Other international transportation revenues, which primarily consist
of cargo handling, freight consolidation, logistics services and charter hire
revenues, were $74 million and $153 million in the second quarter and first
half of 1995, respectively, compared with $62 million and $135 million in the
second quarter and first half of 1994, respectively. Included in the second
quarter and first half of 1994 were approximately $1 million and $9 million,
respectively, in collections of Desert Storm detention charges. The increases
in other revenues were primarily attributable to increases in third party
cargo handling revenues in Asia. In addition, freight consolidation and
logistics services revenues increased due to higher volumes.
The company incurred incremental operating expenses and a loss of ocean
freight revenues during the first half of 1995 resulting from the earthquake
in Kobe, Japan, on January 17, 1995, in which the ocean terminal leased by the
company was damaged extensively. The company expects substantially all of
these expenses and lost revenues to be recovered through the company's
business interruption insurance. The company is in the process of preparing
its insurance claim. The amount of insurance recovery to be ultimately
received cannot be determined at this time. The company and OOCL have resumed
service to Kobe and have adjusted their shared trans-Pacific schedule to and
from Japan. The company cannot estimate the
<PAGE>
extent to which its volumes to and from Japan will be affected by the damage
caused by the earthquake in future quarters, which will depend upon the timing
of port repairs and the recovery of the infrastructure and economy in the
region.
The company currently expects an improvement in earnings in the second
half of 1995 from the first half of 1995. However, increased competitive
pressure on shipping rates is expected in the U.S. import market. The
company's trans-Pacific volumes are expected to increase in the second half of
the year due to seasonal factors and the increased vessel capacity from the
new C11-class vessels, the first of which was delivered in the second quarter.
The weaker U.S. dollar and higher fuel costs are expected to continue to
impact operating expenses. The fuel efficient C11s are expected to improve
the company's per unit operating costs when fully deployed, but will increase
the company's depreciation and interest costs. Utilization of the C11 vessel
capacity depends to a great extent upon the level of demand for transportation
services and competition among carriers in the company's markets, and there is
no assurance that such utilization and resulting improvement in per unit
operating costs will materialize.
The company and Orient Overseas Container Line ("OOCL") are parties to
agreements enabling them to exchange vessel space and coordinate vessel
sailings through 2005. The agreements permit both companies to offer faster
transit times, more frequent sailings between key markets in Asia and the U.S.
West Coast, and to share terminals and several feeder operations within Asia.
Since December 1993, the company has been required to purchase additional
vessel space from OOCL for approximately $7 million annually, accrued ratably
over each year. This commitment will be eliminated with the increase in the
capacity the company can exchange with OOCL, expected with the scheduled
delivery of the second C11-class vessel in late August 1995.
In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and
OOCL signed an agreement to exchange vessel space, coordinate vessel sailings
and cooperate in the use of port terminals and equipment for ocean
transportation services in the Asia-U.S. West Coast trade through 2005. The
carriers currently expect to commence service under this agreement in late
1995 or early 1996.
The three carriers and Nedlloyd Lines B.V. ("NLL") signed a separate
agreement to exchange vessel space, coordinate vessel sailings and cooperate
in the use of port terminals and equipment in an all-water service in the Asia-
U.S. East Coast trade via Panama for a minimum of three years. The four
carriers initiated service under this agreement in March 1995, and weekly
service is currently expected to commence in late August 1995.
Additionally, in September 1994, the four carriers and Malaysian
International Shipping Corporation BHD signed an agreement to exchange vessel
space, coordinate vessel sailings and cooperate in the use of port terminals
and equipment for ocean transportation services in the Asia-Europe trade
through 2001. The carriers currently expect to commence service under the
agreement in January 1996. The company entered the Asia-Europe trade in March
1995 by chartering vessel space through MOL.
The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe alliance
agreements are all expected to be fully implemented by late 1995 or early
1996. Under the terms of the three agreements, alliance partners contribute
and are allocated vessel space, which may be adjusted from time to time. The
value of vessel space provided by the company to the alliance is less than the
value of the total capacity allocated to it through the alliance, resulting in
an annual net cash purchase commitment from the company to its alliance
partners currently estimated to be $29 million, beginning in 1996. For 1995,
the company currently estimates its net
<PAGE>
purchase commitment to its alliance partners for vessel space in the Asia-U.S.
East Coast and Asia-Europe trades to be approximately $35 million. Agreements
covering terminal and equipment sharing among the alliance partners have not
been finalized, and the company's net cash commitment, if any, to the alliance
partners for these services cannot be determined at this time.
In 1994, the company and Transportacion Maritima Mexicana ("TMM"), a
Mexican transportation company, entered into an agreement enabling them to
reciprocally charter vessel space for a period of three years between major
Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico.
The existing agreement will be terminated September 30, 1995. The company and
TMM are in negotiations with respect to a new agreement for reciprocal
charters of lesser amounts of vessel space through April 1996 and a possible
joint service with a third carrier. However, no assurances can be given as to
whether those negotiations will be successful.
The company is party to an Operating-Differential Subsidy ("ODS")
agreement with the U.S. government, expiring on December 31, 1997, which
provides for payment by the U.S. government to partially compensate the
company for the relatively greater expense of vessel operation under U.S.
registry. ODS payments to the company were approximately $31 million and $30
million in the first half of 1995 and 1994, respectively, and totaled $61
million in 1994.
In June 1992, the Bush Administration announced that no new ODS
agreements would be entered into and existing ODS agreements would be allowed
to expire. The Clinton Administration and Congress have been reviewing U.S.
maritime policy. Proposed maritime support legislation introduced in 1994,
referred to as the Maritime Security Program, was not enacted. The
Administration's 1995 budget includes a proposal for a 10-year subsidy program
with $100 million in annual payments to be requested and appropriated on a
year-to-year basis. Maritime support legislation incorporating the
Administration's program was introduced in the U.S. House of Representatives
in March 1995, and it is expected that similar legislation will be introduced
in the U.S. Senate shortly. The company is not able to predict whether or
when maritime support legislation will be enacted or what terms such
legislation may have, if enacted.
While the company continues to encourage efforts to enact maritime
support legislation, prospects for passage of a program acceptable to the
company are unclear. Accordingly, in July 1993, the company filed
applications with the United States Maritime Administration ("MarAd") to
operate under foreign flag its six C11-class containerships, when delivered to
the company upon completion of construction, and to transfer to foreign flag
seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. On
November 15, 1994, MarAd issued a waiver to allow the company to operate its
C11-class vessels, the first of which was delivered in May 1995, under foreign
registry on the condition that the vessels be returned to U.S.-flag in the
event the Maritime Security Program or an acceptable equivalent support
program is enacted. The remaining application is still pending and no
assurances can be given as to whether, or when, the authority will be granted.
In 1995, lawsuits were filed against the company and the U.S.
Department of Transportation by certain of the company's unions and union
members challenging MarAd's November 15, 1994 action granting the company the
waiver allowing it to operate its C11-class vessels under foreign flag. On
June 29, 1995, the U.S. District Court granted summary judgment in favor of
MarAd and the company, which the unions have appealed. While no assurances
can be given, management believes the unions' appeal will not be successful.
