<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended
DECEMBER 31, 1993
Commission File Number 1-8889
MORRISON KNUDSEN CORPORATION
A Delaware Corporation
IRS Employer Identification No. 82-0393735
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208/386-5000
- -------------------------------------------------------------------------------
SECURITIES REGISTERED AND NUMBER OF REGISTRANT'S
COMMON SHARES OUTSTANDING
At March 18, 1994, 33,022,099 shares of registrant's $1.67 par value common
stock (registered pursuant to Securities Exchange Act Section 12(b) on the
New York Stock Exchange and the Pacific Stock Exchange, Inc.) were
outstanding (excluding 421,079 shares held in treasury and including 516,363
unallocated shares of common stock in the Employee Stock Ownership Plan
Trust, accounted for as treasury stock). The registrant has no securities
registered under Securities Exchange Act Section 12(g).
COMPLIANCE WITH REPORTING REQUIREMENTS
The registrant 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 has been subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
required under Item 10 is contained in the registrant's definitive proxy
statement incorporated by reference in Part III of this Form 10-K.
AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NONAFFILIATES
At March 18, 1994, the aggregate market value of the registrant's voting
common stock held by nonaffiliates of the registrant based on the New York
Stock Exchange closing price on March 18, 1994 for shares traded on the
exchange was approximately $900,954,200 (excluding $23,664,600 market value
of 516,363 unallocated shares of common stock held by trustee for
registrant's Employee Stock Ownership Plan Trust and 328,801 shares, which
are assumed to be held by affiliates of the registrant for the purposes of
this calculation).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement, dated April 4, 1994,
for the annual meeting of stockholders on May 12, 1994 are incorporated by
reference into Part II and Part III of this Form 10-K.
<PAGE>
MORRISON KNUDSEN CORPORATION
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1993
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business I-1
Item 2. Properties I-5
Item 3. Legal Proceedings I-6
Item 4. Submission of Matters to a Vote of Security Holders I-6
Additional
Item Executive Officers of the Registrant I-7
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters II-1
Item 6. Selected Financial Data II-1
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations II-1
Item 8. Financial Statements and Supplementary Data II-7
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure II-25
PART III
Item 10. Directors and Executive Officers of the Registrant III-1
Item 11. Executive Compensation III-1
Item 12. Security Ownership of Certain Beneficial Owners and
Management III-1
Item 13. Certain Relationships and Related Transactions III-1
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K IV-1
Signatures IV-2
<PAGE>
PART I
ITEM 1. BUSINESS
(All dollar amounts in thousands)
GENERAL
Morrison-Knudsen Company, Inc., the predecessor to Morrison Knudsen Corporation
(the "Corporation") was incorporated in Delaware in 1932 to carry on a business
founded eighty two years ago at Boise, Idaho. The Corporation's principal
executive offices are located at Morrison Knudsen Plaza, Boise, Idaho 83729.
The Corporation operates in two industry segments, engineering and construction,
and rail systems.
ENGINEERING AND CONSTRUCTION SEGMENT: The Corporation's engineering and
construction segment engages in all types of general construction work
including industrial, heavy civil and marine, mechanical, pipeline, building,
and underground, for a wide range of public and private clients. In addition,
the Corporation renders design services in practically all engineering
disciplines. Other markets for its services include nuclear and fossil-
fueled power plants, environmental and hazardous waste abatement and
operations and maintenance for military and commercial facilities. The
Corporation also operates, through a number of domestic subsidiaries, coal
and lignite mines under long-term contracts. As a general contractor, the
Corporation provides construction services in accordance with the terms and
specifications of each contract, including planning and scheduling,
marshalling of manpower, procurement of equipment and materials, awarding of
subcontracts and direction and overall management of the project. The
Corporation is also responsible for any failure to perform on the part of a
subcontractor. In order to minimize the potential for losses caused by such
defaults, the Corporation normally requires performance and payment bonds or
other adequate assurances of operational and financial capacity from
subcontractors.
RAIL SYSTEMS SEGMENT: The locomotive division of the Corporation's rail
systems segment remanufactures locomotives, manufactures new high technology
locomotives, designs, manufactures and distributes locomotive component
parts, and provides locomotive fleet maintenance services to the railroad
industry. The Corporation provides its products and services to freight and
passenger railroads, including every Class I Railroad in North America, many
metropolitan transit and commuter rail authorities and Amtrak. The transit
division of the rail systems segment is the leading U.S. based manufacturer
of transit cars. Since 1982, the Corporation has remanufactured and/or
overhauled over 3,000 rail passenger vehicles and manufactured approximately
300 new transit cars. The transit division has manufacturing facilities in
Hornell, New York and Chicago, Illinois, and in early 1994 the Corporation
opened a manufacturing facility in Pittsburg, California. Current new car
backlog includes contracts for the Metro North, Chicago Metra, Caltrans and
Bay Area Rapid Transit authorities as well as Amtrak. The Corporation offers
a full range of locomotive and transit services and currently serves
customers in 37 countries around the world.
UNCONSOLIDATED AFFILIATES: In addition, the Corporation has investments in
a number of unconsolidated affiliated companies at December 31, 1993
accounted for by the equity method including the following principal
unconsolidated affiliates: MK Gold Company ("MK Gold") (46.5%); Strait
Crossing Development, Inc. (45%); Texas TGV Corporation (38.2%); AmerBank
(31.1%); and Westmoreland Resources, Inc. (24%). MK Gold holds interests in
two producing gold mining projects in California and provides contract mining
services. Strait Crossing Development, Inc. has a contract to design, build
and operate for 35 years an 8.4-mile-long toll bridge linking the Canadian
provinces of New Brunswick and Prince Edward Island. Texas TGV Corporation
is a development-stage company with a 50-year franchise to provide 200 m.p.h.
passenger service connecting five major Texas cities. AmerBank is a licensed
bank operating in Poland. Westmoreland Resources, Inc. is a mining company
that operates a surface coal mine in Montana. See the "Investments in
Unconsolidated Affiliates" and "Subsequent Events" Notes to Consolidated
Financial Statements in Part II of this Annual Report on Form 10-K for
additional information related to unconsolidated affiliates.
In connection with its construction business, the Corporation, in order to
balance risk with reward, enters into four basic types of contracts: fixed-
price contracts providing for a single price for the total amount of work to
be performed and unit-price contracts providing for a specified price for
each unit of work performed, under which both risk and anticipated income are
the highest; cost-plus-fee contracts with guaranteed maximum costs, under
which risk is reduced and anticipated income is accordingly lower; and cost-
plus-fee contracts, under which risk is minimal and anticipated income is
earned solely from the fee received for services provided. In connection
with its engineering
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<PAGE>
contracts, including design and program management, the Corporation's
compensation is typically on a cost-plus-fee basis. Regardless of the type of
contract, the construction business always has been subject to unusual risks,
including unforeseen conditions encountered during construction, the impact of
inflation upon costs and financing requirements of clients, and changes in
political and legal circumstances in foreign countries, particularly since
contracts for major projects are performed over an extended period of time.
Although the Corporation constantly seeks to minimize and spread the risks over
a large number of contracts, a combination of unusual circumstances could result
in a loss on a particular contract or contracts and the Corporation may
experience significant changes in operating results on a quarterly or annual
basis.
The Corporation frequently participates (principally as sponsor and manager
of the projects) in construction joint ventures with others to share risks
and combine financial, technical and other resources. Each of the joint
venture participants is usually committed to supply a predetermined amount of
capital, and to share in a predetermined percentage of income or loss of the
joint venture. Construction joint ventures frequently have a short life
span, since they are designed and created for the sole purpose of bidding on,
negotiating for, and completing one specific project. These single-purpose
joint ventures last only as long as the construction project undertaken,
which can be less than one year, but are frequently longer on major
construction projects. Construction joint ventures undertaken to complete a
specific project are liquidated when the project is completed. See the
"Construction Joint Ventures" Note to Consolidated Financial Statements in
Part II of this Annual Report on Form 10-K for additional summary joint
venture financial information.
There were no significant changes in the business of the Corporation or in
the services or products offered during 1993 except for the acquisitions and
disposition of certain assets and businesses as described below.
ACQUISITIONS: The Corporation's rail systems segment has established its
position as a leading supplier in North America of critical locomotive
components through a series of business combinations begun in 1991, including
the following acquisitions completed in 1993 and early 1994, and accounted
for by the purchase method of accounting. See the "Acquisitions" and
"Subsequent Events" Notes to Consolidated Financial Statements in Part II of
this Annual Report on Form 10-K for additional information.
- Arrowsmith Power Systems, Inc., a remanufacturer of locomotive turbo
chargers was acquired in August, 1993.
- Clark Industries, Inc., a manufacturer of engine power assemblies was
acquired in December, 1993
- Touchstone, Inc., a leading manufacturer and refurbisher of locomotive
cooling systems was acquired in January, 1994.
The Corporation acquired additional voting stock of McConnell Dowell Corporation
Limited ("MDC") representing 3% of the total issued and outstanding voting stock
bringing the total of its investment to 51.9%. The Corporation consolidated the
accounts of MDC effective with the change in control. MDC and its subsidiaries
are engaged in civil, mechanical, and commercial construction.
DISPOSITION: In December, 1993, MK Gold, then a wholly-owned subsidiary of
the Corporation, completed an initial public offering ("IPO") of its common
stock. After the exercise of the underwriters' over-allotment option and (ii)
the secondary sale of MK Gold's stock by the Corporation, the Corporation's
ownership interest in MK Gold decreased to 46.5%. See the "Subsidiary Sale
of Stock" and "Subsequent Events" Notes to Consolidated Financial Statements
in Part II of this Annual Report on Form 10-K for additional information.
In addition, the Corporation announced on February 23, 1994 that MK Rail
Corporation ("MK Rail"), a wholly owned subsidiary of the Corporation
(formerly the locomotive division of the rail systems segment, and the
locomotive related subsidiaries and affiliates of the Corporation) filed a
Registration Statement with the Securities and Exchange Commission for an
initial public offering of MK Rail common stock. After the Registration
Statement becomes effective and upon completion of the offering, the
Corporation will own approximately 58% of the common stock of MK Rail
(approximately 55% if the underwriters' over-allotment option is exercised in
full) and will continue to control MK Rail.
INDUSTRY SEGMENT DATA: The Corporation's revenue and operating income for
the three years ended December 31, 1993 for each of the industry segments is
set forth below, (dollars in thousands).
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1993 1992(a) 1991(a)
---------- ---------- ---------
<S> <C> <C> <C>
REVENUE
Engineering and construction $2,297,619 $1,985,578 $1,554,628
Rail systems 424,924 299,353 470,163
---------- ---------- ---------
Total revenue $2,722,543 $2,284,931 $2,024,791
---------- ---------- ---------
---------- ---------- ---------
OPERATING INCOME
Engineering and construction $55,118 $40,276 $58,956
Rail systems 21,344 11,031 22,958
---------- ---------- ---------
Total operating income $76,462 $51,307 $81,914
---------- ---------- ---------
---------- ---------- ---------
<FN>
- --------------
(a) Restated to conform to 1993 financial statement presentation
</TABLE>
Operating income consists of revenue less applicable direct and indirect
operating costs and expenses, and excludes general and administrative
expenses and other non-operating income and expense. See the "Industry
Segment and Geographic Information" Note to Consolidated Financial Statements
in Part II of this Annual Report on Form 10-K for additional operating and
asset data for the three years ended December 31, 1993.
ENGINEERING AND CONSTRUCTION
The engineering and construction segment is a leading provider of planning,
design, engineering, construction, procurement, program management,
construction management and project finance services in the infrastructure
market (both domestic and foreign), including water resources and
hydroelectric power, rail and transit, highways and bridges, airports and
other heavy civil projects.
The engineering and construction segment accounted for 84 percent of
consolidated revenue in 1993, 87 percent in 1992 and 77 percent in 1991.
The engineering and construction segment booked new work of $1,873,700 in
1993 compared with $1,633,100 in 1992 and its backlog at December 31, 1993
stood at $3,049,300, a decrease of $443,900 from the previous year end total
of $3,493,200.
RAIL SYSTEMS
The rail systems segment is engaged principally in building new and
rebuilding used mass-transit rail cars and in building new and rebuilding
used railroad locomotives. In addition, the segment provides aircraft
service and maintenance to private and commercial aircraft at its Boise,
Idaho facility.
The rail systems segment accounted for 16 percent of consolidated revenue in
1993, 13 percent in 1992, and 23 percent in 1991.
This segment booked new work of $450,000 in 1993 compared with $1,052,500 in
1992 and its year-end 1993 backlog stood at $1,182,600 an increase of $25,100
from the previous year end. This segment currently depends upon a relatively
few large municipal transit agencies and railroads. The Corporation expects
that this dependence on key customers will continue. The loss of one or
more key customers could have a material adverse effect on the Corporation's
results of operations.
FOREIGN OPERATIONS
The Corporation operates outside the United States through foreign and
domestic subsidiaries which are qualified to do business in various foreign
countries. The Corporation has intensified efforts to market its wide-ranging
engineering, construction and rail systems services abroad. In addition, as
part of its efforts to expand its presence
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in international markets, the Corporation has entered into several agreements
with foreign joint venture partners, acquired interests in rail systems
manufacturing operations and construction companies abroad. In 1993, the rail
systems segment obtained a controlling interest in a fully integrated
manufacturing operation in Buenos Aires, Argentina which includes an
approximately 500,000 square foot facility equipped for maintenance, repair and
remanufacture of locomotives, freight cars and transit vehicles. In addition,
the Corporation acquired a 16.7% equity interest in a company that operates and
maintains commuter railways in Buenos Aires, Argentina. In certain instances,
international projects entail a higher degree of risk than equivalent domestic
projects both from difficulties encountered in performing work in remote
locations (i.e. distances, communication and logistics) and from potential
actions of foreign governments (i.e., political strife, multiple taxation,
currency and foreign exchange limitations).
The Corporation recorded revenues from foreign sources of $600,800 in 1993,
$195,300 in 1992, and $58,100 in 1991.
BACKLOG
Backlog consists of uncompleted portions of engineering and construction
contracts, including the Corporation's proportionate share of joint venture
contracts; the next five-year portion of long-term mining service contracts
and uncompleted portions of rail systems contracts.
The following table reflects the composition of year-end backlog
distinguished on the basis of their pricing arrangements for the three years
ended December 31, 1993:
Composition of year-end backlog
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Fee-type contracts $1,735,100 $2,124,500 $2,672,300
Fixed-price, unit price and fee-type
contracts with guaranteed maximums 2,496,800 2,526,200 1,577,700
---------- ---------- ----------
$4,231,900 $4,650,700 $4,250,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Approximately 43 percent of engineering and construction and 52 percent of
rail systems backlog at December 31, 1993 is expected to be completed in
1994. Although backlog reflects only business which is considered to be firm
and is an indication of expected future revenues, there can be no assurance
that cancellations or scope adjustments will not occur or when revenue from
such backlog will be realized.
U.S. Government contracts continue to be an important part of the
Corporation's business. In 1993, 1992, and 1991, approximately 22, 23, and
23 percent of revenue, respectively, was derived from various U.S. Government
agencies. At December 31, 1993, the Corporation's backlog contains
approximately $951,300 (22 percent) of both fixed-price and cost-plus-fee
contracts and subcontracts with various agencies of the U.S. Government which
are subject to termination at the election of the U.S. Government agencies.
Additional information concerning the Corporation's backlog of uncompleted
contracts is set forth under the caption "New Business and Backlog" of
Management's Financial Review and Analysis in Part II of this Annual Report
on Form 10-K.
COMPETITION
The Corporation is engaged in highly competitive businesses, particularly
that portion which relates to contracts for construction obtained by
competitive bidding. The Corporation competes with other general and
specialty contractors both foreign and domestic, including a number of small
local contractors. Competition is based primarily on price, reputation and
reliability. There can be no assurance that competition in one or more of
the Corporation's markets will not adversely affect the Corporation and its
results of operations. Success or failure in the construction industry is,
in large measure, based upon the ability to compete successfully for
contracts and to provide the engineering, planning, procurement, management
and project financing skills required to complete them in a timely and cost-
efficient manner. Exact statistical data are not available for determining
the relative size of construction and engineering companies.
The Corporation's rail systems segment operates in a highly competitive
environment. In the case of locomotive remanufacturing, it faces competition
from AMF Canada, Conrail, numerous smaller remanufacturers, as well as the
in-house shops of certain railroads. The new locomotive manufacturing market
is dominated by the Electro-Motive
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<PAGE>
Division, General Motors Corporation ("EMD") and GE Transportation Systems,
General Electric Company ("GE"), which collectively accounted for virtually 100%
of the new locomotives delivered in the last five years. The locomotive
division's component parts operations face competition from EMD and GE, as well
as a number of smaller independent component part manufacturers and
distributors. The transit division competes for mass transit rail car business
primarily in the U.S. market with approximately five major competitors. While
the transit division competes with approximately five major foreign
manufacturers, it believes, to the best of its knowledge, that it is the only
domestic designer and manufacturer of new mass transit rail cars. Contracts for
rebuilding locomotives and building new and rebuilding used mass transit rail
cars are awarded on the basis of competitive bid and negotiated contracts.
AVAILABILITY OF RAW MATERIALS
Raw materials and components necessary for the fabrication and manufacturing
of products and the rendering of construction and engineering services for
the Corporation are generally available from numerous sources. The
Corporation does not foresee any unavailability of materials and components
which would have a material adverse effect on its overall business or on
either of its business segments in the near term.
EMPLOYEES
Total worldwide Corporation employment varies widely since it depends upon
the volume, type and scope of operations under way at any given time, as well
as upon weather conditions and other factors.
Worldwide employment, including project direct-hire craft employees at December
31, 1993 was approximately 11,910 with 8,720 employed in the engineering and
construction segment, 2,920 employed in the rail systems segment and 270
employed at corporate offices in Boise, Idaho.
ITEM 2. PROPERTIES
At December 31, 1993, the Corporation and its subsidiaries owned a total of
17 principal plants, warehouses, offices and rental properties located
throughout the United States, Canada, Australia, New Zealand, the Hawaiian
Islands, Micronesia, Melanesia and Indonesia.
The approximate major building space utilized by each segment of the
Corporation at December 31, 1993 is as follows:
<TABLE>
<CAPTION>
Area in Square Feet
Owned Leased
--------- ---------
<S> <C> <C>
Engineering and construction 181,200 1,347,000
Rail systems 1,048,200 1,495,700
Corporate offices 57,200 220,700
--------- ---------
1,286,600 3,063,400
--------- ---------
--------- ---------
</TABLE>
Aggregate annual rental payments on real estate and equipment leased by the
Corporation during the year ended December 31, 1993 was $38,800. For further
information on rentals and minimum rental commitments, see the "Commitments and
Contingencies" Note to Consolidated Financial Statements in Part II of this
Annual Report on Form 10-K.
The Corporation considers that its construction equipment, rail systems
manufacturing facilities and administrative properties are well maintained
and suitable for its current operations. Maintenance and repair expenses
of $44,200 in 1993, $49,500 in 1992, and $56,600 in 1991 have been charged
to operations.
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The description, location and expiration dates of major real and personal
property leases in effect as of December 31, 1993 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Expiration Date of Initial Term
CORPORATE (EXCLUDES RENEWAL OPTIONS, IF ANY)
Corporate Headquarters - 220,700 sq. ft. January 2015
Corporate Aircraft May 1999
ENGINEERING AND CONSTRUCTION
OFFICE, WAREHOUSE, AND MAINTENANCE FACILITIES
Australia, and New Zealand - 310,900 sq. ft. Various thru March 2002
Pleasanton, California - 11,800 sq. ft. March 1996
San Francisco, California - 163,800 sq. ft. September 1999
Arvada, Colorado - 45,300 sq. ft. April and October 1996
Denver, Colorado - 39,900 sq. ft. January 1996 and October 2003
Fort Lauderdale, Florida - 13,200 sq. ft. March 1994 and January 1996
Guam and Saipan - 14,500 sq. ft. and 36 acres September 1994 and
December 2000
Honolulu, Hawaii - 14,100 sq. ft. November 1997
Joliet, Illinois - 54,500 sq. ft. and 3 acres January 1995
Dedham, Massachusetts - 14,300 sq. ft. May 1996
St. Louis, Missouri - 64,500 sq. ft. July and December 1994
Albuquerque, New Mexico - 23,900 sq. ft. March 1994 and March 1995
New York, New York - 15,400 sq. ft. November 1995
Cleveland, Ohio - 384,300 sq. ft. December 2000
Taipei, Taiwan - 33,500 sq. ft. and 2 acres August 1994
Dallas, Texas - 73,300 sq. ft. May 1994, February and October
1995
Waxahachie, Texas 17,500 sq. ft. February 1996
San Antonio, Texas - 14,500 sq. ft. January 1999
Salt Lake City, Utah - 37,800 sq. ft.
and 5 acres October 1994 and
December 2001
SURFACE MINING EQUIPMENT
Carlos, Texas December 2007
RAIL SYSTEMS
LOCOMOTIVES December 2006 and June 2008
PRODUCTION MACHINERY April 1994
OFFICE, WAREHOUSE, HEAVY MANUFACTURING,
FABRICATION, AND AVIATION FACILITIES
Sydney and Adelaide, Australia - 8,500 sq. ft. October 1994 and
October 1995
Pittsburg, California - 214,500 sq. ft.
and 5 acres June 2001
Simi Valley, California - 31,000 sq. ft. January 1997
Boise, Idaho - 53,900 sq. ft. and 18 acres December 1999
Chicago, Illinois - 453,300 sq. ft. August 1994, December 1996 and April 1998
Gilman, Illinois - 18,000 sq. ft. December 1996
Norridge, Illinois - 32,000 sq. ft. August 1995
Hornell, New York - 439,000 sq. ft.
and 44 acres February 2001
Lawrenceville, Pennsylvania - 72,000 sq. ft. December 2000
Pittsburg, Pennsylvania - 122,000 sq. ft. July 2006
Whyalla, South Australia - 51,500 sq. ft. June 1995
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Corporation has no material legal actions pending, but is party to
litigation incidental to its business.
