______________________________________________________________________________
______________________________________________________________________________
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 28, 1996
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
APL LIMITED
(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 26, 1996
____________________________ ____________________________
Common Stock, $.01 par value 25,769,742
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
APL LIMITED
INDEX
PART I. FINANCIAL INFORMATION Page
_____________________
Item 1. Consolidated Financial Statements
Statement of Income 3
Balance Sheet 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 12-21
Part II. OTHER INFORMATION
_________________
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
______________________________________________________________________________
(In thousands, except Quarter Ended 26 Weeks Ended
per share amounts) June 28 June 30 June 28 June 30
1996 1995 1996 1995
______________________________________________________________________________
REVENUES $641,055 $674,290 $1,367,392 $1,414,951
______________________________________________________________________________
EXPENSES
Operating, Net of Operating-
Differential Subsidy 560,624 606,257 1,224,151 1,293,659
General and Administrative 12,110 18,391 25,732 39,731
Depreciation and Amortization 25,764 24,993 57,385 53,307
______________________________________________________________________________
Total Expenses 598,498 649,641 1,307,268 1,386,697
______________________________________________________________________________
OPERATING INCOME 42,557 24,649 60,124 28,254
OTHER INCOME (EXPENSE)
Interest Income 6,253 5,369 12,998 11,497
Interest Expense (14,826) (7,018) (32,560) (15,041)
______________________________________________________________________________
Income Before Taxes 33,984 23,000 40,562 24,710
Federal, State and
Foreign Tax Expense 13,122 8,740 15,819 9,390
______________________________________________________________________________
NET INCOME $20,862 $14,260 $ 24,743 $ 15,320
______________________________________________________________________________
Less Dividends on Preferred Stock 1,687 3,375
NET INCOME APPLICABLE TO
COMMON STOCK $20,862 $12,573 $ 24,743 $ 11,945
______________________________________________________________________________
______________________________________________________________________________
EARNINGS PER COMMON SHARE
______________________________________________________________________________
Primary $0.78 $0.45 $0.94 $0.43
Fully Diluted $0.78 $0.44 $0.93 $0.42
______________________________________________________________________________
DIVIDENDS PER COMMON SHARE $0.10 $0.10 $0.20 $0.20
______________________________________________________________________________
______________________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED BALANCE SHEET (Unaudited)
_______________________________________________________________
(In thousands, except share amounts) June 28December 29
1996 1995
_______________________________________________________________
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 141,739 $ 76,564
Short-Term Investments 156,220 59,086
Trade and Other Receivables, Net 243,938 245,490
Fuel and Operating Supplies 30,665 40,358
Prepaid Expenses and Other Current Assets 71,758 80,840
_______________________________________________________________
Total Current Assets 644,320 502,338
_______________________________________________________________
PROPERTY AND EQUIPMENT
Ships 905,040 1,091,991
Containers, Chassis and Rail Cars 791,798 801,274
Leasehold Improvements and Other 286,168 284,850
Construction in Progress 9,106 25,333
_______________________________________________________________
1,992,112 2,203,448
Accumulated Depreciation and Amortization (847,542) (961,971)
_______________________________________________________________
Property and Equipment, Net 1,144,570 1,241,477
_______________________________________________________________
INVESTMENTS AND OTHER ASSETS 144,328 134,968
_______________________________________________________________
Total Assets $1,933,218 $1,878,783
_______________________________________________________________
_______________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Portion of Long-Term Debt
and Capital Leases $ 3,540 $ 11,810
Accounts Payable and Accrued Liabilities 420,226 425,378
_______________________________________________________________
Total Current Liabilities 423,766 437,188
_______________________________________________________________
DEFERRED INCOME TAXES 156,168 157,480
_______________________________________________________________
OTHER LIABILITIES 136,215 127,858
_______________________________________________________________
LONG-TERM DEBT 725,223 685,954
CAPITAL LEASE OBLIGATIONS 963 1,133
_______________________________________________________________
Total Long-Term Debt and Capital Lease
Obligations 726,186 687,087
_______________________________________________________________
COMMITMENTS AND CONTINGENCIES
_______________________________________________________________
STOCKHOLDERS' EQUITY
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding-
25,789,000 in 1996 and 25,669,000 in 1995 25,789 25,669
Additional Paid-In Capital 3,939 1,943
Retained Earnings 461,155 441,558
_______________________________________________________________
Total Stockholders' Equity 490,883 469,170
_______________________________________________________________
Total Liabilities and
Stockholders' Equity $1,933,218 $1,878,783
_______________________________________________________________
_______________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
________________________________________________________________
(In thousands) 26 Weeks Ended
June 28 June 30
1996 1995
________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 24,743 $15,320
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 57,385 53,307
Deferred Income Taxes 5,762 2,169
Change in Receivables 3,552 (22,083)
Change in Fuel and Operating Supplies 7,769 (5,027)
Change in Prepaid Expenses and
Other Current Assets (1,082) (8,648)
(Gain) Loss on Sale of Property and Equipment (2,079) 287
Gain on Sale of Distribution Services (6,900)
Change in Accounts Payable and
Accrued Liabilities 5,320 (48)
Change in Restructuring Charge Liability (11,572)
Other (20,924) 5,724
________________________________________________________________
Net Cash Provided by Operating Activities 61,974 41,001
_________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (89,633)(138,521)
Proceeds from Sales of Property and Equipment 160,513 901
Proceeds from Sale of Distribution Services 2,000
Purchase of Short-Term Investments (335,662) (40,889)
Proceeds from Sales of Short-Term Investments 238,528 224,277
Other 1,380 1,011
________________________________________________________________
Net Cash Provided by (Used in)
Investing Activities (22,874) 46,779
________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Debt 62,215 71,835
Repayments of Debt (20,660) (12,762)
Repayments of Capital Lease Obligations (10,822) (2,076)
Dividends Paid (5,144) (8,845)
Debt Issue Costs (1,617)
Other 2,114 1,917
________________________________________________________________
Net Cash Provided by Financing Activities 26,086 50,069
________________________________________________________________
Effect of Exchange Rate Changes on Cash (11) 1,864
________________________________________________________________
NET INCREASE IN CASH AND CASH EQUIVALENTS 65,175 139,713
________________________________________________________________
Cash and Cash Equivalents at Beginning of Period 76,564 39,754
________________________________________________________________
Cash and Cash Equivalents at End of Period $141,739 $179,467
________________________________________________________________
________________________________________________________________
SUPPLEMENTAL DATA:
________________________________________________________________
CASH PAID FOR:
Interest, Net of Capitalized Interest $ 31,523 $15,098
Income Taxes, Net of Refunds $ 8,584 $ 9,292
________________________________________________________________
NONCASH INVESTING ACTIVITIES:
Notes Receivable from the Sale of
Distribution Services $ 6,000
________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Significant Accounting Policies
The consolidated financial statements presented herein
include the accounts of APL Limited 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 29, 1995 (Commission File No. 1
8544).
