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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the fiscal year ended September 30, 1996
/ / Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
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to
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Commission File Number: 1-10372
DOMINION BRIDGE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 23-2577796
(State or Other (I.R.S. Employer Identification No.)
Jurisdiction of Incorporation
or Organization)
500 NOTRE DAME ST., 3RD FLOOR
LACHINE, QUEBEC, CANADA H8S 2B2
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (514) 634-3550
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of December 24, 1996, was approximately $53.1 million
based upon the closing price of the Common Stock on such date on the NASDAQ
National Market System of $1.97. The information provided shall in no way be
construed as an admission that any person whose holdings are excluded from the
figure is an affiliate or that any person whose holdings are included is not
an affiliate, and any such admission is hereby disclaimed. The information
provided is included solely for record keeping purposes of the Securities and
Exchange Commission.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes X No
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APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the registrant's sole class of
common stock as of December 24, 1996 was 28,763,648 shares.
All dollar amounts included in this Report are shown in U.S. dollars,
unless otherwise indicated.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant's 1997 Annual
Meeting of Stockholders (the "1997 Proxy Statement") are incorporated by
reference into Items 10, 11, 12 and 13 in Part III. If the 1997 Proxy Statement
is not filed by January 28, 1997, an amendment to this Annual Report setting
forth this information will be duly filed with the Securities and Exchange
Commission.
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PRIVATE SECURITIES LITIGATION
REFORM ACT SAFE HARBOR STATEMENT
When used in this Annual Report on Form 10-K and in other public
statements by the Company and Company officers, the words "expect," "estimate,"
"project," "intend," and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial condition. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial condition to differ materially. Such factors
include, among others: (i) the Company's ability to identify appropriate
acquisition candidates, complete acquisitions on satisfactory terms, or
successfully integrate acquired businesses; (ii) the risk of claims for product
and construction liability; (iii) the Company's ability to secure performance
bonding on the projects it undertakes; (iv) the intense competition and the
bidding process in which the Company competes; (v) the Company's ability to
obtain financing on satisfactory terms and the degree to which the Company is
leveraged, including the extent to which currently outstanding options, warrants
and other convertible securities are exercised; (vi) the sensitivity of the
Company's business to general economic conditions; (vii) the performance of
suppliers and subcontractors; (viii) the timing of completion of projects; (ix)
the Company's ability to avoid penalties for delays in completion of projects
and cost overruns; (x) factors associated with international ventures such as
the relative strength of the dollar when compared to the currencies in the
countries in which the Company operates; (xi) the Company's ability to remain in
compliance with the numerous environmental, health and safety requirements to
which it is subject; (xii) changes in accounting principles, policies or
guidelines; and (xiii) other economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and prices. Additional factors are described in this Annual Report on
Form 10-K and in the Company's other public reports filed with the Securities
and Exchange Commission. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date made. The
Company undertakes no obligation to publicly release the result of any revision
of these forward-looking statements to reflect events or circumstances after the
date they are made or to reflect the occurrence of unanticipated events.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Dominion Bridge Corporation (the "Company") was incorporated on
February 16, 1989 in Delaware as Cedar Group, Inc. and changed its name to
Dominion Bridge Corporation in 1996 to more readily identify the Company with
its principal operating subsidiary. The Company primarily operates as a
diversified international engineering and construction company in North America
and Asia-Pacific, and has additional operations in ship building and repair and
industrial specialty fasteners. In fiscal 1996, the engineering and construction
portion of the Company's business accounted for over 90% of revenues and is
expected to remain at over 80% in fiscal 1997. SEE SEGMENT INFORMATION.
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The Company since 1994 has established its operations by way of four
principal and several other acquisitions. The principal acquisitions concluded
by the Company were: (i) in 1994, the acquisition from United Dominion
Industries Limited ("UDI") of Dominion Bridge Inc. ("DBI"), a 115 year old
Canadian general contractor engaged in infrastructure projects in Canada and
North America; (ii) the initial acquisition of 75% in 1995 (now owned 100%) of
Steen Contractors Limited ("Steen"), whose traditional business is international
engineering and construction primarily in mechanical, heating, ventilation and
air conditioning; (iii) in 1996, the acquisition of 77.4% of McConnell Dowell
Corporation Limited ("MDC"), a general contractor engaged in a broad range of
infrastructure projects in Asia-Pacific; and (iv) also in 1996, the acquisition
of 100% of Davie Industries Inc. ("Davie," formerly known as The MIL Group
Inc.), which is engaged primarily in commercial and military ship design,
construction and repair, and in the manufacturing of industrial products. Its
smaller initial acquisitions were in the industrial and aerospace specialty
fasteners market and included the 1994 acquisition of 70% of Unimetric
Corporation ("Unimetric") from Ateliers de la Haute Garonne ("AHG"), and several
small previous acquisitions by a predecessor company, Edinov Corporation
("Edinov"). In 1994, the Company sold its shares of Edinov, which owned several
Canadian fastener companies, and DBI's steel service center division.
The international engineering and construction activities of the
Company are conducted in North America by DBI and Steen and in Asia-Pacific by
MDC. The following is a summary of the transactions that have been concluded by
the Company to establish its engineering and construction operations.
INTERNATIONAL ENGINEERING AND CONSTRUCTION
DOMINION BRIDGE INC. On April 8, 1994, the Company completed the
acquisition of majority ownership of DBI from UDI, which had operated it as a
division. The acquisition, effective March 9, 1994 for accounting purposes, had
UDI transfer all of the assets, liabilities and business of its Dominion Bridge
division into a newly-created subsidiary of UDI (DBI) of which the Company
purchased for a net payment of Cdn $5,000,000 in cash, 85% ownership of DBI's
common shares. UDI was also issued Cdn $18.3 million of DBI's Class A Preferred
Shares in connection with the transfer of assets. Concurrently, the Company
contributed Cdn $2 million to DBI in exchange for its Class B Preferred Shares.
The Class A Preferred Shares were convertible into the Company's common stock at
a rate of Cdn $6.00 and paid a quarterly dividend at a rate of 7.5% annually.
The Class A Preferred Shares were subject to certain put and call rights.
On October 21, 1994, the Company reached agreement with UDI whereby the
Company acquired from UDI the remaining 15% of the common shares of DBI and the
Class A Preferred Shares in exchange for future cash payments totaling Cdn $18
million and transfer to UDI of certain assets having a book value of $1.4
million. The Company received a waiver of that year's fourth quarter Class A
Preferred Share dividend payment. The agreement between the Company and UDI was
further modified on December 18, 1995, and the future payments to UDI were
reduced to Cdn $11.5 million consisting of cash of Cdn $5.0 million and the
issuance of up to 1,250,334 shares of the Company's common stock to be sold by
UDI from time to time to permit
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UDI to realize up to Cdn $6.5 million. These financial obligations to UDI were
completed in 1996.
At the time that the Class A Preferred Shares were purchased by the
Company, UDI released all of the registered security interests it held on the
assets of DBI, including any claims for bonding, letters of credit or other
guarantees. It further forgave any claims to Cdn $1.8 million of interest and
other claims against DBI as well as all dividends accruing on the Class A
Preferred Shares.
During fiscal 1995, in order to pay its obligations to UDI, the Company
sold to third party investors certain of the reacquired Class A Preferred
Shares, which were concurrently converted into shares of common stock of the
Company at a rate of Cdn $6.00. Of the 643,200 of Class A Preferred Shares
converted to common stock, 450,000 of Class A Preferred Shares were acquired by
Groupe Fidutech from its purchase of $2.7 million of the Class A Preferred
Shares. Groupe Fidutech is a company owned by Messrs. Marengere and Amyot,
who are the Company's Chief Executive Officer and a Director, respectively. SEE
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
STEEN CONTRACTORS LIMITED. On July 31, 1995, but effective March 31,
1995, the Company purchased 75% of the outstanding common shares of Steen
Contractors Limited for a cash price of Cdn $6.3 million (US $4.5 million). The
acquisition, accounted for under the purchase method of accounting, was
effective April 1, 1995 for accounting purposes, the date on which the Company
assumed operational control. The remaining 25% of common shares were purchased
for Cdn $2.1 million (US $ 1.6 million) on March 31, 1996 with the consideration
being fully paid on May 3, 1996. The total cost of the Company's acquisition of
Steen was approximately US $6.1 million. Funds for the initial acquisition of
the 75% of the common shares were provided to the Company by a $5.0 million
bridge loan from BT Commercial Corporation ("BTCC"), an affiliate of Banker's
Trust Company. The loan was repaid in full in October 1995 with funds partially
raised from the private placement sale of convertible preferred stock by the
Company's subsidiary, Cedar Group (TCI) Inc. LLC ("TCI"). SEE ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
MCCONNELL DOWELL CORPORATION LIMITED. In January 1996, the Company,
through a subsidiary, acquired 19.9% of the ordinary shares of MDC from Morrison
Knudsen Corporation for A$1.25 (vs$0.98) per share. On January 18, 1996, a
tender offer was made for all ordinary shares of MDC at a net price to the
seller of A$1.25 (US $0.98). This was later increased to A$1.60 (US $1.25).
Under this tender offer, an additional 11,178,115 ordinary shares, or 26.89%,
were tendered and purchased by the Company's subsidiary. Prior to the expiration
of this tender offer, on March 29, 1996 the Company's subsidiary purchased
12,640,000 ordinary shares or 30.4% in a block purchase on the Australian Stock
Exchange, which provided 50.3% ownership of MDC. For purposes of accounting, MDC
was consolidated as of March 29, 1996. After the close of the tender offer, the
Company's Australian subsidiary owned 32,187,000 ordinary shares or 77.4% of the
outstanding ordinary shares of MDC. The total cost to acquire these ordinary
shares, including all related fees and expenses, was US $40.2 million. The
ordinary shares of MDC continue to trade on the Australian Stock Exchange and
the New Zealand Stock Exchange.
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The Company financed the $40.2 million acquisition cost of MDC by the
issuance of $24. 2 million of a 6% convertible preferred shares of TCI by way of
an offshore private placement and a $30.0 million credit facility from BTCC.
SEE ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES.
SHIP CONSTRUCTION, REPAIR, DESIGN AND INDUSTRIAL PRODUCTION
DAVIE INDUSTRIES INC. On April 24, 1996, but effective March 31, 1996,
the Company purchased from Societe Generale de Financement ("SGF") 100% of the
common stock of Davie Industries in a privatization transaction. SGF is the
industrial finance arm of the Government of Quebec. Under terms of the
transaction, the Company purchased for Cdn $1.00 (one dollar) all of the common
stock of Davie and SGF assumed all the current and contingent liabilities on the
date of acquisition, including Davie's accumulated working capital deficit. On
May 15, 1996, SGF invested an additional Cdn $25.0 million (US $ 18.5 million)
to fund capital expenditures and provide Davie with working capital over the
next two years in accordance with the business plan adopted by the Company and
SGF. SGF has also agreed to invest in Davie up to another Cdn $25.0 million at a
rate of Cdn $1.00 for each Cdn $3.00 invested by the Company for expenditures
under Davie's development plan. The Company is obligated to invest a minimum of
Cdn $45 million to modernize Davie's facilities under the Davie development
plan.
The transaction was accounted for as a purchase for accounting
purposes. Under applicable accounting principles, the Company was further
required to value the assets of Davie acquired at the price paid for the
acquisition. Approximately $24.2 million of net fixed assets were written
down to Cdn $1.00 (one dollar) and the remainder of the difference between the
new assets acquired and the purchase price was accounted for by negative
goodwill which will be amortized against earnings over a three year period.
SPECIALTY FASTENERS
UNIMETRIC INC. The Company acquired 70% of the shares of Unimetric on
April 26, 1994. The purchase price was $1.0 million, consisting of a cash
payment of $0.6 million, issuance of 88,968 shares of the Company's common stock
and a $0.2 million cash purchase of Unimetric 4% non-cumulative, non-voting
preferred shares. Approximately $0.9 million of indebtedness due to AHG by
Unimetric was converted into 4% non-cumulative, non-voting preferred shares.
The Company subsequently purchased the preferred shares of Unimetric by issuing
338,033 shares of its common stock. AHG, the minority shareholder of Unimetric,
has advanced $485,000, which is being repaid from the sales of aerospace
fasteners.
DIVESTITURE OF CANADIAN FASTENER BUSINESS AND STEEL SERVICE CENTER
Divestiture of the Company's Canadian commodity fastener business
carried out by its predecessor company, Edinov, was completed in December 1994.
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The Company at that time sold the shares that it held in Edinov for
cash of Cdn $1.0 million and received Cdn $5.1 million of preferred shares from
the purchaser, 3091473 Canada, Inc. The preferred shares carry a dividend equal
to the bank prime rate and are redeemable annually at varying amounts commencing
in 1995 through 2009.
In December 1994, the Company sold its Amherst, Nova Scotia steel
service center division for gross proceeds of Cdn $0.9 million.
BREAKDOWN OF SALES, OPERATING PROFITS AND IDENTIFIABLE ASSETS BY BUSINESS
SEGMENT AND GEOGRAPHY.
The following table presents the breakdown of sales and operating
profit by business segment for the last three fiscal years.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED 9/30/96 9/30/95 9/30/94
($THOUSANDS)
SALES BY BUSINESS SEGMENT
<S> <C> <C> <C>
Engineering & Construction (1) $ 336,599 $ 150,996 $ 58,181
Shipbuilding and Maintenance (2) $ 21,729 -- --
Specialty Fasteners 4,296 4,754 4,842
Divested Business -- -- 4,936
Total Revenues 362,624 155,750 67,959
OPERATING INCOME (LOSS)
Engineering & Construction (1) $ 2,611 3,246 860
Shipbuilding and Maintenance (2) (131) -- --
Specialty Fasteners (1,467) (1,316) (574)
Divested Business -- -- 380
Segment Operating Income 1,013 1,930 666
Corporate Expenses (5,030) (1,020) (109)
Interest (2,104) (406) (341)
Other income 1,134 1,236 767
Income from operations of joint
ventures 2,189 2,165 --
Income Tax provision (574) (1,693) (300)
Minority interest - common stock (1,667) (122) (19)
Minority interest - dividends on
preferred shares (645) (70) (248)
TOTAL ASSETS
Engineering & Construction (1) $ 224,912 $ 79,400 $ 52,990
Shipbuilding and Maintenance (2) 28,655 -- --
Specialty Fasteners 4,275 5,503 5,150
Total Assets 257,842 84,903 58,140
</TABLE>
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<TABLE>
<CAPTION>
GEOGRAPHIC SEGMENTS NORTH ASIA
FISCAL 1996 AMERICA PACIFIC
<S> <C> <C>
Assets 123,339 134,503
Sales 227,101 135,523
Segment Operating Income (Loss) (5,656) 6,669
</TABLE>
(1) Includes revenues and operating income of DBI from April 1994, of Steen
from April 1995 and of Davie from April 1996.
(2) Includes revenues and operating income from Davie from April 1996.
Prior thereto, the Company was not involved in this business segment.
DESCRIPTION OF ENGINEERING AND CONSTRUCTION BUSINESS
Dominion Bridge Corporation is a diversified engineering and
construction company with operational headquarters in Montreal, Canada and
Melbourne, Australia. It has facilities throughout Canada, Australia, New
Zealand, Singapore, Hong Kong and Indonesia. In fiscal 1996, approximately 93%
of the Company's total revenues were derived from engineering and construction.
Geographically, approximately 63% of these revenues were derived from North
America and 37% were from Asia-Pacific. Revenues from Asia-Pacific were included
only from March 29, 1996, representing the date of consolidation of MDC. It is
expected that revenues from Asia-Pacific will represent approximately 50% of the
Company's total revenues in fiscal 1997.
The Company is engaged in infrastructure construction and engineering
projects. Its principal traditional activities include civil, mechanical and
electrical engineering and construction. Specifically, the Company's
capabilities include tunnels, bridges, pipelines, power plants, plants and
factories, commercial buildings, engineering and design, mechanical contracting,
shipbuilding and repair, oil and gas offshore platforms, mills and mining
infrastructure, and steel fabrication. The Company serves the broad commercial
and industrial markets of energy, pulp and paper, mining, port facilities, large
cranes, material handling systems, petrochemical, food processing, sports and
entertainment facilities, as well as general commercial and industrial facility
construction. The Company's future increase in contractual work is expected to
be derived by the need for building and replacing existing infrastructure in
most parts of the world.
While continuing to augment its engineering and construction capability
through acquisitions, the Company is also dedicated to diversify the historical
reliance of the operating companies on the core business of supply and erection
of steel products and associated services. To that effect the Company has
entered into a joint venture agreement with The New World Power Corporation to
develop renewable energy projects. In addition, pursuant to the management
services contract, one of the Company's officers has assumed the position of
Interim Chief Executive Officer of The New World Power Corporation.
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BACKLOG. As of September 30, 1996 the Company had confirmed contracts
in the infrastructure, engineering and manufacturing services segment for
approximately $205.4 million, approximately $186.4 million of which is to be
completed during fiscal 1997. The dollar amount of the backlog is not
necessarily indicative of the future earnings of the Company related to the
performance of such work. Although backlog represents only business which is
considered to be firm, there can be no assurance that cancellations or scope
adjustments will not occur.