I-6
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation did not submit any matters to a vote of security holders
during the fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to the General Instructions to Form 10-K, the following list is
included in lieu of being presented in the proxy statement, dated April 4,
1994 for the annual meeting of stockholders to be held on May 12, 1994.
Following is a list of the names and ages of the executive officers of the
Corporation together with the date of their election to corporate office and
person(s) chosen to become executive officers, subject to election by the
Board of Directors in May, 1994. There are no family relationships between the
following officers of the Corporation nor are there any arrangements or
understandings between any officer or any other person pursuant to which he
was selected as an officer.
<TABLE>
<CAPTION>
POSITIONS WITH OFFICER
NAME AGE THE CORPORATION SINCE
<S> <C> <C> <C>
EXECUTIVE OFFICERS
William J. Agee 56 Chairman of the Board, President 1988
and Chief Executive Officer
Stephen G. Hanks 43 Executive Vice President - Finance and 1990
and Administration, and Secretary
(Principal Financial Officer)
Edmund J. Gorman 48 Senior Vice President 1991
Stephen R. Grant 54 Senior Vice President 1989
Mark E. Howland 42 Vice President and Controller 1993
(Principal Accounting Officer)
Brent D. Brandon 33 Vice President - Corporate Communications 1993
James F. Cleary, Jr. 30 Vice President - Corporate Finance 1993
and Planning
Douglas L. Brigham 28 Treasurer 1993
EXECUTIVE OFFICER (SUBJECT TO ELECTION)
Gilbert E. Carmichael 66 Senior Vice President
</TABLE>
Messrs. Agee, Hanks, Gorman, and Grant have served the Corporation and its
subsidiaries in various executive capacities for the past five years. The
principal occupations and employment of Messrs. Howland, Brandon, Cleary,
Brigham and Carmichael for the past five years is set forth below.
Mr. Howland served the Corporaton as Assistant Director and Director of
Internal Audit. Prior to his employment with the Corporation in August,
1992, Mr. Howland was employed as a Senior Audit Manager by Price Waterhouse.
Mr. Brandon served the Corporation as Executive Assistant to the Chairman,
and President of Western Aircraft, Inc., a subsidiary of the Corporation.
Prior to his employment with the Corporation in January 1992, Mr. Brandon
served in the armed forces of the United States.
Mr. Cleary served the Corporation as Director of Strategic Planning,
Executive Assistant to the Chairman, and Project Controls Engineer. Prior to
his employment with the Corporation in June 1990, Mr. Cleary was a student at
Harvard Business School in Boston, Massachusetts.
Mr. Brigham served the Corporation as Manager of Investor Relations and
Assistant Manager and Manager of Corporate Finance.
Mr. Carmichael served the Corporation as Senior Vice President, International
Group. Prior to his employment with the Corporation in February, 1993, Mr.
Carmichael served from January, 1989 to December, 1993 as United States
Federal Railroad Administrator.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Traded on the New York and Pacific Stock Exchanges under the Symbol MRN. At
the close of business on March 18, 1994 the Corporation had 33,022,099 shares
issued and outstanding (including 516,363 unallocated shares held by the
trustee for registrant's Employee Stock Ownership Plan Trust).
The approximate number of record holders of the Corporation's voting common
stock at March 18, 1993 is 5,149 and does not include beneficial owners of
the Corporation's common stock held in the name of a broker, dealer, bank,
voting trustee or other nominee. The cash dividends declared and the New
York Stock Exchange composite high and low sales prices of the Corporation's
common stock traded on the New York and Pacific Stock Exchanges for each
quarterly period within the two most recent fiscal years required by this
item are set forth under the caption "Quarterly Financial Data" on page II-6
of this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth under the caption
"Selected Five-Year Financial Data" on page II-2 of this Annual Report on
Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth under the caption
"Management's Financial Review and Analysis" beginning on page II-2 of this
Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth beginning on page II-6
of this Annual Report on Form 10-K.
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<PAGE>
MANAGEMENT'S FINANCIAL REVIEW AND ANALYSIS
<TABLE>
<CAPTION>
SELECTED FIVE-YEAR FINANCIAL DATA
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------
OPERATING SUMMARY 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $2,722,543 $2,284,931 $2,024,791 $1,758,758 $2,270,249
- ----------------------------------------------------------------------------------------------------------------------
Operating income 76,462 51,307 81,914 98,559 104,512
- ----------------------------------------------------------------------------------------------------------------------
Income before extraordinary charge and
cumulative effect of accounting change 35,767 13,436 35,456 37,623 35,685
Extraordinary charge from write off of
unamortized debt issue cost, net of tax -- (3,096) -- -- --
Cumulative effect of accounting change
for postretirement health care costs, net of tax -- (17,403) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $35,767 $(7,063) $35,456 $37,623 $35,685
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common and common
equivalent share:
Income before extraordinary charge and
cumulative effect of accounting change $1.15 $ .44 $1.24 $1.43 $1.40
Extraordinary charge -- (.10) -- -- --
Cumulative effect of accounting change -- (.57) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $1.15 $(.23) $1.24 $1.43 $1.40
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Dividends declared per share $ .80 $ .80 $ .74 $ .74 $ .74
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION SUMMARY
- ----------------------------------------------------------------------------------------------------------------------
Current assets $793,221 $681,412 $658,200 $660,114 $506,866
Current liabilities 689,534 608,730 379,121 410,228 403,677
- ----------------------------------------------------------------------------------------------------------------------
Working capital 103,687 72,682 279,079 249,886 103,189
Investments and other assets 219,060 225,005 216,470 147,649 106,303
Property and equipment, net 213,669 194,007 177,107 164,597 151,538
Total assets 1,225,950 1,100,424 1,051,777 972,360 764,707
Debt due after one year 9,768 457 195,232 194,952 13,678
Other non current liabilities 119,681 115,466 81,274 74,933 82,592
Stockholders' equity 406,967 375,771 396,150 292,247 264,760
- ----------------------------------------------------------------------------------------------------------------------
Book value per share $12.87 $12.26 $13.17 $11.15 $10.42
Shares outstanding at year end 31,617,995 30,639,975 30,086,266 26,199,868 25,415,392
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
BUSINESS
Morrison Knudsen Corporation operates in two industry segments: engineering
and construction, and rail systems.
The engineering and construction segment provides design, engineering,
construction, procurement, project-management and construction-management
services in the infrastructure market, including transportation, water
resources, heavy civil and energy developments, as well as industrial,
institutional and commercial buildings. The segment also provides skills for the
nuclear and fossil-fueled power markets and in cogeneration, waste-to-energy,
environmental and hazardous waste, and wastewater treatment fields; and in
addition serves the hydroelectric, toxic waste, oil and gas, and mine
engineering markets. A number of domestic subsidiaries are engaged in long-term
contract mining of coal and lignite at mines in the United States. Other markets
include operations and maintenance services for military and commercial
facilities.
The rail systems segment is engaged principally in building new and rebuilding
used mass transit rail cars in New York,
California, Illinois and Buenos Aires, Argentina and rebuilding railroad
locomotives at Boise, Idaho, Pennsylvania and South Australia and, in addition,
provides aircraft service and maintenance to private and commercial aircraft at
Boise, Idaho.
In addition, the Corporation has equity interests in a U.S. development-stage,
high-speed commuter rail company, a gold mining company, Indonesian prestress
concrete manufacturing and construction companies, a mining company that
operates a surface coal mine in Montana, a company to design, build and operate
a toll bridge in Canada and a company that operates and maintains commuter
railways in Buenos Aires, Argentina.
II-2
<PAGE>
Financial information about each segment's operations by industry and
geographic area is provided in a note to the financial statements. The
following table sets forth the revenue by industry segment and geographic area
for the years ended December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INDUSTRY SEGMENT REVENUE
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Engineering and construction $2,297,600 $1,985,600 $1,554,600
Rail systems 424,900 299,300 470,200
- --------------------------------------------------------------------------------
Total revenue $2,722,500 $2,284,900 $2,024,800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GEOGRAPHIC AREA REVENUE
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $2,121,700 $2,089,600 $1,966,700
Asia/Pacific 342,400 50,200 15,400
Other international 258,400 145,100 42,700
- --------------------------------------------------------------------------------
Total revenue $2,722,500 $2,284,900 $2,024,800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
NEW BUSINESS AND BACKLOG
Backlog of all uncompleted contracts at December 31, 1993, totaled $4,232
million, compared with $4,651 million at year end 1992. The 1993 year-end
backlog is composed of 59% fixed priced and 41% fee-type contracts, compared
with 54% and 46%, respectively, at December 31, 1992.
The Corporation booked new business of $2,304 million in 1993 compared to
$2,686 million in 1992. New business in 1993 consisted of $1,854 million for
engineering and construction and $450 million for rail systems compared with
$1,633 million and $1,053 million in 1992, respectively. New business consists
of new contracts and changes to existing contracts. Backlog consists of
uncompleted portions of engineering and construction contracts, including the
proportionate share of joint-venture contracts, the next five-year portion of
long-term mining contracts, and uncompleted portions of rail systems contracts.
The following table sets forth the revenue backlog at December 31, 1993 and
1992 and the new business booked in each of the two years ended December 31,
1993.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
INDUSTRY SEGMENT NEW BUSINESS AND BACKLOG
(THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------------------
1993 1992
------------------------- --------------------------
New Business Backlog New Business Backlog
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Engineering and construction $1,853,700 $3,049,300 $1,633,100 $3,493,200
Rail systems 450,000 1,182,600 1,052,500 1,157,500
- ----------------------------------------------------------------------------------------------
Total $2,303,700 $4,231,900 $2,685,600 $4,650,700
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
Approximately 46% of total 1993 year-end backlog (43% of engineering and
construction and 52% of rail systems) is expected to be recognized as revenue
in 1994. Although backlog reflects only business which is considered to be firm
and is an indication of expected future revenues, there can be no assurance
that cancellations or scope adjustments will not occur or when revenue and
earnings from such backlog will be realized.
RESULTS OF OPERATIONS
1993 COMPARED TO 1992
Operating income of the engineering and construction segment in the fourth
quarter of 1993 was $10.9 million compared with $14.1 million (restated) for
the comparable 1992 quarter. The 1993 fourth quarter's results were adversely
affected by (i) the sluggishness of the private sector market for engineering
and construction services and (ii) an increase in operating loss provisions of
$1.2 million. In addition, the 1992 fourth quarter was favorably effected by the
recognition of additional claim revenue of $1.5 million. Operating income of the
engineering and construction segment increased in 1993 to $55.1 million from
$40.3 million
II-3
<PAGE>
(restated) in 1992 due primarily to an improvement in operating results from
heavy civil construction, which sustained significant losses on a number of
contracts in 1992, but which returned to profitability in 1993.
Operating income of the rail systems segment in the fourth quarter of 1993 was
$8.4 million compared with $9.0 million for the comparable quarter of 1992.
This decrease results primarily from a decrease in the number of transit cars
shipped in 1993 compared to 1992, partially offset by an increase in operating
income from the segment's Australian operations and an increase in shipments of
rebuilt locomotives and traction motors. Operating income of this segment
increased to $21.3 million for the year 1993 compared to $11.0 million for
1992. This increase is primarily the result of shipments of new transit cars to
a midwest transit authority begun in the last quarter of 1992 and continuing
through 1993 and increased operating income from the Australian operations.
Research and development expenditures of $3.7 million by the rail systems
segment, relating to the design of new locomotives intended for sale or lease,
were charged to net income in 1993. The Corporation did not incur significant
research and development expenses in 1992.
In December 1993 MK Gold Company, previously a wholly-owned subsidiary of the
Corporation, completed an initial public offering of 8 million unissued shares
of its common stock at an offering price of six dollars a share. The Corporation
recognized a $10.6 million pretax gain because the selling price per share
exceeded the Corporation's carrying cost per share. Concurrent with the initial
public offering, the Corporation sold 1 million shares of MK Gold's common stock
to the public and recognized a $2.1 million pretax gain. See the "Subsidiary
Sale of Stock" Note to Consolidated Financial Statements.
Interest expense in 1993 increased to $3.3 million compared to $1.7 million of
interest expense in 1992 (excluding $10.6 million of original issue discount
recognized in 1992 prior to the redemption for cash of the outstanding LYONs in
1992). The increase reflects the rise in the average short-term borrowings
outstanding from $1.4 million in 1992 to $41.1 million in 1993, partially offset
by a decline in the weighted average interest rate in 1993 compared to 1992. See
the discussions related to the LYONs redemption in "Results of Operations 1992
Compared to 1991" below.
The increase in the Corporation's share of investee net losses from $.1
million (restated) in 1992 to $5.8 million in 1993 reflect increases in the
Corporation's share of losses including (i) $.7 million from Texas TGV
Corporation, (ii) $2.9 million from a new venture investment, (iii) $1.2
million from McConnell Dowell Corporation Limited ("MDC") (for the period prior
to consolidation in July 1993), and a reduction in interest income from MDC
in 1993.
Other income, net increased from $23.7 million in 1992 to $25.8 million in
1993. See the "Other Income (Expense) Net" Note to Consolidated Financial
Statements.
The effective tax rates for the past three years have been: 39.3% in 1991;
44.3% in 1992; and 42.1% in 1993. These rates are higher than the U.S.
statutory rates of 34% in 1991 and 1992 and 35% in 1993, because they include
both foreign income, which generally continues to be taxed at rates higher than
the U.S. statutory rate, and state income taxes. The Corporation changed its
method of accounting for income taxes effective January 1, 1993. The impact of
this change was not significant.
1992 COMPARED TO 1991
Operating income of the engineering and construction segment in the fourth
quarter of 1992 was $14.1 million (restated) compared with $13.0 million for the
comparable 1991 quarter. The increase was primarily due to the recognition of
$1.5 million additional claim revenue. Operating income of the engineering and
construction segment declined from $59.0 million in 1991 to $40.3 million
(restated) in 1992 due in large part to an increase of $2.8 million (restated)
in provisions for estimated losses on a number of heavy-civil construction
contracts, $16.9 million less claims for additional contract revenue and a $3.0
million charge resulting from the suspension of a rapid transit construction
contract. Operating income of the rail systems segment increased to $9.0
million in the 1992 fourth quarter from $2.9 million in the 1991 fourth
quarter, but declined for the year 1992 overall due to the absence of new
transit car shipments until late in the third quarter of 1992.
The decrease in the Corporation's share of investee's earnings and interest
income was due to the acquisition by the Corporation of MD Investments, Inc.
("MDI"), a wholly owned subsidiary of MDC because pursuant to the terms of the
purchase agreement, the management fee of approximately $1.9 million from MDC
ceased in December 1991. The Corporation also recognized $2.0 million in losses
from two corporate joint-venture investments. The loss of $3.0 million annual
interest income from MDC, due to the acquisition of MDI, together with the
completion of a major MDC joint venture project (for which the corporation rec-
ognized $1.1 million income in 1992) reduced the income recognized from MDC in
1993.
The decrease in other income, net stems in part from recognition of a number
of unusual and infrequent charges including: $3.5 million provision for
unrealized losses for marketable equity securities, $1.7 million loss from
settlement of a foreign currency transaction, and $1.5 million loss from
terminating a non-construction joint venture. See the "Other Income (Expense)
Net" Note to Consolidated Financial Statements. In addition, the Corporation
realized $39.7 million of income from investments in 1992. However, the
redemption of the 7.25 percent convertible LYONs on September 30, 1992 for
$204.0 million in cash reduced investment income in future periods.
II-4
<PAGE>
Interest expense declined from $4.2 million in the fourth quarter of 1991 to
$.3 million in the comparable 1992 period and from $16.2 million in the year
1991 to $12.3 million in 1992. The LYONs redemption on September 30, 1992
eliminated the impact of accrued original issue discount (interest expense) on
the results of operations.
The effective income tax rate for 1992 (before extraordinary charge and
cumulative effect of accounting change) was 44.3% compared to 39.3% for 1991.
The increase in the effective rate was the result of operating losses incurred
which were not deductible for state tax purposes and an increase in foreign tax
expense. A tax benefit of 36% was provided on the extraordinary charge and
cumulative effect of accounting change using the incremental tax rate applicable
to the items.
General and administrative expense decreased $2.8 million in the fourth
quarter of 1992 compared to the fourth quarter of 1991 and $7.3 million in 1992
compared to 1991. These decreases are the result of downsizing corporate staff
functions in the third quarter of 1991, reductions in pension expense, group
medical costs, and compensation expense in connection with executive incentive
and stock award plans.
The extraordinary charge of $3.1 million represents the write-off of
unamortized issue cost (net of $1.7 million tax) of the LYONs which were
redeemed for cash on September 30, 1992.
The Corporation changed to the accrual method of accounting for postretirement
health care costs effective January 1, 1992. The cumulative effect of the change
of $17.4 million (net of $9.8 million tax), representing unfunded prior service
cost at December 31, 1991, was recognized in the consolidated statement of
operations as a restatement of the first quarter's results of operations.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash, cash equivalents, and short term investments $91,879 $177,692 $258,090
Net cash provided (used) by:
Operating activities (64,302) 173,905 94,652
Investing activities 894 35,762 (122,042)
Financing activities 21,276 (214,602) 45,764
- --------------------------------------------------------------------------------
</TABLE>
Total capitalization at December 31, 1993 was $454.0 million composed of $47.0
million debt and $407.0 million equity.
The Corporation's primary sources of short-term financing during the past few
years were customer advances, particularly for the rail systems segment, sale of
short-term investments and operations. However, in 1993, net cash generated by
operations decreased compared to the previous two years, primarily as a result
of increased accounts receivable and inventory levels and a decrease in customer
advances, particularly for the rail system segment. The increase in accounts
receivable, including customer's retentions, which increased $17.9 million at
December 31, 1993 compared with December 31, 1992 was due principally to
increased revenues. The increased inventory levels at year-end 1993 primarily
reflected higher inventory levels necessary to support the rail systems'
expanding role as a fully-integrated manufacturer of transit cars and
locomotives and supplier of aftermarket railway products. The decrease in
customer advances in 1993 of $75.7 million were used primarily to fund rail
systems inventories.
Excluding $47.9 million of cash provided from the sale of short-term
investments, net cash used for investments declined in 1993. In 1993 net cash
used for investing activities included $52.2 million that was invested in
property, plant and equipment, primarily for rail systems leasehold
improvements, manufacturing machinery, and equipment. Aside from certain owned
facilities, the Corporation leases the majority of its facilities and certain
construction equipment under noncancellable operating leases. In 1993, rent
expense under all operating leases was $38.8 million. The Corporation's future
lease commitments are discussed in the "Commitments and Contingencies" Note to
Consolidated Financial Statements. In addition to investments in fixed assets,
the Corporation funded $15.5 million for initial design and engineering relating
to new transit car models.
Net cash provided by financing activities increased in 1993 compared to 1992.
In 1992, the Corporation redeemed the LYONs for cash and paid down loan balances
assumed in business combinations. In 1993, the Corporation borrowed short-term
to finance working capital needs. The Corporation expects that it will continue
to incur short-term borrowings from time to time to finance rail systems and
engineering and construction working capital needs. The Corporation believes
that its balance of cash, together with funds generated from operations and
existing short-term and potential long-term borrowing capabilities, will be
sufficient to meet its operating cash requirements in the foreseeable future.
The Corporation had available from banks $135.0 million under committed
revolving credit agreements. The Corporation is currently negotiating with banks
to replace its two unsecured revolving credit agreements with a $150.0 million
revolving credit facility by March 31, 1994.
II-5
<PAGE>
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Selected quarterly financial data for the two years ended December 31, 1993,
is presented below. Computations of earnings per share for each quarter and the
annual period are independent.