<PAGE>
Management of the company believes that, in the absence of ODS or an
equivalent government support program, it will be generally no longer
commercially viable to own or operate containerships in foreign trade under
the U.S. flag because of the higher labor costs and the more restrictive
design, maintenance and operating standards applicable to U.S.-flag liner
vessels. The company continues to evaluate its strategic alternatives in
light of the pending expiration of its ODS agreement and the uncertainties as
to whether an acceptable new U.S. government maritime support program will be
enacted, whether sufficient labor efficiencies can be achieved through the
collective bargaining process, and whether the company's remaining application
to flag its vessels under foreign registry will be approved. While no
assurances can be given, management of the company believes that it will be
able to structure its operations to enable it to continue to operate on a
competitive basis without direct U.S. government support.
On July 28, 1995, legislation was introduced in the U.S. House of
Representatives that would substantially modify the Shipping Act of 1984 (the
"Shipping Act"), which provides the company with certain immunity from
antitrust laws. Proposed changes, which would be phased in during 1997 and
1998, would eliminate government tariff filing and enforcement, allowing
confidential and independent contracts between shippers and ocean carriers and
strengthening provisions that prohibit predatory activities by foreign
carriers. The company is unable to predict whether this legislation will be
enacted or, if enacted, will contain terms similar to those proposed.
Modification or repeal of the Shipping Act could have a material adverse
impact on the competitive environment in which the company operates and on the
company's results of operations.
The company and Matson Navigation Company, Inc. ("Matson") have signed
a memorandum of understanding to pursue negotiations to form a ten-year
alliance between the companies. Pursuant to the terms of this alliance, the
company would sell to Matson its three C9-class and three C8-class
containerships, its Guam assets, for approximately $166 million and
discontinue its westbound service to Guam. Matson would operate a five-ship
service between the Far East and the U.S. West Coast, including the C9-class
vessels, one C8-class vessel and a Matson vessel. The company would have use
of substantially all the vessels' eastbound capacity, and Matson would have
use of substantially all their westbound capacity, with a certain number of
container slots to be held available to the company for the westbound service
and to Matson for the eastbound service. The company currently expects the
sale of the ships and the Guam assets to be completed in late-October, and to
start services under the alliance in early 1996, subject to governmental
approvals. There can be no assurances, however, that negotiations with Matson
will be successful, that governmental approvals will be received or with
respect to the final terms of the transaction.
In January 1995, the company and Columbia Shipmanagement Ltd., a
Cyprus company ("Columbia"), entered into an agreement under which Columbia
has agreed to provide crewing, maintenance, operations and insurance for the
company's six C11-class vessels for a per diem fee per vessel. The agreement
may be terminated at any time by either party with notice.
<PAGE>
<TABLE>
NORTH AMERICA TRANSPORTATION (1)
(Volumes in thousands of FEUs)
<CAPTION>
Second Quarter Year to Date
1995 1994 Change 1995 1994 Change
________________________________________________________________________________________________
Revenues (2) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Stacktrain $ 124 $ 125 (0%) $ 267 $ 255 5%
Non-Stacktrain 55 56 (2%) 126 116 8%
________________________________________________________________________________________________
Stacktrain Volumes
North America 96.5 94.0 3% 206.8 193.7 7%
International 43.3 46.2 (6%) 94.8 94.6 0%
________________________________________________________________________________________________
Stacktrain Average
Revenue per FEU (2) $ 1,284 $ 1,322 (3%) $ 1,291 $ 1,313 (2%)
________________________________________________________________________________________________
________________________________________________________________________________________________
</TABLE>
(1) Volumes and revenue per FEU data are based upon shipments originating
during the period, which differs from the percentage-of-completion method
used for financial reporting purposes.
(2) In addition to third party business, which is referred to above as North
America Volumes, the transportation of containers for the company's
international customers is a significant component of its stacktrain
operations. These shipments are referred to above as International
Stacktrain Volumes and, since they are eliminated in consolidation, are
excluded from Revenues and Stacktrain Average Revenue per FEU.
Revenues from the company's North America transportation operations
increased in the first half of 1995 compared with first half of 1994, as a
result of higher stacktrain volumes. The increase in North America stacktrain
volumes in the second quarter and first half 1995 was due to increased
automotive shipments between the U.S. and Mexico, and containers and chassis
added to its fleet during the second half of 1994, which enabled the company
to meet increasing demand. Stacktrain average revenue per FEU decreased in
the second quarter and first half of 1995 compared with the second quarter and
first half of 1994 due to a decline in the volume of higher-rated cargo. The
company's North America non-stacktrain revenues declined in the second quarter
of 1995 compared with last year's second quarter as volumes declined
approximately 20% due to increased competition from trucking companies in this
market and the loss of several major customers. In the first half of 1995,
North America non-stacktrain revenues increased due to higher automotive
shipments, which were partially offset by lower volumes in other non-
stacktrain markets.
In June 1995, the company and Burlington Motor Carriers, Inc. ("BMC")
signed an agreement whereby the company's U.S. trucking operations, including
related employees and leased equipment and facilities, were transferred to BMC
in consideration of BMC's sublease of such equipment and facilities. In
connection with the transfer, the company entered into a service agreement
with BMC, expiring in December 1997, whereby BMC agreed to provide trucking
services to the company and the company agreed to provide certain minimum
cargo volumes to BMC through October 1, 1997. The transaction did not have a
material affect on the company's other operations or operating results.
During the remainder of 1995, the company expects little or no growth
in North America stacktrain volumes as a result of a slow-down in the U.S.
economy and softening demand for stacktrain services. Demand for automotive
shipments is dependent upon conditions in the Mexican economy and the extent
to which U.S. automakers continue to operate in Mexico, among other factors.
<PAGE>
<TABLE>
TRANSPORTATION OPERATING EXPENSES
<CAPTION>
(In millions, except Second Quarter Year to Date
Operating Cost per FEU) 1995 1994 Change 1995 1994 Change
________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Land Transportation $ 233 $ 239 (3%) $ 513 $ 496 4%
Cargo Handling 140 126 10% 292 265 10%
Vessel, Net 92 76 22% 181 162 12%
Transportation Equipment 50 46 8% 105 98 7%
Information Systems 11 11 (1%) 26 25 2%
Other 81 74 10% 177 160 11%
_______________________________________________________________________________________________
Total $ 607 $ 572 6% $ 1,294 $ 1,206 7%
_______________________________________________________________________________________________
Operating Cost per FEU (1) $ 2,616 $ 2,528 3% $ 2,667 $ 2,575 4%
Percentage of Transportation
Revenues 90% 89% 91% 90%
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
(1) Operating expenses used in this calculation include costs associated with
certain International and North America revenues that are not volume
related.
The weakening of the U.S. dollar relative to the Japanese yen
negatively impacted the company's results by $5 million and $13 million for
the second quarter and first half of 1995. The yen/dollar exchange rate
averaged 84 and 89 yen to the dollar in the second quarter and first half of
1995, respectively, compared with 103 and 108 yen to the dollar in the second
quarter and first half of 1994, respectively. Land transportation expenses
decreased in the second quarter of 1995 from the second quarter of 1994, due
to a decrease in conventional rail expense resulting from a reduction of North
America non-stacktrain volumes. Land transportation expenses increased in the
first half of 1995 from the first half of 1994, due to an increase in North
America stacktrain volumes. Cargo handling expenses increased in the second
quarter and first half of 1995 compared with the 1994 periods due to higher
stevedoring labor rates in Asia and the U.S., increased cargo handling volumes
and the impact of the declining dollar. The commencement of the Asia-Europe
service also resulted in increased cargo handling costs in the second quarter
and first half of 1995 compared with the same 1994 periods. Vessel expenses
increased in the second quarter and first half of 1995 compared with last
year's second quarter and first half due to a 30% and 38% increase in the fuel
cost per barrel in the second quarter and first half of 1995, respectively,
compared to the same 1994 periods, and increased charter hire activity
resulting from additional vessel space purchased from TMM in the Asia-Mexico
market and through other alliance partners in the Asia-Latin America and Asia-
Europe markets. Transportation equipment costs increased in the second
quarter and first half of 1995 compared with the same periods in 1994 due to
increased container leasing costs and increased repair and maintenance costs.