SUPPLIERS. The principal raw material in most of the Company's
infrastructure projects is steel. Steel utilized by the Company is supplied by
Canadian mills and is also imported from Europe and Japan. The Company is not
dependent on any single supplier for its raw materials. Although the price of
steel fluctuates, substantially all of the Company's steel requirements are
purchased for specific projects and the cost of steel is usually reflected in
the price of the project. As a policy, the Company does not maintain significant
raw material inventory not allocated to specific projects.
Steen's operations as a prime mechanical contractor dictate that a
number of raw materials be employed in its operations. Steen uses a number of
suppliers in its operations and is not dependent on any single supplier for its
raw materials.
EMPLOYEES. As of the date of this Report, DBI and Steen employed in the
aggregate approximately 4,176 persons, of which approximately 71% are members of
a labor union. DBI (Lachine), with its approximately 300 employees, has a
collective bargaining agreement in place until October 1997. DBI's Manitoba
operations, with its approximately 40 employees, has a collective bargaining
agreement in place until March 1997. Of the 405 Steen employees, approximately
326 are hourly staff employees which are covered by a general construction
agreement, by each of their respective trades, to which Steen is a signatory.
The general construction agreements cover all aspects generally found in
collective bargaining agreements. Neither DBI nor Steen have suffered any work
stoppages during the last five years and the Company believes their labor
relations to be amicable.
HEALTH AND SAFETY. Health and safety records of contractors continue to
be an important decision criteria of project promoters and owners in the
awarding of contracts. The primary responsibility for safety is that of the
various project managers. DBI and Steen also employ Safety and
Quality Assurance Managers.
MARKETING. DBI, Steen and MDC obtain most of their projects
by competitive bid. DBI, Steen and MDC employ a full-time marketing
work force and also engage agents and consultants to enhance their in-house
marketing capabilities.
DBI has developed an extensive construction cost database,
which allows DBI to calculate construction costs from the limited
engineering details typically available at bid time. Management believes this
database provides an important competitive
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advantage in that it enables DBI to quickly react in the generally short bid
periods that characterize the current marketplace.
FACILITIES. DBI owns and operates manufacturing facilities in four
Canadian Provinces. In each of these facilities, DBI is equipped to receive and
ship material via road and rail. At the Lachine (Montreal) facility, the Company
can also ship by water through its access to international waterways via the St.
Lawrence Seaway.
The largest of the four manufacturing facilities is the 400,000 square
foot facility located on 40 acres of land in a heavy industrial park in Lachine,
near downtown Montreal, Quebec. The second largest facility is a 29 acre site,
also in a heavy industrial park, in Winnipeg, Manitoba. The main building on
this site is a 150,000 square foot fabrication shop which houses most of DBI's
bridge building activity. DBI owns a 23 acre site in Regina, Saskatchewan, which
includes a 35,000 square foot heavy manufacturing facility which has general
heavy manufacturing capability. DBI also owns a 77,000 square foot facility in
Amherst, Nova Scotia, where it operates its fabrication division. Finally, DBI
owns an office in downtown Amherst, which consists of 16,000 square feet of
office space and 16,000 square feet of land.
In Nisku, Alberta, a suburb of Edmonton, DBI leases and operates a
30,000 square foot manufacturing facility. The major activity in this particular
facility is pipe spooling work for the oil and gas sector. In addition, DBI
operates construction offices from leased premises in the following locations:
Richmond, British Columbia; Calgary, Alberta; Nisku, Alberta; Regina,
Saskatchewan; Winnipeg, Manitoba; Oakville, Ontario and Sudbury, Ontario.
Steen operates from leased premises in six locations in the Provinces
of Ontario, Quebec and the Maritimes. With the exception of Toronto, from each
of these locations, Steen carries out all of the mechanical work with its own
facilities and work force, subcontracting only for specialty services, such as
controls, insulation and electrical wiring. In Toronto, the sheet metal work is
subcontracted to independent sheet metal contractors. The other locations
operate sheet metal fabricating facilities equipped with CAD/CAM and automated
duct fabrication machines. All locations prefabricate piping systems and Steen's
facility in Toronto maintains a large pipe fabrication system.
COMPETITION. The markets in which DBI, Steen and MDC operate are highly
competitive. Competition is primarily centered on price, reputation for quality,
timeliness experience, reliability and the financial strength of the contractor.
Due to the number of different markets in which the Company competes throughout
North America and the world, any meaningful estimate of the number of
competitors is impossible. Many of the Company's competitors are substantially
larger, with greater financial, marketing and other resources than those of the
Company. In some instances, due to the constraints of their respective bonding
capacities, DBI, Steen and MDC may be limited in their ability to compete for
very large projects. As has been its past practice,
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the Company will continue to use its best efforts to bid for projects it cannot
handle individually as part of a consortium.
DESCRIPTION OF SHIPBUILDING SEGMENT
The shipbuilding segment accounted for approximately 6% of the
Company's consolidated revenues in fiscal 1996 and is conducted through Davie.
Davie, founded in 1825, is Canada's oldest and largest shipbuilding and ship
repair facility. MIL Intermodal Inc., a subsidiary of Davie, is a designer and a
manufacturer of road-rail interchangeable systems, a recently developed
proprietary technology, which may provide economic and logistic advantages to
the surface transportation industry. Another subsidiary of Davie, MIL Systems,
an engineering division located in Ottawa, Canada, is classified ISO 9001 and
specializes in advance ship design software, naval systems, computer aided
logistic and global telecommunications.
OPERATIONS. Davie's primary operation involves the construction of a
wide-range of merchant and naval vessels including ferries, tankers,
bulk-carriers, destroyers and frigates. Davie's accomplishments include building
the largest ships ever produced in Canada (80,000 dwt tankers), building the MV
Caribou in 1986 which, at the time, was the largest ferry of its class in the
world, constructing three City Class Canada patrol frigates and modernizing four
Tribal Class destroyers of the Canadian Navy. Between 1979 and 1983, Davie
diversified its activities and profitably produced thirteen jack-up drilling
platforms of large size, principally to foreign customers in the offshore
industry.
Davie is also actively involved in ship repair and conversions. Davie
operates two large dry-docks, a floating dock and extension wharfage. The
dry-docks are primarily utilized for ship repair; however, they are also
available for newbuild business. These facilities, together with Davie's
strategic position on the St. Lawrence river, have enabled Davie to successfully
perform and complete a wide spectrum of ship repair work from routine surveys to
major overhauls including structural rebuilds and total conversions.
On the basis of its experience in ship construction and repair, Davie
has been awarded manufacturing contracts from other industrial sectors. For
example, Davie has manufactured equipment for nuclear power plants, scroll cases
and rotary kilns and has served industries as diverse as petro chemicals, pulp
and paper, hydro-electricity and steel mills. Davie has also manufactured 71
sonar dome structures for the U.S. Navy cruiser and destroyer programs, and has
been awarded a contract for the construction of three sonar dome structures with
a purchaser's option for an additional nine. Most recently, Davie is developing
specialized rail equipment for a new road/rail intermodal transportation system.
CURRENT BUSINESS PLAN. A large percentage of Davie's business has
historically consisted of the procurement and performance of military contracts
from the Canadian government. After recognizing a slowdown in Canadian military
shipbuilding, during the past decade, Davie has refocused its business on the
commercial production of merchant ships
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principally for the export market. This decision was based on Davie management's
assessment that there would be a significant increase in the demand for merchant
ships which would be maintained through the year 2005. This increase in demand
is materializing and Davie management believes that it is primarily due to (i)
an increase in seaborne trade; (ii) additional replacement opportunities linked
to the aging of the world merchant vessel fleets; and (iii) a stricter
regulatory environment which is leading to an increase in the scrapping rate of
older ships. Management of Davie has concluded that the price level for new
ships is determined mainly by supply and demand as opposed to cost and, as such,
the expected increase in new building demand would lead to price increases over
the level that prevailed in the late 1980s and early 1990s.
FACILITIES. In terms of area, Davie owns and operates the largest
shipyard in Canada. The shipyard is located on the St. Lawrence river in Quebec
with access to international waterways. The shipyard is owned by Davie outright
and contains two main construction berths. Each berth is served by two gantry
cranes with lifting capacities of 39 and 45 tons and by four mobile cranes, the
largest of which has a maximum individual capacity of 200 tons. The berths are
uncovered and measure 200M x 65M and 250M x 65M, respectively. The combined
berth is capable of being extended to 300M x 150M. Davie leases two dry-docks
and approximately 14 acres of land adjacent to the shipyard from the Canadian
government. The shipyard also houses approximately 220,000 square feet of office
space. The shipyard and dry docks constitute Davie's principal place of
business.
COMPETITION. Commercial ship building is a highly competitive market
with world wide competition. In order to compete successfully in this market,
Davie recognized that it would have to increase its productivity mainly through
the production of ships in series which requires a continuous flow process. In
order to achieve this, Davie is continuing to develop more simplified designs,
improve its facilities and production processes, increase worker flexibility and
more efficiently procure its raw materials. In this regard, Davie has completed
an agreement with a European commercial shipbuilder wherein Davie is given
access to designs and the benefit of marketing, technical, production and
planning support. This has led to direct contact with potential customers which
has allowed Davie to utilize its in-house capabilities to further refine
existing designs in order to produce the next generation of Handymax product
carrier. Davie has also identified containerships with capacities of between
1,500 and 3,000 dwt as a potential market.
LABOR. To effectively compete in world markets, Davie must maintain
reasonable labor costs. Davie currently employs approximately 575 persons of
which approximately 404 are unionized. The unionized workers consist of four
certified bargaining units, the largest of which consists of shipyard employees.
On March 15, 1995, Davie signed a six (6) year collective agreement with this
unit which provided for a 15% reduction in total labor costs, a profit sharing
program, the ability to contract out certain work, a more efficient deployment
of personnel and a
12
<PAGE> 13
more efficient utilization of overtime. Given that labor represents 40% of the
cost of building a commercial ship, Davie management believes that its labor
costs provide Davie with a substantial competitive advantage in the
international markets as its labor costs are below those of its major
competitors in the United States, Japan and Germany. Davie management believes
that its labor relations are amicable.
ENVIRONMENTAL. Davie's operations are subject to Canadian environmental
laws and regulations. In the fall of 1993 the shipyard was the subject of a
Phase I environmental study conducted by consultants, Roche Ltee. Davie is
engaged in the routine clean-up of its facilities and, in this context, certain
recommendations contained in the Phase I report have been implemented.
BACKLOG. As of the date of this report, the Company had confirmed
contracts in the shipbuilding and repair segment for approximately $40.7
million, approximately $36.7 million of which was to be completed during fiscal
1997. The dollar amount of the backlog is not necessarily indicative of the
future earnings of the Company related to the performance of such work.
Although backlog represents only business which is considered to be firm, there
can be no assurance that cancellations or scope adjustments will not occur.
DESCRIPTION OF SPECIALTY FASTENERS BUSINESS
The Company owns three subsidiaries in the specialty fastener business
including Unimetric, which is 70% owned. Unimetric is engaged in the
manufacturing of specialty fasteners for the industrial and aerospace markets,
and has been working to broaden its product line. At fiscal year end,
Unimetric's backlog was up substantially over the prior fiscal year due to an
automotive order. The other two subsidiaries are engaged in the importation and
distribution of standard industrial fasteners, a highly competitive market. The
decision was made by management to divest the assets of these operations and to
close them down.
AGREEMENT WITH THE NEW WORLD POWER CORPORATION
The Company, effective as of October 31, 1996, entered into a joint
venture agreement with The New World Power Corporation ("New World Power") to
jointly develop specified projects of New World Power. These projects include
the further development of wind and hydro electric power plants in North,
Central and South America and China which New World Power has in various
stages of development. Pursuant to the agreement, the Company will invest up
to $2.5 million in the projects in exchange for 50% of New World Power's
interest in such projects. The Company was also given the option to convert is
equity into common stock of New World Power which if all such equity were
earned and converted would give the Company ownership of approximately 41% of
the common stock of New World Power.
In addition to the joint venture agreement, the Company is providing
management assistance to New World Power. Pursuant to a Management Services
Agreement, the Company is providing Vitold Jordan, a Vice President of the
Company, as interim chief executive officer of New World Power.
DOMINION KUHNS BROTHERS & COMPANY, INC.
The Company recently formed, with John D. Kuhns, a project finance
subsidiary known as Dominion Kuhns Brothers and Company, Inc. ("DK"). The
initial mission of DK will be to act as financial advisor to project developers
and to complement the Company's engineering and construction abilities with
financing capability. Management of the Company believes that such capabilities
will be important in the competitive markets in which the Company operates.
ITEM 2. DESCRIPTION OF PROPERTIES.
DBI owns four principal manufacturing facilities in Lachine, Quebec;
Winnipeg, Manitoba; Regina, Saskatchewan and Amherst, Nova Scotia and leases a
manufacturing facility in Nisku, Alberta. In addition, DBI operates construction
offices from leased premises in Richmond, British Columbia; Calgary, Alberta;
and Oakville and Sudbury, Ontario. SEE "ITEM 1. DESCRIPTION OF BUSINESS -
FACILITIES."
Steen operates from leased premises in six locations from the Provinces
of Ontario, Quebec and Canada's maritime provinces at an aggregate cost per year
of approximately Cdn. $288,000.
MDC leases approximately fourteen different properties in New Zealand
and seven properties in Australia, as well as individual properties in
Indonesia, Maylasia, Singapore, Thailand, Saudi Arabia, Hong Kong, and American
Somoa. These properties represent the primary office and production space
utilized by MDC.
MDC in the ordinary course of business, makes investments in machinery
and equipment.
13
<PAGE> 14
Davie owns a shipyard in Quebec, Canada and leases two adjacent dry
docks from the Canadian government. The shipyard contains 220,000 square feet of
office space. Davie conducts all of its industrial and manufacturing operations
from these sites. Furthermore, Davie rents office space in Ottawa, Canada, for
its military research and engineering division MIL Systems. In connection with
the acquisition of Davie by the Company, the Company has committed to modernize
Davie's facilities by investing a minimum Cdn $45 million over the five years
following the date of the acquisition.
Unimetric operates from leased premises in East Providence, Rhode
Island.
Except as noted above, the Company believes its facilities are adequate
for its current use and has no planned capital improvement plan for the
facilities. It is the opinion of management that the properties are adequately
covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, disagreements with individual employees and
disagreements as to the interpretation, effect or nature of individual
agreements arise in the ordinary course of business and may result in legal
proceedings being commenced against the Company.
Other than as set forth below, the Company is not currently involved in
any litigation or proceeding which is material, either individually or in the
aggregate, and, to the Company's knowledge, no other legal proceeding of a
material nature involving the Company is currently contemplated by any
individuals, entities or governmental authorities.
1. The Company commenced an action against Stelco Inc. on December 20,
1994 in The Ontario Court to obtain a declaration that it is the rightful owner
of 75% of the common shares of Stelco Fasteners Ltd. and for damages as a result
of a dispute that arose between the parties in connection with the Company's
acquisition of 75% of the common shares of Stelco Fasteners Ltd., a company
owned by Stelco Inc. The Ontario Court (General Division) denied the Company's
claim in a judgment released on December 21, 1995. On January 19, 1996 the
Company filed a notice of appeal with the Ontario Court of Appeal from the
decision of the Ontario Court General Division, which was denied on November 13,
1996.
2. By complaint dated November 7, 1995, certain shareholders of the
Company (the "Plaintiffs") brought a shareholders derivative suit in the
Chancery Court of the State of Delaware against the Company and Michel L.
Marengere, Micheline Prud'homme, and Rene Amyot, individually. The complaint
alleges certain interested and self-dealing transactions by Mr. Marengere. The
parties have entered into a stipulation of settlement, subject to court
approval. The settlement contemplates (i) the repayment to the Company, prior to
December 31, 1996, of certain loans to affiliates of Mr. Marengere; (ii) the
guarantee by a company controlled by Mr. Marengere of certain payments owed to
the Company by the purchasers of Edinov, a former subsidiary of the Company;
(iii) an agreement that no further interest free loans may be made to Mr.
Marengere; (iv) an agreement that all future transactions not in the ordinary
course
14
<PAGE> 15
of business between the Company and Mr. Marengere be subject to independent
director approval; and (v) payment of attorney's fees in the amount of $140,000.
The loans referred to above were repaid in fiscal 1996. A court hearing on the
settlement has been scheduled for January 24, 1997.
3. By letter dated July 24, 1996, UDI has indicated that it intends to
seek indemnification from the Company and from DBI, with regard to legal
proceedings instituted against UDI by Loblaws Inc. in the Supreme Court of
Newfoundland. The proceedings are based on the collapse of the roof of a
building owned by Loblaws Inc.
The complaint seeks unspecified damages. DBI has informed UDI that
neither itself nor the Company are liable towards UDI in this matter. The
Company has not yet been served with court papers as of the date of this Annual
Report.
4. IPCO International has commenced legal action in Thailand seeking
damages against the Thai company Si Chang Thong (as first defendant) and MDC's
Thailand subsidiary (as second defendant) in connection with alleged
infringements of intellectual property rights of IPCO International relating to
the construction of the Si Chang Thong Island Deep Sea Terminal and Tank Farm in
Thailand. MDC believes these allegations are baseless and are being vigorously
defended.