- ----------------------------------------------------------------------------------------------------
1993 Quarter 1st 2nd 3rd 4th*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $560,195 $655,392 $733,840 $773,116
Operating income $17,876 $17,843 $21,496 $19,247
Net income $7,883 $8,207 $9,250 $10,427
Earnings per common share .26 .27 .30 .33
- ----------------------------------------------------------------------------------------------------
Dividends declared $.20 $.20 $.20 $.20
Market price
High $22.25 $25.62 $27.12 $26.50
Low 19.37 19.75 23.75 21.75
- ----------------------------------------------------------------------------------------------------
<FN>
* Net income for the fourth quarter of 1993 included (i) an after tax gain on
subsidiary sale of stock of $6,271 and (ii) an after tax gain on the
Corporation's sale of subsidiary stock of $1,216.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1992 Quarter (a) 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $508,962 $524,649 $584,650 $666,670
Operating income (loss) $15,075 $14,065 $(975) $23,142
Income (loss) before extraordinary charge and
cumulative effect of accounting change $6,764 $6,960 $(7,145) $6,857
Extraordinary charge from write off of
unamortized debt issue cost, net of tax -- -- $(3,096) --
Cumulative effect of accounting change for
postretirement health care costs, net of tax $(17,403) -- -- --
- ----------------------------------------------------------------------------------------------------
Net income (loss) $(10,639) $6,960 $(10,241) $6,857
- ----------------------------------------------------------------------------------------------------
Earnings (loss) per common share
Income (loss) before extraordinary charge and
cumulative effect of accounting change $.22 $.23 $(.24) $.23
Extraordinary charge -- -- (.10) --
Cumulative effect of accounting change (.57) -- -- --
- ----------------------------------------------------------------------------------------------------
Net income (loss) $(.35) $.23 $(.34) $.23
- ----------------------------------------------------------------------------------------------------
Dividends declared $.20 $.20 $.20 $.20
Market price
High $28.50 $25.56 $22.87 $22.25
Low 23.12 19.50 19.87 17.87
- ----------------------------------------------------------------------------------------------------
<FN>
(a) Restated to conform to 1993 financial statement presentation.
</TABLE>
II-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Morrison Knudsen Corporation
We have audited the accompanying consolidated balance sheets of Morrison Knudsen
Corporation and Subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flow for
each of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedule listed in the Table of Contents at
Item 14. These financial statements and the financial statement schedule are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly in all
material respects the financial position of Morrison Knudsen Corporation and
Subsidiaries at December 31, 1993 and 1992 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
As discussed on page II-23 of the "Notes to Consolidated Financial Statements,"
the Corporation changed its method of accounting for postretirement health care
costs in 1992 to conform with Statement of Financial Accounting Standards No.
106.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Boise, Idaho
February 8, 1994
II-7
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS EXCEPT SHARES DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992(a) 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $2,722,543 $2,284,931 $2,024,791
Cost of revenue (2,646,081) (2,233,624) (1,942,877)
- -----------------------------------------------------------------------------------------------------------------------------
Operating income 76,462 51,307 81,914
General and administrative expenses (37,358) (38,160) (48,813)
Research and development expenses (3,701) -- --
Gain on subsidiary sale of stock 10,602 -- --
Interest expense (3,277) (12,307) (16,156)
Equity in net earnings (loss) and interest earned from unconsolidated affiliates (5,757) (133) 5,545
Other income, net 25,827 23,676 35,964
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes, minority interests, extraordinary charge, and
cumulative effect of accounting change 62,798 24,383 58,454
Income tax expense (26,459) (10,813) (22,998)
Minority interests in net earnings of subsidiaries (572) (134) --
- -----------------------------------------------------------------------------------------------------------------------------
Income before extraordinary charge and cumulative effect of
accounting change 35,767 13,436 35,456
Extraordinary charge from write off of unamortized debt issue cost,
net of tax -- (3,096) --
Cumulative effect of accounting change for postretirement health care costs,
net of tax -- (17,403) --
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $35,767 $(7,063) $1,035,456
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share
Income before extraordinary charge and cumulative effect of
accounting change $1.15 $(.44 $1.24
Extraordinary charge -- (.10) --
Cumulative effect of accounting change -- (.57) --
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $1.15 $(.23) $1.24
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Common shares used to compute earnings (loss) per share 30,991,169 30,410,585 28,544,432
- -----------------------------------------------------------------------------------------------------------------------------
Dividends per share $0.80 $0.80 $0.74
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Restated to conform to 1993 financial statement presentation.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-8
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 1992(a)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $91,879 $1,134,011
Short term investments, at cost that approximates market -- 43,681
Accounts receivable including retentions of $62,800 and $44,871 231,021 160,196
Refundable federal income taxes 21,096 18,365
Inventories 133,350 78,856
Costs and earnings in excess of billings on uncompleted contracts 185,221 127,254
Investments in construction joint ventures 83,116 68,904
Deferred income taxes 25,019 36,135
Other 22,519 14,010
- ----------------------------------------------------------------------------------------------------
Total current assets 793,221 681,412
- ----------------------------------------------------------------------------------------------------
Investments and other assets
Marketable securities, at cost, market $53,180 and $69,998 51,143 60,902
Investments in and receivables from unconsolidated affiliates 62,649 34,567
Investments in gold mining joint ventures -- 31,238
Goodwill and other intangibles, net 36,284 27,127
Other investments and assets 68,984 71,171
- ----------------------------------------------------------------------------------------------------
Total investments and other assets 219,060 225,005
- ----------------------------------------------------------------------------------------------------
Property and equipment, at cost
Land and mineral rights 21,131 20,755
Buildings and improvements 153,252 133,100
Machinery and equipment 67,187 46,708
Construction equipment 226,221 219,591
- ----------------------------------------------------------------------------------------------------
Total property and equipment 467,791 420,154
Less accumulated depreciation (254,122) (226,147)
- ----------------------------------------------------------------------------------------------------
Property and equipment, net 213,669 194,007
- ----------------------------------------------------------------------------------------------------
Total assets $1,225,950 $1,100,424
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<FN>
(a) Restated to conform to 1993 financial statement presentation.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-9
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, 1993 1992(a)
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities
Short term and current portion of long term debt $ 37,238 $1,005,757
Accounts payable including retentions of $45,951 and $44,806 293,746 209,418
Accrued salaries, wages and benefit plan liabilities 46,507 49,649
Other accrued expenses 53,372 55,483
Billings in excess of costs and earnings on uncompleted contracts 104,460 58,966
Advances from customers 147,788 223,501
Dividends payable 6,423 5,956
- ----------------------------------------------------------------------------------------------------
Total current liabilities 689,534 608,730
- ----------------------------------------------------------------------------------------------------
Non current liabilities
Deferred income taxes 24,189 31,149
Deferred compensation 13,671 9,127
Accrued workers' compensation insurance 46,597 46,824
Accrued postretirement benefit obligation 26,506 27,375
Debt due after one year 9,768 457
- ----------------------------------------------------------------------------------------------------
Total non current liabilities 120,731 114,932
- ----------------------------------------------------------------------------------------------------
Commitments and contingencies
- ----------------------------------------------------------------------------------------------------
Minority interests in subsidiaries 8,718 991
- ----------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, par value $.10, authorized 10,000,000 shares, none issued
Common stock, par value $1.67, authorized 100,000,000 shares,
issued 32,698,179 and 32,072,353 shares 54,494 53,453
Capital in excess of par value 252,250 236,337
Retained earnings 127,466 116,330
Treasury stock, 1,080,184 and 1,432,378 shares, at cost (19,435) (25,959)
Deferred compensation for restricted stock awards (5,837) (3,660)
Cumulative translation adjustments (1,971) (730)
- ----------------------------------------------------------------------------------------------------
Total stockholders' equity 406,967 375,771
- ----------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,225,950 $1,100,424
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
(THOUSANDS OF DOLLARS)
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 35,767 $ (7,063) $ 35,456
Reconciliation of net income (loss) to net cash provided (used) by operating
activities:
Cumulative effect of accounting change of $27,192 and extraordinary charge of $4,837 -- 32,029 --
Depreciation expense 37,655 30,218 34,042
Deferred income taxes 4,156 (11,087) (14,585)
Deferred compensation and workers? compensation insurance 6,895 6,015 4,454
Amortization of original issue discount less payment of $32,285 in 1992 -- (21,679) 13,300
Gain on subsidiary sale of stock (10,602) -- --
Gain on sale of assets (14,677) (15,915) (20,204)
Other items, net 14,782 9,929 566
Change in assets and liabilities net of effects of purchases of businesses:
Receivables (30,891) 8,070 50,734
Inventories (38,306) (19,939) 31,113
Costs and earnings in excess of (less than) billings on uncompleted
contracts, net (8,105) 14,821 (17,455)
Equity in construction joint ventures (70) (9,339) (5,642)
Other assets 3,361 225 3,157
Accounts payable, accrued salaries and expenses 12,869 47,504 (433)
Income taxes payable (refundable) (1,423) (19,887) 1,366
Customer advances, net (75,713) 130,003 (21,217)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities (64,302) 173,905 94,652
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Short term investments, net 47,859 90,488 (35,673)
Property and equipment acquisitions (52,187) (35,668) (66,712)
Property and equipment disposals 5,341 7,399 27,334
Investments in and loans to unconsolidated affiliates (9,605) (12,450) (53,167)
Collection of affiliate receivables 4,013 25,302 1,723
Other investments and assets 1,104 (8,961) 4,453
Purchase of businesses, net of cash acquired 4,369 (30,348) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 894 35,762 (122,042)
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net borrowings (repayments) under credit agreements and short term debt 43,810 (22,134) 555
Payments of long term debt (399) (171,813) (18,053)
Borrowings of long term debt 1,526 -- 955
Proceeds from stock sale and stock issued 503 935 80,005
Dividends paid (24,164) (22,530) (18,089)
Other equity transactions of pooled subsidiaries -- 940 391
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 21,276 (214,602) 45,764
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (42,132) (4,935) 18,374
Cash and cash equivalents at beginning of period 134,011 138,946 120,572
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 91,879 $134,011 $138,946
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid, including $32,285 of accumulated original issue discount
on LYONs in 1992 $ 7,076 $ 36,616 $ 6,020
Income taxes paid 25,034 30,257 36,843
Acquisition of assets for stock:
Property, plant and equipment and other assets 10,700 -- --
Goodwill and other intangibles 7,248 -- --
Liabilities assumed (2,535) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-11
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SHARES OF DEFERRED
COMMON STOCK (A) CAPITAL IN COMPENSATION CUMULATIVE
COMMON EXCESS OF RETAINED TREASURY FOR RESTRICTED TRANSLATION
ISSUED TREASURY STOCK PAR VALUE EARNINGS STOCK STOCK AWARDS ADJUSTMENTS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1990 28,399,472 (2,199,604) $47,332 $156,156 $130,320 $(39,740) $(1,821) $ --
Net income 35,456
Dividends declared (18,984)
Issuance of shares 3,450,000 5,750 72,108
in public offering
Stock option and 38,178 445,966 63 1,550 8,060 388
award plans
Treasury stock (47,746) (1,081)
acquired
Compensation 786
amortization
Foreign currency (584)
translation
adjustments
Transactions of 490 (99)
pooled companies
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1991 31,887,650 (1,801,384) 53,145 230,304 146,693 (32,761) (647) (584)
Net loss (7,063)
Dividends declared (23,200)
Stock option and 184,703 375,546 308 4,993 7,073 (3,456)
award plans
Treasury stock (6,540) (271)
acquired
Compensation 443
amortization
Foreign currency (146)
translation
adjustments
Transactions of 1,040 (100)
pooled companies
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1992 32,072,353 (1,432,378) 53,453 236,337 116,330 (25,959) (3,660) (730)
Net income 35,767
Dividends declared (24,631)
Stock issued in 471,996 787 11,653
business
combinations
Stock option and 153,830 365,567 254 4,260 6,847 (3,087)
award plans
Treasury stock (13,373) (323)
acquired
Compensation 910
amortization
Foreign currency (1,241)
translation
adjustments
- --------------------------------------------------------------------------------------------------------------------------------
December 31, 1993 32,698,179 (1,080,184) $54,494 $252,250 $127,466 $(19,435) $(5,837) $(1,971)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Treasury stock at December 31, 1993 includes 579,204 shares of unallocated stock held by the Employee Stock Ownership
Plan Trust.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
II-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
- --------------------------------------------------------------------------------
The term "Corporation" as used in this Annual Report includes Morrison Knudsen
Corporation and its consolidated subsidiaries unless otherwise indicated.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Corporation and all of its majority-owned subsidiaries.
Investments in 20 percent to 50 percent owned companies and joint ventures are
accounted for by the equity method. The Corporation's proportionate share of
joint venture revenue, cost of revenue and operating income is included in the
consolidated statement of operations. Intercompany accounts and transactions
have been eliminated.
RECOGNITION OF REVENUE: The Corporation recognizes revenue on construction
contracts, including substantially all of its construction joint-venture
contracts, on the percentage-of-completion method, based on the proportion of
costs incurred on the contract to total estimated contract costs.
Construction-management and engineering contract revenue is recognized on the
accrual method. Revenue is recognized on long-term rail systems contracts when
products are shipped. Revisions in contract revenue and cost estimates are
reflected in the accounting period when known. Provision is made currently for
estimated losses on uncompleted contracts. Claims for additional contract
revenue in excess of original contract price are recognized when an offer to
settle has been received from the customer.
Costs and earnings in excess of billings represent revenue accrued under the
percentage of completion method but not yet billable under the terms of the con-
tract and are recoverable from customers upon various measures of performance
such as quantities excavated or delivered, costs incurred, time schedules or
completion of the contract. Substantially all the unbilled amounts at December
31, 1993, net of progress payments, are expected to be collected during 1994.
CLASSIFICATION OF CURRENT ASSETS AND LIABILITIES: The Corporation includes in
current assets and liabilities amounts realizable and payable under engineering,
construction and rail systems contracts that extend beyond one year. Accounts
receivable at December 31, 1993 include $26,920 of retentions, generally payable
by customers on final acceptance, which are expected to be collected after 1994.
Advances received from customers as payments on account of work in progress
are regarded as partial payment and reflected as deductions from the related
asset. Advances by customers to provide a revolving fund from which to pay
contract-related costs are reflected as liabilities until the contract is
substantially or fully completed. The Corporation does not pay interest on
advances from customers.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: Cash equivalents consist of
investments in highly liquid securities having an original maturity of three
months or less.
Short-term investments consist of marketable equity securities and other
investment-grade securities and are stated at the lower of their aggregate cost
or market. For purposes of the consolidated statement of cash flow, the
Corporation does not consider short-term investments to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. Most
inventories are valued at actual purchase or standard production costs of units
to be produced under a long-term contract. The remainder are valued at the lower
of last-in, first-out (LIFO) cost or market.
TRANSIT CAR DESIGN COSTS: Certain initial design and engineering costs on new
transit car models are capitalized and amortized over their estimated economic
useful lives of 5 years. The unamortized balance of transit car design and
engineering costs at December 31, 1993 was $15,519. Similar costs were not
material in prior years. Such capitalized costs are included in the accompanying
balance sheet under the caption "Other Investments and Assets". The capitalized
costs are written off if it becomes probable that they cannot be recovered from
future transit car contract revenue.
CREDIT RISKS: Financial instruments which potentially subject the Corporation to
concentrations of credit risks consist of cash equivalents, short-term
investments and billed and unbilled accounts receivable.
The Corporation by policy, limits the amount of credit exposure to any one
financial institution and places the investments with financial institutions
evaluated as highly creditworthy. Concentrations of credit with respect to
billed and unbilled accounts receivable are limited due to the Corporation's
credit evaluation process. Historically, the Corporation has not incurred any
significant credit-related losses.
DEPRECIATION AND AMORTIZATION: The cost of buildings and office furniture and
equipment is depreciated on the straight-line method over periods from 3 to 30
years. The cost of construction equipment (less salvage values of 10 to 20%) is
depreciated on the straight-line method over periods from 5 to 10 years. Certain
specialty equipment is depreciated using the units-of-production method and may
have salvage values which exceed 20% of original cost. The cost and accumulated
depreciation of property and equipment disposals are removed from the accounts,
and gains or losses are reflected in operations.
II-13
<PAGE>
GOODWILL AND OTHER INTANGIBLES: Goodwill, costs in excess of the net assets of
businesses acquired, is amortized on a straight-line basis over periods ranging
from 5 to 30 years. Costs of noncompete agreements are being amortized over
their contract periods of 5 and 10 years. Accumulated amortization at December
31, 1993 and 1992, was $2,741 and $1,300, respectively.
PROJECT DEVELOPMENT COSTS: The Corporation defers certain costs related to the
design, engineering, construction, and ongoing operation and maintenance of
certain major projects in which the Corporation for the first time intends to
retain an ownership interest. Project development costs of $5,922 and $3,031
were deferred at December 31, 1993 and 1992, respectively and are included in
the accompanying balance sheet under the caption "Other Investments and Assets".
FOREIGN CURRENCY TRANSLATION: The functional currency for the majority of the
Corporation's foreign operations is the applicable local currency. The
translation from the applicable foreign currencies to U.S. dollars is performed
for asset and liability accounts using current exchange rates in effect at the
balance sheet date and for revenue and expense accounts using a weighted average
exchange rate during the period. The gains or losses, net of applicable deferred
income taxes, resulting from such translation are deferred as a separate
component of stockholders' equity until disposition or substantial disposition
of the investment. Gains or losses resulting from foreign currency transactions
are included in the net income of the period in which the transaction is
completed. The Corporation enters into foreign exchange forward contracts to
minimize the impact of foreign currency fluctuations on operating results. The
contracts hedge firm purchase commitments and any gains or losses are deferred
and included as a component of the related transaction.
INCOME TAXES: Effective January 1, 1993, the Corporation adopted the provisions
of Statement of Financial Accounting Standards No. 109 ACCOUNTING FOR INCOME
TAXES ("SFAS 109") which requires a company to recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in the company's financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
differences between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Adoption of FAS 109 did not have a
material effect on the financial statements of the Corporation.
RESEARCH AND DEVELOPMENT: Company sponsored research and development
expenditures related to rail systems segment products are expensed as incurred.
EARNINGS (LOSS) PER SHARE: Earnings (loss) per share are computed based on the
weighted average number of shares outstanding plus shares issuable upon assumed
exercise of stock options, reduced by the shares which could be purchased with
the assumed proceeds from such shares, if dilutive.
STATEMENT OF
FINANCIAL ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement No. 112 EMPLOYER'S
ACCOUNTING FOR POSTEMPLOYMENT BENEFITS ("FAS 112"). Adoption is required by
January 1, 1994. The statement establishes standards of financial accounting and
reporting for the estimated cost of benefits provided to former or inactive
employees after employment but before retirement. The Corporation believes that
FAS 112, when adopted, will not have a material effect on its financial position
or results of operations.
SUBSIDIARY SALE OF STOCK
On December 21, 1993, MK Gold Company, ("MK Gold") then a wholly-owned
subsidiary of the Corporation, completed an initial public offering ("IPO") of
8,000,000 shares of its common stock at an offering price of six dollars a
share. MK Gold is in the business of mining gold, developing gold mining
projects and providing contract mining services. The net proceeds to MK Gold
from the IPO, after deducting underwriters'commissions and offering expenses,
were $43,077. The Corporation recorded a $10,602 pretax gain on the IPO in
recognition of the net increase in value of the Corporation's investment in MK
Gold. Concurrent with MK Gold's IPO, the Corporation sold 1,000,000 shares of MK
Gold's common stock to the public, at a price of six dollars a share. These
sales reduced the Corporation's investment to 50%. The Corporation received net
cash proceeds of $5,385 and recognized a $2,056 pretax gain. In January 1994, MK
Gold sold additional common stock to the public which reduced the Corporation's
ownership in MK Gold to 46.5%. The Corporation's accompanying financial state-
ments at December 31, 1993 reflect the investment in MK Gold under the equity
method of accounting. MK Gold's revenue and net income for 1993 prior to the IPO
was $40,963 and $2,475, respectively.
MARKETABLE SECURITIES
Non-current marketable securities are carried at the lower of aggregate cost or
market value. The portfolio consists primarily of foreign government bonds
(maintained in support of the Corporation's self-insurance programs). At
December 31, 1993, the excess of market value over cost consisted of unrealized
gains of $2,472 and unrealized losses of $435.
II-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ACQUISITIONS
In April 1993, the Corporation reached an agreement with Joy Technologies Inc.
("JTI") whereby JTI exchanged cash and other assets, (including its 50% common
stock interest in Joy MK Projects Company ("J/MK"), an unconsolidated
affiliate), for a release by the Corporation of JTI's obligation to complete a
contract for installation of pollution control devices and other consideration.
Effective May 1, 1993, the accounts of J/MK have been fully consolidated with
those of the Corporation. The consolidation of the accounts had no material
effect on the Corporation's accompanying financial statements as of December 31,
1993 and for the year then ended.
Effective July 1, 1993, the Corporation acquired for $527 cash additional
voting stock of McConnell Dowell Corporation Limited ("MDC") representing 3% of
the total issued and outstanding voting stock of MDC bringing the Corporation's
aggregate share of MDC's voting stock to 51.9%. Prior to July 1, 1993, the
Corporation had accounted for its investment in MDC on the equity method. The
Corporation consolidated the accounts of MDC effective with the change in
control.