The increase in information systems costs was due to increased
telecommunications costs in the first half of 1995. Other operating expenses
increased in the second quarter and first half of 1995 compared with the
second quarter and first half of 1994 due to costs for the start-up of the
Asia-U.S. East Coast alliance and the Asia-Europe service. Additionally,
costs related to eliminating the company's administrative offices in Hong Kong
contributed to the increase in other operating expenses in the first half of
1995.
General and administrative expenses decreased 6% and increased 2% in
the second quarter and first half of 1995, respectively, compared with the
second quarter and first half of 1994. The decrease in the quarter's expense
was primarily due to lower expenditures for corporate initiatives to improve
the company's financial and order cycle processes, which were partially offset
by higher relocation expense and ongoing support costs related to new
financial systems. Relocation costs and financial system support costs also
contributed to the increase in general and administrative
<PAGE>
expenses in the first half of 1995. Expenditures for corporate initiatives
were approximately $6 million and $13 million for the second quarter and first
half of 1995, respectively, and $8 million and $16 million for the second
quarter and first half of 1994, respectively. Spending on corporate
initiatives is currently estimated to total $33 million in 1995 and $12
million in 1996. The company currently anticipates that during 1995 and 1996,
between 550 and 900 positions will be eliminated as a result of order cycle
process changes, and approximately 50 positions will be eliminated as a result
of financial process changes. The actual number of position reductions,
however, will not be finally determined until design and implementation of the
new processes in 1995 and 1996, and costs associated with eliminating these
positions cannot yet be estimated. Anticipated cost savings resulting from
these initiatives are expected to be realized in future years, but no
assurances can be given as to the timing or amount of these savings.
Depreciation and amortization expense increased 2% and 1% in the
second quarter and first half of 1995 compared with last year's periods as a
result of increased capital expenditures in 1995, particularly the delivery of
the first C11-class vessel in May 1995. Net interest expense decreased to $2
million and $4 million in the second quarter and first half of 1995,
respectively, from $4 million and $8 million in the second quarter and first
half of 1994, respectively. Interest income in the second quarter and first
half of 1995 increased compared with the 1994 periods due to higher cash
balances and higher interest rates, more than offsetting the increase in
interest expense related to the C11-class vessel. Interest and depreciation
expense will continue to increase in 1995 compared with 1994 periods as the
company takes delivery of its new C11-class vessels.
The company's estimated income tax rate for 1995 is 38%, compared with
34% in 1994. The 1994 income tax rate includes the effect of revisions of
prior years' estimated tax liabilities.
<TABLE>
LIQUIDITY AND CAPITAL RESOURCES
(In millions)
<CAPTION>
______________________________________________________________________________________________
June 30 December 30
As of: 1995 1994
______________________________________________________________________________________________
Cash, Cash Equivalents and
<S> <C> <C>
Short-term Investments $ 211 $ 255
Working Capital 197 206
Total Assets 1,744 1,664
Long-Term Debt and Capital
Lease Obligations (1) 448 391
______________________________________________________________________________________________
June 30 July 1
For the 26 weeks ending: 1995 1994
______________________________________________________________________________________________
Cash Provided by Operations $ 41 $ 46
______________________________________________________________________________________________
NET CAPITAL EXPENDITURES
Ships $ 105 $ 8
Containers, Chassis and Rail Cars 15 20
Leasehold Improvements and Other 19 20
______________________________________________________________________________________________
Total $ 139 $ 48
______________________________________________________________________________________________
FINANCING ACTIVITIES
Borrowings $ 72 $ 147
Repayment of Debt and Capital Leases (15) (14)
Dividend Payments (9) (9)
______________________________________________________________________________________________
______________________________________________________________________________________________
</TABLE>
(1) Includes current and long-term portions.
<PAGE>
In 1993, the company entered into contracts for the construction and
purchase of six new C11-class containerships from Howaldtswerke-Deutsche Werft
AG, of Germany ("HDW") (three ships) and Daewoo Shipbuilding and Heavy
Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated
project cost for the construction of these vessels is $535 million. OOCL has
placed orders to purchase six vessels similar in size and speed to the
company's C11s. The company's C11s and OOCL's similar vessels are scheduled
to be delivered during 1995 and 1996. The company and OOCL have agreed to
initially operate six and five of these vessels, respectively, under their
existing trans-Pacific coordinated sailing and slot-sharing agreements, and in
late 1995 or early 1996, under their Asia-U.S. West Coast alliance agreement
with MOL. The deployment of the 11 new C11-type vessels by the company and
OOCL, replacing 14 older vessels, will increase the combined trans-Pacific
capacity of the company and OOCL by approximately 15%. The company currently
expects growth in demand in the trans-Pacific market and believes that the
increase in combined capacity should be sufficient to permit the company and
OOCL to maintain their combined relative market share in that market.
However, other competing ocean carriers have also placed orders for the
construction of a significant number of new vessels, and no assurances can be
given with respect to anticipated growth in demand, utilization of the
company's increased capacity or the potential negative impact of the increased
capacity on rates. No assurances can be made that the company and OOCL will
be able to maintain their combined market share. Additionally, modification
or repeal of the Shipping Act, which is under consideration as referred to
above, could have a material adverse impact on the company's rates and
volumes.
The company has made payments of $174 million for the purchase of the
C11s to date from the inception of the construction contracts, including
payments of $91 million in the first half of 1995. The amount paid in the
first half of 1995 includes the final payment on the first HDW vessel, which
was delivered in May 1995. Delivery of the other five vessels is scheduled
between late August and December 1995. The remaining 80% of each vessel's
purchase price is due upon delivery of the vessel.
In 1994, the company entered into a loan agreement with European banks
to finance approximately $400 million of the purchase price of the six C11-
class vessels. Principal payments on draw-downs are due in semiannual
installments over a 12-year period commencing six months after the delivery of
each vessel. Interest rates are based upon various margins over LIBOR or the
banks' cost of funds as elected by the company. To finance a portion of the
purchase of the first vessel, the company borrowed approximately $72 million
under this loan agreement. On July 6, 1995, the company entered into an
interest rate swap agreement to exchange the variable interest rate on the C11
financing for a fixed rate for a ten-year period. The swap is effective after
the first principal payment on the Note, which is at an interest rate of
6.985%. As a result of the swap, the effective interest rate is 7.461% for
the first five years and 7.586% for the remaining term of the swap.