5. On or about November 18, 1996 (but not served on the Company until
December 9, 1996), James B. Smith commenced a purported class action securities
lawsuit in the United States District Court for the Eastern District of
Pennsylvania against the Company and Messrs. Marengere and Matossian
individually. The action seeks unspecified damages for the persons who traded in
the Company's common stock during the period commencing on April 20, 1995 and
ending on May 18, 1996. The action alleges that during the class period the
Company issued misleading press releases and reports to the Securities and
Exchange Commission in that the Company failed to disclose allegations made by a
former disgruntled employee regarding DBI's accounting practices, bonding
capability and contracts in connection with his action against the Company for
constructive dismissal. On December 12, 1996 the Company filed an answer denying
the allegations, and strongly affirms that the allegations, both by Smith and
the former employee, are entirely without merit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the over-the-counter market and
is included for quotation on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ").
Since November 4, 1993, the Company's Common Stock has also traded on the
Vancouver Stock Exchange.
The following table sets forth certain information with respect to the
high and low bid prices of the Company's Common Stock during fiscal 1995
(October 1, 1994 to September 30, 1995) and fiscal 1996 (October 1, 1995 to
September 30, 1996).
<TABLE>
<CAPTION>
FISCAL 1995 High Low
----------- ---- ---
<S> <C> <C>
First Quarter 8 5/32 5 3/4
Second Quarter 6 2/8 3 5/8
Third Quarter 5 3/4 3 5/8
Fourth Quarter 6 1/2 3 7/8
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 High Low
----------- ---- ---
<S> <C> <C>
First Quarter 7 7/16 5 7/16
Second Quarter 6 5/16 4 1/2
Third Quarter 5 11/16 2 3/8
Fourth Quarter 3 1/4 1 9/16
</TABLE>
The high and low bid prices for the Company's Common Stock are rounded
to the nearest 1/32. Such prices are inter-dealer prices without retail mark-ups
or commissions and may not represent actual transactions.
HOLDERS
As of December 20, 1996, the approximate number of holders of record of
the Company's Common Stock was 446. Based upon the requests for proxy
information for the Company's 1996 Annual Meeting of Stockholders, the Company
believes the number of beneficial owners of the Common Stock exceeds 6,000.
DIVIDENDS
The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for working
capital. The Company's agreement with its principal lender prohibits the payment
of dividends without the lender's prior written consent.
16
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales 362,624 155,750 67,959 7,003 4,950
Income (loss) from continuing operations (5,684) 2,020 416 (240) (239)
Income (loss) from continuing operations
per common share:
Primary (.31) 0.14 0.05 (0.07) (0.10)
Fully Diluted --(1) 0.11 0.03 (0.07) (0.10)
TOTAL ASSETS 265,247 96,399 72,178 9,774 4,534
Long-term obligation and redeemable 5,764 1,760 518 454 95
preferred stock
Cash dividend declared per common 0 0 0 0 0
share
</TABLE>
(1) Fully diluted earnings per share for this period is not calculated because
inclusion of common share equivalents would be antidilutive.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Background
Initially, the Company operated as Edinov Corporation in the industrial
fasteners market. Since the effective date of the Plan of Reorganization with
the shareholders of Cedar Group, Inc. on September 30, 1993, the Company's
growth has been as a result of four principal acquisitions, three of which were
in the infrastructure engineering and manufacturing services segment and one of
which was in the shipbuilding and ship repair segment. In fiscal 1994, the
Company acquired DBI in fiscal 1995 it acquired Steen and in fiscal 1996 it
acquired MDC and Davie. Each of these acquisitions was accounted for in the
Results of Operations from the effective dates of the acquisition which were
March 9, 1994, April 1, 1995, March 29, 1996 and March 31, 1996, respectively.
The Company also acquired Unimetric, effective January 1, 1994.
The Company has substantially reduced its industrial fastener
operations. During fiscal 1994, the Company divested its Canadian commodity
fastener distribution businesses that had been carried on by Edinov and its
subsidiaries. The divestiture was completed on December 22, 1994 (effective July
1, 1994) and the Company sold all of the shares that it held in Edinov, which
owned all of the shares of George Hegedus Enterprises Ltd., Atto-Renaud
Industries Inc. and Specialty Fasteners Ltd. At the end of fiscal 1996, the
Company closed its industrial fastener importation and distribution businesses.
17
<PAGE> 18
In fiscal 1996, the infrastructure engineering and manufacturing
services business accounted for approximately 93% of all of the revenues of the
Company, as compared to 97% and 86% in fiscal 1995 and 1994. The shipbuilding
and maintenance segment accounts for approximately 6% of the Company's fiscal
1996 revenues, which is a new segment in 1996.
The industrial fasteners segment of the Company's business, which
accounted for approximately 1% and 3% of sales in fiscal 1996 and fiscal 1995,
had been unprofitable and adversely impacted the Company's operating income by
$1.5 million in 1996 and $1.3 million in 1995. This negatively impacted the
Company's earnings per share (on a fully diluted basis) by $0.06 in fiscal 1996
and $0.09 in the prior year. The Company undertook certain steps to return this
segment to profitability. These steps included key management changes, and
marketing and production improvements. Unimetric achieved an operating profit in
the fourth quarter of fiscal 1996 and by the end of the fiscal year had
substantially increased its backlog of business. Management expects that
Unimetric will be profitable for fiscal 1997.
During fiscal 1996, the Company acquired Davie, its initial entrance
into the shipbuilding and repair business. For one dollar, the Company purchased
100% of the shares of Davie from Societe Generale de Financement ("SGF"), the
industrial finance arm of the Government of Quebec, in a privatization
transaction. The acquisition involved competition between several companies for
the privatization, and the Company was selected, management believes, based on
the business plan it submitted to commercially expand Davie. SGF assumed all the
current and contingent liabilities on the date of acquisition including Davie's
accumulated working capital deficiencies. On May 15, 1996, SGF invested an
additional Cdn $25 million (US $ 18.5 million) to fund capital expenditures and
provide for working capital over the next two years in accordance with the
business plan adopted by the Company and SGF. SGF has also agreed to invest in
Davie up to another Cdn $25 million by matching each Cdn $3.00 invested by the
Company with Cdn $1.00 of its own moneys under Davie's development plan.
The acquisition was accounted for by the purchase method. After the
writing down of the fixed assets of Davie to zero, negative goodwill (to be
amortized over three years) amounting to $15.6 million, was created. The Company
has adopted a multi-prong plan to build the revenue and earnings base of Davie,
which was instituted after the acquisition. Davie had an operating loss of $2.4
million since its March 31, 1996 acquisition date but Davie's earnings before
tax and minority interest was $0.2 million reflecting the amortization of
negative goodwill.
FISCAL 1996 COMPARED TO FISCAL 1995
Sales for fiscal 1996 increased 133% to $362.6 million as compared to
$155.8 million in fiscal 1995. The $206.8 million total increase in sales growth
in fiscal 1996 over fiscal 1995 is principally attributable to the acquisitions
of March 29, 1996, MDC and Davie. Of this sales increase of $206.8 million,
$135.5 million (or 65.5% of the fiscal 1996 increase) is from the acquisition of
MDC on March 29, 1996 and $21.7 million (or 10.5%) is from the acquisition of
Davie on March 31, 1996. The remaining increase of $49.6 million (or 24% of the
fiscal 1996 sales increase) is from ongoing operations.
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<PAGE> 19
The Company's internal growth, excluding MDC and Davie in
fiscal 1996 was 16%. The 16% internal growth is derived by comparing the
Company's remaining operations for fiscal 1996 with their twelve months of
operations in fiscal 1995. Pro forma 1995 sales of $177.5 million (versus
$155.8 million reported) are used to include the results of Steen for a twelve
month period instead of for six months from the date of its acquisition on April
1, 1995. Therefore, on a comparable basis, the internal sales increase for
fiscal 1996 was $27.9 million or 16%. Management attributes this increase to
improved efficiencies in marketing and sales at both DBI and Steen. Continued
improvement in marketing and sales during fiscal 1997 is expected.
The following table provides selected expense and income items from the
Company's Consolidated Statements of Operations stated as a percentage of
revenues for the three most recent fiscal years. It will be referred to in the
discussions that follow the table.
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1995 FISCAL 1994
----------- ----------- -----------
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of Sales 90.4% 89.5% 87.3%
Gross Profit 9.6% 10.5% 12.7%
Selling, General & 10.7% 9.9% 11.9%
Administrative
Income from Operations (0.5%) 2.0% 0.8%
Income before Income (0.8%) 2.5% 1.4%
Taxes and Minority
Interests
Net Income (1.6%) 1.3% 0.6%
</TABLE>
Gross profit margins declined by 0.9% in fiscal 1996 as compared to
fiscal 1995. The Company's fiscal 1996 gross profit margin decline to 9.6% was
principally attributable to its DBI operations that were affected by a change in
its mix of business. Management has taken steps that should lead to improvement
in its gross profit margins in fiscal 1997. In fiscal 1996, Steen improved its
gross profit margins over the prior year but due the nature of its engineering
business, Steen's gross profit margin is typically lower than the corporate
average. The inclusion of MDC and Davie for the Company's second six months of
operations in fiscal 1996, was positive with both having gross profit margins
higher than the corporate average in fiscal 1996. In addition, fiscal 1995 sales
mix included a substantial level of high margin fabrication.
In common with most engineering and construction contractors, the
Company has a significant number of outstanding revenue claims, which under
certain US GAAP provisions, cannot be given accounting recognition. These net
unrecognized claims at September 30, 1996 total an aggregate of over $ 68
million. The Company has a successful track record in settling and collecting on
these claims. At the year end, $6.8 million of claims were well advanced in the
process of settlement but have been deferred from recognition in the Company's
final accounts for the fiscal year. There can be no assurance as to the value of
the ultimate claims realized.
19
<PAGE> 20
Selling, general and administrative costs increased from $15.4 million
in fiscal 1995 to $38.7 million in fiscal 1996 or from 9.9% of sales to 10.7% of
sales. Of the $23.3 million increase in total selling, general and
administrative expenses in fiscal 1996, $9.1 million and $5.4 million,
respectively, were from the inclusion of MDC and Davie. The remaining $8.8
million increase includes inclusion of Steen for twelve months in fiscal 1996 as
compared to six months in fiscal 1995 and the increases in the costs of
corporate overhead. Significantly, included in this latter category were
substantial marketing costs expended in fiscal 1996 by DBI to expand sales in
its Canadian markets. These expenditures have begun to provide returns, with the
December 1996 announcement of an initial Canadian pipeline contract for $12.6
million.
During fiscal 1996, the Company incurred certain adjustments as part of
its operating costs which reduced significantly its net income and earnings per
share. These adjustments include:
(a) The expensing in the period of $0.7 million of marketing costs
associated with various foreign joint ventures;
(b) The expensing of certain financing costs $1.0 million
associated with the Company's purchase of MDC; and
(c) One-time tax costs of $1.4 million (see tax discussion below).
Income from the operations of joint ventures primarily represents the
Company's interests through Steen in the joint venture that is providing project
construction management service and procurement services to the offshore
drilling platform in the Hibernia oil field off the coast of Newfoundland.
Although there was minimal difference recorded by the Company between fiscal
1996 and fiscal 1995 in its share of the joint venture's earnings, fiscal 1995
represents, from the date of acquiring Steen, only a six months interest in the
earnings. The decrease in the Company's earnings from the joint venture for
fiscal 1996 as compared to fiscal 1995's pro forma full year income reflects
that the project should be completed by the end of calendar 1997, the Company's
first quarter of fiscal 1998. The termination of the joint venture at the
conclusion of the contract is not expected to result in any expenses to the
Company. Although there can be no assurance of success, management continues to
address additional offshore drilling projects being planned to replace the
stream of income.
The increase in the Company's net interest expense of $1.7 million over
fiscal 1995 to $2.1 million in fiscal 1996 is due to the interest cost and
amortization of financing fees of the $30 million credit facility from BT
Commercial Corporation ("BTCC"), an affiliate of Banker's Trust Company, which
was used to partially finance the acquisition of 77.4% of MDC.
The Company did not recognize any significant benefit from the tax
losses incurred in fiscal 1996. This was due to the incurrence of taxable
income and losses in different international tax jurisdictions. This precluded
obtaining the tax benefits of the Company's losses to offset the tax burden of
its profitable subsidiaries. Additionally, at September 30, 1996, the Company
reevaluated certain tax provisions in light of a) its expected disposition of
the US commodity fastener distribution business, b) the nature of the structure
20
<PAGE> 21
of its 1996 acquisition financing and c) further information regarding various
tax matters. As a result of these re-evaluations, approximately $1.4 million has
been included in the 1996 income tax provision. In fiscal 1995, the Company had
an effective tax rate of 43.4% which was attributable to the losses in its
United States fastener divisions being unable to offset Canadian income tax on
its Canadian earnings.
The increase in preferred dividends paid in fiscal 1996 was from the
issuance of the Company's 6% cumulative preferred stock through its Cedar Group
(TCI) Inc. LLC subsidiary ("TCI"), which were converted into Company common
stock according to a specified formula. During fiscal 1996, the Company issued
$24.2 million of the TCI preferred stock, and at year end, only $7.3 million
remained to be converted to common stock by the holders. The remaining preferred
were converted into the Company's common stock during the first quarter of
fiscal 1997. The minority interests attributable to common stock of $1.7
million, and the increase of $1.5 million over Fiscal 1995, is attributable to
the 22.6% of MDC not owned by the Company. A small portion was attributable to
the 25% of Steen owned by minority shareholders before their interest was
purchased effective March 15, 1996.
Exchange rates used in this discussion for the translation of financial
results for the periods 1994, 1995 and 1996 from Canadian to U.S. dollars were
Cdn $1.00 equals US $.7387, US $.7270 and US $.7326 respectively. For 1996, the
Australian dollar was converted to US dollars at the exchange rate of A $1.00
equals US $.7899. For fiscal 1996, the Company incurred an additional cumulative
currency translation loss of $.8 million, which has been deferred as part of
shareholders' equity.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales for fiscal 1995 of $155 million were 129% higher than those
for fiscal 1994 of $67 million. This increase is primarily attributable to the
inclusion of a full year of DBI's operations during fiscal 1995 as opposed to
seven months during fiscal 1994, as well as the acquisition of Steen. On a
pro-forma basis (as though each of the acquisitions had occurred on October 1,
1993) net sales increased 11% in fiscal 1995 to $177 million from $159 million
in Fiscal 1994.
Gross margin as a percentage of sales was 10.5% in fiscal 1995 versus
12.7% in fiscal 1994. Gross margin declined due to the acquisition of Steen,
which operates with a lower gross margin than DBI.
Selling, general and administrative expenses increased 90% from $8
million in fiscal 1994 to $15 million in fiscal 1995. The increase was primarily
due to the expensing of approximately $1.7 million of marketing and development
costs in Asia and Latin America as well as the inclusion of twelve months of
such expenses in fiscal 1995 for DBI versus seven months in fiscal 1994.
Excluding the extraordinary marketing and development costs referred to above,
selling, general and administrative expenses declined from 11.9% of sales in
fiscal 1994 to 8.8% of sales in fiscal 1995.
21
<PAGE> 22
During fiscal 1995, the Company undertook certain one-time adjustments
which significantly reduced the Company's net income and its earnings per share.
These adjustments included:
(i) The expensing in the period of most of the previous and
current year costs associated with various foreign joint
ventures in the aggregate amount of $1.6 million;
(ii) A write-off of $348,000 of certain assets that remained on the
books of the Company at the time of its September 30, 1993
plan of arrangement which resulted in the Company's exiting
from Chapter 11;
(iii) A write-down of $283,000 for certain pension assets that had
been overstated in fiscal 1994; and
(iv) The expensing of $682,000 of financing costs representing the
Company's costs on the Steen transaction.
Furthermore, the Company's income did not include the following
deferred income items;
(i) The sum of approximately $2.05 million of contract gains not
included in income as they are considered contingent gains;
and
(ii) The deferral by DBI of the value of its interest in a judgment
pertaining to mining assets and mineral claims by
approximately $778,000 which the Company plans to realize in
fiscal 1996.
Although the above one-time adjustments have decreased the Company's
income and earnings for the period, management believes that this decision will
enhance the Company's financial position and its balance sheet while positioning
it strongly for its planned expansion program.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity since the Company's
reorganization have been proceeds from the private placement of equity
securities, bank financing and cash from operations. In addition, in connection
with the Company's acquisition of Davie the Company received $18.5 million in
cash from SGF to fund Davie's operating deficit and to modernize Davie's
operating facilities. As of September 30, 1996, Davie's cash balance amounted to
$17.1 million, which must be utilized solely for Davie's benefit.