On August 20, 1993, the Corporation acquired all of the voting stock of
Arrowsmith Power Systems, Inc. ("Arrowsmith") for $11,425 which consisted of
424,752 shares of the Corporation's common stock and $700 cash. In addition, the
Corporation entered into noncompete agreements with certain former stockholders
of Arrowsmith in exchange for $2,000 cash which cost is being amortized over 10
years. Arrowsmith manufactures turbochargers for locomotives. The acquisition
has been accounted for by the purchase method of accounting. The $3,551 excess
of the purchase price over the estimated fair values of the net assets acquired
has been recorded as goodwill, and is being amortized over 15 years. The
operating results of Arrowsmith are included in the Corporation's consolidated
results of operations from the date of acquisition.
ACCOUNTS RECEIVABLE
The Corporation has a three year agreement with banks (expiring in December
1994) to sell, with limited recourse, up to $60,000 of undivided interests in a
designated pool of accounts receivables. As collections reduce previously sold
undivided interests, new receivables can be sold up to the $60,000 level. In
addition, accounts receivable were sold to a bank under an agreement which ends
in February 1994. Accounts receivable totaling $713,804 and $651,030 have been
sold under the agreements in 1993 and 1992, respectively. At December 31, 1993
and 1992, accounts receivable in the accompanying balance sheet are net of
receivables sold under the agreements of $75,937 and $87,264, respectively.
INVENTORIES
Rail systems inventories are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 4,267 $ 134,264
Work in progress 240,097 136,004
Raw materials 120,481 74,881
- --------------------------------------------------------------------------------
Total inventories 364,845 215,149
Payments on account of work in progress (231,495) (136,293)
- --------------------------------------------------------------------------------
Net inventories $ 133,350 $ 78,856
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Approximately $34,540 and $25,299 of total inventories at December 31, 1993
and 1992, respectively, were valued on the LIFO cost method, and the excess
current replacement cost of these inventories over the stated LIFO value was
$2,924 and $2,930, respectively.
CONSTRUCTION JOINT VENTURES
The Corporation has entered into a number of partnership arrangements commonly
referred to as "joint ventures". Generally, each construction joint venture is
formed to accomplish a specific project and is dissolved upon completion of the
project. The number of joint ventures in which the Corporation participates and
the size, scope and duration of the projects vary between periods. Specific
joint ventures change from period to period, and the comparability of the
following group financial information between periods may not be meaningful.
Summary joint venture financial information follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FINANCIAL POSTION
DECEMBER 31, 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 161,084 $ 132,899
Other current assets 197,448 157,660
Noncurrent assets 5,989 -
Property and equipment, net 37,776 17,429
Advances from customers (87,777) (88,702)
Other current liabilities (208,100) (109,495)
- -------------------------------------------------------------------------------
Net assets $ 106,420 $ 109,791
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Corporation's investment in
construction joint ventures $ 83,116 $ 68,904
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Combined joint ventures, net
Revenue $1,025,376 $ 750,676 $ 342,162
Cost of revenue (985,314) (716,939) (312,620)
- -------------------------------------------------------------------------------
Operating income $ 40,062 $ 33,737 $ 29,542
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Corporation's share, net
Revenue $ 485,393 $ 379,261 $ 216,597
Cost of revenue (465,301) (364,450) (200,267)
- -------------------------------------------------------------------------------
Operating income $ 20,092 $ 14,811 $ 16,330
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
II-15
<PAGE>
INVESTMENTS IN
UNCONSOLIDATED AFFILIATES
The following table presents summarized financial information on a combined 100
percent basis of the unconsolidated affiliated companies accounted for by the
equity method. Amounts presented include the accounts of the following principal
unconsolidated affiliates: MK Gold (50%); Strait Crossing Development, Inc.
(45%); Texas TGV Corporation ("Texas TGV") (38.2%); AmerBank (31.1%); and
Westmoreland Resources, Inc. (24%). MK Gold holds interests in two producing
gold mining projects in California and provides contract mining services. MK
Gold's results of operations are included on the equity basis of accounting for
the period subsequent to the IPO. Strait Crossing Development, Inc. is a joint
venture with a contract to design, build and operate for 35 years an
8.4-mile-long toll bridge linking the Canadian provinces of New Brunswick and
Prince Edward Island. Texas TGV Corporation is a development-stage company with
a 50-year franchise to provide 200 m.p.h. passenger service connecting five
major Texas cities. AmerBank is a licensed bank operating in Poland. The
investment in AmerBank has been classified as current to reflect the
Corporation's intent to sell its interest therein. West moreland Resources, Inc.
is a mining company that operates a surface coal mine in Montana.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FINANCIAL POSITION
DECEMBER 31, 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 91,775 $ 89,922
Non-current assets 125,762 65,081
Current liabilities (68,569) (70,238)
Non current liabilities (17,058) (24,354)
- -------------------------------------------------------------------------------
Net assets $131,910 $ 60,411
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Corporation's investment in and receivables
from unconsolidated affiliates $62,649 $34,567
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $199,110 $286,811 $253,050
Operating income 4,046 10,055 10,555
Net income (loss) (2,734) (3,794) 5,677
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Corporation's equity in net
earnings (loss) and interest
earned from unconsolidated
affiliates $(5,757) $(133) $5,545
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The Corporation's investment in MK Gold at December 31, 1993 was $29,954. The
aggregate market value of MK Gold's voting stock held by the Corporation was
$54,000 at December 31, 1993.
The Corporation received dividends from unconsolidated affiliates of $216 and
$1,380 in 1993 and 1992, respectively.
The Corporation's consolidated retained earnings at December 31, 1993 include
$8,665 of undistributed earnings of the unconsolidated affiliates accounted for
by the equity method.
SHORT-TERM DEBT
The Corporation has two unsecured committed revolving credit agreements ("credit
agreements") with U.S. banks under which it may borrow, at varying interest
rates up to $135,000. One facility allows the Corporation to borrow up to
$100,000 until September 30, 1995, subject to annual extension by the banks. The
second facility for $35,000 expires on March 31, 1994. The Corporation pays a
facility fee of .25 of 1% per year. A balance of $15,900 was outstanding under
these credit agreements at December 31, 1993.
In addition, a subsidiary of the Corporation has an unsecured credit facility
("credit facility") with a Canadian bank with an aggregate commitment at
December 31, 1993, of $26,628 (Canadian $35,000). The credit facility is the
primary source of financing for the construction of a project in Ontario,
Canada. The credit facility terminates January 31, 1995 when the project is
expected to be completed. The subsidiary pays a commitment fee of .75 of 1% per
year. A balance of $14,470 was outstanding under the credit facility at December
31, 1993.
Both the credit agreements and credit facility contain restrictive financial
covenants that require minimum levels of working capital and net worth and
maintenance of specific financial ratios. The Corporation was in compliance with
such covenants at December 31, 1993.
Certain information with respect to short-term debt at December 31, 1993, 1992
and 1991 and for the years then ended follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Short term debt at year end $36,920 $5,477 $1,034
Weighted average interest rate
at year end 5.9% 7.50% 8.50%
Average month end amount
outstanding $41,080 $1,445 $3,527
Weighted average interest
rate for the year 3.50% 4.4% 7.50%
Maximum month end amount
outstanding $87,573 $12,862 $21,330
- --------------------------------------------------------------------------------
</TABLE>
II-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
TAXES ON INCOME
The components of the U.S. federal, state and foreign income tax expense are
shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable
U.S. federal $14,258 $ 10,142 $ 28,905
State and foreign 7,681 228 8,678
- --------------------------------------------------------------------------------
21,939 10,370 37,583
- --------------------------------------------------------------------------------
Deferred
U.S. federal 880 (11,877) (12,720)
State and foreign 3,640 790 (1,865)
- --------------------------------------------------------------------------------
4,520 (11,087) (14,585)
- --------------------------------------------------------------------------------
Total expense (benefit) $26,459 $ (717) $ 22,998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The income tax expense (benefit) applicable to continuing operations,
extraordinary charge and cumulative effect of accounting change are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Continuing operations:
Current $21,939 $12,111 $ 37,583
Deferred 4,520 (1,298) (14,585)
- --------------------------------------------------------------------------------
26,459 10,813 22,998
Extraordinary charge:
Current -- (1,741) --
Cumulative effect of
accounting change:
Deferred -- (9,789) --
- --------------------------------------------------------------------------------
Total expense (benefit) $26,459 $ (717) $ 22,998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Deferred income taxes arise from temporary differences in the recognition of
certain items of revenue and expense for income tax and consolidated financial
statement purposes. The source of each difference and the related tax effect are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee benefit plans $(6,511) $(10,415) $(2,559)
Provision for estimated losses 8,723 (972) (5,534)
Revenue recognition 8,509 (361) (2,479)
Alternative minimum tax 1,286 (2,574) --
Joint ventures (1,600) 3,979 (4,292)
Depreciation 331 2,619 (2,023)
Basis difference in affiliates (1,349) 68 468
Other, net (4,869) (3,431) 1,834
- --------------------------------------------------------------------------------
Deferred income taxes $4,520 $(11,087) $(14,585)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The Corporation may be entitled to recovery of certain material foreign tax
credits not taken or recorded in prior years. The amount of such credits has
not been determined and is subject to challenge by the Internal Revenue Service.
Deferred tax benefits and liabilities as of December 31, 1993 and 1992 consist
of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BENEFITS LIABILITIES TOTAL
- --------------------------------------------------------------------------------
DECEMBER 31,1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee benefit plans $11,508 $ -- $11,508
Provision for estimated losses 17,659 -- 17,659
Revenue recognition -- (9,372) (9,372)
Alternative minimum tax 1,288 -- 1,288
Joint ventures -- (1,371) (1,371)
Depreciation -- (23,123) (23,123)
Basis difference in affiliates -- (1,207) (1,207)
Other, net 5,448 -- 5,448
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities)
Continuing operations 35,903 (35,073) 830
Discontinued operations 313 -- 313
- --------------------------------------------------------------------------------
Total $36,216 $(35,073) $1,143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DECEMBER 31, 1992
- --------------------------------------------------------------------------------
Employee benefit plans $ 4,997 $ -- $ 4,997
Provision for estimated losses 26,382 -- 26,382
Revenue recognition -- (863) (863)
Alternative minimum tax 2,574 -- 2,574
Joint ventures -- (2,971) (2,971)
Depreciation -- (22,792) (22,792)
Basis difference in affiliates -- (2,555) (2,555)
Other, net 214 -- 214
- --------------------------------------------------------------------------------
Deferred tax assets (liabilities)
Continuing operations 34,167 (29,181) 4,986
Discontinued operations 677 -- 677
- --------------------------------------------------------------------------------
Total $34,844 $(29,181) $ 5,663
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Deferred U.S. federal income taxes of $2,325 have not been provided on $5,691
of cumulative undistributed earnings of foreign subsidiaries at December 31,
1993 as such earnings have been or are intended to be indefinitely reinvested in
foreign operations.
Income tax expense on continuing operations differed from income taxes at the
U.S. federal statutory tax rate of 34% (35% for 1993) for the following reasons:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax at federal statutory rate $21,779 $ 8,290 $19,874
Expense (benefit) for:
State taxes 3,550 3,667 4,009
Foreign taxes 3,808 1,297 506
Nondeductible expenses
(nontaxable income), net (2,350) (1,803) (1,391)
Tax credits (328) (638) --
- --------------------------------------------------------------------------------
Income tax expense $26,459 $10,813 $22,998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The domestic and foreign components of income before taxes are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $40,265 $12,496 $52,867
Foreign 22,533 11,887 5,587
- --------------------------------------------------------------------------------
Income before income taxes $62,798 $24,383 $58,454
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
II-17
<PAGE>
OTHER INCOME (EXPENSE) NET
<TABLE>
<CAPTION>
Other income (expense) items are as follows:
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest $10,694 $6,222 $8,050
Dividends 2,733 10,860 9,371
Gains on sales of marketable
securities, net 22,402 22,648 13,546
Provisions for unrealized losses
on marketable securities (1,000) (3,549) --
Foreign currency transaction loss -- (1,651) --
Loss for terminating a
non-construction joint venture -- (1,475) --
Loss on receivable sales (3,578) (3,184) (516)
Underwriting expenses, net (1,480) (2,807) (1,316)
Miscellaneous expenses, net (3,944) (3,388) (345)
Gain on sale of corporate assets -- -- 7,174
- --------------------------------------------------------------------------------
Other income, net $25,827 $23,676 $35,964
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
COMMITMENTS AND CONTINGENCIES
The Corporation has commitments and performance guarantees arising from
engineering, construction and rail systems contracts including those of its
construction joint ventures.
The Corporation is self insured for workers' compensation, automobile, general
liability and third party errors and omissions. The Corporation has insurance
agreements with insurers for losses in excess of self insurance limits.
LONG-TERM LEASES
Total rentals charged to operations in 1993, 1992 and 1991 were $38,800,
$39,800 and $33,300, respectively. Future minimum rental payments under
operating leases with remaining noncancelable terms in excess of one year at
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR REAL ESTATE EQUIPMENT TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 $20,960 $10,264 $31,224
1995 19,916 8,749 28,665
1996 18,893 8,333 27,226
1997 17,469 7,932 25,401
1998 15,912 7,147 23,059
1999 and after 92,258 37,708 129,966
- --------------------------------------------------------------------------------
</TABLE>
In addition, the Corporation has leased mining equipment under an operating
lease through 2008 with a basic annual rent of $6,686, which is reimbursable and
funded under the operating contract with the mine owner.
VERTAC SITE CONTRACTORS
Design, engineering, construction and pre-production start-up costs to develop
a facility for incineration of certain hazardous wastes have been capitalized.
The incineration facility was engaged in hazardous waste processing under a
contract with the State of Arkansas which has expired. The Corporation concluded
negotiations with a prime contractor, who is under contract with the Federal
Environmental Protection Agency ("EPA"), and reached agreement on a subcontract
under which the Corporation will continue processing the measured hazardous
waste at the Arkansas site. The Corporation's investment representing the net
assets of the business was $21,950 and $23,768 at December 31, 1993 and 1992,
respectively. The Corporation will not recover its investment under this subcon-
tract but anticipates that it will receive additional contracts to incinerate
hazardous waste at the site to fully recover its investment.
CF SYSTEMS
The Corporation acquired a solvent extraction processing technology in 1990
and subsequently deferred additional design and engineering costs in modifying
the processing facility for commercial application. The Corporation is currently
negotiating a "sole source" contract with a state agency for remediation of
contaminated soil. The contract, if awarded, should begin about mid-1994, be of
approximately 36 months duration and be principally funded by the EPA. The
Corporation's investment in the business was $13,896 and $14,120 at December 31,
1993 and 1992, respectively.
TEXAS TGV CORPORATION
Texas TGV was awarded a franchise in May 1991 to finance, construct and
operate a high speed rail system in Texas. Through December 31, 1993, the
project has been funded by its shareholders, including the Corporation, which
has a 38.2% equity investment of $13,996 at December 31, 1993. The Texas High
Speed Rail Authority ("Authority") has asserted that Texas TGV is in technical
default because it failed to provide the equity financing commitment by December
31, 1993 as required under the franchise agreement. The Authority has requested
that Texas TGV provide reasons why it is not in default. Texas TGV has informed
the Authority that it believes it is not in default because certain delays have
extended the deadline for providing the equity financing commitment. According
to the franchise agreement, such event of default could result in the ter-
mination of the franchise. No provision for loss, if any, of the Corporation's
investment has been made in the financial statements because the ultimate
outcome of this matter is not predictable at this time.
II-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
DISCONTINUED OPERATIONS
In 1989, the Corporation sold its interest in National Steel and Shipbuilding
Company ("NASSCO") to a NASSCO management group and a NASSCO Employee Stock
Ownership Plan. NASSCO has the right prior to July 31, 1994 to require the
Corporation to provide NASSCO a $21,000 credit facility, $13,000 of which
expires on July 31, 1994 while the remaining $8,000 continues until completion
of a U.S. Navy contract, expected in 1998. At December 31, 1993, NASSCO had no
balance outstanding under the Corporation's credit facility. The Corporation is
contingently liable up to a maximum of $21,000 on a bank credit facility
obtained by NASSCO. The Corporation's credit facility is reduced by the amount
of funds NASSCO borrows under its bank credit facility. The balance outstanding
under NASSCO's bank credit facility at December 31, 1993 was $12,000. If
NASSCO's borrowings under the bank credit facility exceed $8,000 at July 31,
1994, NASSCO has the right to require the Corporation to purchase NASSCO
preferred stock equal to the amount of borrowings in excess of $8,000.
The Corporation has also guaranteed $21,000 of NASSCO's port facility bonds
until not later than December 1, 2002, and guaranteed $1,833 of NASSCO's state
and federal workers' compensation bonds. NASSCO's floating dry dock is pledged
as collateral for the $21,000 port facility bonds.
Net assets of the real estate operations discontinued in 1987 are included in
the accompanying balance sheet under the caption "Other Investments and Assets"
and consist of:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Notes and interest receivable $ 27,222 $ 30,165
Properties held for sale 8,470 9,188
Other assets, net 3,027 2,874
Bank loans, 3.9% and 3.7% at
December 31, 1993, 4.2% and
3.9% at December 31, 1992 (33,500) (34,500)
- --------------------------------------------------------------------------------
Net assets $ 5,219 $ (7,727
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The notes receivable are due at various dates through 1995 at interest rates
ranging from 4.6% to 12%. Most of the notes are collateralized by deeds of
trust.
LETTERS OF CREDIT
The Corporation is contingently liable, in the normal course of business, for
$414,203 in standby letters of credit not reflected in the accompanying
financial statements at December 31, 1993. Of this aggregate amount, $374,097
are for contract performance guarantees on a number of construction and rail
systems contracts. In addition, the Corporation provides a guarantee for a
$40,106 letter of credit issued by third parties to meet the reinsurance
requirements of the Corporation's captive insurance subsidiary. The credit risk
is mitigated by the insurance subsidiary's portfolio of high quality investments
used to collaterize the letter of credit.
II-19
<PAGE>
INDUSTRY SEGMENT AND
GEOGRAPHIC INFORMATION
The Corporation operates in two industry segments: engineering and construction,
and rail systems. All intercompany revenues and expenses are eliminated in
computing revenues and operating income.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INDUSTRY SEGMENT DATA
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Engineering and
construction 2,297,619 1,985,578 1,554,628
Rail systems 424,924 299,353 470,163
- --------------------------------------------------------------------------------
Total revenue $2,722,543 $2,284,931 $2,024,791
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income
Engineering and
construction $55,118 $40,276 $58,956
Rail systems 21,344 11,031 22,958
- --------------------------------------------------------------------------------
Total operating income $76,462 $51,307 $81,914
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating assets
Engineering and
construction $717,202 $1,633,064 $1,547,244
Rail systems 323,408 186,915 162,613
Corporate assets 185,340 280,445 341,920
- --------------------------------------------------------------------------------
Total assets $1,225,950 $1,100,424 $1,051,777
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Property and equipment
acquisitions
Engineering and
construction $19,239 $20,725 $54,901
Rail systems 30,206 9,908 8,061
Corporate 2,742 5,035 3,750
- --------------------------------------------------------------------------------
$52,187 $35,668 $66,712
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Depreciation expense
Engineering and
construction $28,121 $20,958 $21,082
Rail systems 7,617 6,077 7,197
Corporate 1,917 3,183 5,763
- --------------------------------------------------------------------------------
$37,655 $30,218 $34,042
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
A summary of the Corporation's operations by geographic area is presented
below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GEOGRAPHIC DATA
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
United States $2,121,668 $2,089,635 $1,966,679
Asia/Pacific 342,433 50,240 15,421
Other international 258,442 145,056 42,691
- --------------------------------------------------------------------------------
Total revenue $2,722,543 $2,284,931 $2,024,791
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income
United States $48,308 $35,151 $78,792
Asia/Pacific 13,896 3,556 1,849
Other international 14,258 12,600 1,273
- --------------------------------------------------------------------------------
Total operating income $76,462 $51,307 $81,914
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating assets
United States $739,788 $695,711 $608,893
Asia/Pacific 179,710 65,624 54,222
Other international 121,112 58,644 46,742
Corporate assets 185,340 280,445 341,920
- --------------------------------------------------------------------------------
Total assets $1,225,950 $1,100,424 $1,051,777
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Ten percent or more of the Corporation's revenue was derived from contracts
with U.S. Government agencies of $603,900 in 1993, $535,100 in 1992, and
$468,800 in 1991, and $242,000 from a major metropolitan transit authority in
1991.