Company Name and Ticker Symbol Changes
Effective June 1, 1996, American President Companies, Ltd.
effected a name change to APL Limited. In addition, the
company changed its ticker symbol to APL.
Income Taxes
The provision for income taxes has been calculated using
the effective tax rate estimated for the respective years.
The company's estimated income tax rate for 1996 is 39%. The
1996 effective tax rate includes the expected effects of
nondeductible items on estimated annual income. The full year
effective tax rate for 1995 was 43%, which was adjusted from
the expected income tax rate at the end of the second quarter
and first half of 1995 of 38% in the fourth quarter to reflect
the increased effect of nondeductible items on annual income
after the fourth quarter restructuring charge.
Note 2. United States Maritime Agreements
Operating-Differential Subsidy Agreement
Amounts paid under the company's Operating-Differential
Subsidy ("ODS") agreement with the United States Maritime
Administration ("MarAd") were $11.8 million and $14.1 million
for the quarters ended June 28, 1996 and June 30, 1995,
respectively, and $25.4 million and $30.5 million for the 26
week periods ended June 28, 1996 and June 30, 1995,
respectively, and have been included as a reduction of
operating expenses. The reduction in subsidy in 1996 reflects
the sale by the company of six U.S.-flag vessels to Matson
Navigation Company, Inc. ("Matson") in December 1995 and
January 1996 as discussed in Note 6.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 3. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at June 28, 1996
and December 29, 1995, were as follows:
_______________________________________________________________
(In thousands) June 28 December 29
1996 1995
_______________________________________________________________
Accounts Payable $ 59,824 $58,144
Accrued Liabilities 249,512 243,228
Current Portion of Insurance Claims 16,957 19,564
Income Taxes Payable 7,742 5,855
Unearned Revenue 58,898 59,722
Restructuring Charge 27,293 38,865
_______________________________________________________________
Total Accounts Payable and
Accrued Liabilities $420,226 $425,378
_______________________________________________________________
_______________________________________________________________
In the fourth quarter of 1995, the company recorded a one
time charge of $48.4 million related to the accelerated
completion of its reengineering program and other
organizational changes. The charge included $36.4 million
related to the elimination of approximately 950 positions in
company operations that are being reorganized or reduced in
size. As of June 28, 1996, a total of $15.3 million in
severance payments have been made, $10.4 million of which were
made in the first half of 1996. In addition, $5.8 million in
equipment and leasehold improvements have been written off for
closed offices and projects eliminated, $1.2 million of which
was in the first half of 1996.
Note 4. Long-Term Debt
Long-Term Debt at June 28, 1996 and December 29, 1995
consisted of the following:
_______________________________________________________________
(In thousands) June 28 December 29
1996 1995
_______________________________________________________________
Vessel Mortgage Note Due Through 2008 (1) $391,555 $338,044
8% Senior Debentures $150 million Face Amount
Due on January 15, 2024 (2) 147,183 147,169
7 1/8% Senior Notes $150 million Face Amount
Due on November 15, 2003 (2) 148,311 148,227
Series I 8% Vessel Mortgage Bonds
Due Through 1997(3) 21,441 33,353
8% Refunding Revenue Bonds Due
on November 1, 2009 12,000 12,000
Other 7,115 7,161
_______________________________________________________________
Total Debt 727,605 685,954
Current Portion 2,382
_______________________________________________________________
Total Long-Term Debt $725,223 $685,954
_______________________________________________________________
_______________________________________________________________
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt (continued)
(1)The company has taken delivery of six new C11-class vessels.
To finance a portion of the purchase price of these vessels,
the company borrowed approximately $340 million in 1995 and
$62 million in 1996 under a loan agreement with European
banks pursuant to vessel mortgage notes due through 2008.
Principal payments are due in semiannual installments over a
12-year period commencing six months after the delivery of
the respective vessels. The interest rates on the notes are
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 four principal payments. Aggregate deferred payments are
due at the end of the term of the notes. Principal payments
on this debt are classified as long-term on the basis that
the company has the ability to defer at least two payments.
The notes issued under this loan agreement are
collateralized by the C11-class vessels.
The company entered into interest rate swap agreements on
four of the vessel mortgage notes, with a notional amount of
$268.7 million at June 28, 1996, to exchange the variable
interest rates on such notes for fixed rates for periods
ranging between 7 and 12 years. The current variable
interest rates for all of the vessel mortgage notes range
between 6.165% and 6.65%. As a result of the swaps, the
effective interest rates range between 6.625% and 7.531% for
the first five years after inception, and 6.625% and 7.656%
for the remaining terms of the swaps. Net payments or
receipts under the agreements are included in interest
expense.
(2)The Senior Notes had an effective interest rate of 7.325%,
and an unamortized discount of $1.7 million and $1.8 million
at June 28, 1996 and December 29, 1995, respectively. The
Senior Debentures had an effective interest rate of 8.172%,
and an unamortized discount of $2.8 million at June 28, 1996
and December 29, 1995. Interest payments are due
semiannually.
(3)Principal payments on each of the company's Series I Vessel
Mortgage Bonds are due in equal semiannual installments of
$2.4 million. 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 two of the
remaining cash payments, which it has not yet exercised.
Principal amounts are classified as long-term debt when the
company's ability to issue Series II Bonds in lieu of the
remaining semiannual cash payments extends beyond one year.
The bonds issued under this loan agreement are
collateralized by the five C10-class vessels.
The company has a credit agreement with a group of banks
which provides for an aggregate commitment of $200 million
through March 1999. The credit agreement 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.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt (continued)
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. Stockholders' Equity
Common Stock
On April 30, 1996, the Board of Directors approved a
program to repurchase, from time to time, up to an aggregate of
$50 million of its common stock through open market or
privately negotiated transactions. As of the end of the second
quarter of 1996, no repurchases had been made.
Earnings Per Common Share
For the second quarter and first half of 1996, earnings
per common share on a primary and fully diluted basis were
computed by dividing net income by the weighted average number
of common shares and common equivalent shares outstanding.