The Company issued during fiscal 1996 $24.2 million of preferred shares
of its subsidiary, TCI, by way of an offshore private placement, and obtained a
$30.0 million credit facility from BTCC. The proceeds, net of issuance costs of
approximately $4.0 million, were used to fund; the $40.2 million acquisition of
MDC, approximately $4.7 million to partially retire the outstanding minority
interest preferred shares in DBI, $5.0 million to repay the BTCC Steen
acquisition bridge loan and the balance of approximately $0.3 million was added
to working capital. The TCI preferred shares paid cash dividends at the rate of
6% per annum. The TCI Preferred Shares became convertible into the Company's
common stock,
22
<PAGE> 23
beginning May 31, 1996, at a conversion price equal to 12% less than the market
price of the common stock during the five trading days prior to conversion if
converted prior to June 30, 1996, or 15% less than the market price of the
common stock during the five trading days prior to conversion, if converted
thereafter. There was no minimum conversion price. All TCI preferred shares
outstanding on the maturity date of October 31, 1998, were to automatically
convert into shares of common stock of the Company at a price equal to the
weighted average price of the Company's shares traded on NASDAQ during the 20
previous trading days. As of the end of the fiscal year, $7.3 million of the
preferred shares remained outstanding and $16.9 million had converted into
7,994,606 shares of the Company's common stock. During the first quarter of
fiscal 1997, the remaining outstanding balance of the TCI preferred shares were
converted into 3,686,704 shares of the Company's common stock.
The Company has a $30 million Credit Facility (the "Facility") from
BTCC, of which $30 million was outstanding as of September 30, 1996. The
Facility provided funding for the Company's acquisition of MDC. Amounts
outstanding under the Facility bear interest at (i) the greater of 1.5% per
annum above the prime rate announced from time to time by Banker's Trust Company
or 0.5% above the federal funds rate established from time to time by the
Federal Reserve Bank of New York; or (ii) at a rate equal to 2.5% above the
London Interbank Offered Rate for a period of up to six months, at the election
of the Borrower. The Facility matures on April 30, 1997 and is secured by a lien
on substantially all of the assets of the Company. The Facility agreements
provide for an acceleration of the maturity date in the event of an "Event of
Default" (as such term is defined in the Facility agreements). An Event of
Default includes failure to pay when due any installment of interest on or
principal of the Facility and any failure to observe the covenants provided in
the Facility agreements, including certain financial covenants.
The Company is exploring with BTCC the conversion of the Facility into
a long-term loan. Management of the Company is also exploring alternative
sources to refinance amounts outstanding under the Facility. Management of the
Company believes that it will be able to convert the Facility or otherwise
obtain replacement financing prior to the maturity date of the Facility.
During fiscal 1996, the Company's operations used cash in the amount of
$4.7 million, while operations used cash of $4.3 million in fiscal 1995. The
net use of cash in operations was attributable to the net operating loss and
augmented by substantial investments in working capital at the fiscal year end.
In its normal course of business, the Company may be investing in inventories
and have amounts due from its customers that it cannot finance through customer
advances and accounts payable. DBI, Steen and MDC were each committed to
various infrastructure projects which were net users of cash at the year-end.
Subsequent to the year-end, several of these major projects have commenced to
reverse the net cash investment and the Company is scheduled to produce net
positive cash flows from changes in working capital accounts over the first two
quarters of fiscal 1997.
In addition to the reversal of the working capital investment, the
Company has instituted several significant business initiatives to correct the
operating cash flow deficiency. The Company has entered into arrangements to
sell its commodity fastener trading stock and plant assets for cash proceeds in
the first quarter of 1997. The Company has initiated plant and administrative
staff reductions in its DBI operations to achieve operating cost savings and
benefit from rationalization of operations with those of Steen. The Company has
initiated its business plan at Davie to focus on returning the operation to
profitability and positive cash flow.
The Company has historically grown through acquisitions and expects to
continue to explore acquisition opportunities. Such acquisitions may have a
significant impact on the Company's need for capital. The Company would explore
a range of financing options which could include public or private debt or
equity financing. There can be no assurance that such financing will be
available, or if available, will be available on terms attractive to the
Company.
The Company is subject to a risk of claims for product liability. If a
product liability claim exceeding the Company's insurance coverage or its own
available resources was to be successfully asserted against the Company, it
could have a material adverse effect on the Company's financial condition. The
Company has general liability insurance of approximately $5 million per
occurrence, with a maximum of $5 million of claims payable during any policy
year. There is no assurance that such coverage will be sufficient to fully
insure against claims
23
<PAGE> 24
brought against the Company and its subsidiaries, or that the Company will be
able to maintain such insurance at affordable rates or obtain additional
insurance covering the products.
EFFECT OF INFLATION
The Company's operating costs are subject to general economic and
inflationary pressures. While operating costs have increased during the past
years, the Company does not believe that its operations have been significantly
affected by inflation.
ITEM 8. FINANCIAL STATEMENTS.
The information required by this Item is found immediately following
the signature page to this report.
The financial statements of the Company's unconsolidated joint venture
interest in the PCL-ACKER STORD-STEEN-BECKER joint venture for the fiscal year
ending January 31, 1997 will be filed by an amendment to the Annual Report in
accordance with Rule 3-09 of Regulation S-X not later than ninety days after
the joint venture's fiscal year-end.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
24
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information with regard to this item is incorporated herein by
reference to the Company's definitive 1997 Proxy Statement under the captions
"ELECTION OF DIRECTORS" and "MANAGEMENT OF THE COMPANY," or in an Amendment to
this Annual Report to be filed with the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION.
Information with regard to this item is incorporated herein by
reference to the Company's definitive 1997 Proxy Statement under the caption
"EXECUTIVE COMPENSATION," or in an Amendment to this Annual Report to be filed
with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with regard to this item is incorporated herein by
reference to the registrant's definitive 1997 Proxy Statement under the caption
"BENEFICIAL OWNERSHIP OF COMMON STOCK," or in an Amendment to this Annual Report
to be filed with the Securities and Exchange Commission.
25
<PAGE> 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information with regard to this item is incorporated herein by
reference to the Company's definitive 1997 Proxy Statement under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS," or in an Amendment to this
Annual Report filed with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
A. Financial Statements filed as part of this Report:
Auditors' Report of Deloitte & Touche, Independent Auditors, on
Company's Consolidated Financial Statements for the fiscal year ending
September 30, 1996
Auditors' Report of Ernst & Young, Independent Auditors, on the
Company's Consolidated Financial Statements for the fiscal years ending
September 30, 1995 and 1994
Consolidated Balance Sheets of the Company as at September 30, 1996 and
1995
Consolidated Statements of Operations of the Company for the fiscal
years ended September 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows of the Company for the fiscal
years ended September 30, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity of the Company for the
fiscal years ended September 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements of the Company
26
<PAGE> 27
B. The following Exhibits are filed as part of this Report:
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 (a) Amended and Restated Certificate of Incorporation of
the Company (Incorporated by reference to Exhibit
3(i) of the Company's Report on Form 10-Q for the
period ended June 30, 1996)
3.2 (b) Certificate of Designation for the Company's Series
One Preferred Stock (Incorporated by reference to the
Company's Registration Statement on Form 8-A for its
Preferred Stock Purchase Rights, filed December 11,
1996 (the "Form 8-A"))
3.2 Second Amended and Restated By-Laws
4.1 Shareholder Rights Plan dated as of November 26, 1996
between the Company and Continental Stock Transfer &
Trust Company (Incorporated by reference to the Form
8-A)
10.1 Subscription Agreement dated July 26, 1993 between
Edinov and Fidutech relating to the purchase of
Fidutech of 777,778 Units (Incorporated by reference
to Exhibit 10.1 to the Annual Report on Form 10-KSB
for the transition period from January 31, 1993 to
September 30, 1993)
10.2 Subscription Agreement dated September 15, 1993
between Edinov and Fidutech relating to the purchase
of Fidutech of 266,667 Units (Incorporated by
reference to Exhibit 10.2 to the Annual Report on
Form 10-KSB for the transition period from January
31, 1993 to September 30, 1993)
10.3 Master Agreement Between United Dominion Industries
Limited, Cedar Group, Inc., Edinov Corporation, and
Dominion Bridge Inc. dated March 9, 1994
(incorporated by reference to the Company's Form 8-K,
dated April 8, 1994)
10.4 Rollover Agreement Between United Dominion Industries
Limited and 3010864 Canada Inc., effective December
31, 1993 (incorporated by reference to the Company's
Form 8-K, dated April 8, 1994)
10.5 Share Purchase Agreement Between United Dominion
Industries Limited and the Company dated March 10,
1994 (incorporated by reference to the Company's Form
8-K, dated April 8, 1994)
10.6 Shareholders' Agreement Between United Dominion
Industries Limited, the Company, Edinov Corporation,
and 3010864 Canada, Inc., dated April 8, 1994
(incorporated by reference to the Company's Form 8-K,
27
<PAGE> 28
dated April 8, 1994)
10.7 Guarantee and Indemnity Agreements Between United
Dominion Industries Limited, the Company and Edinov
Corporation (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994)
10.8 Registration Rights Agreement Between United Dominion
Industries Limited the Company dated April 8, 1994
(incorporated by reference to the Company's Form 8-K,
dated April 8, 1994)
10.9 Hypothecation and Pledge of Securities Agreement
between United Dominion Industries Limited and the
Company (incorporated by reference to the Company's
Form 8-K, dated April 8, 1994)
10.10 United Dominion Industries Limited Security Agreement
with 3010864 Canada (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994)
10.11 Debenture Between 3010864 Canada and United Dominion
Industries Limited, dated April 8, 1994 (incorporated
by reference to the Company's Form 8-K, dated April
8, 1994)
10.12 Services Agreement between the Company and Michel
Marengere (incorporated by reference to Exhibit 10.13
to the Company's Report on Form 10-KSB for the fiscal
year ended September 30, 1995 (the "1995 10-KSB")
10.13 Services Agreement between the Company and Nicolas
Matossian (incorporated by reference to Exhibit 10.14
of the 1995 10-KSB)
10.14 The Company's 1995 Stock Option Plan (incorporated by
reference to Exhibit 10.15 of the 1995 10-KSB)
10.15 Credit Facility Agreement between the Company and BT
Commercial Corporation (Incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form
8-K dated March 29, 1996 (the "March 29, 1996 Form
8-K"))
10.16 Cedar Group, Inc. Guarantee Agreement (Incorporated
by reference to Exhibit 2.2 to the March 29, 1996
Form 8-K)
10.17 Cedar Group, Inc. Pledge Agreement (Incorporated by
reference to Exhibit 2.3 to the March 29, 1996 Form
8-K)
10.18 Cedar Group, Inc. Security Agreement (Incorporated by
reference to Exhibit 2.4 to the March 29, 1996 Form
8-K)
10.19 Cedar Group Canada, Inc. Pledge Agreement
(Incorporated by reference to Exhibit 2.5 to the
March 29, 1996 Form 8-K)
10.20 Cedar Group Canada, Inc. Security Agreement
(Incorporated by reference to Exhibit 2.6 to the
March 29, 1996 Form 8-K)
11.0 Statement regarding computation of earnings per share
(Incorporated from within the Financial Statements)
21 Subsidiaries
23.1 Consent of Deloitte & Touche
23.2 Consent of Ernst & Young
28
<PAGE> 29
C. Reports on Form 8-K
Report on Form 8-K dated November 26, 1996 reporting
adoption of the Shareholder Rights Plan.
29
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act
of 1934, the Registrant has duly caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: December 27, 1996 DOMINION BRIDGE CORPORATION
By: /s/ Michel L. Marengere
-------------------------------
Chief Executive Officer
By: /s/ Robert Chartier
-------------------------------
Interim Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K has been signed by the following persons in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Michel L. Marengere Chairman of the Board of December 27, 1996
- ----------------------- Directors, Chief Executive
Michel L. Marengere Officer and Director
/s/ Rene Amyot Director December 27, 1996
- -----------------------
Rene Amyot
/s/ Peter P. Gil Director December 27, 1996
- -----------------------
Peter P. Gil
/s/ Nicolas Matossian President and Chief Operating December 27, 1996
- ----------------------- Officer
Nicolas Matossian
/s/ Robert Chartier Vice President, Interim CFO December 27, 1996
- -----------------------
Robert Chartier
/s/ Reynald Lemieux Director December 27, 1996
- -----------------------
Reynald Lemieux
/s/Louis Berlinguet Director December 27, 1996
- -----------------------
Louis Berlinguet
30
<PAGE> 31
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Dominion Bridge Corporation
We have audited the accompanying consolidated balance sheet of Dominion Bridge
Corporation as at September 30, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dominion Bridge
Corporation as at September 30, 1996, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.
The financial statements as at and for the years ended September 30, 1995 and
1994 were reported on by another firm of chartered accountants, which expressed
an unqualified opinion under date of December 20, 1995.
/s/ Deloitte & Touche
Montreal, Canada
December 23, 1996
F-1
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
CEDAR GROUP, INC. (NOW KNOWN AS DOMINION BRIDGE CORPORATION)
We have audited the accompanying consolidated balance sheet of CEDAR GROUP, INC.
as of September 30, 1995 and the consolidated statements of operations,
stockholders' equity and cash flows for the years ended September 30, 1995 and
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cedar Group, Inc.
as at September 30, 1995 and the consolidated results of its operations and its
cash flows for the years ended September 30, 1995 and 1994 in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young
Montreal, Canada
December 20, 1995
F-2
<PAGE> 33
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
$ $ $
<S> <C> <C> <C>
SALES 362,624 155,750 67,959
- -----------------------------------------------------------------------------------------------------------------
Cost of sales 327,921 139,407 59,295
Selling, general and administrative expenses 38,720 15,433 8,107
- -----------------------------------------------------------------------------------------------------------------
366,641 154,840 67,402
Income from operations of joint ventures (Note 8) 2,189 2,165 -
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from operations (1,828) 3,075 557
Interest expense, net (2,104) (406) (341)
Other income 1,134 1,236 767
- -----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and minority interest (2,798) 3,905 983
- -----------------------------------------------------------------------------------------------------------------
Income taxes (Note 11)
Current 1,283 (300) 70
Deferred (709) 1,993 230
- -----------------------------------------------------------------------------------------------------------------
574 1,693 300
- -----------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest (3,372) 2,212 683
Minority interest - dividends on preferred shares (645) (70) (248)
Minority interest - common stock (1,667) (122) (19)
- -----------------------------------------------------------------------------------------------------------------
NET (LOSS) INCOME (5,684) 2,020 416
- -----------------------------------------------------------------------------------------------------------------
Net income (loss) per common share and common
share equivalents $ $ $
Primary (0.31) 0.14 0.05
Fully diluted - 0.11 0.03
- -----------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
and common share equivalents outstanding
Primary 18,174,000 14,929,000 8,912,000
Fully diluted 23,565,000 17,688,000 12,064,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-3
<PAGE> 34
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS AT SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------------
$ $
<S> <C> <C>
ASSETS
Current assets
Cash (Note 4) 26,231 4,765
Term deposits collateralizing bank indebtedness - 1,688
Investments - 2,779
Accounts receivable (Note 5) 126,911 44,169
Inventories (Note 6) 43,762 12,746
Prepaid expenses and other current assets 5,417 1,822
Advances to shareholders - 501
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 202,321 68,470
- -----------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net (Note 7) 38,289 20,661
Advances to a shareholder - 697
Assets of business transferred under contractual
arrangements (preferred shares) (Note 3 vii) 3,847 3,640
Goodwill 11,958 -
Pension assets (Note 12) 1,187 1,619
Advances to and investments in unincorporated joint ventures (Note 8) 2,398 -
Other assets 5,247 1,312
- -----------------------------------------------------------------------------------------------------------------
265,247 96,399
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank indebtedness (Note 9) 5,624 1,688
Term loan (Note 9) 30,000 5,000
Accounts payable and accrued expenses 119,839 31,991
Customer advances 16,166 6,062
Current portion of obligations under capital leases 2,979 -
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 174,608 44,741
- -----------------------------------------------------------------------------------------------------------------
Advances from unincorporated joint venture - 750
Deferred income taxes 5,147 5,994
Accrued post-retirement benefits other than pensions (Note 12) 514 522
Obligations under capital leases (Note 10) 2,274 -
Minority interest 17,546 10,161
Negative goodwill (Note 3 ii) 12,945 -
Other long-term liabilities 2,976 488
- -----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 25,000,000 shares
authorized, none issued
Common stock, $0.001 par value; 50,000,000 shares authorized;
issued and outstanding: 24,722,188 shares in 1996 and
14,990,188 shares in 1995 25 15
Additional paid-in capital 57,601 36,345
Deficit (5,931) (874)
Cumulative translation adjustment (634) 142
- -----------------------------------------------------------------------------------------------------------------
51,061 35,628
Subscription receivable (1,824) (1,885)
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 49,237 33,743
- -----------------------------------------------------------------------------------------------------------------
265,247 96,399
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Commitments and contingencies (Note 15)
See accompanying notes
F-4
<PAGE> 35
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
$ $ $
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income (5,684) 2,020 416
Adjustments to reconcile net income to the
cash provided by (used for) operating activities
Minority interest in net income 1,667 122 19
Depreciation and amortization 6,902 3,217 2,224
Common stock issued for services 85 170 -
Amortization of negative goodwill (2,626) - -
Deferred income taxes (709) 1,993 230
Deferred pension cost 432 434 -
Gain on sale of assets (1,105) (689) (210)
Income from operations of joint ventures (2,189) (2,165) -
Advances to and investments in joint ventures 860 1,189 -
Increase in accounts receivable (25,963) (10,797) (6,594)
Decrease in prepaid expenses and other assets 6,516 806 629
Decrease (increase) in inventories 18,012 (3,148) 2,390
(Decrease) increase in accounts payable (595) 5,660 (1,529)
Decrease in customer advances (272) (3,263) (5,132)
Other - net (30) 178 (282)
- -----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (4,699) (4,273) (7,839)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Decrease (increase) in investments - 2,696 (1,169)
Decrease (increase) in term deposits 1,688 (1,688) -
Cash consideration paid for acquired businesses (40,214) (4,476) (4,550)
Cash of acquired businesses 35,081 544 -
Purchase of minority interest of subsidiaries (6,186) (8,298) -
(Advance to) repayment by divested businesses (207) 739 (902)
Repayment by (advance to) a shareholder 1,198 (417) (1,734)
Repayment by (advance to) an officer - 565 (565)
Cash payment for purchase of equipment (12,209) (10) (94)
Proceeds from sale of property and equipment 2,905 2,152 604
Decrease in other assets 312 - -
- -----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (17,632) (8,193) (8,410)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 2,619 3,493 10,901
Proceeds from exercise of warrants 359 757 13,195
Proceeds from exercise of options - - 303
Net repayments on line of credit - - (3,408)
Issue of preferred shares of subsidiary to minority interest 24,142 - 200
Issue costs of subsidiary preferred shares (1,497) - -
Bank indebtedness (10,909) 1,688 -
Other long-term liabilities 250 488 -
Issue of capital lease obligations 4,332 - -
Term loan 25,000 5,000 -
Payment of other obligations - - (592)
Decrease in subscription receivable 61 - -
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 44,357 11,426 20,599
- -----------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate fluctuations on cash (560) 227 93
- -----------------------------------------------------------------------------------------------------------------
Net change in cash 21,466 (813) 4,443
Cash, at beginning of year 4,765 5,578 1,135
- -----------------------------------------------------------------------------------------------------------------
CASH, AT END OF YEAR (Note 4) 26,231 4,765 5,578
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE> 36
<TABLE>
<CAPTION>
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30
(IN THOUSANDS OF U.S. DOLLARS)
- -----------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
$ $ $
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest 1,457 406 341
Taxes 705 310 -
- -----------------------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for acquisition
of businesses
Fair value of assets acquired (net of
cash acquired) - - 2,771
Liabilities assumed and minority interest - - 1,721
- -----------------------------------------------------------------------------------------------------------------
Net assets acquired - - 1,050
Cash outlays - - 800
- -----------------------------------------------------------------------------------------------------------------
Issuance of common stock for acquisitions - - 250
- -----------------------------------------------------------------------------------------------------------------
Preferred shares received on transfer of assets of
divested businesses
Fair value of net assets divested - - 4,531
Cash received - - 739
- -----------------------------------------------------------------------------------------------------------------
Preferred shares of the acquirer of divested businesses - - 3,792
- -----------------------------------------------------------------------------------------------------------------
Issuance of common stock on conversion of
minority interest preferred shares 19,700 - -
Purchase of preferred stock minority interest
of subsidiaries (19,700) - -
- -----------------------------------------------------------------------------------------------------------------
Issuance of common stock in repayment of debt - - 66
- -----------------------------------------------------------------------------------------------------------------
Settlement on acquisition of minority interest (627) 1,034 -
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-6
<PAGE> 37
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Pursuant to a resolution of the Board of Directors dated May 15, 1996,
Cedar Group, Inc. changed its name to Dominion Bridge Corporation.