In December 1993, the company entered into contracts with Daewoo for
the construction and purchase of three diesel-powered K10-class containerships
to be delivered in 1996. The total estimated cost for construction of these
vessels is $195 million. The company is engaged in efforts related to the
possible sale of the K10 construction contracts to third party investors. In
July 1995, the company, MOL, OOCL and NLL obtained a commitment from a
European bank, subject to certain conditions, to finance the purchase of the
K10 contracts, and a portion of the purchase price to be paid for the vessels,
by such third party investors. The company, MOL, OOCL and NLL also entered
into an agreement to form a joint venture company to charter-back these
vessels from such investors for use in the Asia-Europe trade, subject to,
amoung other things, the sale of the construction contracts to
<PAGE>
such investors. The sale of the K10 construction contracts is expected to be
completed by the end of the third quarter of 1995 if negotiations are
successfully completed. No assurances can be given that these negotiations
will be successfully completed. The company has made progress payments of $24
million as of June 30, 1995 for these vessels, including a payment of $6
million in the first half of 1995. Remaining installments totaling $30
million are due in 1995, and the final 70% is due upon delivery of the vessels
in 1996.
In addition to vessel expenditures of $105 million, the company made
capital expenditures in the first half of 1995 of $34 million primarily for
purchases of chassis, and terminal and leasehold improvements. Capital
expenditures in 1995 are expected to be approximately $520 million, including
approximately $420 million of vessel costs and excluding any expenditures on
the K10-class vessels. The balance is expected to be spent primarily on
terminal equipment in North America and Asia, terminal improvements in North
America, chassis and computer systems. The company has outstanding purchase
commitments to acquire cranes, facilities, equipment and services totaling $77
million. In addition to vessel progress payments of $4 million, the company
made capital expenditures in the second quarter and first half of 1994
primarily for purchases of chassis, leasehold improvements and an office in
Mexico.
The company has a credit agreement with a group of banks which
provides for an aggregate commitment of up to $200 million through March 1999.
As an alternative to borrowing under its credit agreement, the company has an
option under that agreement to sell up to $150 million of certain of its
accounts receivable to the banks. This alternative is subject to less
restrictive financial covenants than the borrowing option.
On July 14, 1995 the company issued a notice of redemption for all $75
million of its 9% Series C Cumulative Convertible Preferred Stock ("Series C
Preferred Stock"). On July 28, 1995, at the option of its stockholders, the
1,500,000 shares of Series C Preferred Stock were converted into 3,961,498
shares of common stock, or 2.641 shares of common stock for each share of
Series C Preferred Stock (a conversion price of $18.93 per share of common
stock).
On July 21, 1995, the Board of Directors authorized the repurchase of
up to six million shares of the company's common stock. The form and timing
of the repurchase and the exact number of shares to be repurchased will depend
upon market conditions and will be primarily funded with cash on hand.
The company believes its existing resources, cash flows from
operations and borrowing capacity under its existing credit facilities will be
adequate to meet its liquidity needs for the foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The company is a party to various pending legal proceedings, claims
and assessments arising in the course of its business activities, including
actions relating to trade practices, personal injury or property damage,
alleged breaches of contracts, torts, labor matters, employment practices, tax
matters and miscellaneous other matters. Some of these proceedings involve
claims for punitive damages, in addition to other specific relief.
Among these actions are approximately 1,790 cases pending against the
company, together with numerous other ship owners and equipment manufacturers,
involving injuries or illnesses allegedly caused by exposure to asbestos or
other toxic substances on ships.
The company insures its potential liability for bodily injury to
seamen through mutual insurance associations. Industry-wide resolution of
asbestos-related claims and resolutions of claims against bankrupt shipping
companies at higher than expected amounts could result in additional
contributions to those associations by the company and other association
members.
In December 1989, the government of Guam filed a complaint with the
Federal Maritime Commission ("FMC") alleging that American President Lines,
Ltd. and an unrelated company charged excessive rates for carrying cargo
between the U.S. and Guam, in violation of the Shipping Act, 1916 and the
Intercoastal Shipping Act of 1933, and seeking an undetermined amount of
reparations. Three private shippers are also complainants in this proceeding.
Evidentiary hearings have been concluded and a decision by the FMC is not
expected until 1996.
In April 1994, a lawsuit, Hockert Pressman & Flohr Money Purchase
Plan, et. al. vs. American President Companies, Ltd., et. al., was filed
against the company and certain of its officers in United States District
Court for the Northern District of California. The suit alleges that the
company and certain officers made false and misleading statements about the
company's operating and financial performance in violation of federal
securities laws, and seeks unspecified damages on behalf of a purported class
of stockholders who purchased shares of the company's common stock during the
period October 7, 1993 through March 30, 1994. The discovery process is
underway. The company believes that it has meritorious defenses and intends
to defend itself vigorously against this lawsuit.
In October 1991, the California Department of Motor Vehicles (the
"DMV") assessed the company approximately $4.23 million in additional chassis
registration fees. The company appealed the assessment. An administrative
hearing of the company's appeal resulted in a ruling in the company's favor.
The DMV rejected that decision and required payment of the assessment. In
1993, the company filed a mandamus action to compel the DMV to abide by the
administrative decision, as well as a suit for refund. The company prevailed
in the mandamus action, but was denied a summary judgment motion in the refund
action. The parties have appealed both decisions to the California Court of
Appeals, which has requested additional briefings. The company believes that
it is entitled to a refund of the amount paid and intends to pursue the matter
vigorously.
<PAGE>
Based upon information presently available, and in light of legal and
other defenses and insurance coverage and other potential sources of payment
available to the company, management does not expect the legal proceedings
described, individually or in the aggregate, to have a material adverse impact
on the company's consolidated financial position or operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 2, 1995 in Oakland,
California. Two proposals, in addition to the election of directors and
ratification of auditors, were submitted to the stockholders as described in
the company's Proxy Statement dated March 31, 1995 and were voted upon and
approved by the stockholders at the meeting. The following table describes
the results of the stockholder votes:
<TABLE>
<CAPTION>
Votes Votes Withheld Non
For Against /Abstain Votes
_____________________________________________________________________________________________
Election of Directors:
<S> <C> <C> <C> <C>
John H. Barr 29,125,243 239,169
John M. Lillie 29,129,259 235,153
Toni Rembe 29,124,511 239,901
Amendment of the company's
Certificate of
Incorporation 24,581,038 4,646,785 136,588 1
Adoption of the 1995
Stock Bonus Plan 27,666,863 1,519,553 177,996
Ratification of Auditors 29,196,300 112,543 55,568 1
</TABLE>
The voting included 25,402,970 shares of common stock (each of which
is entitled to one vote), representing 93.0% of the outstanding shares of
common stock on the record date of March 1, 1995, and 1,500,000 shares of
Preferred Stock (each of which was entitled to approximately 2.641 votes),
representing 100% of the outstanding shares of Preferred Stock.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
The following documents are exhibits to this Form 10-Q:
Exhibit
No. Description of Document
_______ _______________________
3.1 Integrated copy of the amended By-laws.
10.1 Amendments Nos. 1 and 2 dated May 10, 1995 and July 12, 1995,
respectively, to the Credit Agreement among American President
Companies, Ltd., borrower, and Morgan Guaranty Trust Company of New
York (as agent and participant), Bank of America National Trust and
Savings Association, The First National Bank of Boston, The Industrial
Bank of Japan, Limited, ABN AMRO Bank N.V. and The First National Bank
of Chicago.
27 Financial Data Schedules filed under Article 5 of Regulation S-X
for the second quarter ended June 30, 1995.
(b) Reports on Form 8-K
No current report on Form 8-K was filed during the quarter for which
this report on Form 10-Q is filed.
<PAGE>
American President Companies, Ltd. and Subsidiaries
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.
AMERICAN PRESIDENT COMPANIES, LTD.