Primary earnings per share for the second quarter and first
half of 1995 was 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. For the second quarter of 1995, fully diluted
earnings per share were computed based on the assumption that
the Series C Cumulative Convertible Preferred Stock ("Series C
Stock") was converted into common stock. Fully diluted
earnings per share for the first half of 1995 was computed
based upon the assumption that Series C Stock was not converted
into common stock, as the result would be antidilutive. The
number of shares used in these computations were as follows:
_______________________________________________________________
Weighted Average Number of Common and Common Equivalent Shares
_______________________________________________________________
(In millions) Quarter Ended 26 Weeks Ended
June 28 June 30 June 28 June 30
1996 1995 1996 1995
_______________________________________________________________
Primary 26.6 28.1 26.3 28.0
Fully Diluted 26.7 32.1 26.6 28.1
_______________________________________________________________
_______________________________________________________________
Weighted average shares for the second quarter and first
half of 1996 reflect the repurchase of six million shares of
the company's common stock in August through October 1995.
Supplementary Earnings Per Share Data
In July 1995, the Series C Stock was converted into
3,961,498 shares of common stock. Had the Series C Stock been
converted at the beginning of 1995, primary earnings per share
for the second quarter and first half of 1995 would have been
$0.44 and $0.48, respectively, compared with $0.45 and $0.43 as
reported. Fully diluted earnings per share for the second
quarter and first half of 1995 would have been $0.44 and $0.48,
respectively, compared with $0.44 and $0.42 as reported.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 5. Stockholders' Equity (continued)
Stock Bonus Plan
During the first half of 1996, the company issued
5,185 shares of common stock and 13,298 phantom shares under
the 1995 Stock Bonus Plan (the "Plan"). The Plan
permits certain executives and key employees to receive all
or part of their bonuses in the form of shares of
common stock or phantom shares. In
addition, non-employee directors may elect to
receive all or part of their annual retainers and/or
meeting fees in the form of shares of common stock or
phantom shares. Participants receive a premium in the form of
additional shares equal to 17.6% of the number of shares
of common stock or phantom shares received, which vest
over a two year period.
Note 6. Commitments and Contingencies
Commitments
Alliances
In connection with the sale of the company's K10-
class vessel construction contract to a third party in
September 1995, the company, Mitsui OSK Lines, Ltd.
("MOL"), Orient Overseas Container Line ("OOCL") and
Nedlloyd Lines B.V. ("NLL"), formed a joint venture company
that agreed to charter back the K10 vessels for seven years,
in which their respective shares are each 25%. OOCL has
agreed to subcharter the K10s from the joint venture for
seven years for use in the AsiaEurope trade, replacing
three of its 2,800 twenty-foot
equivalent unit F-class vessels. The three replaced F-
class vessels are being chartered to the joint venture for
ten years and subchartered by the company from the joint
venture for four years. The subcharters for two of such
vessels have been assumed by Transportacion Maritima
Mexicana ("TMM") for a period of three years. TMM's
obligations under the assumed subcharters have been
guaranteed by the company. The company has been deploying
the third F-class vessel since May 1996 in its West
Asia/Middle East service.
The company and Matson commenced service under a 10-
year alliance in February 1996. In connection with the
alliance, the company sold Matson six of its U.S.-flag ships
(three C9-class vessels and three C8-class vessels) and
certain of its assets in Guam for approximately $163
million in cash. One of the ships was sold in December
1995, and the remaining five vessels were sold in January
1996. The net gain on the sale of the four vessels used in
the alliance and the assets in Guam, after deducting related
costs, is estimated to be $2.5 million, depending upon
final vessel modification and drydock costs. The net gain
on the sale will be deferred and amortized over the 10-year
term of the alliance. The net gain on the sale of the
fifth vessel was $1.6 million and was recognized in the
first quarter of 1996. Four of these vessels, together with
a fifth Matson vessel, are currently being used in the
alliance. Matson is operating the vessels in the alliance,
which serves the U.S. West Coast, Hawaii, Guam, Korea and
Japan, and has the use of substantially all the westbound
capacity. The company has the use of substantially all
the alliance vessels' eastbound capacity.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Commitments and Contingencies (continued)
Commitments (continued)
Facilities, Equipment and Services
The company had outstanding purchase commitments
to acquire cranes, facilities, equipment and services
totaling $106.1 million at June 28, 1996. 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 28, 1996, the company had
outstanding letters of credit totaling $28.6 million,
which guarantee the company's performance
under certain of its commitments.
Contingencies
In October 1995, Lykes Bros. Steamship Co., Inc.
("Lykes") filed a petition seeking protection from its
creditors under Chapter 11 of the U.S. Bankruptcy laws.
The company chartered four L9-class vessels from Lykes, and
Lykes operates three Pacesetter vessels chartered from the
company. Two L9s had been redelivered to Lykes as of
June 28, 1996 and a third L9 was subsequently
redelivered. The remaining L9, which is scheduled to be
returned in late September 1996, and the three Pacesetters
are currently being operated by the company and Lykes,
respectively, under Bankruptcy Court order dated April 4,
1996. The L9-class vessel is used in the company's West
Asia/Middle East service. On July 26, 1996, the Bankruptcy
Court gave its final approval to a settlement agreement between
the company and Lykes, which confirms the company's continued
use of the L9 still on charter until mid-September 1996. The
settlement also allows Lykes the use of the three Pacesetters
until December 31, 1997 and requires Lykes to cure liens it has
created on those vessels. The settlement agreement is subject
to certain conditions and may be appealed. The potential
consequence of Lykes' Chapter 11 petition are not expected to
have a material adverse impact on the company's consolidated
financial position or operations.
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.
Note 7. Sale of Domestic Distribution Services
On May 2, 1996, the company sold its rights to service
certain domestic intermodal customers of APL Land Transport
Services, Inc. ("APLLTS"), a wholly owned subsidiary of the
company, to Hub Group, Inc. ("Hub") for $2.0 million in cash
and $6.0 million in notes, and realized a pre-tax gain of $6.9
million. In addition, APLLTS and Hub entered into a 10-year
agreement whereby APLLTS will provide stacktrain services to
Hub. Revenues related to the servicing rights sold represented
approximately 6% of the company's consolidated 1995 revenues.
<PAGE>
APL Limited and Subsidiaries
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the quarter and 26
weeks ended June 28, 1996 should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the company's Annual Report
on Form 10-K for the year ended December 29, 1995.