Dominion Bridge Corporation, a Delaware corporation with executive
offices in Montreal, Canada, specializes in international engineering,
infrastructure development and project management and ship building and
repair.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by management
in accordance with accounting principles generally accepted in the
United States, the most significant of which are outlined below. These
principles require the use of estimates to measure the financial effects
of past transactions or events and the present status of assets and
liabilities.
Principles of consolidation
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions
have been eliminated upon consolidation.
Since the beginning of the current fiscal year, the Company has (1)
acquired the remaining minority interests in Dominion Bridge Inc. and
Steen Contractors Limited, (2) acquired approximately 77.4% of the
outstanding shares of McConnell Dowell Corporation Limited and (3)
acquired 100% of the outstanding share capital of Industries Davie Inc.
(formerly Groupe MIL Inc.).
Each of the above acquisitions were accounted for under the purchase
method of accounting. Under the purchase method of accounting, the
assets of the acquired entity are reflected on the balance sheet at
their fair market value on the date of purchase, with the balance of the
purchase price attributed to goodwill. In the case of Industries Davie
Inc., since the purchase price was nominal, the difference between the
fair market value of the assets and the purchase price is treated as
negative goodwill. Goodwill is amortized on a straight-line basis over
periods not exceeding forty years. Negative goodwill is amortized on a
straight-line basis over a period of three years.
Cash
Cash includes short-term deposits with terms less than 90 days.
Short-term deposits with terms longer than 90 days are stated at cost
which approximates fair market value.
F-7
<PAGE> 38
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Construction contracts
Income on construction contracts is recognized on the
percentage-of-completion basis. Provisions for anticipated losses on
uncompleted contracts are made in the period in which losses are first
determinable.
In the ordinary course of its construction business, the Company
together with the client, may conduct a review following the completion
of the project, for the purpose of establishing a final contract amount.
Until such a final amount is agreed upon and fully documented, no
revenue adjustment is made and any amount owing to the Company is
treated as a contingent gain and is recognized in the period in which
the Company's entitlement to the payment is established. In the fourth
quarter of fiscal 1996, the Company reached a settlement with respect to
the resolution of a major claim for a completed project. The Company has
provided its auditors with corroborating evidence to support the
validity and collectibility of the claim. In the auditors' opinion
however, at the time of completion of the consolidated financial
statements, the audit evidence accumulated was not sufficient to meet
the requirement for revenue recognition under generally accepted
auditing standards in the United States. Consequently, no recognition
was given to the claim in the consolidated financial statements of the
Company as at September 30, 1996. Such revenue will be recognized in the
period in which the documentation is completed.
Inventories
Work in process related to construction contracts is stated at
accumulated costs less amounts charged to income based on the percentage
of completion of individual contracts. Raw materials are stated at the
lower of cost (first in, first out) or replacement cost. Finished goods
comprise steel and steel hardware products held for sale and are stated
at the lower of cost (first in, first out) or net realizable value.
Investment in and advances to unincorporated joint ventures
The Company's investment in and advances to unincorporated joint
ventures is accounted for by the equity method whereby the investment is
initially recorded at cost and the carrying value is adjusted thereafter
to include the Company's pro rata share of earnings less drawings
received.
Property, plant and equipment
Property, plant and equipment, including assets that were acquired under
capital leases, are stated at cost. Maintenance and repairs are charged
to expenses as incurred. When assets are sold or otherwise disposed of,
the cost and related accumulated depreciation are removed from their
respective accounts and the resulting gain or loss is reflected in
current operations. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets, generally five to seven
years for machinery and equipment and forty years for buildings.
F-8
<PAGE> 39
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Pension costs
The Company maintains defined benefit pension plans which cover certain
of its Canadian employees. Pension plan obligations are valued using the
projected benefit actuarial method and best estimate assumptions.
Pension plan assets are valued at market-related values. The Company
also participates in defined contribution plans for its Australian and
certain of its Canadian employees.
Post-retirement benefits other than pensions
The Company accrues for benefits such as health care, life insurance
coverage and long service leave to which retired employees are entitled.
The obligation is adjusted on an annual basis to reflect the expected
cost of providing post-retirement benefits during the years an employee
renders service.
Translation of foreign currencies and foreign exchange contracts
All assets and liabilities of the Company's subsidiaries operating
outside the United States are translated into U.S. dollars using current
exchange rates and income statement items are translated using weighted
average exchange rates for the year. The resulting translation
adjustment is included as a component of stockholders' equity. Other
foreign currency transaction gains and losses are included in
determining net income.
Income taxes
The Company accounts for income taxes under the liability method.
Deferred taxes reflect the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts.
Net income per share
Primary net income per common share is computed by dividing the income
applicable to common shares by the weighted average number of shares of
common stock outstanding and common stock equivalents including the
dilutive effect of options and warrants from the date of grant.
Net income per common share on a fully diluted basis assumes that all
convertible instruments were converted to common stock at the earlier of
the beginning of each year or the date of issuance.
F-9
<PAGE> 40
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES
(i) Acquisition of McConnell Dowell Corporation Limited
Cedar Group Australia Pty Ltd. (CGA), an Australian indirect
wholly-owned subsidiary of the Company, purchased between March 29
and April 9, 1996 through the facilities of the Australian Stock
Exchange, 23,913,000 ordinary shares of McConnell Dowell
Corporation Limited (MDC), representing approximately 57.5% of the
issued ordinary shares of MDC. Prior to these acquisitions, CGA had
acquired 8,274,000 ordinary shares of MDC representing
approximately 19.9% of the issued ordinary shares of MDC. As at
September 30, 1996, CGA owns 32,187,000 ordinary shares of MDC
representing a 77.4% ownership interest.
The purchase price for the acquisition, including acquisition
costs, amounted to $40,214.
The Company has accounted for the acquisition of MDC using the
purchase method as of March 29, 1996, the date at which the
Company achieved voting control of MDC. Accordingly, the assets
and liabilities of MDC as at September 30, 1996 are consolidated
into the accounts of the Company.
Prior to March 29, 1996, the Company accounted for its investment
in MDC using the equity method.
The total cost of the acquisition was allocated to the net assets
acquired on the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Current assets 108,691
Fixed and other assets 14,390
Goodwill 11,875
- -----------------------------------------------------------------------
Total assets 134,956
- -----------------------------------------------------------------------
Current liabilities 81,708
Other liabilities 4,709
- -----------------------------------------------------------------------
Total liabilities 86,417
- -----------------------------------------------------------------------
Net assets 48,539
Common shares held by minority shareholders at book value 8,325
- -----------------------------------------------------------------------
NET CONSIDERATION PAID 40,214
- -----------------------------------------------------------------------
</TABLE>
The acquisition was financed partially by a term loan from Bankers
Trust and by the issuance, by a subsidiary of the Company, of
preferred shares.
F-10
<PAGE> 41
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)
(ii) Acquisition of Industries Davie Inc.
On April 24, 1996, but effective March 31, 1996, the Company's
wholly-owned subsidiary Cedar Group Canada Inc. acquired from
Societe Generale de Financement du Quebec (SGF), 100% of the
equity of Industries Davie Inc.(IDI) for the purchase price of
CDN$1.00.
The Company has accounted for the acquisition of IDI using the
purchase method and has been given effect at March 31, 1996.
Accordingly, the assets and liabilities of IDI as at September 30,
1996 are consolidated in the accounts of the Company.
The total cost of the acquisition was allocated to the net assets
acquired on the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Current assets 44,127
Fixed assets -
Other assets 2,089
- ----------------------------------------------------------------------------
Total assets 46,216
- ----------------------------------------------------------------------------
Current liabilities 30,645
Negative goodwill 15,571
- ----------------------------------------------------------------------------
Total liabilities 46,216
- ----------------------------------------------------------------------------
Net assets -
- ----------------------------------------------------------------------------
NET CONSIDERATION PAID -
- ----------------------------------------------------------------------------
</TABLE>
Negative goodwill amounting to $24,225 has been applied to reduce
to nil the value of long-term non-monetary assets and the balance
of $12,945 (net of accumulated amortization of $2,626) is being
disclosed as negative goodwill on the balance sheet.
iii) Acquisition of Steen Contractors Limited
Effective April 1, 1995, the Company acquired 75% of the common
stock of Steen Contractors Limited (Steen), a Canadian company
engaged in construction services provided in Canada, for a cash
consideration of $4,476.
Effective March 31, 1996, the remaining 25% of Steen's common
shares were purchased for a cash consideration of CDN$2,135
(US$1,571), resulting in goodwill of $230.
The acquisitions have been accounted for under the purchase method
of accounting and have been given effect from April 1, 1995 for
the first 75% purchase and from March 31, 1996 for the second 25%
purchase. Accordingly, the assets and liabilities of Steen as at
September 30, 1995 and 1996 are consolidated into the accounts of
the Company.
F-11
<PAGE> 42
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)
(iii) Acquisition of Steen Contractors Limited (cont'd)
The total cost of the initial 75% interest in Steen was allocated
to the net assets acquired on the basis of their fair value as
follows:
<TABLE>
<CAPTION>
$
<S> <C>
Current assets 18,505
Fixed assets 255
Other assets 1,235
- ----------------------------------------------------------------------
Total assets 19,995
- ----------------------------------------------------------------------
Current liabilities 12,056
Other liabilities 1,726
- ----------------------------------------------------------------------
Total liabilities 13,782
- ----------------------------------------------------------------------
Net assets 6,213
Common shares held by minority shareholders at book value 1,737
- ----------------------------------------------------------------------
NET CONSIDERATION PAID 4,476
- ----------------------------------------------------------------------
</TABLE>
The acquisition was financed by a $5,000 term loan from Bankers
Trust which was repaid on October 31, 1995.
(iv) Acquisition of Dominion Bridge Inc.
Effective March 9, 1994, the Company acquired from United Dominion
Industries Limited (UDIL) 85% of the common stock of Dominion Bridge
Inc. (DB), a Canadian company engaged in construction and engineering
services provided in Canada and Asia for a cash consideration of
$3,750 and the issue by DB of Class A preferred shares in the amount
of CDN$18,338. The acquisition has been accounted for by the purchase
method and earnings have been included in the results of operations
from the date of acquisition.
F-12
<PAGE> 43
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)
(iv) Acquisition of Dominion Bridge Inc. (cont'd)
The total cost of the acquisition was allocated to the net assets
acquired on the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Current assets 23,381
Fixed assets 25,632
Other assets 3,525
- ------------------------------------------------------------------------------------
Total assets 52,538
- ------------------------------------------------------------------------------------
Current liabilities 23,765
Other liabilities 10,604
- ------------------------------------------------------------------------------------
Total liabilities 34,369
- ------------------------------------------------------------------------------------
Net assets 18,169
Common and preferred shares held by minority shareholders at book value 14,419
- ------------------------------------------------------------------------------------
NET CONSIDERATION PAID 3,750
- ------------------------------------------------------------------------------------
</TABLE>
The CDN$18,338 Class A Preferred Shares of DB, bearing a cumulative
dividend of 7.5%, originally issued to UDIL were convertible into
the Company's common stock at a rate of CDN$6.00 per share. On
October 21, 1994, the Company agreed to acquire the minority
holdings of common and Class A preferred shares of DB held by UDIL.
The agreement provided that these interests would be acquired for
cash payments of CDN$18,000, the transfer of assets having a book
value of CDN$1,368 and the waiver of the preferred dividend
requirement for the Company's 1994 fourth quarter. As of September
30, 1995, the Company paid CDN$8,300, transferred the assets and
received all of the common shares of DB held by UDIL and CDN$8,786
face value of preferred shares.
On December 18, 1995, the Company accepted the offer of UDIL to
acquire all remaining preferred shares of DB and the waiver of all
claims and dividends for an aggregate consideration of CDN$11,500
(US$8,200) consisting of a cash payment of CDN$5,000 (US$3,648) and
the balance to be paid through the issuance of up to 1,250,334
shares of the Company. The book value of the minority interest
related to the preferred shares was $8,200 at September 30, 1995.
During the year ended September 30, 1996, the Company issued
1,000,000 common shares, valued at $2,855, and paid cash of $967 in
lieu of issuing 200,000 common shares to UDIL to settle its
obligation arising from the acquisition of the remaining preferred
shares of DB. At September 30, 1996, an obligation to issue a final
50,334 shares remained and the Company settled this obligation
through a cash payment of $103 on November 4, 1996. The deficiency
of the final consideration paid from the book value of the
obligation has been credited as a capital transaction in the
statement of stockholders' equity at September 30, 1996 and a
decrease in minority interest in the amount of $627.
F-13
<PAGE> 44
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)
(v) Acquisition of Unimetric Corporation
Effective January 1, 1994, the Company acquired from Ateliers de
la Haute-Garonne (AHG) 70% of the common stock of Unimetric
Corporation (Unimetric), a United States manufacturer of
specialty fasteners for the aerospace and industrial markets. The
acquisition has been accounted for by the purchase method and
earnings have been included in the results of operations from the
date of the acquisition.
The total cost of the acquisition was allocated to the net
assets acquired on the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
<S> <C>
Current assets 1,136
Fixed assets 1,613
Other assets 22
- ---------------------------------------------------------------------
Total assets 2,771
- ---------------------------------------------------------------------
Current liabilities 539
Other liabilities 356
- ---------------------------------------------------------------------
Total liabilities 895
- ---------------------------------------------------------------------
Net assets 1,876
Common shares held by minority shareholders at book value 826
- ---------------------------------------------------------------------
NET CONSIDERATION PAID 1,050
- ---------------------------------------------------------------------
<CAPTION>
The acquisition was financed by:
$
<S> <C>
Issuance of common shares 250
Cash payment 800
- -------------------------------------------------------------------------
1,050
- -------------------------------------------------------------------------
</TABLE>
The cash payment includes $200 which was invested by the minority
shareholders in preferred shares of Unimetric Corporation.