Dated: August 4, 1995 By /s/ William J. Stuebgen
______________________ ____________________________
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
BY-LAWS
of
AMERICAN PRESIDENT COMPANIES, LTD.
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the Company in the
State of Delaware and the name of the resident agent in charge thereof is The
Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-100,
Dover, Delaware 19901.
Section 2. Other Offices. The Company shall have its principal office
at 1111 Broadway, Oakland, California 94607 and shall also have offices at such
other places as the Chairman of the Board and the Board of Directors may from
time to time designate or appoint, or as the business of the Company may
require.
ARTICLE II
Directors
Section 1. Powers. The corporate powers, business and property of the
Company shall be vested in and exercised, conducted and controlled by the Board
of Directors which may exercise all said powers of the Company and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Section 2. Determination of Number. The exact number of Directors who
shall constitute the Board of Directors shall be determined by resolution
adopted by the affirmative vote of a majority of the entire Board of Directors
at any regular or special meeting of said Board; provided, that notice of such
proposed action shall have been given in the notice for such regular or special
meeting; and provided, further, however, that in no event shall the number of
directors be less than five. No decrease in the number of Directors shall have
the effect of shortening the term of any incumbent Director.
Section 3. Nominations. Nominations for election to the Board of Directors
of the Company at a meeting of stockholders may be made by the Board or on
behalf of the Board by the Nominating Committee appointed by the Board, or by
any stockholder of the Company entitled to vote for the election of Directors at
such meeting. Such nominations, other than those made by or on behalf of the
Board, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary of the Company, and
received by him not less than thirty (30) days nor more than sixty (60) days
prior to any meeting of stockholders called for the election of Directors;
provided, however, that if less than thirty-five (35) days' notice of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary of the Company not later than the close of business
on the seventh (7th) day following the day on which the notice of meeting was
mailed. Such notice shall set forth as to each proposed nominee who is not an
incumbent Director (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the principal occupation
or employment of each such nominee, (iii) the number of shares of stock of the
Company which are beneficially owned by each such nominee and by the nominating
stockholder, and (iv) any other information concerning the nominee that must be
disclosed of nominees in proxy solicitations Regulation 14A of the Securities
Exchange Act of 1934.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
ARTICLE III
Meetings of Directors
Section 1. Place of Meetings. Meetings of the Board of Directors of the
Company whether regular, special or adjourned shall be held at the principal
office of the Company, as specified in Section 2 of Article I hereof, or at any
other place within or without the State of Delaware which has been designated
from time to time by resolution of the Board or by written consent of all
members of the Board. Any meeting shall be valid wherever held, if held upon the
written consent of all members of the Board of Directors given either before or
after the meeting and filed with the Secretary of the Company.
Section 2. Regular Meetings. Regular meetings of the Board of Directors
shall be held immediately following the adjournment of each annual meeting of
the stockholders, every second month thereafter and at such other times as may
be designated from time to time by resolution of the Board of Directors.
Section 3. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman or the President of the
Company or by any four Directors.
Section 4. Notice of Meetings. Written notice of the time and place of
special meetings of the Board of Directors shall be delivered at least two (2)
days before the meeting personally to each Director, or sent in writing, by mail
addressed to such Director, at his address as it appears on the records of the
Company, with postage thereon prepaid; such notice shall be deemed to be given
at the time when the same shall be deposited in the United States mail;
provided, however, that if a special meeting is called by the Chairman or the
President or by any four Directors because the need for urgent action exists,
then each Director shall be given not less than three (3) hours' notice, and
such notice shall be deemed given once it has been conveyed to a Director in
person or by telephone or an attempt has been made to give such notice by
telephoning a Director at his home telephone number and his business office
telephone number as such numbers are shown in the Secretary's records. Notice
to Directors may also be given by telex or telegram.
Whenever any such notice is required to be given, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto. If the
address of a Director is not shown on the records and is not readily
ascertainable, notice shall be addressed to him at the city or place in which
the meetings of the Directors are regularly held. Notice of the time and place
of holding an adjourned meeting need not be given to absent Directors if the
time and place be fixed at the meeting adjourned.
Section 5. Quorum. A majority of the authorized number of Directors shall
constitute a quorum of the Board of Directors for the transaction of business.
Every act or decision done or made by a majority of the Directors present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the Board of Directors. In the absence of a quorum, a majority of the Directors
present may adjourn from time to time, without notice other than an announcement
at the meeting, until a quorum shall be present.
Section 6. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 7. Telephone Meetings. Members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
ARTICLE IV
Officers
Section 1. Officers. The officers of the Company shall consist of a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary,
one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers
and a Controller. The salary which each said officer shall receive, and the
manner and times of its payment, shall be fixed and determined by the Board of
Directors upon the advice of the Compensation Committee and may be altered by
said Board from time to time at its discretion.
The Board of Directors may appoint such other officers and agents as it
shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
The officers of the Company shall hold office until their successors are
chosen and qualify. Any officer elected or appointed by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the Company shall be filled by
the Board of Directors.
Section 2. Chairman of the Board. The Chairman of the Board shall be
the Chief Executive Officer of the Company and, subject to control and direction
of the Board of Directors, he shall have general management and direction of the
business of the Company. He shall be a member of the Board of Directors and
Chairman of the Executive Committee thereof, and, except for the Compensation
Committee, an ex officio member of all other committees thereof, shall preside
at all meetings of the Board of Directors and the stockholders and shall do and
perform such other duties as may from time to time be assigned to him by the
Board of Directors.
Section 3. President. The President shall be the Chief Operating
Officer of the Company. In the absence or disability of the Chairman, he shall
perform the duties of the Chairman of the Board and, when so acting, shall have
all of the powers of and be subject to all the restrictions upon the Chairman of
the Board. The President shall, in the absence of the Chairman of the Board,
preside at meetings of the Board of Directors and the stockholders, and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 4. Vice Presidents. In the event of the absence or disability
of the Chairman of the Board and the President, the Vice Presidents, in the
order designated by the Directors or, in the absence of any designation, then in
the order of their election, shall perform the duties of the Chairman of the
Board and the President and, when so acting, shall have all the powers of and be
subject to all the restrictions upon the Chairman of the Board and the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5. The Secretary and Assistant Secretary. The Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Company and
of the Board of Directors in a book to be kept for that purpose and shall
perform similar duties for the committees of the Board when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors, or the
Chairman of the Board, under whose supervision such officer shall be.
The Secretary shall have custody of the corporate seal of the Company and
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the Secretary's signature. The Board of
Directors may give general authority to any other officer to affix the seal of
the Company and to attest the affixing by his signature.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election) shall, in the absence
of the Secretary or in the event of the Secretary's inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 6. The Treasurer and Assistant Treasurers. The Treasurer shall
have the custody of the corporate funds and securities and shall deposit all
moneys and other valuable effects in the name and to the credit of the Company
in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Company as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Chairman of the Board and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election), shall, in the absence
of the Treasurer or in the event of the Treasurer's inability or refusal to act,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
Section 7. Controller. The Controller shall have charge of the Company's
books of accounts, records and auditing, and generally do and perform all such
other duties as pertain to such office, and as may be required by the Board of
Directors. The Controller shall render to the Chairman of the Board and the
Board of Directors, at its regular meetings, or when the Board of Directors so
requires, a report on the financial condition of the Company.