II-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
LONG-TERM DEBT
Long-term debt at December 31, 1993 and 1992 consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE, 4.8%, DUE UPON SALE OF LAND AND
BUILDING, INTEREST PAYABLE MONTHLY $7,421 $ --
OTHER LONG TERM DEBT OF BUSINESSES ACQUIRED,
7.5% TO 12.5% IN 1993, 8% TO 15.6% IN 1992 2,665 737
- --------------------------------------------------------------------------------
TOTAL 10,086 737
LESS CURRENT PORTION (318) (280)
- --------------------------------------------------------------------------------
LONG TERM PORTION 9,768 $ 457
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
STOCK PLANS
STOCK OPTION
Under the amended 1991 Stock Incentive Plan ("Plan") the Corporation may grant
incentive stock options ("ISOs") and nonqualified stock options ("NQSOs"), stock
appreciation rights, limited stock appreciation rights and shares of restricted
stock to officers and other key employees. The exercise price of an ISO may not
be less than 100% of the fair market value on the date of grant. For NQSOs, the
plan provides for granting fixed- and variable-price options at exercise prices
equal to the fair market value on the date of grant ("grant price"), except
variable-price options may be exercised at (1) the fair market value on the date
of exercise if less than the grant price or (2) the grant price less any market
appreciation from date of grant to date of exercise, but not less than par value
of $1.67 per share.
Options granted become exercisable cumulatively over periods of three, four,
five, and six years from the date of grant. At December 31, 1993, options were
exercisable to purchase 526,313 shares. Unexercised options expire 10 years
after the date of grant.
At December 31, 1993, 380,652 shares of treasury stock were held for
variable-price option distributions.
The following table summarizes the changes in shares under option:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRICE RANGE
SHARES PER SHARE
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares under option
December 31, 1990 $817,682 $1.67-21.43
Options granted 84,000 $23.18-25.60
Options exercised 154,274 $1.67-23.94
Options canceled/expired (65,904)
Shares under option
December 31, 1991 $681,504 $3.50-24.81
Options granted $399,400 $20.44-27.84
Options exercised (55,748) $5.50-25.03
Options canceled/expired (33,452)
Shares under option
December 31, 1992 991,704 $11.06-21.25
Options granted $448,000 $21.19-26.44
Options exercised (51,250) $3.87-24.88
Options canceled/expired (85,186)
- --------------------------------------------------------------------------------
Shares under option
December 31, 1993 1,303,268 $2.94-25.13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The number of shares of common stock reserved for granting future options and
restricted stock awards was 405,874, 883,924, and 483,324, at December 31, 1993,
1992, and 1991, respectively.
The Corporation has a stock option plan, adopted in 1990, under which 192,000
shares of common stock have been reserved for issuance to non-employee directors
and 132,000 shares have been granted as of December 31, 1993. The plan entitles
the non-employee directors to purchase shares of common stock at a 50 percent
discount from fair market value at the date of grant. The options granted become
exercisable in one-third increments over a three-year period beginning one year
after the date of grant. Options for 80,000 shares were exercisable at December
31, 1993.
RESTRICTED STOCK
The restricted stock awards are partially conditioned on continued employment
during restriction periods of from one to five years. In certain instances a
portion of the award immediately vests at the date of the award. Recipients of
awards have all the rights of stockholders except the right to receive the stock
until the condition of continued employment has been met. During 1993, there
were 116,000 shares awarded as restricted stock. At December 31, 1993, there
were 99,000 restricted shares outstanding under the current plan and 18,400
shares outstanding under the predecessor plan, with restriction periods ranging
from one to four years.
In addition, the Corporation has issued 190,117 shares of restricted stock,
with restriction periods of three, five and ten years, to former stockholders of
acquired businesses as consideration for noncompete agreements and
II-21
<PAGE>
in return for an agreement to provide services to the Corporation during
specific future periods. During 1993, the recipients acquired full rights to
18,412 shares. At December 31, 1993, 171,705 shares remained outstanding with
restriction periods ranging from two to ten years.
Compensation expense for the employee and non-employee restricted stock award
plans and the non-employee directors stock option plan was $852 in 1993, $804 in
1992 and $1,291 in 1990.
EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation has an Employee Stock Ownership Plan ("ESOP") for salaried
employees. The Corporation prefunded 2,441,936 shares of common stock to an
ESOP Trust in 1988. Employee salary deferrals to the Corporation's 401(k)
savings plan, not to exceed 3% of annual compensation, are matched with an
allocation of shares in the ESOP. Unallocated shares are reflected as treasury
stock in the accompanying balance sheet. Cash dividends paid by the Corporation
on allocated and unallocated shares held by the ESOP Trust are subsequently paid
in cash to plan participants. Compensation expense for the fair market value of
the allocated shares and the redistribution of Corporation dividends on
unallocated shares paid in cash to plan participants in 1993, 1992 and 1991 was
$8,555, $7,777 and $7,529, respectively.
BENEFIT PLANS
PENSION PLANS
The Corporation sponsors a non-contributory defined benefit pension plan,
adopted effective January 1, 1988, covering substantially all of its non-union,
salaried employees. The Corporation funds amounts deductible for federal income
tax purposes.
Effective December 31, 1991 the Corporation curtailed its defined benefit plan
so that employees do not earn additional defined benefits for future services.
The Plan remains in existence and continues to pay benefits, to invest assets
and to receive contributions, if necessary.
Pension cost (income) included the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PENSION COST (INCOME)
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost, benefits earned
during year $ -- $ -- $ 5,950
Interest cost on projected/
accumulated benefit obligation 2,869 2545 3,138
Actual return on plan assets (4,240) (2,168) (5,700)
Net amortization and deferral 1,602 (1,155) 4,925
- --------------------------------------------------------------------------------
Pension cost (income) $ 231 $ (778) $ 8,313
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The funded status of the plan at December 31, 1993 and 1992 follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PREPAID PENSION COST
DECEMBER 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits
of $39,286 and $27,751 $(43,116) $(32,000)
Plan assets at fair value 44,332 40,729
Plan assets more than accumulated
benefit obligation 1,216 8,729
Unrecognized net losses 10,562 3,280
- --------------------------------------------------------------------------------
Prepaid pension cost $11,778 $12,009
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The prepaid pension cost is included in the accompanying balance sheet under
the caption "Other Investments and Assets".
At December 31, 1993, approximately 44% of plan assets of $44,332 are invested
in common stocks, 15% in corporate bonds, 22% in U.S. government securities and
19% in cash equivalents.
The discount rates used in determining the actuarial present value of the
accumulated benefit obligation were 7% and 8.5% for 1993 and 1992, respectively.
The expected long-term rate of return on plan assets was 8.5% for 1993 and 1992.
The Corporation sponsors several defined contribution pension plans for
certain hourly contract mining and construction service employees. Pension cost
recognized, based on hours worked, amounted to $2,320 in 1993, $1,596 in 1992
and $1,667 in 1991.
The Corporation participates in numerous construction-industry multiemployer
pension plans. Generally, the plans provide defined benefits to substantially
all direct-hire craft employees covered by collective bargaining agreements.
Pension cost under the plans amounted to $10,302 in 1993, $12,693 in 1992 and
$9,728 in 1991. Under ERISA, as amended by the Multiemployer Pension Plan
Amendment Act of 1980, a contributor to a multiemployer plan is liable, upon
termination of the plan or its withdrawal from the plan, for its share of the
multiemployer Plan's unfunded vested liabilities.
The Corporation has long maintained policies and procedures to attempt to
preclude it from being subject to withdrawal liability for any portion of an
unfunded vested liability under a construction industry multi employer pension
plan. Based on information provided by the multiemployer plan's administrators
to the U.S. Department of Labor, the Corporation's share of such plans unfunded
vested liabilities as of the most recent disclosures available is approximately
$11,200.
II-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCENTIVE PLANS
The Corporation has an executive incentive plan and two long-term incentive and
benefit plans for officers and key executives, the costs of which amounted to
$5,536 in 1993, $3,528 in 1992 and $4,336 in 1991.
SUPPLEMENTAL RETIREMENT INCOME ARRANGEMENTS
The Corporation has unfunded supplemental retirement income arrangements for
officers and key employees and an unfunded defined benefit pension plan for
non-employee directors.
Periodic cost of the plans included the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PERIODIC COST
YEAR ENDED DECEMBER 31, 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost benefits earned during year $336 $303 $297
Interest cost on projected
benefit obligation 693 667 657
Net amortization and deferral 350 327 318
- --------------------------------------------------------------------------------
Periodic cost $1,379 $1,297 $1,272
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The unfunded status of the plans at December 31, 1993 and 1992 follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ACCRUED BENEFIT OBLIGATION
DECEMBER 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation,
including vested benefits
of $10,906 and $7,298 $(11,080) $(7,862)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Projected benefit obligation $(12,300) $(8,377)
Prior service cost not yet recognized 571 342
Unrecognized net losses 3,263 4,231
- --------------------------------------------------------------------------------
Accrued benefit obligation $ (8,466) $(3,804)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The discount rates and rates of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
7% and 6%, and 8.5% and 6%, respectively, for 1993 and 1992.
POSTRETIREMENT HEALTH CARE PLAN
In addition to providing pension and other supplemental retirement income
arrangements, certain health care benefits are provided for retired employees.
Benefit design changes in 1992 limited postretirement health care benefits to
employees who retired by July 1, 1993. Employees who retire thereafter are not
eligible for postretirement health care benefits. Retirees who retired before
July 1, 1990 pay no contributions for coverage while those who retired after
July 1, 1990 and before July 1, 1993 pay contributions.
Effective January 1, 1992, the Corporation changed its accounting for
postretirement health care costs to the accrual method. In prior years, cost was
recognized when retirees' claims were paid. The unfunded present value of the
accumulated postretirement benefit obligation for retirees of $27,192 ($17,403
after tax) at December 31, 1991 was recognized as a cumulative effect of an
accounting change as of the beginning of 1992.
Postretirement health care costs for 1993 and 1992 were $2,494 and $2,470,
respectively, consisting of interest cost of $2,494 and $2,311 respectively, on
the unfunded accumulated postretirement benefit obligation. Cash payments for
retiree's claims were $2,181 in 1991.
The following table sets forth the plan's activity and unfunded balance at
December 31, 1993 and 1992.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ACCRUED POSTRETIREMENT BENEFIT OBLIGATION
DECEMBER 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $(36,475) $(25,526)
Fully eligible participants -- (1,666)
- --------------------------------------------------------------------------------
(36,475) (27,192)
Postretirement health care cost -- (2,470)
Benefits paid -- 2,287
Unrecognized net loss from changes in assumptions 9,969 --
- --------------------------------------------------------------------------------
Accrued postretirement benefit obligation $(26,506) $(27,375)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The accumulated postretirement benefit obligation was determined using the
projected unit credit method and an assumed discount rate of 7% and 8.5% for
1993 and 1992, respectively. In addition, an annual rate increase of 11.6% and
12.3% in the per capita cost of health care benefits was assumed for 1993 and
1992, respectively, gradually declining to 5% in the year 2008 and thereafter
over the projected payout period of the benefits. The health care cost trend
rate assumption has a significant effect on the amounts reported. For example, a
1% increase in the health care cost trend rate would increase the accumulated
postretirement benefit obligation at December 31, 1993 by $3,014 and the 1993
cost by $211.
FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments at December 31, 1993 and 1992
have been determined by the Corporation, using available market information and
appropriate valuation methodologies. However, considerable judgment is necessary
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Corporation could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts. The contract or notional amounts
reflect the extent of involvement the Corporation has in particular classes of
financial instruments.
II-23
<PAGE>
The carrying amounts and estimated fair values of financial instruments at
December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONTRACT OR
CARRYING FAIR NOTIONAL
AMOUNT VALUE AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
DECEMBER 31, 1993
- --------------------------------------------------------------------------------
FINANCIAL ASSETS
Retentions $62,800 $60,267
Marketable securities 51,143 53,180
Other investments and assets:
Discontinued operations
Notes and interest receivable 27,222 26,080
Notes payable 33,500 33,500
Other financial assets 17,587 17,378
FINANCIAL LIABILITIES
Retentions 45,951 44,097
Customers advances (gross) 147,788 139,527
OFF BALANCE SHEET FINANCIAL INSTRUMENTS
Committed revolving credit agreements 338 $135,000
Standby letters of credit 1,905 414,203
Lending commitments 986 73,436
- --------------------------------------------------------------------------------
DECEMBER 31, 1992
- --------------------------------------------------------------------------------
FINANCIAL ASSETS
Retentions $44,871 $43,109
Marketable securities 60,902 69,998
Other investments and assets:
Discontinued operations
Notes and interest receivable 30,165 28,690
Notes payable 34,500 34,500
Other financial assets 22,752 26,547
FINANCIAL LIABILITIES
Retentions 44,806 43,047
Customers advances (gross) 223,501 215,779
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Committed revolving credit agreements 325 $130,000
Standby letters of credit 1,166 313,971
Lending commitments 860 73,914
Forward exchange contracts and hedges 674 44,646
- --------------------------------------------------------------------------------
</TABLE>
CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, ACCOUNTS RECEIVABLE (LESS
RETENTIONS), UNBILLED COSTS, ACCOUNTS PAYABLE, BILLINGS IN EXCESS, SHORT-TERM
AND LONG-TERM DEBT.The carrying amounts of these items are reasonable estimates
of their fair values.
RETENTIONS. Rates currently available to the Corporation for the sale of trade
receivables at a discount are used to estimate fair value.
MARKETABLE SECURITIES. Fair values are based on quoted market prices.
DISCONTINUED OPERATIONS. Fair value of notes and interest receivable are
determined by discounting the projected cash flows using rates which would be
made to borrowers with similar credit ratings for the same maturities. Notes
payable are valued at rates currently available to the Corporation for debt with
similar terms.
OTHER FINANCIAL ASSETS. The projected cash flows of notes receivable are
discounted at current market rates to estimate fair value. The fair values of
investments at cost in small untraded companies are estimated using conservative
potential earnings ratios or at the Corporation's proportionate share of the
market value of the investee's underlying net assets.
ADVANCES. Net present value of future expected cash flows discounted at rates
currently available for short term debt are used to estimate fair value.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS. The fair value of committed revolving
credit agreements, standby letters of credit, and lending commitments are
estimated using fees currently charged to the Corporation taking into account
remaining terms and the creditworthiness of the counterparty. Forward exchange
contracts and hedges are valued based on quoted prices for financial instruments
with identical or similar terms.
NON-FINANCIAL INSTRUMENTS.The estimated fair value of financial guarantees is
based upon rates charged for similar agreements or estimated cost to terminate
them determined from the amount of exposure under the guarantee and the
likelihood of performance being required.
SUBSEQUENT EVENTS
SUBSIDIARY SALE OF STOCK
Under an option granted by MK Gold to the underwriters of the IPO to purchase
additional shares of common stock to cover over-allotments, 1,350,000 shares of
MK Gold's common stock at six dollars a share were sold on January 14, 1994
which decreased the Corporation's ownership to 46.5%. The net proceeds to MK
Gold from the January 1994 sale, after deducting commissions and offering
expenses, were $7,533. In January 1994, the Corporation recorded a $1,182 pretax
gain in recognition of the net increase in value of the Corporation's investment
in MK Gold.
ACQUISITION
On January 31, 1994, the Corporation acquired all of the voting stock of
Touchstone, Inc. ("Touchstone") for $22,665 which consisted of 720,000 shares of
the Corporation's common stock and $3,900 cash. Touchstone is a supplier of new
and remanufactured locomotive cooling systems. The acquisition has been
accounted for by the purchase method of accounting. The excess of the purchase
price over the estimated fair values of the net assets acquired was
approximately $17,965 and has been recorded as goodwill, which will be amortized
over fifteen years. Touchstone had total assets at December 31, 1993 of $12,341
and net assets of $5,466. Touchstone's revenue and net income for the year ended
December 31, 1993 was $20,032 and $265, respectively.
II-24
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
II-25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the executive officers of the Corporation,
see the unnumbered caption "Executive Officers of the Registrant" at the end
of Part I of this Annual Report of Form 10-K. For information with respect
to the directors of the Corporation, see the caption "Election of Directors"
on pages 2 and 3 of the proxy statement, which is incorporated herein by this
reference. For information with respect to delinquent Section 16(a) filings
by reporting persons of the Corporation, see the caption "Filing Disclosure"
on page 19 of the proxy statement, which is incorporated herein by this
reference.
ITEM 11. EXECUTIVE COMPENSATION
For information with respect to compensation of the executive officers and
directors of the Corporation, see the disclosures set forth under the
captions "Director Compensation", "Stock Option Plan for Non-Employee
Directors", "Retirement Plan for Non-Employee Directors", "Non-Employee
Directors Deferred Compensation Plan", "Compensation Committee Report on
Executive Compensation- (I. General Compensation Policies Applicable to
Officers and Key Employees, II. Corporate Performance and Executive
Compensation, III. CEO Compensation, IV. Company Performance Graph and V.
Section 162(m) of the Internal Revenue Code"), "Executive Compensation",
"Aggregate Option Exercises and Fiscal Year-End Option Values", "Long-Term
Incentive Plans", "Pension", and "Employment Contracts and Change in Control
Arrangements" on pages 4 through 19, and the information set forth under the
Corporation's proposal on "Approval of the Morrison Knudsen Corporation Chief
Executive Officer Incentive Plan" and "Proposal to Approve the Morrison
Knudsen Corporation Stock Compensation Plan" on pages 21 through 27 of the
proxy statement, which is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Merrill Lynch & Co., Inc., New York, New York and Mellon Bank
Corporation, Pittsburgh, Pennsylvania, trustee for the Corporation's Employee
Stock Ownership Plan Trust are each known by the Corporation to beneficially
own more than 5 percent of the Corporation's voting common stock. The
information set forth under the caption "Voting Securities and Principal
Holders Thereof" on pages 20 and 21 of the proxy statement is incorporated
herein by this reference.
(b) Security ownership by management as outlined on pages 20 and 21 of the
proxy statement under the caption "Voting Securities and Principal Holders
Thereof," is incorporated herein by this reference.
(c) There are no arrangements known to the Corporation the operation of which
may at a subsequent date result in a change in control of the registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to certain relationships and related
transactions see the disclosure set forth under the caption "Indebtedness
Information" on page 19 of the proxy statement, which is incorporated herein
by this reference.
III-1
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE
(a) Financial Statements, Schedules and Exhibits.
1. Financial Statements included in Part II of
this Annual Report on Form 10-K:
Independent Auditors' Report II-7
Consolidated Statements of Operations for
years ended December 31, 1993, 1992, and 1991 II-8
Consolidated Balance Sheets at
December 31, 1993 and 1992 II-9, II-10
Consolidated Statements of Cash Flow for
years ended December 31, 1993, 1992 and 1991 II-11
Consolidated Statements of Stockholders' Equity
for years ended December 31, 1993, 1992 and 1991 II-12
Notes to Consolidated Financial Statements II-13 - II-24
2. Financial Statement Schedule as of December 31, 1993 included in Part
IV of this Annual Report on Form 10-K:
VII. Guarantee of Securities of Other Issuers IV-3
Financial statement schedules not listed above are omitted because
they are not required or are not applicable, or the required
information is given in the financial statements including the notes
thereto. Captions and column headings have been omitted where not
applicable.
3. Exhibits:
The exhibits to this Annual Report on Form 10-K are listed in the
Exhibit Index contained elsewhere in this Annual Report.
(b) Reports on Form 8-K:
During the quarter ended December 31, 1993 the Corporation reported (a)
the completion of an initial public offering by MK Gold Company, then a
wholly-owned subsidiary of the Corporation and (b) the acquisition of a
one-third ownership interest in a German state-owned mining and
reclamation company.
IV-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized on March 30, 1994.
Morrison Knudsen Corporation
By /s/ W. J. Agee *
-------------------------------------------------
W. J. Agee, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below on March 30, 1994 by the following
persons on behalf of the Corporation in the capacities indicated.
Chairman of the Board, President and Chief Executive Officer
/s/ W. J. Agee * (Principal Executive Officer)
- -----------------------
W. J. Agee
Executive Vice President - Finance and Administration,
/s/ S.G. Hanks and Secretary
- ----------------------- (Principal Financial Officer)
S.G. Hanks
Vice President and Controller
/s/ M. E. Howland * (Principal Accounting Officer)
- -----------------------
M.E. Howland
/s/ G. E. Sarsten * Director
- -----------------------
G. E. Sarsten
/s/ J. Arrillaga * Director
- -----------------------
J. Arrillaga
Director
- -----------------------
Z. Brzezinski
/s/ L. E. Fox * Director
- -----------------------
L. E. Fox
/s/ C. B. Hemmeter * Director
- -----------------------
C. B. Hemmeter
/s/ P. S. Lynch * Director
- -----------------------
P. S. Lynch
/s/ R. A. McCabe * Director
- -----------------------
R. A. McCabe
/s/ I. C. Peden * Director
- -----------------------
I. C. Peden
/s/ J. W. Rogers, Jr. * Director
- -----------------------
J. W. Rogers, Jr.
/s/ G. R. Roche * Director
- -----------------------
G. R. Roche
/s/ P. V. Ueberroth * Director
- -----------------------
P. V. Ueberroth
* Stephen G. Hanks, by signing his name hereto, does hereby sign
this Annual Report on Form 10-K on behalf of each of the above-named officers
and directors of Morrison Knudsen Corporation, pursuant to powers of attorney
executed on behalf of each such officer and director.