RESULTS OF OPERATIONS
Second Quarter Year to Date
(In millions) 1996 1995 Change 1996 1995 Change
______________________________________________________________________
Revenues
______________________________________________________________________
International Transportation $482 $495 (3%) $1,018 $1,022 0%
North America Transportation 159 179 (11%) 349 393 (11%)
______________________________________________________________________
Operating Income $ 42 $ 25 73% $ 60 $ 28 >100%
______________________________________________________________________
Pretax Income $ 34 $ 23 48% $ 41 $ 25 64%
______________________________________________________________________
______________________________________________________________________
Operating income for the second quarter and first half of
1996 was $42 million and $60 million, respectively, compared
with operating income of $24 million and $28 million in the
second quarter and first half of 1995, respectively. Included
in operating income for the second quarter and first half of
1996 was a $6.9 million gain from the sale of the company's
rights to service certain domestic intermodal customers. Also
included in operating income for the first half of 1996 was a
$1.6 million gain from the sale of a vessel which occurred in
the first quarter.
In the second quarter and first half of 1996, the
company's operating income improved primarily as a result of
reduced per unit operating costs, reduced general and
administrative expenses, and improved average revenue per forty
foot equivalent unit ("FEU") in the company's intra-Asia
market, in each case as compared with the second quarter and
first half of 1995. These factors were partially offset by
reductions in revenues in the company's U.S. import and U.S.
export markets and increases in interest expense in the second
quarter and first half of 1996 as compared with the same
periods in 1995.
INTERNATIONAL TRANSPORTATION (1)
(Volumes in thousands of FEUs)
Second Quarter Year to Date
1996 1995 Change 1996 1995 Change
_____________________________________________________________________
Import
Volumes 48.1 46.6 3% 95.2 99.0 (4%)
Average Revenue per FEU $3,633 $4,303 (16%) $3,764 $4,179 (10%)
_____________________________________________________________________
Export
Volumes 34.0 40.8 (17%) 76.5 85.0 (10%)
Average Revenue per FEU $3,207 $3,236 (1%) $3,209 $3,201 0%
_____________________________________________________________________
Intra-Asia
Volumes 43.8 43.8 0% 91.0 89.8 1%
Average Revenue per FEU $2,190 $1,989 10% $2,183 $1,992 10%
_____________________________________________________________________
Asia-Europe
Volumes 10.0 4.2 >100% 18.9 4.5 >100%
Average Revenue per FEU $2,097 $2,424 (13%) $2,182 $2,444 (11%)
_____________________________________________________________________
_____________________________________________________________________
<PAGE>
(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.
The company's U.S. import volumes increased in the second
quarter of 1996 compared with the same period last year
primarily as a result of increases in military dry cargo, and
commercial dry cargo from South China. U.S. import volumes
decreased in the first half of 1996 compared with the
first half of 1995 due to decreases in shipments of
commercial dry cargo, primarily from Hong Kong, Taiwan,
Malaysia and the Philippines, particularly in the first
quarter of 1996. The U.S. import market continues to be
affected by lower overall volumes, excess capacity and strong
competition.
Volumes of the company's U.S. export cargo decreased
in the second quarter and first half of 1996 compared with
the second quarter and first half of 1995, due primarily
to the sale by the company of six ships and its Guam
business to Matson, which resulted in a decrease in the
company's available vessel capacity in this market.
Additionally, the company generally carried heavier cargo
in the first half of 1996, which constrained utilization
of available vessel capacity.
Utilization of the company's share of alliance
transPacific containership capacity in the first half of
1996 was 69% and 85% for U.S. import and U.S. export
shipments, respectively, compared with 81% and 99%,
respectively, in the first half of 1995.
The company's intra-Asia volumes were unchanged in
the second quarter of 1996 compared with last year's second
quarter as decreased commercial dry cargo was offset by
increased refrigerated cargo. Intra-Asia volumes increased
slightly in the first half of 1996 compared with the first
half of 1995 as increased refrigerated cargo more than
offset decreased commercial dry cargo. In addition,
reduced shipments to and from Kobe, Japan resulting from
the January 1995 earthquake adversely affected the first
half of 1995.
Service between Asia and Europe by the company began
in March 1995 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 the
second quarter of 1995. In the second quarter and first
half of 1996, volumes from Asia to Europe were primarily
from Hong Kong, the People's Republic of China and Japan,
and included such commodities as general merchandise,
electronic goods and footwear. Shipments from Europe to
Asia in the second quarter and first half 1996 were
primarily general merchandise, paper products, and
industrial machinery and parts from the Netherlands, the
United Kingdom and Denmark.
Average revenue per FEU for the company's U.S.
import shipments decreased in the second quarter and first
half of 1996 compared with the second quarter and first
half of 1995 due to decreases in negotiated service
contract rates beginning in late 1995 and continuing into
the second quarter of 1996. In late 1995, the company
initiated pricing actions for specific commodities in
specific trade lanes in response to competitive
conditions and loss of market share in its U.S. import
market. Subsequently, competitors and the company have
further lowered rates, and considerable rate instability in
the U.S. import market continues to exist.
Destabilization of rates, if extensive, could have a
material adverse impact on carriers in this trade, including
the company.
<PAGE>
The slight decline in average revenue per FEU in
the company's U.S. export market in this year's second
quarter compared with the same period in 1995 was due to a
decrease in rates for military dry cargo, partially offset
by increases in refrigerated cargo rates. Average revenue
per FEU for the first half of 1996 compared with the
first half of 1995 was
relatively unchanged as decreased rates for military dry
cargo offset increased refrigerated cargo rates.
Average revenue per FEU in the company's intra-Asia
market increased in the second quarter and first half of 1996
compared with the second quarter and first half of 1995
attributable to a higher proportion of higher-rated
refrigerated and longerdistance shipments and modest general
rate increases since the second quarter of 1995.
Average revenue per FEU in the company's Asia-
Europe market decreased in the second quarter and first half
of 1996 as compared to the second quarter and first half
of 1995. Eastbound service in the Asia-Europe market,
which includes lower-rated cargo than the westbound
service, began in the second quarter of 1995 and resulted
in a reduction in average revenue per FEU. Additionally,
rate deterioration in this market resulting from excess
vessel capacity contributed to lower average revenue per
FEU.
Other international transportation revenues, which
include cargo handling, freight consolidation, logistics
services and charter hire revenues, totaled $82 million and
$174 million in the second quarter and first half of
1996, respectively, compared with $74 million and $153
million in the second quarter and first half of 1995,
respectively. This increase reflects increased cargo
handling revenues in Asia and North America resulting from
the company's alliances, and increased charter hire
revenues.
The company incurred incremental operating expenses and
a loss of ocean freight revenues during the second quarter
and first half of 1995 as a result of the January 1995
earthquake in Kobe, Japan, in which the ocean terminal
leased by the company was extensively damaged. The
company expects substantially all of these expenses and
lost revenues to be recovered through its business
interruption insurance and has submitted its claim to its
insurers. Management recorded its best estimate of
the recovery in other international transportation
revenues in 1995.
