SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the fiscal year ended
December 31, 1996
Commission file number 1-5642
DRAVO CORPORATION
A PENNSYLVANIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NUMBER 25-0447860
3600 ONE OLIVER PLAZA
PITTSBURGH, PENNSYLVANIA 15222-2682
TELEPHONE (412) 566-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class: Registered:
Common Stock, $1.00 Par Value New York Stock Exchange
Preference Stock Purchase Rights New York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. Yes XX . No_____.
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. XX
Common shares outstanding as of March 20, 1997: 14,771,620
Aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 20, 1997: $160,641,368
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 31, 1996 are incorporated by reference to the extent set
forth in Parts I, II and IV of this Report. Portions of the
Proxy Statement for Annual Meeting of Shareholders on April 24,
1997 are incorporated by reference to the extent set forth in
Part III of this Report.
TABLE OF CONTENTS
Page
PART I Item 1. Business 3 - 5
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote
of Security Holders 7
PART II
Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matter 8 - 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 12
PART III
Item 10. Directors and Executive Officers of the
Registrant 13
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management 14
Item 13. Certain Relationships and Related
Transactions 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 15 - 21
Signatures 22
Independent Auditors' Report on Schedules 23
Schedule I. Condensed Financial Information of Registrant 24 - 31
Table of Contents for documents filed herein as Exhibits
4, 11, 13, 21, 23, 24 and 27 32
-2-
PART I
Item 1. Business
(a) General Development of the Business
Dravo Corporation (the Registrant or company) was incorporated in
Pennsylvania in 1936 to consolidate several related corporations
then operating various elements of a business started in 1891 by
F. R. Dravo. Its corporate offices are located at 3600 One
Oliver Plaza, Pittsburgh, Pennsylvania 15222-2682, and its
telephone number is 412-566-3000. As used herein, the term Dravo
includes its consolidated subsidiaries unless otherwise
indicated. In December, 1987, Dravo's Board of Directors
approved a major restructuring program which concentrated Dravo's
future direction exclusively on opportunities involving its
natural resources business. The plan included the sale or other
disposition of the former Engineering and Construction segment,
as well as the sale of the former Materials Handling and Systems
segment approved earlier. All units scheduled for sale were sold
by the end of 1989. The remainder of these businesses have been
presented as discontinued operations in the financial
statements.
Late in 1994, the company sold substantially all the assets and
certain liabilities of Dravo Basic Materials Company, its
construction aggregates subsidiary, to Martin Marietta Materials,
Inc. (Martin Marietta). As a result, Dravo is now primarily a
lime company operating principally in the United States.
Operations are carried on by a wholly-owned subsidiary, Dravo
Lime Company (Dravo Lime). Activities include the production of
lime for utility, metallurgical, pulp and paper, municipal,
construction and miscellaneous chemical and industrial
applications as well as the development and marketing of related
environmental technologies, products and services. Three major
utility companies with whom the company has long-term contracts -
American Electric Power, Pennsylvania Power Company and
Cincinnati Gas & Electric Company - each accounted for more than
10 percent of consolidated revenue in 1996. All reserves are
located on properties physically accessible for purposes of
mining and processing limestone into lime.
Dravo Lime, one of the nation's largest lime producers, owns and
operates three integrated lime production facilities, two in
Kentucky and one in Alabama. In 1995 a two kiln expansion was
completed at the Black River plant in Butler, Kentucky. With the
Black River expansion on-line, Dravo Lime's annual quicklime
capacity totals approximately three million tons. This capacity
will further increase to slightly over 3,300,000 tons-per-year
when a fourth 1,100 tons-per-day kiln now in the process of being
constructed at Maysville, Kentucky is completed early in the
second quarter of 1997.
The Maysville plant, currently a three kiln, 1,050,000 tons-per-
year facility, is located along the Ohio River and produces a
material marketed under the trade name Thiosorbicr Lime that has
a product chemistry ideally suited for removing sulfur dioxide
from power plant stack gases. All of Maysville's output is
committed under long-term contracts with utility companies in the
Ohio Valley region. All contracts contain provisions for price
escalation. Owned reserves at the Maysville site are recovered
from a mine 950 feet underground and are considered adequate to
sustain the future four kiln operation in excess of seventy-five
years.
-3-
Item 1. Business (continued)
Dravo Lime's Black River facility is an integrated Thiosorbicr
quicklime, high calcium pebble and pulverized quicklime, and bulk
and bagged hydrated lime facility. Located along the Ohio River
at Butler, Kentucky, Black River has an annual quicklime capacity
of 1,350,000 tons-per-year. Of that total, in excess of seventy
percent is committed to utility companies and steel and paper
customers under long-term contracts with price escalation
provisions. Limestone reserves at Black River are recovered from
a 600-feet-deep underground mine. At Black River's expanded rate
of capacity, reserves are considered adequate to sustain
production levels for more than seventy-five years.