Section 8. Powers of Attorney. Whenever an applicable statute, decree,
rule or regulation requires a document to be subscribed by a particular officer
of the Company, such document may be signed on behalf of such officer by a duly
appointed attorney-in-fact, except as otherwise directed by the Board of
Directors or limited by law.
ARTICLE V
Meetings of Stockholders
Section 1. Meetings. Annual meetings of stockholders shall be held in the
City of Oakland, State of California, at the principal office of the Company, as
specified in Section 2 of Article I hereof, or at such other place either within
or without the State of Delaware as shall be designated from time to time by
resolution of the Board of Directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders shall be
held at such date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of meeting. At the annual meeting the
stockholders shall elect by a plurality vote the number of Directors equal to
the number of Directors of the class whose term expires at such meeting (or, if
fewer, the number of Directors properly nominated and qualified for election) to
hold office until the third succeeding annual meeting of stockholders after
their election and shall transact such other business as may properly be brought
before the meeting.
To be properly brought before an annual meeting, business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors or (c) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before the meeting by a stockholder, the Secretary of the
Company must have received notice in writing from the stockholder not less than
thirty (30) days nor more than sixty (60) days prior to the meeting; provided,
however, that if less than thirty-five (35) days' notice of the meeting is given
to stockholders, such notice shall have been received by the Secretary of the
Company not later than the close of business on the seventh (7th) day following
the day on which the notice of meeting was mailed.
Such written notice to the Secretary shall set forth, as to each matter
the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business, (ii) the name and address, as they appear on the
Company's books, of the stockholder proposing such business, (iii) the class and
number of shares of stock of the Company beneficially owned by such stockholder,
and (iv) any material interest of such stockholder in such business.
Notwithstanding any other provision in these By-Laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 2.
Section 3. Stockholder List. The officer who has charge of the stock
ledger of the Company shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 4. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, may be called by the Board of Directors or by the
Chairman of the Board.
Section 5. Notice of Meeting. Written notice of any annual or special
meeting stating the place, date and hour of the meeting and, in the case of a
special meeting, stating the purpose or purposes for which the meeting is
called, shall be given not less than ten (l0) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Whenever notice is required to be given to any stockholder, such notice
shall be given in writing, by mail, addressed to each stockholder at his address
as it appears on the records of the Company, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Whenever any such notice is required to be
given, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 6. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 7. Conduct of Meetings. The Chairman of the Board, or such other
officer as may preside at any meeting of the stockholders, shall have the
authority to establish from time to time, such rules for tile conduct of such
meetings, and to take such action, as may in his judgment be necessary or proper
for the conduct of the meeting and in the best interests of the Company and the
stockholders in attendance in person or by proxy.
ARTICLE VI
Committees of the Board of Directors
Section 1. Executive Committee. The Board of Directors shall appoint
an Executive Committee to consist of the Chairman of the Board and not less than
two (2) nor more than six (6) other Directors of the Company. The Chairman of
the Board shall act as Chairman of the Executive Committee, and the Executive
Committee shall meet at such times and places as it may determine. The
Executive Committee shall have and may exercise when the Board is not in session
all the powers of the Board in the management of the business and affairs of the
Company, without limitation, except as set forth in Section 9 below.
Section 2. Nominating Committee. The Board of Directors shall appoint a
Nominating Committee consisting of three Directors of the Company who shall not
be officers of the Company. The Nominating Committee shall recommend to the
Board the number of Directors which best meets the requirements of the Company;
identify, evaluate, review and recommend to the Board qualified candidates to
fill vacancies on the Board and any newly created directorships resulting from
an increase in the number of Directors; recommend to the Board the individuals
to constitute the nominees of the Board for election as directors at the annual
meeting of stockholders; recommend to the Board a list of Directors selected as
members of each committee of the Board; and perform such other duties as may be
assigned by the Board.
Section 3. Compensation Committee. The Board shall appoint a
Compensation Committee consisting of three (3) or more Directors of the Company.
The Compensation Committee shall review annually and recommend to the Board of
Directors the level of compensation of the Chairman of the Board, giving
consideration to the amount and composition of his total compensation in terms
of salary, stock options and other benefits; review annually the recommendations
of the Chairman of the Board concerning salaries and other compensation of all
senior officers reporting to the Chairman, as well as review from time to time
other conditions of employment; administer the 1989 Stock Incentive Plan, the
1992 Directors' Stock Option Plan, the 1995 Deferred Compensation Plan and year-
end bonus plans; review and make recommendations to the Board of Directors for
changes in the Company's compensation and benefit plans and practices; and
administer other compensation plans that may be adopted from time to time as
authorized by the Board of Directors.
Section 4. Audit Committee. The Board of Directors shall appoint an Audit
Committee of three or more Directors of the Company who shall not be officers of
the Company. The Audit Committee shall receive from and review with the
Company's independent auditors the annual report of such auditors; review with
the independent auditors the scope of the succeeding annual examination;
nominate the independent auditors to be appointed each year by the Board; review
consulting services made by the Company's independent auditors and evaluate the
possible effect on the auditors' independence of performing such services;
ascertain the existence of adequate internal accounting and control systems; and
review with management and the Company's independent auditors current and
emerging accounting and financial reporting requirements and practices affecting
the Company.
Section 5. Quorum and Vacancies. A majority of the members of the
committee (which majority shall, in the case of the Executive Committee, include
the Chairman of the Board) shall constitute a quorum for the transaction of
business. In the absence or disqualification of a member of a committee, the
member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in place
of any such absent or disqualified member.
Section 6. Notice and Emergency Action. Notice of the time and place of
committee meetings shall be given in writing or by telephone or in person, by
any member of the committee, to all members of the committee at least two (2)
days' prior to the time of holding such meeting; provided, however, that such
notice requirement shall not be applicable if any member of the Executive
Committee deems it necessary to cause the Executive Committee to act on an
urgent basis. In the event a member of the Executive Committee deems such urgent
action necessary, such member shall attempt to contact each other member of the
Executive Committee by telephone for the purpose of having each such member
consider and act upon the urgent matter or matters presented. Such consideration
and action may take place by telephone without convening in meeting. The quorum
and voting requirements set forth in Section 5 above shall pertain to such
urgent action, and for this purpose all persons reached by telephone shall be
deemed to be present. The member of the Executive Committee who calls for urgent
action in the manner described herein, immediately following the approval or
disapproval of any action thereby proposed, shall report such action to the
Secretary of the Company for the purpose of having it described in the minutes
of the Executive Committee. Such report and minutes shall also include a
recitation of all efforts made by the member calling for such action to contact
other Executive Committee members by telephone.
Section 7. Minutes; Reports to Board. Each committee shall keep regular
minutes of its meetings. All actions of the committees shall be reported to the
Board of Directors at the meeting of the Board of Directors next succeeding such
action.
Section 8. Other Committees. The Board of Directors, from time to time,
may appoint other committees for any purpose or purposes, and any such committee
shall have such powers as shall be specified in the resolution of its
appointment.
Section 9. Duties. Any committee, including the Executive Committee, to
the extent provided in the resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Company, and may authorize the
seal of the Company to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets, recommending to the
stockholders a dissolution of the Company or a revocation of a dissolution, or
amending the By-Laws of the Company; and, unless the resolution of the Board
expressly provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
ARTICLE VII
Certificates for Stock
Section 1. Certificates. Every holder of stock in the Company shall be
entitled to have a certificate signed by, or in the name of the Company by the
Chairman of the Board, or the President or a Vice President and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Company, certifying the number of shares owned by him in the Company.