*By /s/ S.G. Hanks
- -------------------------------------------
S.G. Hanks, Attorney-in-fact
IV-2
<PAGE>
MORRISON KNUDSEN CORPORATION
SCHEDULE VII. GUARANTEE OF SECURITIES OF OTHER ISSUERS
DECEMBER 31, 1993
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
TOTAL AMOUNT
NAME OF ISSUER OF SECURITIES TITLE OF ISSUE OF GUARANTEED NATURE OF
GUARANTEED BY REGISTRANT SECURITIES GUARANTEED AND OUTSTANDING GUARANTEE
- ---------------------------- --------------------- --------------- ---------
<S> <C> <C> <C>
National Steel and Shipbuilding Secured 6.60% $21,000 (c)
Company ("NASSCO") (a) Industrial Revenue
Bonds (b)
<FN>
(a) For additional information, see the Commitments and Contingencies
Note to Consolidated Financial Statements in Part II of this Annual
Report on Form 10-K.
(b) NASSCO's floating dry dock is pledged as collateral. The Corporation
has guaranteed the bonds until not later than December 1, 2002.
(c) Principal and interest are guaranteed. The amount of annual interest
guaranteed is $1,386.
</TABLE>
IV-3
<PAGE>
MORRISON KNUDSEN CORPORATION
EXHIBIT INDEX
EXHIBITS MARKED WITH AN ASTERISK ARE FILED HEREWITH, THE REMAINDER OF THE
EXHIBITS HAVE HERETOFORE BEEN FILED WITH THE COMMISSION AND ARE
INCORPORATED BY REFERENCE.
Exhibit
Number Exhibits
- ------- --------
3.1 The registrant's Restated Certificate of Incorporation, including all
amendments thereto (filed as Exhibit 4.1 to the registrant's Form S-3
Registration Statement No. 33-55402 filed on December 4, 1992 and
incorporated herein by reference.)
3.2 The registrant's Restated By-Laws, including all amendments thereto
(filed as Exhibit 3.2 to the registrant's Form 10-K Annual Report for
year ended December 31, 1992 and incorporated herein by reference.)
4.1 Rights Agreement dated as of June 12, 1986 (the "Rights Agreement")
between the registrant and Chemical Trust Company of California, as
Rights Agent (filed as Exhibit 2.1 to the registrant's Registration
Statement on Form 8- A filed on June 25, 1986 and incorporated herein
by reference) and Amendment to Rights Agreement dated July 7, 1988
(filed as Exhibit 28 to the registrant's Current Report on Form 8-K
dated July 7, 1988 and incorporated herein by reference.)
4.2 The registrant's credit agreement totalling $150 million with the
following financial institutions: Morgan Guaranty Trust Company of New
York, Bank of America National Trust and Savings Association,
Continental Bank N.A., Deutsche Bank AG, Society National Bank,
National Westminster Bank PLC. (The registrant undertakes to furnish a
copy of such credit agreement to the Commission upon request.)
4.3 The registrant's unsecured credit facility with a Canadian bank of
$26,628,000 (The registrant undertakes to furnish a copy of the credit
agreement to the Commission upon request.)
10.1 Agreement to Vary Shareholders Agreement and Plan of Restructuring and
for the Sale and Purchase of Shares in McConnell Dowell Investments,
Inc. among the registrant, McConnell Dowell Holdings Pty Limited and
McConnell Dowell Corporation Limited dated April 29, 1992 (filed as
Exhibit 10.4 to Form 10-K Annual Report for year ended December 31,
1992 and incorporated herein by reference.)
10.2 Deed of Variation of Class C Notes dated August 14, 1992, and Deed of
Indemnity dated August 14, 1992, each entered into pursuant to the
Agreement to Vary Shareholders Agreement and Plan of Restructuring and
for the Sale and Purchase of Shares in McConnell Dowell Investments,
Inc. dated April 29, 1992 (filed as Exhibit 10.6 to Form 10-K Annual
Report for year ended December 31, 1992 and incorporated herein by
reference.)
10.3 Form of Guaranty by the registrant, as Guarantor, in favor of Morgan
Guaranty Trust Company of New York, as Trustee (filed as Exhibit 4.2
to Amendment No. 1 to Form S-3 Registration Statement No. 33-50046
filed on October 30, 1992 and incorporated herein by reference.)
10.4 Form of Indenture of Trust between the City of San Diego and Morgan
Guaranty Trust Company of New York, as Trustee (filed as Exhibit 4.3
to Amendment No. 1 to Form S-3 Registration Statement No. 33-50046
filed on October 30, 1992 and incorporated herein by reference.)
<PAGE>
10.5 Form of Loan Agreement between the City of San Diego and National
Steel and Shipbuilding Company (filed as Exhibit 4.4 to Amendment No.
1 to Form S-3 Registration Statement No. 33-50046 filed on October 30,
1992 and incorporated herein by reference.)
MANAGEMENT CONTRACT OR COMPENSATORY PLAN OR ARRANGEMENT WHICH IS
SEPARATELY IDENTIFIED IN ACCORDANCE WITH ITEM 14(A) (3) OF FORM 10-K.
10.6 The registrant's Executive Incentive Plans for the years 1972
through 1981, inclusive (filed as Exhibit 10.2 to Form 10-K
Annual Report for year ended December 31, 1990 and incorporated
herein by reference.)
10.7* The registrant's 1982 Executive Incentive Plan, as amended.
10.8 A description of the registrant's Key Executive Disability
Insurance Plan (filed as Exhibit 10.12 to Form 10-K Annual Report
for year ended December 31, 1992 and incorporated herein by
reference.)
10.9 The registrant's Key Executive Life Insurance Plan (filed as
Exhibit 10.13 to Form 10-K Annual Report for year ended December
31, 1992 and incorporated herein by reference.)
10.10 The registrant's Key Executive Long-Term Incentive Plan (filed as
Exhibit 10.2 to Form 10-Q Quarterly Report for quarter ended
March 31, 1991 and incorporated herein by reference.)
10.11 The registrant's Long-Term Performance Compensation Benefit Plan
(filed as Exhibit 10.8 to Form 10-K Annual Report for year ended
December 31, 1991 and incorporated herein by reference.)
10.12 The registrant's Stock Incentive Plan, as amended (filed as
Exhibit 10.16 to Form 10-K Annual Report for year ended December
31, 1992 and incorporated herein by reference.)
10.13 * The registrant's Supplemental Savings Plan, as amended.
10.14 * The registrant's Deferred Compensation Plan.
10.15 Form of registrant's Indemnification Agreement (filed as Exhibit
B to Proxy Statement dated March 23, 1987, and incorporated
herein by reference.) A schedule listing the individuals with
whom the registrant has entered into such agreements is filed
herewith.
10.16 Form of registrant's Supplemental Retirement Benefit Agreement
(filed as Exhibit 10.6 to Form 10-K Annual Report for year ended
December 31, 1988 and incorporated herein by reference.) A
schedule listing the individuals with whom the registrant has
entered into such agreements is filed herewith.
10.17 Form of registrant's Employment Agreement (filed as Exhibit 10.2
to Form 10-Q Quarterly Report for quarter ended June 30, 1993 and
incorporated herein by reference.) A schedule listing the
individuals with whom the registrant has entered into such
agreements is filed herewith.
<PAGE>
10.18 The registrant's Non-Employee Directors' Deferred Compensation
Plan, as amended (filed as Exhibit 10.4 to Form 10-K Annual
Report for year ended December 31, 1989 and incorporated herein
by reference.)
10.19 The registrant's Retirement Plan for Non- Employee Directors, as
amended (filed as Exhibit 10.22 to Form 10-K Annual Report for
year ended December 31, 1992 and incorporated herein by
reference.)
10.20 The registrant's Stock Option Plan for Non-Employee Directors, as
amended (filed as Exhibit 10.23 to Form 10-K Annual Report for
year ended December 31, 1992 and incorporated herein by
reference.)
10.21 The registrant's employment agreement with William J. Agee dated
April 2, 1991 (filed as Exhibit 10.1 to Form 10-Q Quarterly
Report for quarter ended March 31, 1991 and incorporated herein
by reference.)
10.22 The registrant's Key Executive Long-Term Incentive Plan
Participation Agreement with William J. Agee dated November 1,
1991, amending the registrant's employment agreement with William
J. Agee dated April 2, 1991 (filed as Exhibit 10.16 to Form 10-K
Annual Report for year ended December 31, 1991 and incorporated
herein by reference.)
10.23 The registrant's Supplemental Retirement Benefit Agreement with
William J. Agee dated April 2, 1991 (filed as Exhibit 10.26 to
Form 10-K Annual Report for year ended December 31, 1992 and
incorporated herein by reference.).
10.24 The registrant's Deferred Compensation Agreement with Stephen
Grant dated January 1, 1989 (filed as Exhibit 10.27 to Form 10-K
Annual Report for year ended December 31, 1992 and incorporated
herein by reference.).
10.25 The registrant's Amendment to Deferred Compensation Agreement with
Stephen R. Grant dated July 15, 1993 (filed as Exhibit 10.3 to
Form 10-Q Quarterly Report for quarter ended June 30, 1993 and
incorporated herein by reference.)
10.26 * The registrant's employment agreement with Gunnar E. Sarsten
dated as of March 1, 1994.
13. * The registrant's Annual Report to Stockholders for the year ended
December 31, 1993, furnished for the information of the SEC and
not deemed to be "filed" as part of the Form 10-K filing.
21. * Subsidiaries of the registrant.
23. * Consent of Deloitte & Touche, independent auditors.
24. * Powers of Attorney.
<PAGE>
Exhibit 10.7
MORRISON KNUDSEN CORPORATION
EXECUTIVE INCENTIVE PLAN
1. PURPOSE
The purpose of the Executive Incentive Plan (the "Plan") of Morrison Knudsen
Corporation, a Delaware corporation (the "Company") is to enhance the ability of
the Company to attract and retain competent executive personnel by rewarding
superior performance and increasing proprietary and personal interests of
successful employees in the Company.
2. EFFECTIVE DATE
This Plan shall become effective upon its approval by the shareholders and shall
continue from year to year until terminated by the Board of Directors of the
Company.
3. ELIGIBILITY
Participation in the Plan is limited to key employees of the Company and its
subsidiaries, including officers and members of the Board of Directors of the
Company, who in the judgment of the Executive Compensation and Stock Option
Committee (the "Committee") materially contribute to the profitability of the
Company. Eligibility of members of the Committee shall be restricted in
accordance with Section 6 of the Plan.
4. AWARD
(a) Establishment of Award Fund
For each fiscal year (an "Award Year"), the Company shall establish an
"Award Fund" which shall be computed in accordance with Subsection (b) of
this section.
(b) Performance Evaluation
For the purpose of determining the amount of the Award Fund for each Award
Year, the performance of the Company shall be evaluated according to
criteria established for the Award Year as the Committee shall deem
appropriate for the purpose of the Plan. The criteria may be described in
terms of Company-wide objectives or of objectives which are related to
performance of the division, subsidiary, department or function within the
Company in which the participant is employed. If during the Award Year
relating to any Award Fund events or transactions should occur which, in
the sole judgment of the Committee, are unrelated to the performance of the
participant and result in distortion of the criteria
<PAGE>
relating to such Award Fund, the Committee may adjust such criteria to
eliminate such distortion. The Award Fund shall not in any event, however,
exceed 9.55% of the Award Year's net profit after taxes ("NPAT") determined
in accordance with generally accepted accounting principles and certified
by the Company's independent accountants.
(c) Computation of Award Fund
The Committee shall, promptly after the date on which the necessary
financial or other information for a particular Award Year becomes
available, compute the Award Fund.
(d) Allocation of Award Fund
The Award Fund shall be allocated among participants in accordance with
each participant's Award Fund percentage. A participant's Award Fund
percentage will be computed using the base award allocation schedule. The
base award allocation varies between fifty percent (50%) and twenty percent
(20%) of a participant's salary based upon salary grade and/or
organizational level of participant.
President & CEO 50%
Corporate Executive & Sr. Vice Presidents 42.5%
Subsidiary Presidents & Sr. Vice Presidents 25/35%
Corp. Vice Presidents & Subsidiary Executive Vice Presidents 20/30%
Subsidiary Vice Presidents 20/25%
Other Key Employees 20%
Individual variations among members of the above groups shall be as
determined by the Committee. The Committee may, in its discretion, modify
individual awards where deemed appropriate by such Committee, but in no
event may the Committee increase by more than 50% the award that otherwise
would be payable to a participant. Unallocated portions of the Award Fund
may be distributed in the discretion of the Committee.
5. PAYMENT OF AWARDS
(a) Award
Effective January 1, 1986, a participant's award shall be paid in cash to
such participant as soon as practicable after the independent auditors have
certified net income for the Award Year. The foregoing to the contrary
notwithstanding, the Committee may, in its sole and absolute discretion,
agree to accelerate the payment of awards to participants for an Award Year
prior to the certification of net income for such year, based upon an
estimate of the net income for such Award Year.
2
<PAGE>
Awards may be paid pursuant to the preceding sentence, in the sole and
absolute discretion of the Committee, prior to the end of an Award Year.
(b) Forfeiture
Except as provided in Section 5(d) hereof, in the event a participant's
employment is terminated without the consent of the Company during the term
of an Award Year, said participant's right to participate in any award
under the Plan shall be forfeited.
(c) Beneficiaries and Transferability
A participant shall have the right to designate in writing a beneficiary or
beneficiaries to receive such participant's rights under the Plan or to
change a prior beneficiary designation without the consent of the
beneficiary. The rights of a participant under this Plan shall be non-
transferable and non-assessable.
(d) Pro Rata Apportionment
In the event a participant retires, dies or is permanently disabled during
an Award Year, or in the event there is any termination of the
participant's employment during an Award Year which is a "qualifying
termination" pursuant to Section 11 hereof, such participant's award shall
be paid in proportion to that part of the year such participant was
employed by the Company.
(e) Vesting Event
Phantom Stock units shall be converted to cash and/or Company Common Stock
as determined by the Committee, in its discretion, and distributed to the
participant, the participant's estate or the participant's beneficiary,
designated in writing, only upon the earliest of the following events (the
"Vesting Event"): (i) completion of ten (10) subsequent years of service
with the Company (including subsidiaries); (ii) death; (iii) normal or
early retirement under a Company retirement plan; (iv) total and permanent
disability as determined by the Committee; (v) Change in Control of the
Company (as defined in Section 10 hereof); or (vi) termination of
employment by the Company.
(f) Withholding for Taxes
Provision for payment by a participant of any federal, state or local
withholding taxes attributable to an award shall be made in a manner
satisfactory to the Company as determined by the Committee. The Committee
in its sole discretion may permit a participant, upon delivery of a written
election to the Secretary of the Company (or
3
<PAGE>
to such other person who may be designated by the Committee) to elect to
have the Company withhold shares otherwise issuable upon a vesting event in
the event that the Committee determines to distribute shares. Shares so
withheld will be credited against this tax obligation at their fair market
value determined as provided below. Elections by a participant to have
shares of Common Stock withheld to satisfy tax obligations shall be subject
to the following provisions:
(1) The maximum number of shares to be withheld with respect to an award
shall be the number of whole shares calculated by dividing (A) the maximum
federal, state and local tax payable by the participant with respect to a
deferred award by (B) the fair market value of each share to be withheld.
The fair market value of each share to be withheld shall be equal to the
mean between the highest and lowest quoted price of the Company's Common
Stock on the New York Stock Exchange on the date (the "Tax Date") that the
amount of tax to be withheld with respect to the deferred award is to be
determined.
(2) A participant may elect (i) to have shares withheld with respect
to all awards granted pursuant to the Plan ("standing election"), or
(ii) to have shares withheld with respect to a specific award
("specific election"). Elections shall be subject to the following
restrictions: (A) all elections must be made in writing and delivered
to the Secretary of the Company (or such other period who may be
designated by the Committee) at its principal office on or prior to
the applicable Tax Date; (B) specific elections are irrevocable; (C)
standing elections are revocable; provided, however, that, in the case
of Insiders (as hereinafter defined), revocations must be made in one
of the time periods in which an election must be made as provided in
subsection (3) below; and (D) all elections will be subject to the
disapproval of the Committee in its sole discretion.
(3) Elections by participants whose transactions in the Company's
Common Stock are subject to Section 16(b) of the Securities Exchange
Act of 1934 ("Insiders") will be subject to the following additional
restrictions: (i) elections will not be effective with respect to an
award until six months after such award is granted (except that this
limitation will not apply in the event death or disability of the
participant occurs prior to the expiration of the six-month period);
and (ii) elections must be made either six months or more prior to the
applicable Tax Date or in the ten-business-day period beginning on the
third business day following the release of the Company's quarterly or
annual summary statement of sales and earnings as set forth in Rule
16(b)3(e)(3)(iii) under the Securities Exchange Act of 1934 or any
similar period specified in any successor rule to the same effect.
4
<PAGE>
6. EXECUTIVE COMPENSATION COMMITTEE
The Committee shall have full authority to administer this Plan. Such Committee
shall consist of three or more members who shall be appointed by the Board of
Directors of the Company. The Committee shall: (a) designate Plan participants,
making appropriate changes in respect of an Award Year at any time or times
prior to the granting of awards for such year; (b) review Plan goals from time
to time, and modify such goals and the formula for calculation of the Award Fund
whenever it appears appropriate, provided that the Award Fund shall not exceed
9.55% of the Award Year's NPAT; (c) specify awards as soon as practicable after
the close of an Award Year, modifying individual awards where deemed appropriate
by such Committee, but in no event may the Committee increase by more than 50%
the award that would otherwise be payable to a participant; (d) distribute
Deferred Awards to participants in stock, cash or a combination upon the
occurrence of the Vesting Event; and (e) generally administer and interpret the
Plan provisions in compliance with the intent of the Plan and any applicable
laws, regulations, and other governmental authority.
7. RELATIONSHIP OF EXECUTIVE INCENTIVE PLAN TO BENEFIT PLANS
The amount charged against the Award Fund with respect to an award to a
participant under the Plan shall be eligible for inclusion in the participant's
earnings base for the purpose of determining the benefits to which the
participant is entitled under retirement, savings, group life insurance and
long-term disability plans of the Company.
8. EFFECT OF PLAN ON RIGHT TO CONTINUED EMPLOYMENT AND INTEREST IN PARTICULAR
PROPERTY
Neither the existence of this Plan nor any award granted pursuant to it shall
create any right to continued employment of any participant by the Company or
any of its subsidiaries or affiliates. No person shall have, under any
circumstances, any interest whatsoever, vested or contingent, in any particular
share or shares of the Company that may be held either by the Company or by any
participating subsidiary by virtue of any award. This Plan shall not be deemed a
substitute for, and shall not preclude the establishment or continuation of any
other plan, practice or arrangement that may now or hereafter be provided for
the payment of compensation, special awards or employee benefits to employees
generally, or to any class or group of employees, such as and without
limitation, any savings, thrift, profit-sharing, pension, retirement, excess
benefit, group insurance or health care plans. Any such arrangements may be
authorized by the Board and payment thereunder may be made independently of this
Plan.
9. COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS
No certificate for shares of stock distributable pursuant to this Plan shall be
issued and delivered unless the issuance of such certificates complies with all
applicable legal requirements including, without limitation, compliance with
the provisions of the Securities
5
<PAGE>
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and
the requirements of the exchanges on which the stock may, at the time, be
listed.
10. CERTAIN DEFINITIONS
The following definitions of certain capitalized terms shall apply for purposes
of this Plan:
(a) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under
the Exchange Act.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" for termination by the Company of the participant's
employment, after any Change in Control (as defined in this Section 10),
shall mean (i) the willful and continued failure by the participant to
substantially perform the participant's duties with the Company (other than
any such failure resulting from the participant's incapacity due to
physical or mental illness) after a written demand for substantial
performance is delivered to the participant by the Board, which demand
specifically identifies the manner in which the Board believes that the
participant has not substantially performed the participant's duties, or
(ii) the willful engaging by the participant in conduct which is
demonstrably and materially injurious to the Company, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, no act,
or failure to act, on the participant's part shall be deemed "willful"
unless done, or omitted to be done, by the participant not in good faith
and without reasonable belief that the participant's act, or failure to
act, was in the best interest of the Company.