The company's Longview facility, located near Birmingham,
Alabama, is an integrated facility as well that produces high
calcium quicklime, and bulk and bagged hydrated lime from owned
limestone reserves. At this plant, Dravo Lime also produces
dolomitic quicklime from limestone purchased from a nearby
dolomitic stone quarry. Due to its material handling and storage
capabilities and its ability to produce high calcium and
dolomitic lime, the Longview facility is able to custom blend
quicklime to its customers' chemical specifications. Longview's
annual lime production capacity is approximately 570,000 tons-per-
year. The company is currently evaluating the possibility of
building a fourth kiln at Longview. In early 1997, Dravo Lime
purchased a number of land parcels adjacent to the Longview
quarry that doubled its limestone reserves. Recoverable reserves
are estimated to last approximately 40 years at the current
quarry production rate. Although it will not be necessary until
the distant future, Longview could be converted to an underground
mine if a further extension of reserves is necessary.
In conjunction with the sale of Dravo Basic Materials' assets to
Martin Marietta, Dravo Lime entered into agreements appointing
Martin Marietta the exclusive distributor of certain aggregate by-
products. In 1995, an aggregates processing plant was
constructed at the Longview facility that annually produces
between 500,000 to 1,000,000 tons of aggregates for purchase by
Martin Marietta. A benefit of this installation is to make a
marketable by-product out of limestone that is chemically
unsuitable for lime production, thereby reducing the cost Dravo
Lime incurs to recover the high calcium limestone reserves that
are beneath the aggregate quality material.
Dravo Lime products are distributed through quicklime
distribution terminals located in Aliquippa, Donora and Monaca,
Pennsylvania; Porterfield, Ohio; Brunswick, Georgia; and Tampa,
Fort Lauderdale and Sanford, Florida. At Baton Rouge, Louisiana,
Dravo Lime owns and operates a lime hydration and bagging
facility from which quicklime, and bulk and bagged hydrated lime
products are distributed.
(b) Competitive Conditions
Dravo encounters competition at all its operations but believes
that its experience, strategically located reserves and technical
expertise in the flue gas desulfurization industry give it
certain competitive advantages.
-4-
Item 1. Business (continued)
Dravo's research and development expenditures were $3.7 million
in 1996 and $3.6 million in 1995. Research and development
spending in 1997 is expected to exceed $3.3 million. The company
expects the research, much of which is being conducted jointly
with utility customers, to lower both the capital and operating
costs associated with flue gas desulfurization (FGD). A major
advancement toward that goal was achieved with the development of
a second generation, proprietary ThioClearr FGD technology. A
commercial scale demonstration facility using this technology is
currently being engineered and constructed at Applied Energy
Services' Beaver Valley cogeneration facility in Monaca,
Pennsylvania. Construction is expected to be completed in the
second quarter of 1997. Other research projects are aimed at
developing proprietary technologies for use in reducing stack gas
emissions of combined SOx/NOx and air toxins while recovering and
processing salable by-products. Dravo believes that in this
field its long-term contracts, accumulated experience and
technical skill represent significant competitive advantages.
With the exception of its research and development capabilities,
several firms with which Dravo competes have comparable resources
and income. Dravo competes with other firms for qualified
professional personnel, particularly those with technical skills.
(c) Corporate Development
Dravo's corporate development policy encompasses growth through
investment in existing businesses, internal development and
acquisition. The company announced in October 1996 that it was
undertaking an investment banking review of strategic
alternatives to accelerate growth and enhance shareholder value.
Additionally, to the extent that business units no longer meet
management's long-term profitability performance criteria and
business strategies, or do not contribute significantly to
corporate objectives, a policy of divestiture is followed.
Continuing operations of Dravo Corporation, which are principally
domestic in nature, function in one segment, a natural resource
business, primarily involved in the production, processing and
supply of lime for environmental, metallurgical, pulp and paper,
municipal, construction and miscellaneous chemical and industrial
applications as well as the development and marketing of related
environmental technologies, products and services. Dravo's
position as the world's leading producer of lime for flue gas
desulfurization applications was enhanced by the passage of the
1990 Clean Air Act Amendments.
Further information required by this item is incorporated by
reference to the information set forth under the captions
indicated below in the 1996 Annual Report to Shareholders which
accompanies this report:
Caption in Annual Report Page No.
Results of Operations 12 - 14
Note 16: Research and Development 32
Employees at Year-End 35
-5-
Item 2. Properties
The following is a listing of principal offices, plants and mines
currently used in operations:
Use Location Owned or Leased
Executive and general Pittsburgh, Pennsylvania Leased
offices
Production facilities Saginaw, Alabama Owned
Butler, Kentucky Owned
Maysville, Kentucky Owned
Distribution sites Ft. Lauderdale, Florida Leased
Tampa, Florida Owned/Leased
Sanford, Florida Leased
Brunswick, Georgia Owned/Leased
Baton Rouge, Louisiana Owned
Porterfield, Ohio Leased
Donora, Pennsylvania Leased
Monaca, Pennsylvania Owned/Leased
The following table shows a summary of the company's reserves at
December 31, 1996 and tons mined by Dravo Lime in 1996.
(Tons in millions)
Recoverable 1996
Reserves Production
Underground Mines:
Owned 592.6 6.2
Quarries:
Owned (1) 31.1 1.4
623.7 7.6
(1) Does not include over 27 million tons of reserves purchased
in early 1997.