Section 2. Signatures. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Company with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
Section 3. Foreign Owners. The outstanding shares of the Company shall at all
times be owned by citizens of the United States to such extent as will, in the
judgment of the Board of Directors, reasonably assure the preservation of the
Company's status as a United States citizen within the provisions of Section 2
of the Shipping Act, 1916, as amended, or any successor statute applicable to
the business being conducted by the Company (the "Citizenship Provisions"). The
Board of Directors may restrict any original issuance of shares of the Company
to citizens of the United States as such term is defined in the Citizenship
Provisions ("United States Citizens"), and, in any event, shall from time to
time establish, as a condition to the issuance or transfer of shares of the
Company to non-United States Citizens, the minimum percentage of the total
outstanding shares of the Company which shall be owned by United States
Citizens, which minimum percentage may, in the discretion of the Board of
Directors, exceed the minimum percentage required by law (the "Minimum
Percentage"). Nothing herein shall be deemed to preclude ownership by United
States Citizens of shares of the Company in excess of the Minimum Percentage.
Certificates evidencing shares of stock of the Company may be issued in
separate series, denominated respectively "Domestic Share Certificates" and
"Foreign Share Certificates." Domestic Share Certificates shall be issued in
respect of shares owned of record and beneficially by United States Citizens;
Foreign Share Certificates shall be issued in respect of shares owned of record
or beneficially by non-United States Citizens. Holders of Domestic Share
Certificates and of Foreign Share Certificates shall have in all respects the
same corporate status and corporate rights, share for share, except that
transfers of Domestic Share Certificates to non-United States Citizens shall be
restricted and, in certain circumstances, the rights of holders of Foreign Share
Certificates shall be restricted, both as herein provided.
If any shares evidenced by Domestic Share Certificates or Foreign Share
Certificates shall be transferred to United States Citizens, the share
certificates issued to the transferee in respect of the shares transferred shall
be Domestic Share Certificates.
If any shares evidenced by Domestic Share Certificates shall be proposed
to be transferred to non-United States Citizens, the share certificates issued
to the transferee in respect of the shares transferred shall be Foreign Share
Certificates; provided, however, if the stock records of the Company shall
disclose immediately prior to the time of such proposed transfer that (i) the
maximum percentage of outstanding shares of voting stock of any class allowed to
be owned by non-United States Citizens has been met or has been exceeded or (ii)
the maximum percentage of outstanding shares of voting stock of any class
allowed to be owned by non-United States Citizens would be exceeded as a result
of such proposed transfer, no transfer of shares of such class represented by
Domestic Share Certificates shall be made to non-United States Citizens.
If it shall be found by the Company that stock represented by a Domestic
Share Certificate is, in fact, owned of record or voted by or for the account of
a non-United States Citizen, the holder of such stock shall, upon the request of
the Secretary or the transfer agent of the Company, surrender such Domestic
Share Certificate for cancellation in exchange for the issuance of a Foreign
Share Certificate for such stock; provided, however, if the stock records of the
Company shall disclose immediately prior to the time of such proposed exchange
that (i) the maximum percentage of outstanding shares of voting stock of any
class allowed to be owned by non-United States Citizens has been met or has been
exceeded or (ii) the maximum percentage of outstanding shares of voting stock of
any class allowed to be owned by non-United States Citizens would be exceeded as
a result of such proposed exchange, then the exchange shall not be made and the
holder of such stock represented by a Domestic Share Certificate shall not be
entitled to receive dividends or to have any other rights, except the right to
transfer such stock to a United States Citizen.
The Board may establish from time to time reasonable procedures for
establishing the citizenship of stockholders of the Company and, without
limiting the foregoing, may require that in connection with each issue or
transfer of shares of the Company the purchaser or transferee shall certify his
citizenship status and such matters relevant thereto as the Board may require.
The Board may also establish from time to time such other reasonable
procedures as it may deem desirable for the purposes of implementing these
provisions.
Section 4. New Certificates. The Board of Directors may, or may designate
certain persons to, authorize the issuance of a new certificate or certificates
to replace any certificate or certificates theretofore issued by the Company
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors or such designated person may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative, to
give the Company a bond indemnity sufficient to indemnify it against any claim
that may be made against the Company on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 5. Transfer of Stock. Upon surrender to the Company or the transfer
agent of the Company of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the Company to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 6. Fixing Record Date. In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to such other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. Registered Stockholders. The Company shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
Dividends
Section 1. Dividends upon the capital stock of the Company, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Company available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Company, or for such other purpose
as the Directors shall think conducive to the interest of the Company, and the
Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE IX
Indemnification
Section 1. The Company shall indemnify any person who was or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a Director, officer or employee of the Company, or
is or was serving at the request of the Company as a Director, officer or
employee of another company, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Delaware. Such
indemnification (unless ordered by a court) shall be made as authorized in a
specific case upon a determination that indemnification of the Director, officer
or employee is proper in the circumstances because he has met the applicable
standards of conduct set forth in the General Corporation Law of the State of
Delaware. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (2) if such quorum is not obtainable, or even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
The foregoing right of indemnification shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any By-Law, agreement, vote of stockholders or disinterested Directors or
otherwise and shall continue as to a person who has ceased to be a Director,
officer or employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 2. Insurance. The Board of Directors shall have the power to
authorize to the extent permitted by the General Corporation Law of the State of
Delaware the purchase and maintenance of insurance on behalf of any person who
is or was a Director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a Director, officer, employee or agent
of another company, partnership, joint venture, trust or other enterprise
against any liability asserted against him or incurred by him in such capacity
or arising out of his status as such whether or not the Company would have the
power to indemnify him against such liability under the provisions of the
General Corporation Law of the State of Delaware.
ARTICLE X
Corporate Seal
The Corporate seal shall have inscribed thereon the name of the Company
and the words "Incorporated July l4, 1983, Delaware."
ARTICLE XI
Amendments
Any of these By- Laws may be altered, a mended or repealed by the
affirmative vote of at least two thirds of the Directors of the Company, which
shall include the affirmative vote of at least one Director of each class of the
Board of Directors if the Board shall then be divided into classes or by the
affirmative vote of the holders of seventy-five percent (75 %) of the shares of
the Company entitled to vote in the election of Directors, voting as one class.
EXECUTION COPY
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of May 10, 1995 to the Credit Agreement dated
as of March 25, 1994 (the "Agreement") among AMERICAN PRESIDENT COMPANIES, LTD.
(the "Borrower"), the BANKS party thereto and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent (the "Agent").
WHEREAS, certain Subsidiaries of the Borrower propose to exchange
ships and other assets with other Subsidiaries of the Borrower, and the
undersigned parties wish to amend the Agreement to permit such exchanges;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement has the
meaning assigned to such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Agreement shall, from and after date on which this Amendment becomes effective
as provided in Section 4 below, refer to the Agreement as amended hereby.
SECTION 2. Amendment to Permit Certain Exchanges. Section 5.15
of the Agreement is amended by deleting the word "and" at the end of clause (d);
redesignating clause (e) as clause (f) and changing the two references in said
Section to "clause (e)" to refer to "clause (f)"; and adding the following new
clause (e):
(e) any acquisition by a Subsidiary of all or substantially all
of the business or assets of any other Subsidiary; provided that the
business of each such Subsidiary shall consist of acquiring, owning,
leasing and/or operating a single ship; and
SECTION 3. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 4. Counterparts; Effectiveness. This Amendment may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto
were upon the same instrument. This Amendment shall become effective on the
date when the Agent shall have received duly executed counterparts hereof signed
by the Borrower and the Required Banks (or, in the case of any such party as to
which an executed counterpart shall not have been received, the Agent shall have
received telegraphic, telex, facsimile or other written confirmation from such
party of execution of a counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first above written.