(d) "Change in Control" shall mean a change in control of the Company,
which shall be deemed to have occurred if the conditions set forth in any
one of the following three paragraphs shall have been satisfied:
(i) any Person, other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or a company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities; or
(ii) during any period of two consecutive years (not including
any period prior to the adoption of Amendment No. 5 to this Plan),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Company to effect a transaction
described in Section 10(d)(i) or
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Section 10(d)(iii) hereof) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other Company, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(f) "Good Reason" for termination by the participant of the participant's
employment shall mean the occurrence after a Change in Control, without the
participant's express written consent executed after such Change in Control, of
any one of the following acts by the Company, or failures by the Company
to act:
(i) the assignment to the participant of any duties inconsistent
with the participant's status as an executive officer of the Company
or a substantial adverse alteration in the nature or status of the
participant's responsibilities from those in effect immediately prior
to the Change in Control;
(ii) a reduction by the Company in the participant's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time;
(iii) the relocation of the Company's principal executive offices
to a location more than twenty-five miles from the location of such
offices immediately prior to the Change in Control or the Company's
requiring the participant to be based anywhere other than the
Company's principal executive offices except for required travel on
the Company business to an extent substantially consistent with the
participant's present business travel obligations;
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(iv) the failure by the Company, without the participant's
consent, to pay to the participant any portion of the participant's
current compensation or to pay to the participant any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such
compensation is due;
(v) the failure by the Company to continue in effect any
compensation plan or arrangement in which the participant participates
immediately prior to the Change in Control which is material to the
participant's total compensation, including but not limited to the
Company's Executive Incentive Plan, Supplemental Executive Incentive
Plan, Restricted Stock Award Plan, Stock Option Plan, Retirement Plan,
Savings Plan and Deferred Compensation Agreement, or any substitute
plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company
to continue the participant's participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the
level of the participant's participation relative to other
participants, as such relative level existed at the time of the Change
in Control; or
(vi) the failure by the Company to continue to provide the
participant with benefits substantially similar to those enjoyed by
the participant under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
participant was participating at the time of the Change in Control,
the taking of any action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the
participant of any material fringe benefit enjoyed by the participant
at the time of the Change in Control, or the failure by the Company to
provide the participant with the number of paid vacation days to which
the participant is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the Change in Control.
The participant's right to terminate the participant's employment for
Good Reason shall not be affected by the participant's incapacity due
to physical or mental illness. The participant's continued employment
shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder.
(g) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
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11. QUALIFYING TERMINATION
Any termination of the participant's employment within the two (2) years
immediately following a Change in Control shall be a "qualifying termination" of
employment pursuant to this Section 11, unless such termination is (i) by the
Company for Cause or (ii) by the participant without Good Reason.
12. POST-CHANGE-IN-CONTROL DISCRETION
Notwithstanding any other provision of this Plan, neither any discretion given
the Committee with respect to participants, awards or an Award Fund, nor any
right given the Committee to adjust criteria or goals relating to an Award Fund,
may be exercised after a Change in Control in any way which adversely affects
the Award Fund for the Award Year in which the Change in Control occurs (or the
immediately preceding Award Year, if payment with respect thereto has not been
made before the Change in Control occurs), or any participant's rights with
respect to either such Award Year.
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Exhibit 10.13
MORRISON KNUDSEN CORPORATION
SUPPLEMENTAL SAVINGS PLAN
ARTICLE I - INTRODUCTION
1.1 PURPOSE
The Board of Directors of Morrison Knudsen Corporation has decided that it is in
the best interests of the Corporation and its subsidiaries to establish a
nonqualified supplemental savings plan for certain executives of the
corporation. This Plan is necessitated by certain compensation and benefit
limitations imposed by the Employee Retirement Income Security Act of 1974, as
amended and by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986,
as amended.
1.2 ESTABLISHMENT OF PLAN
The Board of Directors hereby establishes the Morrison Knudsen Corporation
Supplemental Savings Plan, effective as of January 1, 1992 (the "Plan"). The
Plan is intended to be a plan of deferred compensation for a select group of
management or highly compensated employees, and shall be so interpreted.
1.3 INCORPORATION OF SAVINGS PLAN
Effective as of January 1, 1986, the Corporation established the Morrison
Knudsen Corporation Savings Plan (the "Savings Plan"). The terms of the Savings
Plan are hereby incorporated into this Plan by reference. Unless otherwise
indicated herein, the provisions of any future amendments to the Savings Plan
shall also be incorporated into this Plan by reference. Unless otherwise
indicated under Article II of this Plan, capitalized terms used in this Plan
shall have the meaning given those terms in the Savings Plan.
ARTICLE II - DEFINITIONS
The capitalized terms used in the Plan shall have the meanings set forth in this
Article. The masculine gender, when used herein, includes the feminine gender,
and, unless the context indicates otherwise, the singular includes the plural
and the plural the singular.
2.1 BOARD
"Board" means the Board of Directors of the Corporation.
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2.2 COMPENSATION
"Compensation" means an Employee's total taxable remuneration for the
performance of services during each Plan Year in which he is a Participant as
reflected on form W-2, including, but not limited to, his base salary, bonuses
or other forms of compensation, such compensation to be determined before any
reduction on account of any withholding, such as Federal or state income or
employment taxes, and any other amounts which he could have received in cash in
lieu of (i) a nontaxable benefit provided by the Employer through a cafeteria
plan under Section 125 of the Code or (ii) a contribution made on his behalf by
the Employer pursuant to the Savings Plan, but excluding the value of any
benefits provided an Employee through any qualified employee pension plans
sponsored by the Employer and any compensation paid in kind.
2.3 COMPENSATION COMMITTEE
"Committee" means the Executive Compensation and Nominating Committee of the
Board. Such Committee shall be the named fiduciary for purposes of ERISA.
2.4 CORPORATION
"Corporation" means Morrison Knudsen Corporation, a Delaware corporation.
2.5 EFFECTIVE DATE
"Effective Date" means January 1, 1992.
2.6 EMPLOYER
"Employer" means the Corporation and any other affiliated entity.
2.7 PARTICIPANT
"Participant" means an executive of the Employer who has satisfied the Plan
eligibility requirements in accordance with Article III and who has elected to
participate in the Plan.
2.8 PLAN
"Plan" means the Morrison Knudsen Corporation Supplemental Savings Plan which is
set forth in this document, together with any and all amendments and supplements
hereto.
2.9 PLAN ADMINISTRATOR
"Plan Administrator" means the Committee or its delegate.
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2.10 PLAN YEAR
"Plan Year" means the calendar year.
2.11 SALARY REDUCTION AGREEMENT
"Salary Reduction Agreement" means an agreement whereby an executive employee
who is eligible to participate in the Plan elects such participation and
authorizes his Employer to reduce his Compensation on an pre-tax basis by a
specified percentage. Such Salary Reduction Agreement shall be the same
agreement whereby a participant in the Savings Plan authorizes the Company to
reduce his Compensation; thus, by electing to participate in the Savings Plan,
the executive shall be electing to participate in this Plan. The foregoing to
the contrary notwithstanding, with respect to this Plan, a Salary Reduction
Agreement shall be subject to the restrictions set forth in Sections 3.1, 3.2
and 4.1 of the Plan.
ARTICLE III - PARTICIPATION
3.1 ELIGIBILITY
Each employee of the Employer may participate in this Plan for a given Plan Year
provided (i) his Compensation for such Plan Year equals or exceeds an amount
equal to the dollar limitation in effect for such Plan Year under Section
401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code"), and
(ii) he is not covered by an agreement or plan which provides any part of the
benefits that are required to be provided under this Plan. Subject to the
remaining provisions of the Plan, an employee's participation shall be automatic
and shall commence the first payroll period following the date on which his
Compensation exceeds the amount calculated above. In order for such employee to
automatically participate in the Plan during any given Plan Year, on or before
December 31 of the preceding Plan Year, the employee must have (i) elected to
participate in the Plan, by completing a Salary Reduction Agreement, or
reconfirming a past Salary Reduction Agreement (which election may be a
transcription of an oral election made over an interactive telephone system) and
(ii) filed the election referred to in subparagraph (ii) above with the Human
Resources Department.
3.2 ELECTION TO MODIFY OR TERMINATE PARTICIPATION
An employee may elect to modify or terminate his participation in the Plan by
filing a notice of such modification or termination in the same manner in which
an election is made. Such modification or termination will be effective with
respect to Compensation earned for a calendar year only if such notice is filed
on or before January 31 of such calendar year.
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ARTICLE IV - ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
4.1 CALCULATION OF EMPLOYEE CONTRIBUTION
A Participant's Salary Deferral Agreement shall be effective with respect to
this Plan for a given Plan Year only if (a) such Participant defers under the
Savings Plan an amount of Compensation equal to the maximum permissible elective
deferral under Section 402(g) of the Code for such Plan Year, and (b) such
Participant receives a matching contribution under the Savings Plan for such
Plan Year equal to five percent (5%) multiplied by the dollar limitation in
effect for such Plan Year under Section 401(a)(17) of the Code. The amounts
deferred shall be referred to as "Employee Contributions" and shall first be
made to the Savings Plan, to the extent permitted by law, and then to this Plan.
Employee Contributions shall be credited to the Plan for each payroll period as
of the date the Participant receives his paycheck containing the Compensation
upon which the Employee Contributions are based. 4.2 Allocations of
Contributions and Dividends
4.2 ALLOCATIONS OF CONTRIBUTIONS AND DIVIDENDS
(a) DEFERRED COMPENSATION ACCOUNTS. There shall be established for each
Participant a bookkeeping account to be designated as that Participant's
deferred compensation "Account" to reflect the Participant's interest under the
Plan. The Account shall be further divided into subaccounts known as the Stock
Unit Account and the Interest Account.
(b) STOCK UNIT ACCOUNT. All amounts deferred by the Participant into this
Plan as Employee Contributions up to the first 3 percent of such Participant's
Compensation shall be credited to the Participant's Stock Unit Account and shall
be converted into stock units. The number of stock units shall be computed by
dividing the Employee Contribution credited to the Stock Unit Account by the
fair market value of the Company's common stock. The fair market value shall be
the mean between the high and the low selling price on the New York Stock
Exchange on the last business day immediately preceding the day such stock units
are computed.
(1) CASH DIVIDEND CREDITS. Additional stock units shall be credited
to a Participant's Account in amounts equal to the cash dividends which the
Participant would have received had the Participant been the owner on the
record dates for the payment of such dividends of the number of shares of
the Company's common stock equal to the number of units in the
Participant's Account.
(2) STOCK DIVIDEND CREDITS. Additional stock units shall be credited
to the Participant's Account in a number of units equal to the number of
shares of the Company's common stock, rounded to the nearest one-hundredth
share, which the Participant would have received as stock dividends had he
been the owner on the
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record dates for the payments of such stock dividends of the number of
shares of the company's common stock equal to the number of units credited
to his Account.
(3) RECAPITALIZATION. If, as a result of a recapitalization of the
Company (including a stock split), the Company's outstanding shares of
common stock shall be changed into a greater or smaller number of shares,
the number of stock units then credited to a Participant's Account shall
be appropriately adjusted on the same basis.
(c) INTEREST ACCOUNT. All amounts deferred by a Participant into this Plan
as Employee Contributions in excess of the first 3 percent of such Participant's
Compensation shall be credited to the Participant's Interest Account. A
Participants Interest Account shall be credited with annual interest each year
at a rate equal to the prime rate of Citibank, N.A. in effect at the beginning
of that year or such other rate approved by the Committee prior to the beginning
of such year and communicated in writing to the Participants. Interest shall be
posted as of the last day of each calendar quarter to the Participant's Interest
Account and shall be computed on the average of the beginning and ending balance
of the Participant's Interest Account for such quarter.
(d) EMPLOYER MATCHING CONTRIBUTIONS. As of the date on which each
Participant makes his Employee Contributions to the Plan, the Employer shall
credit, as an Employer Matching Contribution, an amount equal to such Employee
contribution. Such Employer Matching Contribution shall be allocated among the
Participant's Stock Unit Account and Interest Account, as directed by the
Participant. In the case of amounts deferred and credited to the Stock Unit
Account, the Employer Matching Contribution shall immediately be converted to
stock units, rounded to the nearest hundredth of a share, in the manner outlined
in Section 4.2(b).
(e) DATE AND MANNER OF PAYMENT. Upon the Employee's termination of
employment for any reason other than "Cause" as defined in Section 4.3 below,
the Employee shall be entitled to receive, less any taxes required by law to be
withheld therefrom, a single sum cash payment in an amount equal to the sum of
(i) thebalance of his Interest Account as of the date he terminated employment
and (ii) the fair market value as of the date he terminated employment of the
stock units credited to his Stock Unit Account assuming such stock units had
been converted on a one-to-one basis for a share of the Company's $3.33 par
value common stock. The fair market value of the Company's common stock shall be
the mean between the high and the low selling price on the New York Stock
Exchange on the last business day immediately preceding the day on which the
participant terminated employment. Such distribution shall be made, subject to
federal securities laws, within 60 days following the Participant's termination
of employment. If an Employee is terminated for "Cause" as defined in Section
4.3 below, all of the foregoing rules of this Section 4(e) shall be applicable,
except that the Employer Matching Contributions in such Employee's Stock Unit
Account and Interest Account shall be forfeited as of the date on which he was
terminated for "Cause" and no further Employer Matching Contributions shall be
credited to his Stock Unit Account or Interest Account.
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(f) ACCOUNTING. The Secretary or his delegate shall keep a record of all
sums which each Participant has elected to defer to his Account and dividends
and interest thereon. Within 60 days after the close of each calendar year, the
Secretary or his delegate shall furnish each Participant who has participated in
the Plan for at least one calendar year, a statement of such accounting.
4.3 CAUSE DEFINED
For purposes of Section 4.2 above, "Cause" shall mean Executive's: (i)
conviction of any criminal violation involving dishonesty, fraud or breach of
trust; (ii) willful engagement in any misconduct in the performance of his
duties that materially injures Company, monetarily or otherwise; (iii)
performance of any act which, if known to Company's customer, clients or
stockholders would materially and adversely affect Company's business; or (iv)
willful and substantial nonperformance of assigned duties (other than any such
failure resulting from Executive's incapacity due to physical or mental illness)
which has continued after Company's Board of Directors has given written notice
of such nonperformance to Executive, which notice specifically identifies the
manner in which the Board of Directors believes that Executive has not
substantially performed his duties and which indicates the Board of Directors'
intention to terminate Executive's employment because of such nonperformance.
For purposes of clauses (ii) and (iv) of this Section 4.3, no act or omission on
Executive's part shall be deemed "willful" if committee or omitted in good faith
and with a reasonable belief that his action was in the best interest of
Company.
4.4 ADJUSTMENT TO EMPLOYER CONTRIBUTION FOR YEAR OF TERMINATION OF
PARTICIPATION
If a Participant terminates employment prior to December 31 of a given year, he
shall not be entitled to receive the Employer Contribution for such year.
4.5 BENEFICIARY DESIGNATION
In the event the Participant dies prior to receiving his benefits under this
Plan, the Compensation Committee shall pay such benefits to the Participant's
designated beneficiary or beneficiaries within the time period specified in
Section 4.2(g)(i). A Participant's beneficiary under this Plan shall be the
person or persons designated as Beneficiary or Beneficiaries by the Participant
under the Savings Plan.
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ARTICLE V - NATURE OF PLAN
5.1 BENEFIT TRUST AGREEMENT
The Corporation shall attach this Plan, as amended from time to time, to Exhibit
A, as amended from time to time, of the Morrison Knudsen Corporation Benefit
Trust Agreement (the "Benefit Trust Agreement").
5.2 UNFUNDED AGREEMENT
Except in the case of a Potential Change in Control (as defined in Section 1.13
of the Benefit Trust Agreement), the Corporation shall not be required to set
aside any funds or other assets to be used to satisfy its obligation under this
Plan.
5.3 NO SECURITY INTEREST
It is the intent of the Corporation and Participant that the amounts, if any,
set aside shall not create a "funded" trust within the meaning of the Code or
ERISA and that such amounts, if any, shall remain at all times subject to the
claims of the Corporation's general creditors. Accordingly, the Corporation
shall not create a security interest in the amounts, if any, set aside in favor
of any Participant or his beneficiary or beneficiaries, or any other creditor.
5.4 DISTRIBUTION UNDER BENEFIT TRUST AGREEMENT
Distributions made under the Benefit Trust Agreement to a Participant or his
beneficiary or beneficiaries with respect to this Plan shall, to the extent of
such distributions, satisfy the Corporation's obligations under this Plan.
5.5 ALIENATION
The interest of a Participant or his beneficiary or beneficiaries may not be
sold, transferred, assigned or encumbered in any manner, either voluntarily or
involuntarily, and any attempt to so alienate, sell, transfer, assign, pledge,
encumber or charge the same shall be null and void. No benefit hereunder, before
it is paid, shall be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person to whom such benefits or funds are payable,
nor shall it be subject to garnishment, attachment or other legal or equitable
process.
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ARTICLE VI - MISCELLANEOUS
6.1 NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in this Plan shall be deemed to give any Participant the right to be
retained in the service of the Employer or to deny the Employer any right it may
have to discharge a Participant at any time.
6.2 NAMED FIDUCIARIES
The Compensation Committee shall be the named fiduciary of the Plan for purposes
of Section 402(a)(1) of the Employee Retirement Income Security Act of 1974. The
Compensation Committee shall have the authority to control and manage the
operation and administration of the Plan. The Compensation Committee and its
agents shall not be liable to any person for any action taken or omitted in
connection with the administration of this Plan except in the case of willful
misconduct or lack of good faith.
6.3 SUCCESSORS AND ASSIGNS
This Plan shall be binding upon the successors and assigns of the parties
hereto.
6.4 RIGHT TO AMEND AND TERMINATE
The Compensation Committee reserves the right to modify, alter, amend, or
terminate the Plan, at any time and from time to time, without notice, to any
extent deemed advisable; provided, however, that no such amendment or
termination shall (without the written consent of the Participant, if living,
and if not, his beneficiary) adversely affect any benefit under the Plan which
is or becomes payable with respect to the Participant or beneficiary as of the
date of such amendment or termination.
6.5 CLAIMS PROCEDURES
Any Participant, beneficiary or authorized representative, may file a claim for
benefits under the Plan by submitting to the Compensation Committee a written
statement describing the nature of the claim and requesting a determination of
its validity under the terms of the Plan. Within 30 days after the date such
claim is received by the Compensation Committee, it shall issue a ruling with
respect to the claim. If the claim is wholly or partially denied, written notice
shall be furnished to the claimant, which notice shall set forth in a manner
calculated to be understood by the claimant:
(1) the specific reason or reasons for denial;
(2) specific reference to pertinent Plan provisions on which the denial is
based;
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(3) a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(4) an explanation of the claims review procedures. Any Participant,
beneficiary or authorized representative whose claim for benefits has been
denied, may appeal such denial by resubmitting to the Compensation
Committee a written statement requesting a further review of the decision
within 60 days of the date the claimant receives the notice of such denial.
Such statement shall set forth the reason supporting the claim, the reason
such claim should not have been denied, and any other issues or comments
which the claimant deems appropriate with respect to the claim.
If the claimant shall request in writing, the Compensation Committee shall make
copies of the Plan documents pertinent to his claim available for examination of
the claimant.
Within 60 days after the request for further review is received, the
Compensation Committee shall review its determination of benefits and the
reasons therefor and notify the claimant in writing of its final decision. Such
written notice shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, with specific references to
the pertinent Plan provisions on which the decision is based.
6.6 GOVERNING LAW
This Plan shall be governed by and construed in accordance with the laws of the
State of Idaho to be extent such laws are not preempted by Federal Law.
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Exhibit 10.14
MORRISON KNUDSEN CORPORATION
DEFERRED COMPENSATION PLAN
SECTION I - GENERAL
This Deferred Compensation Plan (hereinafter called the "Plan") is intended to
allow for the deferral of compensation by key employees of Morrison Knudsen
Corporation and its subsidiaries. The purpose of the Plan is to encourage
outstanding service and to attract, retain and motivate highly competent
personnel.
SECTION II - DEFINITIONS
The following definitions shall apply to this Plan.
2.1 "ACCOUNT" - One of any of the separate unfunded accounts established for
each year's deferral for each Participant, on the books of the Company for
purposes of recording amounts credited to each Participant under the Plan.
2.2 "BONUS AWARD" - The cash bonus compensation paid to a Key Employee by the
Employer before payroll deductions under the Morrison Knudsen Corporation
Executive Incentive Plan.
2.3 "COMPANY" - Morrison Knudsen Corporation.
2.4 "EMPLOYER" - The Company and subsidiaries or affiliates thereof to which
this Plan is extended by the Board of Directors of the Company.
2.5 "KEY EMPLOYEE" - Any "highly compensated employee" (as defined in Section
414(Q) of the Internal Revenue Code of 1986) who has been selected by the
Executive Compensation and Stock Option Committee of the Board of Directors
of the Company to be eligible for the Plan.
2.6 "PARTICIPANT" - An employee who has elected, under the Plan, to defer
payment of Bonus Awards. A person remains a Participant so long as he or
she is employed by the Employer whether or not he or she remains a Key
Employee.
SECTION III - ELIGIBILITY
All Key Employees shall be eligible to become Participants in the
Plan.
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SECTION IV - ELECTION
4.1 BONUS DEFERRALS. A Key Employee who is eligible to receive a Bonus Award
may elect, under the terms and conditions of the Plan, to defer all or a
portion of such Bonus Award. Such election shall be made by written notice
in the manner specified by the Company; shall specify the deferral amount
determined under Section 5.1 and the payment option under Section 6.1; and
shall be irrevocable once made.
4.2 BONUS DEFERRAL ELECTION. An election to defer Bonus Awards shall be made on
or before December 15 in the year prior to the year in which such Bonus
Award is payable. A new election shall be made each year.
4.3 Company shall credit the amounts deferred under this Plan to the Account of
the Participant. The amounts represented by such Accounts shall not be
segregated from the general funds of the Company. Such credits shall be
made as of the first day of the month next following the month in which
such amount would otherwise have been paid to the Participant.