F-14
<PAGE> 45
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)
(vi)(a) Pro-forma results - 1996
Set forth below is the Company's unaudited pro-forma combined
summary of operations for the year ended September 30, 1996 as
though each of the acquisitions made during 1996 had been made on
October 1, 1995.
<TABLE>
<CAPTION>
(in thousands of dollars
except per share data)
<S> <C>
Sales $ 527,555
Net income (loss) $ (9,260)
Per common share
Primary $ (0.51)
Fully diluted $ --
Average number of common shares and common
share equivalents outstanding
Primary 18,174,000
Fully diluted 27,699,000
</TABLE>
- ------------------------------------------------------------------------
The unaudited pro-forma combined summary of operations has been
prepared utilizing the historical financial statements of the
Company and the acquired businesses. The unaudited pro-forma
combined summary of operations does not purport to be indicative of
the results which actually would have been obtained if the
acquisitions had been made at the beginning of the Company's 1996
year or of future results of operations.
The unaudited pro-forma combined summary of operations includes the
effects of the purchase price allocation adjustments. The purchase
price allocation adjustments include the adjustment of the net
assets acquired to the price paid for them, including the estimated
costs associated with the integration of the businesses.
(vi)(b) Pro-forma results - 1995
Set forth below is the Company's unaudited pro forma combined
summary of operations for the years ended September 30, 1995 and
1994 as though each of the acquisitions completed in 1995 had been
made on October 1, 1993.
<TABLE>
<CAPTION>
[In thousands except per share data] 1995 1994
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales 177,459 159,162
Net income (loss) 1,114 (2,292)
Per common share
Primary 0.07 (0.26)
Fully diluted 0.06 (0.26)
Average number of common shares and common
share equivalents outstanding
Primary 14,929,000 8,951,000
Fully diluted 17,688,000 8,951,000
- --------------------------------------------------------------------------------------------------
</TABLE>
The unaudited pro forma combined summary of operations has been
prepared utilizing the historical financial statements of the
Company and the acquired businesses. The unaudited pro forma
combined summary of operations does not purport to be indicative of
the results which actually would have been obtained if the
acquisitions had been made at the beginning of the Company's 1994
year or of future results of operations.
The unaudited pro forma combined summary of operations includes the
effects of the purchase price allocation adjustments. The purchase
price allocation adjustments include the adjustment of the net
assets acquired to the price paid for them, including the estimated
costs associated with the integration of the businesses.
F-15
<PAGE> 46
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
3. ACQUISITIONS AND DIVESTED BUSINESSES (CONT'D)
(vii) Divested businesses
Effective July 1, 1994, the Company decided to divest the
Canadian commodity fastener distribution businesses, formerly
conducted by Edinov. The results of operations to June 30, 1994
are included in the consolidated statements of operations and
cash flows.
The transaction was completed on December 22, 1994 by the receipt
of CDN$1,000 cash and CDN$5,135 preferred shares of the acquirer.
No gain or loss was recognized on the transaction. The preferred
shares bear a cumulative dividend equal to the bank prime rate at
the beginning of every fiscal year where a dividend is declared
and are collateralized by a pledge of Edinov's assets. These
preferred shares are redeemable at varying amounts annually
through 2009, commencing at CDN$250 in 1996 and CDN$350
thereafter. During 1996, Edinov retired shares for CDN$250. The
Company's ability to realize the value of the preferred shares is
dependent on future operations of the divested businesses.
4. CASH
Included in cash is $17,078 of cash which is in the accounts of IDI.
Pursuant to the purchase agreement with SGF (see note 3(ii)) this cash is
restricted in its use to the benefit of IDI.
5. ACCOUNTS RECEIVABLE
Accounts receivable are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
--------------------------
$ $
<S> <C> <C>
Trade and other receivables 99,389 34,874
Holdback receivable 13,714 4,535
Unbilled receivables 15,312 5,898
Allowance for doubtful accounts (1,504) (1,138)
- -------------------------------------------------------------------------------
126,911 44,169
- -------------------------------------------------------------------------------
</TABLE>
6. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
-------------------------
$ $
<S> <C> <C>
Raw materials 2,958 3,443
Construction contracts, work in process 38,625 6,921
Finished goods 2,179 2,382
- -------------------------------------------------------------------------------
43,762 12,746
- -------------------------------------------------------------------------------
</TABLE>
F-16
<PAGE> 47
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ACUMULATED NET BOOK
COST DEPRECIATION VALUE
- ----------------------------------------------------------------------------------------------------
$ $ $
<S> <C> <C> <C>
1996
Land 6,813 - 6,813
Building 4,114 604 3,510
Machinery and equipment 35,458 12,779 22,679
Machinery under capital leases 5,857 570 5,287
- ----------------------------------------------------------------------------------------------------
52,242 13,953 38,289
- ----------------------------------------------------------------------------------------------------
1995
Land 7,157 - 7,157
Building 4,079 540 3,539
Machinery and equipment 16,636 6,671 9,965
- ----------------------------------------------------------------------------------------------------
27,872 7,211 20,661
- ----------------------------------------------------------------------------------------------------
</TABLE>
8. ADVANCES TO AND INVESTMENTS IN UNINCORPORATED JOINT VENTURES
Subsidiaries of the Company have interests in unincorporated joint
ventures.
The Company's share of assets and liabilities as at September 30, and the
revenue, expenses and net earnings of the joint ventures for the years
ended September 30, are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------
$ $
<S> <C> <C>
Assets 5,716 1,608
Liabilities 3,205 2,358
Revenue 15,040 8,319
Expenses 12,851 6,154
- ----------------------------------------------------------------------------------------------------
Net earnings 2,189 2,165
- ----------------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 48
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
9. FINANCING ARRANGEMENTS
On April 29, 1996, the Company entered into an agreement with Bankers
Trust Commercial Corporation "(BTCC") for a term loan in the amount of
$30,000. This loan bears interest at LIBOR and is collateralized by all
the assets of the consolidated group. The weighted average interest rate
on the term loan was 8.25% for the period ended September 30, 1996. The
maturity date for the loan is April 30, 1997. At that time, the loan can
be renegotiated. The Company is currently negotiating new financing
arrangements with its lenders.
A subsidiary of the Company has entered into operating credit facilities
totalling $6,200 bearing interest at variable rates. At September 30,
1996, $4,708 was outstanding under these facilities. Certain facilities
have restrictions on their usage and are limited for use on specific
projects.
10. OBLIGATIONS UNDER CAPITAL LEASES
A subsidiary of the Company has obligations under capital leases which
are due as follows:
<TABLE>
<CAPTION>
$
<S> <C>
1997 3,352
1998 1,210
1999 660
2000 440
2001 220
- --------------------------------------------------
5,882
LESS: IMPUTED INTEREST 629
- --------------------------------------------------
5,253
LESS: AMOUNTS DUE WITHIN ONE YEAR 2,979
- --------------------------------------------------
2,274
- --------------------------------------------------
</TABLE>
F-18
<PAGE> 49
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
11. INCOME TAXES
The provision for income taxes comprises the following elements:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------
$ $ $
<S> <C> <C> <C>
CURRENT
United States 217 - -
Canada 463 (300) 70
Asia-Pacific 603 - -
- -----------------------------------------------------------------------------------------
1,283 (300) 70
- -----------------------------------------------------------------------------------------
DEFERRED
United States 1,382 (139) -
Canada (2,400) 2,132 230
Asia-Pacific 309 - -
- -----------------------------------------------------------------------------------------
(709) 1,993 230
- -----------------------------------------------------------------------------------------
574 1,693 300
- -----------------------------------------------------------------------------------------
</TABLE>
The related income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------
$ $ $
<S> <C> <C> <C>
United States (364) (1,246) (381)
Canada (8,981) 5,151 1,364
Asia-Pacific 6,547 - -
- -----------------------------------------------------------------------------------------
(2,798) 3,905 983
- -----------------------------------------------------------------------------------------
</TABLE>
Deferred tax liabilities and assets comprise the following elements at
September 30:
<TABLE>
<CAPTION>
1996 1995
--------------------
$ $
<S> <C> <C>
Deferred tax liabilities
Book over tax value of property and equipment 3,959 4,443
Income from operations of joint ventures 955 1,226
Completed contracts basis 536 1,334
Other 492 161
- ----------------------------------------------------------------------------------------
5,942 7,164
- ----------------------------------------------------------------------------------------
Deferred tax assets
OPEB obligation 193 203
Rationalization reserves 197 481
Net operating loss carryforward 20,808 2,019
Valuation allowance for operating losses carried forward (20,403) (1,533)
- ----------------------------------------------------------------------------------------
795 1,170
- ----------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITIES 5,147 5,994
- ----------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 50
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
11. INCOME TAXES (CONT'D)
The difference between the Company's effective income tax rate and the
statutory rate on income from operations is reconciled below:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------
$ $ $
<S> <C> <C> <C>
Income tax expense (recovery) at U.S.
statutory rate (979) 1,367 344
State tax (recovery), net of federal tax benefits (167) 234 59
Foreign income taxes at less than statutory rate (1,433) (155) (35)
Operating losses without tax benefit 1,746 162 -
Other 1,407 85 (68)
- ------------------------------------------------------------------------------------------------------------------
574 1,693 300
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
As at September 30, 1996, the Company had unused net operating losses
carried forward for income tax purposes which expire as follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA
FEDERAL FEDERAL
$ $
(CDN)
<S> <C> <C> <C>
2006 600
2007 1,673
2008 1,465
2009 381 2001 15,171
2010 340 2002 52,595
2011 1,763 2003 4,225
-------------------------------------------------------------------
6,222 71,991
-------------------------------------------------------------------
</TABLE>
The benefit of these losses has been partly recognized in the Company's
books. For financial reporting purposes, a valuation allowance of $
20,403 (1995 - $1,533) has been recognized to offset the deferred tax
assets relating to the net operating losses carried forward.
F-20
<PAGE> 51
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
12. BENEFIT PLANS
PENSION PLANS
The Company maintains defined benefit pension plans covering employees
at most Canadian operations. The benefits are based on an average of the
employee's earnings in the years preceding retirement and on credited
service. Certain supplemental unfunded plan arrangements also provide
retirement benefits to specified groups of participants.
The Company's funding policy for these plans is to contribute amounts
sufficient to meet the minimum funding requirements of the regulatory
authorities, plus any additional amounts which the Company may determine
to be appropriate.
The net pension expense for Company-sponsored pension plans consists of
the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
$ $ $
<S> <C> <C> <C>
Service cost - benefits earned during the year 1,199 894 881
Interest cost on projected benefit obligations 3,023 1,173 1,178
Return on plan assets (3,255) (1,280) (1,354)
Net amortization 96 8 --
----- --- ---
NET PENSION EXPENSE 1,063 795 705
===== === ===
</TABLE>
The reconciliation of the funded status of pension plans is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
$ $
<S> <C> <C>
Plan assets at fair value 50,065 17,305
Actuarial present value of projected benefit
obligations 46,585 16,155
------ ------
Plan assets in excess of projected benefit
obligations 3,480 1,150
Unrecognized prior service cost for plan
amendments 769 361
Unrecognized net experience (gain) loss (3,062) 108
------ ------
NET PENSION ASSET RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEET 1,187 1,619
====== ======
</TABLE>
F-21
<PAGE> 52
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
12. BENEFIT PLANS (CONT'D)
The weighted average of assumptions used in the determination of the
projected benefit obligation is:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
% % %
<S> <C> <C> <C>
Discount rate 8.0 8.0 8.0
Rate of increases in compensation level 6.0 6.0 6.0
Expected long-term rate of return on assets 8.0 8.0 8.0
</TABLE>
The assets of the Company-sponsored plans are invested primarily in
equities and bonds.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides post-retirement health care and life
insurance benefits to most Canadian retirees. In general, employees who
retire after attaining age 60 with five years of service are eligible
for continued health care and life insurance coverage. Dependent health
care and life insurance coverage are also available. Most retirees
contribute towards the cost of health care coverage, with the
contributions generally varying based on service. The Company accrues
the expected cost of providing post-retirement benefits during the years
an employee renders service.
Net periodic post-retirement benefit cost includes the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
$ $ $
<S> <C> <C> <C>
Service cost - benefits earned during the year 1 1 1
Interest cost on accumulated post-retirement
benefit obligation 41 40 41
NET PERIODIC POST-RETIREMENT BENEFIT COST 42 41 42
</TABLE>
At present, there is no prefunding of the post-retirement benefits
recognized under FASB Statement No. 106. The following table presents
the status of the plans reconciled with amounts recognized in the
consolidated balance sheet for the Company's post-retirement benefits:
<TABLE>
<CAPTION>
1996 1995
---- ----
$ $
<S> <C> <C>
Accumulated post-retirement benefit obligation
Active plan participants 514 522
POST-RETIREMENT BENEFIT LIABILITY RECOGNIZED
IN THE CONSOLIDATED BALANCE SHEET 514 522
</TABLE>
F-22
<PAGE> 53
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
12. BENEFIT PLANS (CONT'D)
For measurement purposes, the assumed weighted average annual rate of
increase for capital cost of health care benefits is 11 percent for 1996
and assumed to decrease one percent per year to 7 percent in the year
2000 and remain constant thereafter. The weighted average discount rate
used in determining the accumulated post-retirement benefit obligation
was 8 percent at September 30, 1996. The rate of increase in
compensation levels assumed was 6 percent.
OTHER
Subsidiaries of the Company contribute to defined contribution plans for
eligible employees. The contributions for 1996, 1995 and 1994 were $942,
$4,186 and Nil respectively.
A subsidiary of the Company recognizes the liability for wages and
salaries, annual leave and sick leave. The liability is measured as the
present value of expected future payments to be made in respect of
services provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are
discounted using interest rates on Australian government guaranteed
securities with terms that match, as closely as possible, the estimated
future cash flows. The current portion of the liability in the amount of
$2,625 has been presented as part of "Accounts payable and accrued
expenses" and the long-term portion in the amount of $1,030 has been
presented as part of "Other long-term liabilities".
13. RELATED PARTY TRANSACTIONS
In 1995, the Company advanced $994 to a shareholder, Group Fidutech
International Inc. Of this amount, $577 was repaid during the year ended
September 30, 1995 and the balance of $417 was repaid in December 1995.
In 1994, the Company advanced $1,734 to a shareholder, Fidutech
Technologies Ltd. and its affiliates. Of this amount, $1,155, was
assumed by the acquirer of Edinov as of July 1, 1994, (Note 3 vii)). The
balance of $579 was repaid during the year ended September 30, 1996.
14. STOCKHOLDERS' EQUITY
1996
During 1996, the Company issued 7,994,606 shares of its common stock
upon the conversion of $16,845 of Cedar Group (TCI) Inc. preferred
shares in accordance with the terms of the preferred share agreement.
During 1996, the Company issued 1,000,000 shares of its common stock to
UDIL as part of the settlement to acquire the remaining UDIL held
preferred shares of DB for a total consideration of $2,855 (Note 3 iv)).
F-23
<PAGE> 54
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
14. STOCKHOLDERS' EQUITY (CONT'D)
During 1996, the Company issued 30,000 shares of its common stock valued
at $85 for services rendered by a consultant and a former officer of the
Company.
During 1996, the Company issued 107,394 shares of its common stock for a
consideration of $359 upon exercise of warrants.
During 1996, the Company issued 600,000 shares of its common stock to
the public for total proceeds of $2,619.
1995
In December 1994, the Company sold CDN$2,700 of Class A Preferred Shares
of Dominion Bridge Inc. which it held to Groupe Fidutech International,
Inc. (GFI). Subsequently, pursuant to the terms of the Class A Preferred
Shares, GFI converted the CDN$2,700 of Class A Preferred Shares into
450,000 shares of common stock of the Company. GFI is owned by certain
officers and directors of the Company. During the year, the Company
issued an additional 193,200 shares of its common stock at a price of
$4.43 per share upon conversion of Class A Preferred Shares of Dominion
Bridge Inc., in accordance with the terms of the Preferred Shares
Agreement. These conversion transactions of Dominion Bridge Inc. Class A
preferred Shares provided total proceeds of $2,849.
In December 1994, the Company issued 409,207 shares of its common stock
at a price of $2.81 per share upon conversion of preferred shares of
Unimetric Corporation in accordance with the terms of the preferred
shares for total consideration of $1,150.
During 1995, the Company issued 262,363 shares of its common stock to
Fidutech Technologies Inc., a company owned by an officer of the Company
and 22,500 shares to an individual at a price of $2.60 upon exercise of
warrants granted in connection with the September 30, 1993 private
placement for aggregate proceeds of $741.
During 1995, the Company issued 45,000 shares of its common stock to
various parties for services rendered aggregating $170. The amount has
been included in selling, general and administrative expenses for the
year ended September 30, 1995.
During 1995, the Company issued 90,000 shares of its common stock for
services rendered by underwriters and directors in May 1993.
On February 2, 1995, the Company issued 10,000 shares of its common
stock at a price of $1.68 per share upon exercise of warrants issued on
September 30, 1993.