The alliance agreements between the company, OOCL,
MOL, NLL and Malaysian International Shipping Corporation
BHD, were fully implemented in the first quarter of
1996. Also implemented in the first quarter of 1996
was the alliance between the company and Matson. The
company and TMM are parties to an agreement for a
reciprocal charter of vessel space. The company and TMM
have entered into negotiations with respect to the
reciprocal charter of increased vessel space. It is
currently expected that a final agreement will be
completed by the end of the third quarter of 1996. However,
no assurances can be given as to whether or when those
negotiations will be successfully completed. The company
and TMM have agreed to continue to exchange vessel space
pending finalization of a revised agreement.
Under the company's ODS agreement with MarAd,
expiring December 31, 1997, payments to the company were
approximately $25 million and $31 million in the first half
of 1996 and 1995, respectively. As a result of its sale of
six U.S.-flag vessels to Matson, the company expects ODS
payments in 1996 to be between $35 million and $40
million, compared with $62 million in 1995.
<PAGE>
Proposed maritime support legislation providing for a
10year subsidy program with up to $100 million in annual
payments to be requested and appropriated on a year-to-year basis
has passed the U.S. House of Representatives and is
awaiting consideration before the U.S. Senate. It would
provide $2.3 million per vessel per year, compared with
$3.1 million per vessel under ODS. 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.
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.
In April 1996, legislation was introduced in the
U.S. House of Representatives that would substantially
modify the Shipping Act of 1984 (the "Shipping Act"). The
Shipping Act, among other things, provides the company with
certain immunity from antitrust laws and requires the company
and other carriers in U.S. foreign commerce to file
tariffs publicly. This
legislation, the Ocean Shipping Reform Act ("HR2149"),
would, if enacted, be phased in during 1997 and 1998
and would eliminate government tariff filing and
enforcement, allow confidential and independent contracts
between shippers and ocean carriers, strengthen provisions
that prohibit predatory activities by foreign carriers and
prescribe certain oversight responsibilities within the
government while continuing the company's existing
antitrust immunity. A similar bill was introduced in the
U.S. Senate thereafter which has been amended in several
respects. The company is unable to predict whether this or
other proposed legislation will be enacted or whether, if
enacted, it will contain terms similar to those proposed.
Enactment of legislation modifying the Shipping Act,
depending upon its terms, could have a material adverse
impact on the competitive environment in which the company
operates and on the company's results of operations.
For the remainder of 1996, the company currently
expects continuing strong markets in its intra-Asia and
refrigerated trades. Additionally, the company currently
expects lower U.S. export volumes than in 1995, reflecting
the sale of the Guam business and reduced market demand.
In the company's U.S. import market, the company
currently expects challenging conditions for the
remainder of the year, characterized by excess capacity,
flat or lower volumes and reduced rates. The
extent to which these conditions materialize depends
upon developments such as, but not limited to, changes in
market growth rates, general economic and political
conditions in the markets served, the amount and timing
of an anticipated significant increase in industry
capacity, the extent of rate reductions in the company's
markets, successful continuation of the company's alliances,
and the timing and extent of industry deregulation.
<PAGE>
NORTH AMERICA TRANSPORTATION (1)
(Volumes in thousands of FEUs)
Second Quarter Year to Date
1996 1995 Change 1996 1995 Change
_________________________________________________________________
Revenues (2) (In millions)
Stacktrain $ 128 $ 124 3% $ 268 $ 267 0%
Non-Stacktrain 31 55 (43%) 81 126 (36%)
_________________________________________________________________
Stacktrain Volumes
North America 102.9 96.5 7% 217.7 206.8 5%
International 38.2 43.3 (12%) 81.2 94.8 (14%)
_________________________________________________________________
Stacktrain Average
Revenue per FEU (2) $1,244 $1,284 (3%) $1,232 $1,291 (5%)
_________________________________________________________________
_________________________________________________________________
(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 decreased 11% in the second quarter and first half
of 1996 compared with the same periods in 1995, primarily as a
result of the sale of the company's rights to service certain
domestic intermodal customers early in the second quarter of
1996. The sale reduced revenues and related operating costs in
the company's North America operations in the second quarter
and first half of 1996, and is expected to reduce revenues and
related operating costs in future quarters. Also contributing
to the revenue decline were lower rates due to increased
competition, industry-wide softness in demand and excess
capacity. Partially offsetting the decline in revenues in the
second quarter of 1996 compared with the same period in 1995
was an increase in the company's North America stacktrain
revenues primarily due to increased volumes in the U.S. and
Mexico markets.
During the remainder of 1996, the company currently
expects modest growth in demand in the North America stacktrain
market. Demand for automotive shipments is expected to be
strong but is dependent upon conditions in the U.S. and Mexican
economies and the extent to which U.S. automakers continue to
operate in Mexico, among other factors. No assurances can be
given that growth in demand in these markets will materialize.
<PAGE>
TRANSPORTATION OPERATING EXPENSES
(In millions, except Second Quarter Year to Date
Operating Cost per FEU) 1996 1995 Change 1996 1995 Change
____________________________________________________________________
Land Transportation $ 211 $ 233 (9%) $ 463 $ 513 (10%)
Cargo Handling 148 140 6% 306 292 5%
Vessel, Net 83 92 (10%) 193 181 6%
Transportation Equipment 49 50 (2%) 107 105 2%
Information Systems 11 11 0% 22 26 (16%)
Other 58 81 (27%) 133 177 (24%)
____________________________________________________________________
Total $ 560 $ 607 (8%) $1,224 $1,294 (5%)
____________________________________________________________________
Operating Cost per FEU (1) $2,504 $2,803 (11%) $2,618 $2,859 (8%)
Operating Ratio (1) 93% 96% 96% 98%
____________________________________________________________________
____________________________________________________________________
(1)Operating Costs used in these calculations include
Operating, General and Administrative, and Depreciation and
Amortization expenses, some of which are associated with
certain International and North America revenues that are
not volume related. Prior periods have been restated for
comparability.
The strengthening of the U.S. dollar relative to the
Japanese yen had a positive impact on the 1996 second quarter
and first half operating expenses of approximately $7 million
and $10 million, respectively, compared with the same periods
in 1995. The yen/dollar exchange rate averaged 106 and 107 yen
to the dollar in the second quarter and first half of 1996,
respectively, compared with 84 and 89 yen to the dollar in the
second quarter and first half of 1995, respectively.