SECTION V - DEFERRAL AMOUNT ELECTION
5.1 DEFERRAL AMOUNT. Key Employees may elect to defer any percentage or a
specific dollar amount of any Bonus Award. Key Employees may elect to
defer any percentage of a Bonus Award, a specific dollar amount of a Bonus
Award or a percentage of a Bonus Award that exceeds a specific dollar
amount.
5.2 DEDUCTIONS. The Company may deduct from any distribution under this Plan
any amounts owed by the Participant to the Company or any Employer.
SECTION VI - DISTRIBUTIONS
6.1 OPTION. Except as provided in Section 6.2, Participants may choose to
receive payment of each of their Accounts under any of the following
methods:
(a) Payment of the Account in a single lump-sum payment in the first
month immediately following the month of such Participant's
retirement from the Employer;
(b) Payment of the Account in a single lump-sum payment in any
January after 1987;
(c) Payment of the Account in equal monthly installments over a
period commencing with the month immediately following the month
of such
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Participant's retirement and ending with a month specified by the
Participant; or
(d) Any other form of payment approved by the Company.
If a Participant fails to specify a payment option described in (a), (b),
(c) or (d) of this Section 6.1, such Participant shall be deemed to have
specified the payment option described in (a) above.
6.2 TERMINATION. If a Participant's employment with the Employer terminates
prior to his or her retirement from the Employer, the Participant shall be
paid the balance of his or her Account in a lump sum as soon as
administratively feasible following such termination.
6.3 MODIFICATION OF ELECTION. A Participant may change his or her specified
beneficiaries at any time. Any election or request pursuant to this Section
6.3 shall be made in writing and in such form and manner as may be
prescribed by the Company.
6.4 DISTRIBUTION. Company shall pay the entire balance of the Participant's
Account to the Participant (including the interest credited in accordance
with Section VII) in accordance with the payment option determined under
Section 6.1.
SECTION VII - INTEREST CREDIT
INTEREST. As of the first day of each calendar quarter, the Company shall
credit to each Participant's Account [including any Account being held for
monthly disbursements under Section 6.1(c)] interest on the average daily
balance of such Account during the immediately preceding calendar quarter
at a rate of interest equal to the prime rate as quoted by Citibank, N.A.,
in effect at the beginning of such quarter.
SECTION VIII - RIGHTS AND FORFEITURES
8.1 NO RIGHT TO EMPLOYMENT. Nothing contained in this Plan shall:
(a) Confer upon any employee any right of employment with the Employer;
(b) Interfere in any way with the right of the Employer to terminate or
change the terms or conditions of any employee's employment at any
time; or
(c) Confer upon any employee or other person any claim or right to any
distribution under the Plan except in accordance with its terms.
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8.2 UNFUNDED PLAN. This Plan will be unfunded. Nothing contained in this Plan
and no action pursuant hereto shall create or be construed to create a
trust of any kind or a fiduciary relationship between the Company, the
Participant or any other person. Any compensation deferred under this Plan
shall continue for all purposes to be a part of the general funds of the
Company. To the extent that any Participant, Key Employee or other person
acquires a right to receive payments from the Plan, such right shall be no
greater than the right of any unsecured general creditor of the Company.
8.3 ASSIGNMENT. Except as provided in Section 5.2, no right or interest of any
Participant in an Account or in the Plan shall, prior to actual payment or
distribution to such Participant, be assignable or transferable in whole or
in part, either voluntarily or by operation of law or otherwise, or be
subject to payment of debts of any Participant by execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner, unless
the assignment of such benefit or right is pursuant to a qualified domestic
relations order issued by a court of competent jurisdiction.
SECTION IX - DEATH OF PARTICIPANT
DISTRIBUTION UPON DEATH. On the death of Participant, the balance of the
Participant's Account on the date of death shall be distributed to the
Participant's beneficiary in a lump sum as soon as administratively
feasible. If no beneficiary is designated by Participant or if the
designated beneficiary is dead, then the amounts provided for hereunder
shall be paid to the estate of the Participant.
SECTION X - FINANCIAL HARDSHIP.
HARDSHIP PAYMENTS. A Participant shall not be entitled to withdraw any
portion of his or her Account except as provided in Section 6; PROVIDED,
that, in cases of hardship constituting immediate and heavy financial need
due to an unanticipated emergency caused by an event beyond the
Participant's control, the Executive Compensation and Stock Option
Committee of the Board of Directors of the Company may authorize, on a
nondiscriminatory basis and taking into account other resources of the
Participant, a hardship withdrawal of the portion of the Participant's
Account as is required to meet the need created by the hardship.
SECTION XI - ADMINISTRATION
11.1 AMENDMENT OR SUSPENSION. The Company may, from time to time, amend or
suspend any or all of the provisions of the Plan. The Company may at any
time terminate the Plan. If the Plan is terminated, the value of each
Participant's Account as of the date of termination shall be distributed to
such Participant in a lump sum as soon as administratively feasible. The
Company shall not amend this Plan in any way that would reduce the accrued
balance of a Participant's Account.
4
<PAGE>
11.2 PLAN ADMINISTRATION. The Executive Compensation and Stock Option Committee
of the Board of Directors of the Company shall have power to construe the
Plan, prescribe rules and regulations relating to the Plan, and make all
other determinations necessary or advisable for the administration of the
Plan. The Committee's interpretations and construction hereof, including an
evaluation of a Participant's Account, or the amount or recipient of any
payment to be made therefrom, shall be binding and conclusive on all
persons for all purposes. The Executive Compensation and Stock Option
Committee of the Board of Directors of the Company may correct any defect
or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent it deems expedient. No officer, director or
employee of the Company shall be liable to any person for any action taken,
or omitted to be taken, in connection with the interpretation and
administration of this Plan unless attributable to willful misconduct or
bad faith on behalf of the person acting for the Company.
11.3 EXPENSES. All expenses and costs incurred in connection with the
administration and operation of the Plan shall be borne by the Company.
11.4 GOVERNING LAW. The provisions of this Plan shall be interpreted and
construed in accordance with the laws of the State of Idaho.
11.5 SUCCESSORS, ETC. This Plan shall be binding upon and inure to the benefit
of the Company, its successors, assigns, and the Participant and his or her
heirs, executors, administrators, legal representatives or other designees.
5
<PAGE>
SCHEDULE TO EXHIBIT 10.15
MORRISON KNUDSEN CORPORATION
SCHEDULE OF INDEMNIFICATION AGREEMENTS
Name Date of Agreement
---- -----------------
Agee, William J. February 13, 1987
Arrillaga, John October 10, 1990
Brandon, Brent D. November 5, 1993
Brigham, Douglas L. August 6, 1993
Brzezinski, Zbigniew February 8, 1994
Cleary, James F. (Jr.) August 6, 1993
Fox, Lindsay E. February 28, 1992
Gorman, Edmund J. February 9, 1990
Grant, Stephen R. May 5, 1989
Hanks, Stephen G. February 9, 1990
Hemmeter, C. B. May 5, 1989
Howland, Mark E. February 8, 1994
Lynch, Peter S. May 5, 1989
McCabe, Robert A. February 13, 1987
Peden, Irene C. August 3, 1990
Roche, Gerard R. August 3, 1990
Rogers, John W. February 5, 1993
Sarsten, Gunnar E. October 10, 1990
Ueberroth, Peter V. August 3, 1989
<PAGE>
Schedule to Exhibit 10.16
MORRISON KNUDSEN CORPORATION
SCHEDULE OF SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENTS
NAME DATE OF AGREEMENT
---- -----------------
Agee, William J. April 2, 1991
Chmiel, Kenneth W. August 3, 1990
Fearon, Joseph G. August 3, 1990
Gorman, Edmund J. August 3, 1990
Grant, Stephen R. April 13, 1989
Sarsten, Gunnar E. October 10, 1990
Tinstman, Robert A. August 3, 1990
Williams, G. Bretnell August 3, 1990
<PAGE>
Schedule to Exhibit 10.17
MORRISON KNUDSEN CORPORATION
SCHEDULE OF EMPLOYMENT AGREEMENTS
NAME DATE OF AGREEMENT
---- -----------------
Granger, Jack C. January 1, 1993
Hanks, Stephen G. January 1, 1993
Smith, Thomas J. January 1, 1993
Tinstman, Robert A. January 1, 1993
<PAGE>
Exhibit 10.26
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1st day of March 1994 between Morrison
Knudsen Corporation, a Delaware corporation ("MK" or "Company") and Gunnar E.
Sarsten ("Employee").
RECITALS
Employee has been employed by MK for a number of years and is knowledgeable
about the business of the Company. Most recently, Employee has been President
and Chief Operating Officer of MK, as well as President and CEO of the
Engineering and Construction Group of MK's subsidiary, Morrison Knudsen
Corporation, an Ohio Corporation ("MK Ohio"). In the foregoing capacities,
Employee has been one of the primary forces behind the Company's efforts to
develop large power projects in the United States and around the world. As a
result, Employee is intimately familiar with the capabilities of the Company in
its domestic and international markets, particularly as they relate to the
development of large power projects.
Employee will retire from the positions enumerated above effective March 1,
1994. MK desires to retain the services of Employee on a full-time basis subject
to the terms set forth herein to assist it in the formulation and execution of
its business plans for the domestic and international power markets. Employee
desires to provide such assistance on the terms below.
NOW, THEREFORE, it is agreed:
1. TERM. This Agreement shall commence on the 1st day of March 1994 and
shall expire on the 28th day of February 1995; provided, however, that upon
mutual written agreement of the parties, this Agreement shall continue for an
additional 12 month period (March 1, 1995 through February 29, 1996).
Thereafter, the Agreement shall continue from year to year (March 1st - February
28th) upon mutual written agreement of the parties.
2. TITLE AND SERVICES.
a. Employee shall have the title Chairman and Chief Executive
Officer of MK International.
b. Employee shall report to MK's Chief Executive Officer or his
designee.
c. Although Employee's specific duties will be those that are
assigned to him from time to time by the Company's Chief Executive Officer
or his designee, broadly defined, they will include the representation of
the interests of MK in connection with domestic and international
construction, engineering and power
<PAGE>
projects (the "Services"). Employee's principal place of business shall be
Belle Haven, Virginia.
d. Employee will initially focus his efforts on development of large
power projects in selected regions of the United States and the world.
Employee will continue his service as a member of the board of directors of
those companies (other than MK) on which he currently serves.
3. TIME. Employee agrees that he is a full-time employee of MK subject
to the following terms and conditions: The Parties anticipate that Employee can
accomplish his full-time work by performing 80 days of Services during each year
of this Agreement. The calculation of 1994 Services shall begin effective March
1, 1994. Services need not be performed on consecutive days. Services in excess
of 80 days per annum performed by Employee shall be scheduled only with the
consent of Employee and Company.
4. COMPENSATION.
a. The annual base compensation to Employee shall be $141,667 per
annum ("Base Compensation"). Fifty percent (50%) of the Base Compensation
shall be paid in cash, less applicable taxes withheld pursuant to Company's
payroll practices, and fifty percent shall be set aside in accordance with
an election made by Employee pursuant to the terms of the Company's
Deferred Compensation Plan.
b. For Services performed in excess of 80 days per annum, Employee
shall be paid a daily rate of $1,771 (the "Additional Compensation").
Employee shall set forth in a weekly report to the Company's Chief
Executive Officer or his designee the number of days he has performed
Services in excess of 80 days. Such report shall form the basis for a
year-end bonus, which bonus shall equal the number of days of Services in
excess of 80 multiplied by $1,771. The Additional Compensation shall
appear on the last payroll check of the year. The Additional Compensation
shall be treated as wages with fifty percent being paid in cash, less
applicable taxes, and the remaining fifty percent shall be deferred as
described in subparagraph a. above.
c. Employee shall be reimbursed monthly for his normal business
expenses incurred in the performance of the Services, including business
class transportation on international flights. All reimbursements shall be
made in accordance with MK's policies regarding reimbursement of business
expenses. MK's Cleveland office will provide routine support in processing
of travel vouchers and in administrative/logistics matters.
d. During the term of this Agreement, Employee shall also be
provided with supplemental benefits at no cost to Employee which shall
result in the following levels of coverage, inclusive of any coverage
provided by basic Company-sponsored benefits:
i. Pre-Retirement life insurance equal to three times
Employee's annual base salary in effect while he served as MK's
President and Chief Operating Officer;
2
<PAGE>
ii. Post-Retirement life insurance equal to one times Employee's
annual base salary in effect while he served as MK's President
and Chief Operating officer; and
iii. Disability coverage from all MK-sponsored and government
sources equal to 60% of his Base Compensation, less any offsets
under the terms of such disability programs.
e. Employee shall be eligible to participate in all health and
welfare benefits generally available to other salaried employees of MK.
f. MK shall pay the cost of state engineering licenses for Employee
in those states in which Employee is currently licensed as an engineer.
g. MK shall pay the monthly membership fee to Gibson Island Club for
Employee.
h. If Employee terminates employment with the Company for a reason
other than "Cause" as defined in Section 5 a. below at a time when he is
not fully vested in his accounts under the Morrison Knudsen Corporation
401(k) Savings Plan, ESOP, and Supplemental Savings Plan, MK shall pay
Employee, as soon as practicable following such termination (an in no event
later than 30 days following such termination), an amount equal to the
value of the forfeited portions of such accounts, calculated on Employee's
last day of employment, less applicable taxes. Such amount shall be paid
in a single sum payment.
i. If Employee terminates employment with the Company for a reason
other than "Cause" as defined in Section 5 a. below at a time when he is
not vested in (i) his retirement benefit under the Morrison Knudsen
Corporation Retirement Plan, effective January 1, 1988 and frozen as of
December 31, 1991 (the "MKRP Benefit") and (ii) his retirement benefit
under the Supplemental Retirement Benefit Agreement, effective October 10,
1990 (the "SRBA Benefit"), MK shall pay Employee an amount equal to the
forfeited MKRP Benefit and the forfeited SRBA Benefit at the same time and
in the same amounts as such benefits would have been paid had no forfeiture
occurred.
j. If requested by MK's Chief Executive Officer, Employee shall
develop for the CEO's approval, or his designee's approval, a system for
potential incentive compensation. Employee shall not be entitled to
incentive compensation except as may be approved pursuant to this
subparagraph j.
k. During Employee's period of employment with MK, all restricted
stock awards and options heretofore granted to Employee shall vest at the
times and in the amounts set forth in the applicable agreements and the
Stock Incentive Plan.
3
<PAGE>
5. RIGHTS UPON TERMINATION.
a. During the term of this Agreement, Employee may be terminated by
the Company only for Cause. For purposes of this Agreement, Cause shall
mean (i) willful refusal by Employee to follow a lawful written order of
the Chief Executive Officer of MK or his designee, (ii) Employee's willful
and continued failure to perform his duties under this Agreement (except
due to Employee's incapacity due to physical or mental illness) after a
written demand is delivered to Employee by the Chief Executive Officer or
his designee specifically identifying the manner in which the Employee has
failed to perform his duties, (iii) Employee's willful engagement in
conduct materially injurious to MK: or (iv) Employee's conviction for any
felony involving moral turpitude. For purposes of clauses (i), (ii), and
(iii) of this definition, no act, or failure to act on Employee's part
shall be deemed "willful" unless done, or omitted to be done, by Employee
not in good faith and without reasonable belief that Employee's act, or
failure to act, was in the best interests of Company. In the event
Employee is terminated for Cause prior to the expiration of the term
hereunder, no amounts shall be due or payable.
b. In the event of the Employee's death, total and permanent
disability or voluntary resignation during the term of the Agreement, this
Agreement shall terminate and Employee shall be entitled to be compensated
in accordance with the provisions of Section 4 through the date of such
termination, but shall not be entitled to receive any compensation for the
remainder of the term of the Agreement.
c. In the event the Employee terminates employment for reasons other
than those identified in subparagraphs a. and b. above, he shall be
entitled to receive the base compensation set forth in Section 4 for the
remainder of the term of this Agreement in a single sum, payable in
accordance with the provisions of Section 4.
6. ENTIRE AGREEMENT; NO MODIFICATION. This Agreement expresses the
entire agreement of the parties on the subjects covered hereunder and may not be
modified or amended except by a writing signed by the party to be charged. This
Agreement specifically supersedes the Employment Agreement between MK and
Employee executed on July 15, 1993, which shall be void and of no effect upon
the execution of this Agreement. Anything in this Agreement to the contrary
notwithstanding, the Supplemental Retirement Benefit Agreement entered into
between Employee and MK, effective October 10, 1990, shall not be affected by
this Agreement and shall continue in full force and effect.
7. MITIGATION AND OFFSET. Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise, nor to offset the amount of any payment provided for in this
Agreement by amounts earned as a result of Employee's employment or self-
employment during the period he is entitled to such payment.
8. SUCCESSORS. The rights and duties of a party hereunder shall not be
assignable by that party; provided, however, that this Agreement shall be
binding upon and inure to the benefit of any successor of MK, and any such
successor shall be deemed substituted for MK
4
<PAGE>
under the terms of this Agreement. The term successor as used herein shall
include any person, firm, corporation or other business entity which at any
time, by merger, purchase or otherwise, acquires all or substantially all of the
assets or business of MK.
9. VALIDITY. In the event that any provision of this Agreement is held
to be invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Agreement.
10. HEADINGS AND INTERPRETATION. Paragraphs or other headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretations of this Agreement.
11. APPLICABLE LAW. To the full extent controllable by stipulation of the
parties, this Agreement shall be interpreted and enforced under Idaho law.
IN WITNESS WHEREOF, Company has executed this Agreement by a duly
authorized officer, and Employee has placed his signature hereon this _____ day
of March, 1994.
MORRISON KNUDSEN CORPORATION
/s/ William J. Agee
By: -------------------------------------
William J. Agee
Chairman and Chief Executive Officer
EMPLOYEE
/s/ Gunnar E. Sarsten
By: -------------------------------------
Gunnar E. Sarsten
5
<PAGE>
EXHIBIT 21
MORRISON KNUDSEN CORPORATION
Subsidiaries of the Registrant
Consolidated, wholly owned subsidiaries of the
registrant, Morrison Knudsen Corporation (Delaware)
and its consolidated subsidiaries.
State or Country of
Incorporation
-------------
Atascosa Mining Co. Nevada
Black Micro Corporation Northern Mariana Islands
Broadway Insurance Company Ltd. Bermuda
CF Systems Corporation Massachusetts
E.E. Black, Ltd. Hawaii
Ferguson MK River, Ltd. England
Joy MK Project Company Nevada
MK Corporation of Australia Limited Australia
MK Engine Systems New York
MK-Ferguson of Idaho Company Idaho
MK Ferguson of Oak Ridge Company Tennessee
Morrison Knudsen Corporation Ohio
Morrison-Knudsen Financial Company, Inc. Nevada
Motor Coils Manufacturing Company Pennsylvania
National Projects, Inc. Nevada
Navasota Mining Company, Inc. Nevada
Power Parts Company Nevada
The names of particular subsidiaries have been excluded because when considered
in the aggregate as a single subsidiary, as of December 31, 1993, they would not
constitute a significantsubsidiary under Rule 1-02 of Regulation S-X.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements No.
2-48200 on Form S-1 and Nos. 33-32413, 33-32414, and 33-32415 on Form S-8 of our
report dated February 8, 1994 appearing in this Annual Report on Form 10-K of
Morrison Knudsen Corporation for the year ended December 31, 1993.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Boise, Idaho
March 30, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints E. J. Gorman, S. G. Hanks and M. E. Howland, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1993, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ William J. Agee
______________________________________
William J. Agee
Chairman and Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman and S. G. Hanks, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign on his behalf as a director or officer or both, as the case
may be, of Morrison Knudsen Corporation, a Delaware corporation, Form 10-K
Annual Report for year ended December 31, 1993, and any and all amendments
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Mark E. Howland
____________________________________
Mark E. Howland
Controller
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Gunnar E. Sarsten
__________________________________________
Gunnar E. Sarsten
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ John Arrillaga
______________________________________
John Arrillaga
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Lindsay E. Fox
______________________________________
Lindsay E. Fox
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute
orsubstitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Christopher B. Hemmeter
______________________________________
Christopher B. Hemmeter
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Peter S. Lynch
_____________________________________
Peter S. Lynch
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Robert A. McCabe
______________________________________
Robert A. McCabe
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for her and in her name, place and stead, in
any and all capacities, to sign on her behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as she might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Irene C. Peden
______________________________________
Irene C. Peden
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Gerard R. Roche
______________________________________
Gerard R. Roche
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ John W. Rogers, Jr.
______________________________________
John W. Rogers, Jr.
Director
<PAGE>
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
and appoints W. J. Agee, E. J. Gorman, S. G. Hanks and M. E. Howland, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign on his behalf as a director or officer or both,
as the case may be, of Morrison Knudsen Corporation, a Delaware corporation,
Form 10-K Annual Report for year ended December 31, 1993, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Power of Attorney has been signed below on the 8th day of February, 1994.
/s/ Peter V. Ueberroth
______________________________________
Peter V. Ueberroth
Director