F-24
<PAGE> 55
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
14. STOCKHOLDERS' EQUITY (CONT'D)
1994
On March 31, 1994, the Company issued 3,354,346 shares of its common
stock at a price of $3.25 per share, aggregating $10,901 and warrants to
purchase 3,354,346 common shares at a price of $3.75 per share: these
warrants were exercised in July 1994, for proceeds aggregating $12,579.
The Company issued 200,000 warrants to an underwriter to purchase an
equivalent number of common shares at a price of $4.00 per share until
January 31, 1999. The Company also issued 330,000 shares of its common
stock and 200,000 warrants to purchase 100,000 common shares at a price
of $3.25 per share until March 31, 1995 and 100,000 common shares at a
price of $3.75 and $4.00 per share if exercised before March 31, 1995
and March 31, 1996 respectively, to two individuals for services
rendered in connection with the private placement.
On March 31, 1994, the Company issued 88,968 shares of its common stock
at a price of $2.81 per share, aggregating $250, as part of the
consideration for the purchase of 70% of the outstanding shares of
Unimetric Corporation common stock.
On March 1, 1994, the Company issued 140,866 shares of its common stock
at a price of $0.47 per share pursuant to a convertible debenture issued
to an officer for aggregate proceeds of $66.
In 1994, the Company issued 295,000 shares of its common stock for
services rendered by underwriters and directors in connection with stock
issuance for funds raised in 1993.
In 1994, the Company issued 42,500 of its common stock upon exercise of
options granted to underwriters and advisers for aggregate proceeds of
$102.
In 1994, the Company issued 237,360 shares of its common stock at a
price of $2.60 per share upon exercise of warrants granted in connection
with the September 30, 1993 private placement for aggregate proceeds of
$616.
INCENTIVE PLAN
The Company has a stock option plan available to grant options to
executive officers, non-executive officers and certain key employees of
the Company. The stock option plan was adopted by the shareholders in
1995 and provides for the issuance of 2,180,000 options to purchase
2,180,000 shares of the Company at a price ranging from $0.59 to $4.125
per share. The options were exercisable over a three-year period.
Pursuant to a resolution of the Board of Directors dated September 12,
1996, the exercise price certain share options has been changed to $2.00
and the expiry date has been changed to September 30, 1998.
F-25
<PAGE> 56
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
14. STOCKHOLDERS' EQUITY (CONT'D)
INCENTIVE PLAN (CONT'D)
Pursuant to certain employment agreements the Company has a plan
available to grant units to its key executive officers. The unit allows
the holder to obtain one share in the common stock of the Company for
$2.00 and one warrant. The warrant can then be converted into one common
share, of the company for $2.00. The total number of units outstanding
is 150,000 and can be converted into 300,000 shares of common stock of
the company. These units expire on September 30, 1998.
The Company has a plan available to grant warrants to key executive
officers of the Company (as explained above) and non-employees of the
Company at prices ranging from $2.00 to $4.00. The total number of
warrants outstanding is 550,000 which can be converted into 550,000
shares of common stock of the Company. These warrants expire from
September 30, 1998 to December 31, 1999.
<TABLE>
<CAPTION>
OPTION, WARRANT
AND UNIT PRICE
SHARES PER SHARE AGGREGATE
$ $
------ --------------- ---------
<S> <C> <C> <C>
OUTSTANDING
SEPTEMBER 30, 1993 130,125 0.59 to 1.68 216
Granted 300,000 2.68 804
Cancelled (120,000) 0.59 to 1.68 201
Exercised (10,125) 0.59 to 1.68 15
--------- ------------- ------
OUTSTANDING
SEPTEMBER 30, 1994 300,000 2.68 804
Granted 1,535,000 4.125 6,332
Exercised -- -- --
Cancelled -- -- --
--------- ------------- ------
OUTSTANDING
SEPTEMBER 30, 1995 1,835,000 2.68 to 4.125 7,136
Adjustment for 1995 warrants outstanding 600,500 2.00 to 4.00 1,601
Granted 675,000 2.00 1,350
Exercised (107,394) 3.25 to 4.125 (359)
Cancelled (123,106) 2.00 (246)
Adjustment to share option price - - (3,322)
--------- ------------- ------
OUTSTANDING
SEPTEMBER 30, 1996 2,880,000 6,160
========= ============= ======
</TABLE>
F-26
<PAGE> 57
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
14. STOCKHOLDERS' EQUITY (CONT'D)
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-based Compensation" which will come into effect for the
Company beginning October 1, 1996. SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements and encourages (but
does not require) compensation cost to be measured based on the fair
value of the equity instrument awarded. Companies are permitted,
however, to continue to apply APB Opinion No.25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No.25 to its
stock-based compensation awards and will disclose the required proforma
effect on net income and earnings per share.
15. COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse space under non-cancellable
operating leases. Future minimum lease payments under all
non-cancellable leases for the five years subsequent to September 30,
1996 consist of the following:
<TABLE>
<CAPTION>
$
<C> <C>
1997 2,698
1998 1,967
1999 1,483
2000 1,201
2001 318
</TABLE>
Total rent expense for all operating leases amounted to $1,580, $976 and
$834 for the years ended September 30, 1996, 1995 and 1994,
respectively.
In December 1996, the Company was notified that a class action
shareholder complaint had been filed against it and certain executive
officers of the Company. The complaint alleges that the defendants
misled the investing public as to the quality and status of a number of
contracts obtained by the Company as well as failed to disclose various
inaccurate and misleading accounting practices. Management intends to
vigorously defend this claim and believes the claim is without merit. As
the outcome of this claim is indeterminable, no provision has been
recorded in the consolidated financial statements.
During 1995, the Company submitted a Claim Notification Letter to a
customer and issued invoices to another customer against which a cash
advance of $2,100 was applied. These amounts were originated with a view
to recovering substantial cost increases pertaining to the design,
manufacture and delivery of major infrastructure assets. The Company
believes that the costs and expenses claimed are justified and has
obtained a third party analysis as to the reasonability of its claim to
the first customer. It has also received acknowledgment of the invoices
issued to the second customer. During 1995, the value of these claims
has been recognized in sales in the amount of $3,672. While management
believes that the favourable outcome of these claims is probable, their
resolution will involve further negotiation with the clients, or
arbitration, and the ultimate realization may vary from the current
estimates.
F-27
<PAGE> 58
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- -------------------------------------------------------------------------------
15. COMMITMENTS AND CONTINGENCIES (CONT'D)
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the Company. It is impossible at this time
for the Company to predict with any certainty the outcome of such
litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability,
to the extent not provided for through insurance or otherwise, would be
material in relation to the Company's consolidated financial position.
A subsidiary of the Company has guaranteed 49% of the debt of an equity
investee. At September 30, 1996, the equity investee has sufficient
assets to meet such obligations.
Certain subsidiaries have given various warranties on asset sales and in
respect of taxation to purchasers of certain of the Company's former
subsidiaries and equity investments. A warranty claim from one purchaser
of a former equity investment is being defended and remains unresolved.
Management is of the opinion that it is unlikely that any liability
would be material to the Company's consolidated financial position.
Certain subsidiaries of the Company are contingently liable for letters
of credit, commitments and performance guarantees arising in the
ordinary course of business.
The purchase offer agreement entered into by the Company and Societe
Generale de Financement du Quebec (SGF) dated April 24, 1996 to acquire
the shares of IDI requires, amongst other things, that the Company,
together with SGF, invest a minimum of CDN$60,000 over the five years
following the acquisition of IDI. The investment is to be made as part
of a business plan to restructure the business of IDI.
Subsequent to year-end, the Company entered into a joint venture
agreement in which it is committed to fund operations to a maximum
amount of $2,500.
The Company and its subsidiaries are engaged in manufacturing activities
subject to numerous environmental laws, regulations and guidelines
adopted by various governmental authorities in the jurisdictions in
which the Company operates. The Company's policy is to accrue for
environmental costs in the accounting period in which a loss is known or
considered probable and the amount can be estimated.
The Company's Canadian subsidiary, DB, periodically entered into forward
exchange contracts to hedge specific anticipated foreign currency
inflow. It did not engage in speculation. The foreign exchange contracts
do not subject the Company to operating risk due to exchange rate
movements because gains and losses on these contracts offset losses and
gains on the transactions being hedged. As at September 30, 1996, 1995
and 1994, the Company had approximately NIL, NIL and $5,040 of foreign
exchange contracts outstanding, hedging specific transactions. The
forward exchange contracts generally had maturities which do not exceed
one year and exchange rates are agreed to at the inception of the
contracts. No significant gains or losses are deferred in the
consolidated balance sheet.
F-28
<PAGE> 59
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------
16. FINANCIAL INSTRUMENTS
Concentration of credit risk
Concentrations of credit risk with respect to trade, holdbacks and other
receivables are limited due to the large number of customers comprising the
Company's customer base and their dispersion across many different
industries and geographic locations. The Company does not require
collateral from its customers. As at September 30, 1996 and 1995, the
Company had no significant concentrations of credit risk.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and bank indebtedness
The carrying amounts reported in the balance sheet for cash and bank
indebtedness approximate their fair value.
Accounts receivable and accounts payable
The carrying amounts reported in the balance sheet for accounts receivable
and accounts payable approximate their fair value.
Assets of business transferred under contractual arrangements
The carrying amount of assets of business transferred under contractual
arrangements reported in the balance sheet approximate its fair market
value.
Term loan
The carrying amount reported in the balance sheet approximates its fair
value.
Customer advances
The carrying amount reported in the balance sheet approximate its fair
value.
Other long-term liabilities
The other long-term liabilities presented in the balance sheet are
comprised of amounts accrued by a subsidiary for long service leave, annual
leave and sick leave, and other amounts due after September 30, 1997. The
carrying amounts reported in the balance sheet approximate their fair
value.
F-29
<PAGE> 60
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------
16. FINANCIAL INSTRUMENTS (CONT'D)
The carrying amounts and fair values of the Company's financial instruments
at September 30, 1996 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNTS VALUE
------------------------------------------------------------------------
$ $
<S> <C> <C>
Cash 26,231 26,231
Accounts receivable 126,911 126,911
Assets of business transferred
under contractual arrangements 3,847 3,847
Bank indebtedness 5,624 5,624
Term loan 30,000 30,000
Accounts payable and accrued expenses 119,839 119,839
Customer advances 16,166 16,166
Other long-term liabilities 2,976 2,976
</TABLE>
17. COMPARATIVE FIGURE
Certain comparatives figures have been reclassified to conform with the
presentation adopted in 1996.
18. BUSINESS SEGMENTS
The Company operates in the following industry segments:
Construction Products and Services - Design, engineering and construction
of large industrial and commercial structures and construction services.
Fasteners - Design and manufacturing of specialty fasteners targeted to the
aerospace industry and distribution of imported fasteners for industry.
Ship building, repair, design and engineering.
F-30
<PAGE> 61
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------
18. BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS SHIP BUILDING DIVESTED
AND SERVICES FASTENERS AND REPAIR BUSINESS TOTAL
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Assets (1) 224,912 4,275 28,655 -- 257,842
- ------------------------------------------------------------------------------------------------------
Sales 336,599 4,296 21,729 --
362,624
Segment operating
income (loss) 2,611 (1,467) (131) 1,013
Corporate expenses (5,030)
Interest - net (2,104)
Other income 1,134
Income from operations
of joint ventures 2,189
Income tax provision (574)
Minority interest
- common stock (1,667)
Minority interest
-dividends on preferred
shares (645)
- ------------------------------------------------------------------------------------------------------
Net income (5,684)
- ------------------------------------------------------------------------------------------------------
Capital expenditures 11,781 -- 428 -- 12,209
- ------------------------------------------------------------------------------------------------------
Depreciation and
amortization 6,476 327 (2,604) -- 4,199
- ------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) Assets exclude $7,405, $11,496 and $14,038 of corporate amounts in 1996,
1995 and 1994 respectively.
F-31
<PAGE> 62
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------
18. BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESS TOTAL
$ $ $ $
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Assets(1) 79,400 5,503 -- 84,903
- ------------------------------------------------------------------------------------------
Sales 150,996 4,754 -- 155,750
- ------------------------------------------------------------------------------------------
Segment operating income
(loss) 3,246 (1,316) -- 1,930
Corporate expenses (1,020)
Interest - net (406)
Other income 1,236
Income from operations
of joint venture 2,165
Income tax provision (1,693)
Minority interest - common stock (122)
Minority interest - dividends
on preferred
shares (70)
- ------------------------------------------------------------------------------------------
Net income 2,020
- ------------------------------------------------------------------------------------------
Capital expenditures 244 8 -- 252
- ------------------------------------------------------------------------------------------
Depreciation and amortization 2,687 378 -- 3,065
- ------------------------------------------------------------------------------------------
</TABLE>
F-32
<PAGE> 63
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------
18. BUSINESS SEGMENTS (CONT'D)
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESS TOTAL
$ $ $ $
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Assets(1) 52,990 5,150 -- 58,140
- -------------------------------------------------------------------------------------------
Sales 58,181 4,842 4,936 67,959
- -------------------------------------------------------------------------------------------
Segment operating income
(loss) 860 (574) 380 666
Corporate expenses (109)
Interest - net (341)
Other income 767
Income tax provision (300)
Minority interest - common stock (19)
Minority interest - dividends
on preferred
shares (248)
- -------------------------------------------------------------------------------------------
Net income 416
- -------------------------------------------------------------------------------------------
Capital expenditures -- 94 -- 94
- -------------------------------------------------------------------------------------------
Depreciation and amortization 1,695 333 96 2,224
- -------------------------------------------------------------------------------------------
</TABLE>
F-33
<PAGE> 64
DOMINION BRIDGE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1996
(ALL DOLLAR FIGURES ARE IN THOUSANDS OF U.S. DOLLARS UNLESS OTHERWISE INDICATED)
- --------------------------------------------------------------------------------
18. BUSINESS SEGMENTS (CONT'D)
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
AUSTRALIA
UNITED AND DIVESTED
STATES CANADA S.E. ASIA BUSINESS TOTAL
$ $ $ $ $
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Assets(1) 4,275 119,064 134,503 -- 257,842
- -----------------------------------------------------------------------------------------------------
Sales 4,296 222,805 135,523 -- 362,624
- -----------------------------------------------------------------------------------------------------
Segment operating income
(loss) (1,467) (4,189) 6,669 -- 1,013
- -----------------------------------------------------------------------------------------------------
1995
Assets(1) 5,503 79,400 -- 84,903
- -----------------------------------------------------------------------------------------------------
Sales 4,754 150,996 -- 155,750
- -----------------------------------------------------------------------------------------------------
Segment operating income
(loss) (1,316) 3,216 -- 1,930
- -----------------------------------------------------------------------------------------------------
1994
Assets(1) 5,150 52,990 -- 58,140
- -----------------------------------------------------------------------------------------------------
Sales 4,842 58,181 4,936 67,959
- -----------------------------------------------------------------------------------------------------
Segment operating income
(loss) (574) 860 380 666
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) Assets exclude $7,405, $11,496 and $14,038 of corporate amounts in 1996,
1995 and 1994 respectively.
F-34
<PAGE> 65
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 14,990,188 15 36,345 (874) 142 (1,885)
Issuance of common stock upon
conversion of Dominion Bridge, Inc.
Class A preferred shares 1,000,000 1 2,854 -- -- --
Issuance of common stock upon
conversion of Cedar Group (TCI) LLC
preferred shares 7,994,606 8 16,837 -- -- --
Issuance of common stock upon
exercise of warrants 107,394 -- 359 -- -- --
Issuance of common stock
for services rendered 30,000 -- 85 -- -- --
Issuance of common stock for cash
consideration 600,000 1 2,618 -- -- --
Share issue costs -- -- (1,497) -- -- --
Translation adjustments, net of income
taxes of nil -- -- -- -- (776) --
Settlement on acquisition of minority interest
(Note 3 iv)) -- -- -- 627 -- --
Receipt of cash during the year -- -- -- -- -- 61
Net loss for the year -- -- -- (5,684) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 24,722,188 25 57,601 (5,931) (634) (1,824)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-35
<PAGE> 66
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
(CONT'D)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 13,507,918 13 31,927 (1,860) (342) (1,885)
Issuance of common stock upon
conversion of Dominion Bridge, Inc.