Land transportation expenses decreased in the second
quarter and first half of 1996 from the comparable periods in
1995 due to the sale during the second quarter of 1996 of the
rights to service certain domestic intermodal customers and
reduced rail rates. Additionally, company controlled trucking
expenses declined in the second quarter and first half of 1996,
as a result of the company's sale of its U.S. trucking
operations in June 1995.
Cargo handling expenses increased in the second quarter
and first half of 1996 compared with 1995, primarily as result
of higher stevedoring volumes largely from the company's
alliances, and higher rates in certain locations. The revenues
for these services provided by the company to its alliance
partners are included in other transportation revenues. This
increase was partially offset by lower costs resulting from a
weaker Japanese yen compared with the U.S. dollar in the second
quarter and first half of 1996 compared with the 1995 periods.
Vessel expenses decreased in the second quarter of 1996
compared with second quarter of 1995 primarily as a result of
cost savings from the sale of six U.S.-flag vessels to Matson.
This decline was partially offset by increased costs related to
the new C11-class vessels. Subsidy payments were lower as a
result of the vessel sales to Matson, partially offset by a
prior year subsidy rate adjustment. Fuel prices increased 5%
and 7% in the second quarter and first half of 1996,
respectively, compared with the comparable 1995 periods.
Vessel expenses increased in the first half of 1996 compared
with first half of 1995 as a result of increased costs related
to the new C11-class vessels, increased purchases of vessel
space from the alliance partners in the Asia-Europe and
AsiaLatin America services, and lower subsidy payments.
Partially offsetting the year to date increases were cost
savings as a result of the sale of vessels to Matson.
<PAGE>
Transportation equipment costs decreased in the
second quarter of 1996 compared with the second quarter of
1995 and increased in the first half of 1996 compared with
the first half of 1995, reflecting the relative amounts
of increased container lease costs and reduced rail car per
diem costs.
The decrease in information systems costs in the
first half of 1996 compared with the first half of 1995
was due primarily to the elimination of positions in late
1995.
Other operating expenses decreased in the second
quarter and first half of 1996 compared with the second
quarter and first half of 1995 due to the pretax gain of
$6.9 million on the sale of the company's rights to
service certain domestic intermodal customers in the
second quarter of 1996, and favorable foreign currency
rate changes in Asia in 1996, particularly in Japan.
Also contributing to the decrease in other operating
expenses were cost savings related to position eliminations
resulting from the company's reengineering program.
Certain of the company's collective bargaining
agreements covering shoreside and unlicensed seagoing unions
in the U.S. expired in June and July 1996. The company
completed negotiations with the respective unions, and new three-
year contracts were agreed to by the unions in July 1996
with no significant disruptions in the company's
operations. Each contract is subject to ratification by
the unions' membership and is scheduled to be voted upon in
August.
The company's new contract with its unlicensed
seagoing unions provides for automatic termination 45 days
after the enactment of proposed legislation establishing a
new maritime support program. During this 45-day period,
the company and the unions would meet to negotiate a new
agreement covering any vessels enrolled in the program. The
contract also provides for severance payments of $1.2
million per vessel in the event proposed maritime support
legislation is not enacted and the company sells or flags
under foreign registry any of its seven vessels which are
covered by the contract. The company is not able to
predict whether or when maritime support legislation will
be enacted or whether, if it is enacted, the company will be
able to reach agreement with the unions through the
collective bargaining process on terms and conditions
providing sufficient labor efficiencies to compensate for
reduced subsidy payments. If the maritime support
legislation is enacted and the company is unable to
reach such an agreement, labor difficulties which could
have a material adverse impact on the company's operations
could result.
General and administrative expenses decreased 34% and
35% in the second quarter and first half of 1996,
respectively, compared with the second quarter and first
half of 1995. Expenditures for corporate initiatives to
improve the company's financial and order cycle processes
were approximately $6 million and $13 million in the second
quarter and first half of 1995, respectively. There were
no such expenditures in the second quarter and first half
of 1996. In addition, salary costs decreased due to
eliminations of positions.
Depreciation and amortization expense increased 3% and
8% in the second quarter and first half of 1996 compared with
the same periods in 1995 primarily as a result of the
deployment of the six new C11-class vessels and other capital
spending.
Net interest expense increased from $2 million and
$4 million in the second quarter and first half of
1995, respectively, to $9 million and $20 million in the
second quarter and first half of 1996, respectively,
primarily due to debt incurred in connection with the
C11-class vessels purchased during 1995 and January 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
(In millions)
_______________________________________________________________
June 28 December 29
As of: 1996 1995
_______________________________________________________________
Cash, Cash Equivalents and
Short-term Investments $ 298 $ 136
Working Capital 221 65
Total Assets 1,933 1,879
Long-Term Debt and Capital
Lease Obligations (1) 730 699
_______________________________________________________________
June 28 June 30
For the 26 weeks ending: 1996 1995
_______________________________________________________________
Cash Provided by Operations $ 62 $ 41
_______________________________________________________________
INVESTING ACTIVITIES
Proceeds from Sales of
Property and Equipment $ 161 $ 1
Proceeds from Sale of
Distribution Services 2
Net Capital Expenditures
Ships $ 68 $ 105
Containers, Chassis and Rail Cars 7 15
Leasehold Improvements and Other 15 19
_______________________________________________________________
Total Net Capital Expenditures $ 90 $ 139
_______________________________________________________________
FINANCING ACTIVITIES
Borrowings $ 62 $ 72
Repayment of Debt and Capital Leases (31) (15)
Dividend Payments (5) (9)
_______________________________________________________________
_______________________________________________________________
(1)Includes current and long-term portions.
In the first quarter of 1996, the company sold Matson five
U.S.-flag ships (three C9-class vessels and two C8-class
vessels) and certain of its assets in Guam for approximately
$158 million in cash. This transaction is more fully described
in Note 6 of Notes to Consolidated Financial Statements.
The company took delivery of its final C11-class vessel in
January 1996. To finance a portion of the cost of this vessel,
the company borrowed approximately $62 million in 1996 in
the form of vessel mortgage notes under a loan agreement
with European banks. This debt is more fully described in
Note 4 of Notes to Consolidated Financial Statements.
In addition to vessel expenditures of $68 million,
the company made capital expenditures in the first half of
1996 of $22 million primarily for purchases of chassis,
containers, and terminal and leasehold improvements.