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Thomas R. Meier
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
/s/ Diana H, Imhof
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Michael J. Dasher
Title: Managing Director
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Alicia Szendiuch
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By /s/ Makoto Masuda
Title: Deputy General Manager
ABN AMRO BANK N.V.
By /s/ Peter J. Melloni
Title: Vice President
By /s/ Larry Osborne
Title: Group Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Karen J. Andrews
Title: Vice President
EXECUTION COPY
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT dated as of July 12, 1995 to the Credit Agreement dated
as of March 25, 1994 as heretofore amended (the "Agreement") among AMERICAN
PRESIDENT COMPANIES, LTD. (the "Borrower"), the BANKS party thereto and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
WHEREAS, the Borrower proposes to repurchase shares of its common
stock, from time to time, for an aggregate purchase price not to exceed
$300,000,000 and wishes to amend certain covenants in the Agreement to mitigate
the effect of such purchases on calculations thereunder, and the undersigned
Banks are willing so to amend the Agreement provided that certain other changes
are made therein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References.
(a) Unless otherwise specifically defined herein, each term used
herein which is defined in the Agreement has the meaning assigned to such term
in the Agreement. Each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Agreement shall, from and
after date on which this Amendment becomes effective as provided in Section 6
below, refer to the Agreement as amended hereby.
(b) The following new definitions are added to Section 1.01 of
the Agreement in the appropriate alphabetical order:
"1995 Share Repurchase Program" means the program approved by the
Borrower's board of directors on July 21, 1995 (i) to repurchase shares
of the Borrower's common stock, from time to time, on the open market or
through a tender offer or otherwise for an aggregate purchase price not
to exceed $300,000,000 and (ii) to retire and cancel the shares of
common stock so repurchased.
"Rent" means, for any period, the total rental expense of
the Borrower and its Consolidated Subsidiaries for such period under
operating leases that have initial noncancelable terms in excess of one
year, calculated on a consolidated basis in the same manner as total
rental expense was calculated for purposes of the last sentence of Note
6 to the Borrower's consolidated financial statements for its fiscal
year ended December 30, 1994.
(c) The definition of "Consolidated Tangible Net Worth" is amended in
its entirety to read as follows:
"Consolidated Tangible Net Worth" means at any date an amount
equal to the sum of:
(A) the amount that would, in accordance with generally
accepted accounting principles, be reflected as 9% Series C
Cumulative Convertible Preferred Stock and/or 9% Series D
Convertible Preferred Stock of the Borrower on a balance sheet of
the Borrower at such date,
(B) the consolidated stockholders' equity of the Borrower
and its Consolidated Subsidiaries less their consolidated
Intangible Assets and
(C) an amount (not to exceed $300,000,000) equal to the
aggregate amount by which such consolidated stockholders' equity
shall have been reduced on or before such date as a result of the
Borrower's purchase of shares of its own common stock pursuant to
the 1995 Share Repurchase Program,
all determined as of such date. For purposes of this definition
"Intangible Assets" means the amount (to the extent reflected in
determining such consolidated stockholders' equity) of (i) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of assets of a going concern business made within twelve
months after the acquisition of such business) subsequent to December
31, 1993 in the book value of any asset owned by the Borrower or any of
its Consolidated Subsidiaries, (ii) all Investments in unconsolidated
Subsidiaries and other Affiliates and (iii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, anticipated future benefit of
tax loss carry-forwards, copyrights, organization or developmental
expenses
including research and developmental expenses and other intangible
assets.
SECTION 2. Consolidated Interest Coverage Ratio. Section 5.10 of
the Agreement is amended by changing the ratio contained in the first sentence
thereof from 3.0 to 1 to 3.5 to 1.
SECTION 3. Consolidated Leverage Ratio. Section 5.11 of the
Agreement is amended by replacing the existing table of ratios with the
following table:
Period Ratio
Effective Date 1.4 to 1
through 12/31/95
1/1/96 through 12/31/96 1.2 to 1
1/1/97 and thereafter 1.0 to 1
SECTION 4. Consolidated Fixed Charge Coverage Ratio. The
following new covenant is added after Section 5.15 of the Agreement:
SECTION 5.16. Consolidated Fixed Charge Coverage Ratio. At the
end of each fiscal quarter of the Borrower ending after December 31,
1995, the Consolidated Fixed Charge Coverage Ratio for the period of
four consecutive fiscal quarters of the Borrower then ended shall not be
less than (i) 1.80 to 1 if such period ends on or before December 31,
1996 or (ii) 1.85 to 1 if such period ends after December 31, 1996.
The "Consolidated Fixed Charge Coverage Ratio" means the ratio
determined pursuant to the following formula:
CFCCR= CPE + IE + DP + R
-----------------
IE + R
CFCCR = Consolidated Fixed Charge Coverage Ratio
CPE = Consolidated Pretax Earnings
IE = Interest Expense
DP = Depreciation
R = Rent
SECTION 5. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts; Effectiveness. This Amendment may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Amendment shall become effective on the date when the
Agent shall have received:
(i) duly executed counterparts hereof signed by the Borrower and
the Required Banks (or, in the case of any such party as to which an
executed counterpart shall not have been received, the Agent shall have
received telegraphic, telex, facsimile or other written confirmation
from such party of execution of a counterpart hereof by such party) and
(ii) for the account of each Bank, an amendment fee equal to 1/8
of 1% of such Bank's Commitment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first above written.
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Thomas R. Meier
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
/s/ Diana H, Imhof
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Michael J. Dasher
Title: Managing Director
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Alicia Szendiuch
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By /s/ Makoto Masuda
Title: Joint General Manager
ABN AMRO BANK N.V.
By /s/ Larry Osborne
Title: Group Vice President
By /s/ Daniel P. Taylor
Title: Corporate Bank Officer
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Gerald F. Mackin
Title: Authorized Agent
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from the 10-Q of American
President Companies, Ltd. for the quarters ended June 30, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> JUN-30-1995
<CASH> 179,467
<SECURITIES> 31,510
<RECEIVABLES> 302,819<F1>
<ALLOWANCES> 0
<INVENTORY> 41,576
<CURRENT-ASSETS> 607,185
<PP&E> 1,967,948
<DEPRECIATION> 942,941
<TOTAL-ASSETS> 1,744,359
<CURRENT-LIABILITIES> 409,784
<BONDS> 436,278
<COMMON> 27,462
75,000
0
<OTHER-SE> 522,313
<TOTAL-LIABILITY-AND-EQUITY> 1,744,359
<SALES> 0
<TOTAL-REVENUES> 1,414,951
<CGS> 0
<TOTAL-COSTS> 1,346,966<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,041
<INCOME-PRETAX> 24,710
<INCOME-TAX> 9,390
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,320
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.42
<FN>
<F1>The Allowance for Doubtful Accounts, included in Receivables, amounted to
$20,988 at June 30, 1995.
<F2>The Provision for Doubtful Accounts, included in Total-Costs, amounted to
$6,249 for the 26 weeks ended June 30, 1995.
</FN>
</TABLE>