Class A preferred shares 643,200 1 2,848 -- -- --
Issuance of common stock upon
conversion of Unimetric Corporation
preferred shares 409,207 1 1,149 -- -- --
Issuance of common stock upon
exercise of warrants 284,863 -- 741 -- -- --
Issuance of common stock
for services rendered 45,000 -- 170 -- -- --
Issuance of common stock
issue expenses 90,000 -- -- -- -- --
Issuance of common stock upon
exercise of warrants 10,000 -- 16 -- -- --
Share issue costs -- -- (506) -- -- --
Settlement on acquisition of minority
interest (Note 3 iv)) -- -- -- (1,034) -- --
Translation adjustments, net of income
taxes of nil -- -- -- -- 484 --
Net loss for the year -- -- -- 2,020 -- --
- --------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 14,990,188 15 36,345 (874) 142 (1,885)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-36
<PAGE> 67
DOMINION BRIDGE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
(CONT'D)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION SUBSCRIPTION
SHARES STOCK AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 5,544,532 5 7,220 (2,276) (21) (1,885)
Issuance of common stock upon
exercise of options 162,500 1 302 -- -- --
Issuance of common stock upon
exercise of warrants 3,591,706 4 13,191 -- -- --
Issuance of common stock for
Unimetric Corp. 88,968 -- 250 -- -- --
Issuance of common stock for
stock issue expenses 295,000 -- -- -- -- --
Issuance of common stock through
private placement 3,684,346 3 10,898 -- -- --
Issuance of common stock in
repayment of debt 140,866 -- 66 -- -- --
Translation adjustments, net of income
taxes of nil -- -- -- -- (321) --
Net income for the year -- -- -- 416 -- --
- -------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 13,507,918 13 31,927 (1,860) (342) (1,885)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-37
<PAGE> 1
Exhibit 3.2
SECOND AMENDED AND RESTATED
BYLAWS OF
DOMINION BRIDGE CORPORATION
A Delaware Corporation
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year for the purpose of electing directors and
conducting such other proper business as may come before the meeting. The date,
time and place of the annual meeting may be determined by resolution of the
board of directors or as set by the Chief Executive Officer, if there be one, or
the President, of the Corporation.
Section 2. Special Meetings. Unless otherwise prescribed by Delaware
Corporation Law or by the Certificate of Incorporation, special meetings of
stockholders, for any purpose or purposes, may be called only by either the
Chief Executive Officer, if there be one, or the President, and shall be called
by the Secretary or any Assistant Secretary, if there be one, at the request in
writing of a majority of the board of directors. Such request shall state the
purpose or purposes of the proposed meeting. Upon receipt of such written
request, the Chief Executive Officer, if there be one, or the President of the
Corporation shall fix a date and time for such meeting which such date shall be
within ten business days of the proposed date specified in the written request.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
Corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than 10 nor more than 60 days before the date of the meeting. All such
notices shall be delivered, either personally or by mail, by or at the direction
of the board of directors, the Chief Executive Officer or the Secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the Corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends for the express purpose of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened.
<PAGE> 2
Section 5. Quorum. The holders of the majority of the outstanding
shares of capital stock entitled to vote at a meeting, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by statute or by the Certificate of
Incorporation. If a quorum is not present, the holders of fifty percent of the
shares present in person or represented by proxy at the meeting, and entitled to
vote at the meeting, may adjourn the meeting to another time and/or place. When
a specified item of business requires a vote by a class or series (if the
Corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum (as to such class or series) for the
transaction of such item of business.
Section 6. Waiver of Notice. Any stockholder, either before or after
any stockholders' meeting, may waive in writing notice of the meeting, and his
waiver shall be deemed the equivalent of giving notice. Attendance at a meeting
by a stockholder shall constitute a waiver of notice, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 7. Notice of Business. At any meeting of the stockholders of
the Corporation, only such proper business shall be conducted as shall have been
brought before the meeting (i) by or at the direction of the board of directors
or (ii) by any stockholder of the Corporation who is a stockholder of record at
the time of giving of the notice provided for in this Section 7, who shall be
entitled to vote at such meeting and who complies with the notice procedures set
forth in this Section 7. For business to be brought before a meeting of
stockholders by a stockholder, the stockholder shall have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive office of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 60 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend any document, including these Bylaws, the language of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of the stockholders except in accordance with the
procedures set forth in this Section 7. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of these Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 7, a stockholder shall
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<PAGE> 3
also comply with all applicable requirements of the Securities and Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder with
respect to matters set forth in this Section 7.
Section 8. Voting. Unless otherwise required by Delaware Corporation
Law, the Certificate of Incorporation or these Bylaws, any question brought
before any meeting of stockholders shall be decided by the vote of the holders
of a majority of the stock represented and entitled to vote thereat. Each
stockholder shall have one vote for each share of stock entitled to vote held of
record by such stockholder and a proportionate vote for each fractional share so
held, unless otherwise provided in the Certificate of Incorporation. The board
of directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held. Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation he has
expressly empowered the pledgee to vote thereon, in which case only the pledgee,
or his proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety, or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same shares, unless
the Secretary of the Corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect: (i) if only one votes, his act binds all; (ii) if
more than one vote, the act of the majority so voting binds all; and (iii) if
more than one vote, but the vote is evenly split on any particular matter, each
fraction may vote the securities in question proportionately, or any person
voting the shares or a beneficiary, if any, may apply to the Court of Chancery
or any court of competent jurisdiction in the State of Delaware to appoint an
additional person to act with the persons so voting the shares. The shares shall
then be voted as determined by a majority of such persons and the person
appointed by the Court. If a tenancy is held in unequal interests, a majority or
even-split for the purpose of this subsection shall be a majority or even-split
in interest.
Section 9. Proxies. A stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. No proxy shall be or acted upon after three (3) years from its date,
unless the proxy provides for a longer period.
Section 10. Consent of Stockholders in Lieu of Meeting. No action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, and stockholders
of the Corporation may not take action by written consent.
Section 11. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of
3
<PAGE> 4
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The lists shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 12. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 11 of this Article I or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE II
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number Election and Term of Office. Except as otherwise
fixed by or pursuant to provisions of the Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a preference
over the Common Stock and as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of directors of
the Corporation which shall constitute the board as of the date these Bylaws are
first amended and restated shall be three. Thereafter, the number of directors
shall be established from time to time by resolution of the board of directors.
The directors, other than those who may be elected by the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, shall be classified, with respect to the time for which they
severally hold office, into three classes, of one director in each class, one
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in fiscal year 1995, another class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
fiscal year 1996, and another class to be originally elected for a term expiring
at the annual meeting of stockholders to be held in fiscal year 1997, with each
class to hold office until its successor is elected and qualified. At each
annual meeting of the stockholders of the Corporation after fiscal year 1995,
the successors of the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election. The
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote in the
election of directors. Directors need not be stockholders.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election by the stockholders as directors of
the Corporation. Nominations of persons for election as directors of the
Corporation may be made at a meeting of stockholders (a) by or at the direction
of the board of directors, (b) by any nominating committee or persons appointed
by the board of directors or (c) by any stockholder of the Corporation entitled
to vote for the
4
<PAGE> 5
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2. Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
office of the Corporation not less than 50 days nor more than 75 days prior to
the meeting; provided, however, that in the event that less than 60 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. Such stockholder's notice to the Secretary of the
Corporation shall set forth (a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as now or hereafter
amended; and (b) as to the stockholder giving the notice, (i) the name and
record address of such stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by such
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election by the stockholders as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein. The chairman of the meeting of the stockholders shall, if the
facts warrant, determine and declare to the meeting that nomination was not made
in accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 3. Removal and Resignation. Subject to the rights of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified circumstances, any director
may be removed from office only for cause and only by the affirmative vote of
the holders of a majority of the combined voting power of the then outstanding
shares of stock entitled to vote generally in the election of directors, voting
together as a single class. Any director may resign at any time upon written
notice to the Corporation.
Section 4. Vacancies. Any vacancies in the board of directors for any
reason, and directorships resulting from any increase in the number of
directors, may be filled by the board of directors, although less than a quorum,
and any directors so chosen shall hold office until the next election of the
class for which such directors shall have been chosen and until their successors
shall be elected any qualified.
Section 5. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this Bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
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<PAGE> 6
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the Chief Executive Officer, if there shall be one, or the President,
on at least 24 hours notice to each director, either personally, by telephone,
by mail, or by facsimile; in like manner and on like notice, the Chief Executive
Officer, if there shall be one, or the President, must call a special meeting on
the written request of at least a majority of the directors.
Section 7. Ouorum, Required Vote and Adjournment. A majority of the
total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum shall
not be present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation, which
to the extent provided in such resolution or these Bylaws shall have and may
exercise the powers of the board of directors in the management and affairs of
the Corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
Section 9. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. The vote of a majority of committee
members present at a meeting at which a quorum is present shall be the act of a
committee.
Section 10. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of
the board of directors or any committee thereof who is present at a meeting
shall be conclusively presumed to have waived notice of such meeting except when
such member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the
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<PAGE> 7
meeting or unless his or her written dissent to such action shall be filed with
the person acting as the Secretary of the meeting before the adjournment thereof
or shall be forwarded by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
Section 13. Compensation. The directors may be paid their expenses, if
any, of attendance at each meeting of the board of directors and may be paid a
fixed sum which may be cash or other property or any combination thereof) for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE III
OFFICERS
Section 1. Number. The officers of the Corporation shall be elected by
the board of directors and shall consist of a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary, a
Treasurer, and such other officers and assistant officers as may be deemed
necessary or desirable by the board of directors. Any number of offices may be
held by the same person, except that no person may simultaneously hold the
office of President and Secretary. In its discretion, the board of directors may
choose not to fill any office for any period that it may deem advisable.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The Chief Executive Officer shall appoint other officers to serve for
such terms as he or she deems desirable. Vacancies may be filled or new offices
created and filled at any meeting of the board of directors. Each officer shall
hold office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
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<PAGE> 8
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the Corporation.
Section 6. The Chairman of the Board. The Chairman of the Board, if
elected or appointed, shall preside at all meetings of the stockholders and
board of directors at which he or she is present. He or she shall present to the
annual meeting of stockholders a report of business of the Corporation for the
preceding fiscal year and shall perform such other duties as, from time to time,
may be assigned to him by the Board of Directors.
Section 7. The Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the Corporation. In the absence of the
Chairman of the Board, the Chief Executive Officer shall preside at all meetings
of the stockholders and board of directors at which he or she is present.
Subject to the powers of the board of directors, the Chief Executive Officer
shall have general charge of the business, affairs and property of the
Corporation and control over its officers, agents and employees; and shall see
that all orders and resolutions of the board of directors are carried into
effect. The Chief Executive Officer shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the Corporation. The Chief
Executive Officer shall have such other powers and perform such other duties as
may be prescribed by the board of directors or as may be provided in these
Bylaws.
The Chief Executive Officer shall have the power and authority
to execute, without specific prior Board approval, all contracts, agreements and
obligations of the Corporation that arise in the ordinary course of business of
the Corporation which do not involve liabilities to the Corporation in an amount
in excess of five million dollars ($5,000,000).
Section 8. President. The President shall, in the absence or disability
of the Chief Executive Officer, act with all of the powers and be subject to all
the restrictions of the Chief Executive Officer. The President shall also
perform such other duties and have such other powers as the board of directors,
the Chief Executive Officer or these Bylaws may, from time to time, prescribe.
Section 9. Vice Presidents. The Vice President, if any, or if there
shall be more than one, the Vice Presidents in the order determined by the board
of directors shall in the absence or disability of the President, act with all
of the powers and be subject to all the restrictions of the President. The Vice
Presidents shall also perform such other duties and have such other powers as
the board of directors, the Chief Executive Officer or these Bylaws may, from
time to time, prescribe.
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<PAGE> 9
Section 10. The Secretary and Assistant Secretaries. The Secretary
shall attend all meetings of the board of directors, all meetings of the
committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the Chief Executive Officer's supervision, the Secretary shall give, or
cause to be given, all notices required to be given by these Bylaws or by law;
shall have such powers and perform such duties as the board of directors, the
Chief Executive Officer or these Bylaws may, from time to time, prescribe; and
shall have custody of the corporate seal of the Corporation. The Secretary, or
an Assistant Secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such Assistant Secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature. The
Assistant Secretary, or if there be more than one, the Assistant Secretaries in
the order determined by the board of directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
board of directors, the Chief Executive Officer, the President, or Secretary
may, from time to time, prescribe.
Section 10. The Treasurer and Assistant Treasurer. The Treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the board of directors;
shall cause the funds of the Corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the Chief Executive Officer and the board of directors, at its
regular meeting or when the board of directors so requires, an account of the
Corporation; and shall have such powers and perform such duties as the board of
directors, the Chief Executive Officer, the President or these Bylaws may, from
time to time, prescribe. If required by the board of directors, the Treasurer
shall give the Corporation a bond (which shall be rendered every six years) in
such sums and with such surety or sureties as shall be satisfactory to the board
of directors for the faithful performance of the duties of the office of
Treasurer and for the restoration to the Corporation, in case of death,
resignation, retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in the possession or under the
control of the Treasurer belonging to the Corporation. The Assistant Treasurer,
or if there shall be more than one, the Assistant Treasurers in the order
determined by the board of directors, shall in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer. The
Assistant Treasurers shall perform such other duties and have such other powers
as the board of directors, the Chief Executive Officer, the President or
Treasurer may, from time to time, prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these Bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 12. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the
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powers and duties of such officer to any other officer or to any director, or to
any other person whom it may select.
ARTICLE IV
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
the Chief Executive Officer, the President or a Vice President and the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by such holder in the Corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
Corporation or its employee or (2) by a registrar, other than the Corporation or
its employee, the signature of any such Chief Executive Officer, President, Vice
President, Secretary, or Assistant Secretary may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation whether because of death, resignation or
otherwise before such certificate or certificates have been delivered by the
Corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the books of the
Corporation. Shares of stock of the Corporation shall only be transferred on the
books of the Corporation by the holder of record thereof or by such holder's
attorney duly authorized in writing, upon surrender to the Corporation of the
certificate or certificates for such shares endorsed by the appropriate person
or persons, with such evidence of the authenticity of such endorsement,
transfer, authorization, and other matters as the Corporation may reasonably
require, and accompanied by all necessary stock transfer stamps. In that event,
it shall be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate or certificates, and record the
transaction on its books. The board of directors may appoint a bank or trust
company organized under the laws of the United States or Canada or any state or
province thereof to act as its transfer agent or registrar, or both in
connection with the transfer of any class or series of securities of the
Corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
10
<PAGE> 11
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be the close of business on the next
day preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in
the subscription agreement, subscriptions for shares shall be paid in full at
such time, or in such installments and at such times, as shall be determined by
the board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
ARTICLE V
GENERAL PROVISIONS
11
<PAGE> 12
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the Corporation and all notes and other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
or officers, or any agent or agents, of the Corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiary, including any officer or employee who is a
director of the Corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the Corporation shall be voted by the Chief
Executive Officer, unless the board of directors specifically confers authority
to vote with respect thereto, which authority may be general or confined to
specific instances, upon some other person or officer. Any person authorized to
vote securities shall have the power to appoint proxies, with general power of
substitution.
12
<PAGE> 13
Section 8. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these Bylaws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these Bylaws is or becomes inconsistent with any provision of the Certificate of
Incorporation, the General Corporation Law of the State of Delaware or any other
applicable law, the provision of these Bylaws shall not be given any effect to
the extent of such inconsistency but shall otherwise be given full force and
effect.
ARTICLE VI
AMENDMENTS
THESE BYLAWS MAY BE AMENDED, ALTERED, OR REPEALED AND NEW
BYLAWS ADOPTED AT ANY MEETING OF THE BOARD OF DIRECTORS BY A
MAJORITY VOTE. THE FACT THAT THE POWER TO ADOPT, AMEND, ALTER,
OR REPEAL THE BYLAWS HAS BEEN CONFERRED UPON THE BOARD OF
DIRECTORS SHALL NOT DIVEST THE STOCKHOLDERS OF THE SAME POWERS.
13
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY STATE OR COUNTRY OF INCORPORATION
Davie Industries Canada
MIL Davie, Inc. Canada
MIL Intermodal, Inc. Canada
Cedar Group Canada, Inc. Canada
DB Technology, Inc. Canada
Cedar Group Australia, Pty. Australia
McConnell Dowell Corporation Limited Australia
Dominion Bridge Inc. Canada
Steen Contractors Limited Ontario
Becker Contractors Limited Newfoundland
Becker Contractors Inc. Quebec
Banyan Fasteners Corp. Delaware
Cedar Warehousing, Inc. Pennsylvania
Evergreen Fastening System, Inc. Delaware
M.S.W. International, Inc. Pennsylvania
Unimetric Corporation New Hampshire
DB Barbados Inc. Barbados
DB Venezuela Inc. Venezuela
Cedar Group (TCI) Inc. LLC Turks and Caicos Islands
DB Power Inc. Delaware
Dominion Kuhns Brothers & Company, Inc. Delaware
Dominion Bridge Development Company (TCI) Limited Turks and Caicos Islands
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference into (i)
post-effective amendment on Form S-3 to the Registration Statement on Form SB-2
(Commission File No. 33-88796) of Dominion Bridge Corporation, formerly Cedar
Group, Inc. (the "Company") and (ii) the Registration Statement on Form S-8
(Commission File No. 333-01045) of the Company, of our report dated December
23, 1996 on the financial statements of the Company as of and for the fiscal
year ended September 30, 1996.
By: /s/ DELOITTE & TOUCHE
---------------------
Deloitte & Touche
Dated: December 27, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference into (i)
post-effective amendment on Form S-3 to the Registration Statement on Form SB-2
(Commission File No. 33-88796) of Dominion Bridge Corporation, formerly Cedar
Group Inc. (the "Company") and (ii) the Registration Statement on Form S-8
(Commission File No. 333-01045) of the Company, of our report dated December 20,
1995 on the financial statements of the Company as of and for the fiscal years
ended September 30, 1995 and September 30, 1994.
By: /s/ ERNST & YOUNG
-----------------
Ernst & Young
Dated: December 27, 1996
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