Capital expenditures in 1996 are currently expected to be
approximately $205 million, including $69 million of vessel
costs. The balance is expected to be spent primarily on
terminal equipment in North America and Asia, terminal
improvements in North America, refrigerated containers and
computer systems. The company has outstanding purchase
commitments to acquire cranes, facilities, equipment and
services totaling $106 million. In the first half of 1995,
in addition to vessel expenditures of $105 million,
the company's other capital expenditures totaled $34
million primarily for purchases of chassis and terminal and
leasehold improvements.
<PAGE>
On April 30, 1996, the Board of Directors approved
a program to repurchase, from time to time, up to an
aggregate of $50 million of its common stock through
open market or privately negotiated transactions. These
repurchases are
expected to be made with cash on hand. As of the end of
the second quarter of 1996, no repurchases had been made.
On July 30, 1996, the Board of Directors declared
a quarterly cash dividend of $0.10 per share of common
stock, payable on September 1, 1996 to common stockholders
of record on August 15, 1996.
The company believes its existing resources, cash
flows from operations and borrowing capacity under its
existing credit facilities (See Note 4 of Notes to
Consolidated Financial Statements for a description of
these facilities) will be adequate to meet its liquidity
needs for the foreseeable future.
Certain Factors That May Affect Operating Results
Statements prefaced with "expects",
"anticipates", "estimates", "believes" and similar words are
forward looking statements based on the company's current
expectations as to prospective events, circumstances and
conditions over which it may have little or no control and
as to which it can give no assurances. All forward looking
statements, by their nature, involve risks and
uncertainties that could cause actual results to differ
materially from those projected.
The severity of the challenging conditions expected
for the company and the shipping industry generally, and
the impact of those conditions on the company's operating
results, will depend on factors such as the timing and
extent of an anticipated slowing of market growth in
certain markets served by the company, the amount and
timing of an anticipated significant increase in industry
capacity due to new vessel deliveries to competing
carriers, rate reductions in some market segments due to
this additional capacity and other factors, successful
continuation of the company's alliances, which comprise a
significant factor in the company's long-term strategy to
remain competitive, union member ratification of labor
contracts concluded by the company and the pace and
degree of industry deregulation, including whether
an acceptable maritime support program and proposed amendments
to the Shipping Act of 1984 are enacted.
Demand in the trans-Pacific market is dependent
on factors such as the quantity of available import and
export cargo in this market and economic and political
conditions in the U.S. and other Pacific Basin countries.
The magnitude of the impact on the company of any growth
or contraction in the trans-Pacific market will depend on
whether and when new vessels ordered by competing
carriers are delivered and where they are ultimately
deployed and further vessel orders, if any, by competing
carriers. Because a number of competing ocean carriers
have placed orders for the construction of a significant
number of new vessels, growth in capacity in the trans-
Pacific market in 1996 and 1997 is expected to be
significantly greater than growth in demand.
Growth in demand in the North America stacktrain
market and demand for automotive shipments will depend on
economic and political conditions in the U.S. and Mexico,
including the relative values of the U.S. dollar and the
Mexican Peso, and the extent to which U.S. automakers
continue to operate in Mexico, among other factors.
Growth in these markets could also be impacted by labor
disputes involving the company's customers or service
providers.
<PAGE>
The continuation of savings in operating expenses,
and further incremental savings, if any, in connection
with the company's reengineering program and
organizational changes will depend on the ultimate future
effectiveness and results of those efforts. There can be
no assurance that the company will continue to realize
these savings, and changes in the timing of any
anticipated savings by the company, or the failure to
realize some or all of these savings, could materially
and adversely affect the company's operating results.
Other risks and uncertainties include the degree and
rate of market growth or contraction in other markets served
by the company and the company's ability to respond in
mitigation of any contraction or to take advantage of such
growth, changes in the cost of fuel, the status of
labor relations, the amplitude of recurring seasonal
business fluctuations and the continuation and
effectiveness of the Trans-Pacific Stabilization
Agreement and the various shipping conferences to which
the company belongs. The failure by the union
memberships to ratify labor agreements recently concluded
by the company could result in work stoppages, strikes or
other labor difficulties or in higher labor costs, which
could have a material adverse effect on the company's
operating results. The company has in the past experienced
such difficulties and there can be no assurance that any
such difficulties will not occur in the future. The
company's inability to reach agreement with the unions
through the collective bargaining process on terms and
conditions providing sufficient labor efficiencies to
compensate for reduced subsidy payments in the event
maritime support legislation is enacted could also
result in such labor difficulties.
Also, the company is subject to inherent risks
of conducting business internationally, including unexpected
changes in, or imposition of, legislative or
regulatory requirements, fluctuations in the relative values
of the U.S. dollar and the various foreign currencies
with which the company is paid and funds its local
operations, tariffs and other trade barriers and
restrictions affecting its customers, potentially longer
payment cycles, potentially greater
difficulty in accounts receivable collection,
potentially adverse taxes and the burden of complying with a
variety of foreign laws. In addition, in connection
with its international operations, the company is subject
to general geopolitical risks, such as political and
economic instability and changes in diplomatic and trade
relationships affecting it or its customers.
The company expressly disclaims any obligation
or undertaking to update any forward looking statements
contained herein in the event of any change in the
company's expectations with regard thereto or with regard to current
or prospective conditions or circumstances on which any
such statement is based.
<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 2,670 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. In May 1996, an order
was entered in the United States District Court for the
Eastern District of Pennsylvania, which administratively
dismissed most of such cases without
prejudice and with all statutes of limitation
tolled, and with reinstatement permitted upon fulfillment
by plaintiffs of certain specified conditions. In July 1996,
the Court agreed to reinstate 29 cases against vessel
owners provided that medical evidence is provided by September
30, 1996. The company is presently unable to ascertain or predict
the potential impact of this order on the disposition
or eventual outcome of such cases.
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
and the Intercoastal Shipping Act of 1933, and seeking an
undetermined amount of reparations. Three private
shippers are also complainants in this
proceeding. On June 3, 1996, the FMC administrative law
judge ordered that the complaint be dismissed on the
merits. The complainants filed an appeal on July 25, 1996
with the FMC. A decision by the FMC is expected in August
1997.
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.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on April
30, 1996 in Oakland, California. The election of three
Class I directors and ratification of auditors, were
submitted to the stockholders, as described in the
company's Proxy Statement dated March 26, 1996, and were
voted upon and approved by the stockholders at the meeting.
The following table describes the results of the stockholder
votes:
Votes Votes Withheld
For Against /Abstain
_____________________________________________________________
Election of Directors:
Tully M. Friedman 22,629,530 130,789
Joji Hayashi 22,319,593 440,726
G. Craig Sullivan 22,636,206 124,113
Ratification of Auditors 22,648,425 76,849 35,045
The voting included 25,696,015 shares of common
stock (each of which was entitled to one vote), representing
88.6% of the outstanding shares of common stock on the
record date of March 1, 1996.
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.
3.2 Certificate of Ownership and Merger merging APL
Limited into American President Companies, Ltd., and
changing the name of American President Companies, Ltd.
to APL Limited, effective June 1, 1996.
10.1 Amendment No. 2 to the 1988 Deferred Compensation
Plan, effective April 1, 1996
27 Financial Data Schedules filed under Article 5
of Regulation S-X for the second quarter ended June 28,
1996.
(b) Reports on Form 8-K
On May 17, 1996 and July 16, 1996, the company filed
a Form 8-K and a Form 8-K/A, respectively, dated May
2, 1996, for the sale of the rights to service
certain domestic intermodal customers to Hub Group,
Inc., and the pro-forma effects of the sale.
<PAGE>
APL Limited 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.
APL LIMITED
Dated: August 2, 1996 By /s/ William J. Stuebgen
______________________ ____________________________
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
--
BY-LAWS
OF
APL LIMITED
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
President 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, when present, preside at all meetings of
the Board of Directors and the stockholders and shall do and
perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 3. President. The President shall be the
Chief Executive Officer of the Company. He shall be a
member of the Board of Directors and of the Executive
Committee thereof and, except for the Compensation Committee
and the Audit Committee, an ex officio member of all other
committees thereof, and he shall have responsibility for the
general management and direction of the business of the
Company, subject to control and direction of the Board of
Directors. 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 President, 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
President 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 President
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 President.
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 President and not less than two (2) nor more than six
(6) other Directors of the Company. 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 and the President, giving consideration for each 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
and the President concerning salaries and other compensation
of all senior officers reporting to each of them, 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 Stock Bonus 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 President) 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.
06/01/96
--
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
APL LIMITED
INTO
AMERICAN PRESIDENT COMPANIES, LTD.
(Pursuant to Section 253 of the General
Corporation Law of Delaware)
AMERICAN PRESIDENT COMPANIES, LTD., a Delaware
corporation (the "Corporation"), does hereby certify:
FIRST: That the Corporation is incorporated pursuant
to the General Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the
outstanding shares of the capital stock of APL LIMITED, a
Delaware corporation ("APL").
THIRD: That the Corporation, by the following
resolutions of its Board of Directors, duly adopted on the
13th day of March, 1996, determined to merge into itself APL
on the conditions set forth in such resolutions:
RESOLVED, that this Corporation merge into itself
its subsidiary, APL Limited ("APL"), and assume all of
said subsidiaryOs liabilities and obligations,
effective June 1, 1996; and be it further
RESOLVED, that, upon the effective date of the
merger, the name of this Corporation shall be changed
to APL Limited; and be it further
RESOLVED, that the President or any Executive Vice
President, and the Secretary or any Assistant
Secretary, of this Corporation be, and they hereby are,
directed to make, execute and acknowledge a Certificate
of Ownership and Merger setting forth a copy of the
resolutions to merge said APL into this Corporation and
to change this CorporationOs name to APL Limited and to
assume APLOs liabilities and obligations and to file
the same in the Office of the Secretary of State of
Delaware and a certified copy thereof in the Office of
the Recorder of Deeds of New Castle County; and be it
further
RESOLVED, that this CorporationOs Bylaws be, and
they hereby are, amended as of the effective date of
such merger to reflect the change of name of this
Corporation from American President Companies, Ltd. to
APL Limited; and be it further
RESOLVED, that the officers of this Corporation
be, and they hereby are, severally and not jointly,
authorized and directed to provide all notices, execute
all documents, make all filings and take all actions as
any of them may deem to be necessary or appropriate in
connection with carrying out the purposes of the
foregoing resolutions.
IN WITNESS WHEREOF, the Corporation has caused its
corporate seal to be affixed and this certificate to be
signed by its authorized officers this 28th day of May,
1996.
AMERICAN PRESIDENT COMPANIES, LTD.
[SEAL]
By: /s/ Maryellen B. Cattani
Maryellen B. Cattani
Executive Vice President
ATTEST:
/s/ Peter A.V. Huegel
Peter A.V. Huegel
Assistant Secretary
AMENDMENT NO. 2 TO
1988 DEFERRED COMPENSATION PLAN OF
AMERICAN PRESIDENT COMPANIES, LTD.
Section 8 of the 1988 Deferred Compensation Plan of
American President Companies, Ltd., as adopted on November
29, 1988, is amended effective as of April 1, 1996, by
adding at the end thereof the following new subsection:
(c) Upon application of an Executive, the
Committee may determine in its sole discretion that
payments from one or more of the Executive's Deferral
Accounts shall be made at an earlier date than the time
or times specified on the Executive's Election Forms
(even in the absence of a Total and Permanent
Disability or Financial Hardship). All distributions
under this Subsection (c) shall be reduced by a penalty
equal to six percent of the amount otherwise
distributable, which penalty shall be forfeited to the
Company. An Executive who has received a distribution
under this Subsection (c) thereafter shall not make
additional deferrals under the Plan.
To record the amendment of the Plan, the Company has
caused its duly authorized officer to affix the corporate
name hereto.
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ Timothy J. Windle
Title Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Form 10-Q of APL
Limited for the quarter ended June 28, 1996 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-27-1996
<PERIOD-END> JUN-28-1996
<CASH> 141,739
<SECURITIES> 156,220
<RECEIVABLES> 243,938<F1>
<ALLOWANCES> 0
<INVENTORY> 30,665
<CURRENT-ASSETS> 644,320
<PP&E> 1,992,112
<DEPRECIATION> 847,542
<TOTAL-ASSETS> 1,933,218
<CURRENT-LIABILITIES> 423,766
<BONDS> 726,186
0
0
<COMMON> 25,789
<OTHER-SE> 465,094
<TOTAL-LIABILITY-AND-EQUITY> 1,933,218
<SALES> 0
<TOTAL-REVENUES> 1,367,392
<CGS> 0
<TOTAL-COSTS> 1,281,536<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,560
<INCOME-PRETAX> 40,562
<INCOME-TAX> 15,819
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,743
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.93
<FN>
<F1>The Allowance for Doubtful Accounts, included in Receivables, amounted to $22.3
million at June 28, 1996.
<F2>The Provision for Doubtful Accounts, included in Total-Costs, amounted to $2.9
million for the 26 weeks ended June 28, 1996.
</FN>
</TABLE>