Additional information required by this item is incorporated by
reference to the information set forth under Item 1(a) "General
Development of the Business" on pages 3 through 5 of this Form 10-
K.
-6-
Item 3. Legal Proceedings
Information required by this item is incorporated by reference to
the information set forth under the caption Note 8: "Contingent
Liabilities" in the Notes to Consolidated Financial Statements on
pages 25 and 26 of the 1996 Annual Report to Shareholders which
accompanies this report.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders for
the three months ended December 31, 1996.
-7-
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Information required by this item is incorporated by reference to
the information set forth under the captions indicated below in
the 1996 Annual Report to Shareholders which accompanies this
report:
Caption in Annual Report Page No.
Common Stock Market Price 15
Shareholders at year-end 35
Dividends 14, 35
Description of Dravo Capital Stock
General
Under its Restated Articles of Incorporation ("the Articles"), as
amended, Dravo is authorized to issue 1,878,870 shares of
preference stock, par value $1.00 per share, and 35,000,000
shares of common stock, par value $1.00 per share. At December
31, 1996 issued preference and common shares were 220,386 and
15,096,817, respectively and there were 333,168 shares of common
stock held in the treasury.
Four series of preference stock have been established by
resolutions of the Board of Directors: $2.20 Cumulative
Convertible Series A Preference Stock ("Series A Preference
Stock"), consisting of 26,817 shares, issued on September 1,
1970; $2.475 Cumulative Convertible Series B Preference Stock
("Series B Preference Stock"), consisting of 165,516 shares,
issued on June 12, 1973; Series C Preference Stock consisting of
200,000 shares; and $12.35 Series D Cumulative Convertible
Exchangeable Preference Stock ("Series D Preference Stock"),
consisting of 200,000 shares, issued on September 21, 1988. All
of the shares of Series A Preference Stock were converted into
shares of common stock on April 2, 1978. Presently there are
20,386 shares of Series B Preference Stock and 200,000 shares of
Series D Preference Stock issued and outstanding. No shares of
Series C Preference Stock have been issued or are outstanding.
The Board of Directors did not extend the rights to issue Series
C stock, pursuant to the Shareholders' Rights Agreement, past the
April 17, 1996 expiration date. Other series of preference stock
may be created by resolution of the Board of Directors with such
dividend, liquidation, redemption, sinking fund and conversion
rights as shall be specified therein.
Dividend Rights
The holders of the preference stock are entitled to cumulative
dividends, payable quarterly, which must be paid and the next
quarterly dividend set apart before any dividends (except
dividends in common stock or any other
-8-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters (continued)
Dividend Rights (continued)
stock ranking after the preference stocks as to dividends and
assets) are declared, or paid, or monies set apart for the
payment of dividends on any class of stock ranking after the
preference stock as to dividends or assets. The rate of
dividends payable upon the Series B Preference Stock is $2.475
per annum. The rate of dividends payable upon the Series D
Preference Stock is 12.35 percent per annum or $12.35 per share,
which rate shall be increased by 2 percent per annum if such
dividends are not paid on any quarterly dividend payment date
until accrued and unpaid dividends on the Series D Preference
Stock are paid.
The holders of the common stock are entitled to such dividends as
may be declared by the Board of Directors out of assets properly
available for that purpose. No common stock dividends have been
declared since April, 1987.
Other information required by this item is incorporated by
reference to the information set forth under the caption "Note 5:
Notes Payable", in the Notes to Consolidated Financial Statements
on pages 24 and 25 of the 1996 Annual Report to Shareholders
which accompanies this report.
Voting Rights
Each share of the common stock and the preference stock is
entitled to one vote, which is cumulative in the election of
directors. The Board of Directors is divided into three classes,
and approximately one third of the directors are elected each
year for three year terms. The effect of such classification of
the Board is to increase the number of shares, voted
cumulatively, necessary to elect directors. If dividends on the
preference stock shall be unpaid or in arrears for six quarterly
dividend periods, the holders of the preference stock voting as a
class shall have the right to elect two additional directors.
Liquidation Rights
In the event of the voluntary or involuntary liquidation or
dissolution of Dravo, or the sale or other disposition of
substantially all of its assets, the holders of the Series B
Preference Stock shall be entitled to receive the sum of $55 per
share plus all accumulated and unpaid dividends thereon; and the
holders of Series D Preference Stock shall be entitled to receive
$100 per share plus all accumulated and unpaid dividends thereon.
The holders of any other series of preference stock which may be
issued shall be entitled to receive the amounts provided for in
the resolutions creating such series. The holders of the common
stock shall share ratably in the remaining assets, if any.
-9-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters (continued)
No Preemptive Rights and Non-assessability
No preemptive rights attach to the common stock or the preference
stock. Neither the holders of the common stock nor the
preference stock are liable to further calls or assessment by
Dravo.
Redemption and Sinking Fund Provisions
There are no redemption provisions with respect to the common
stock. The Series B Preference Stock may be redeemed, in whole
or in part, at the option of Dravo, on not less than 60 days
notice, on any quarterly dividend payment date by the payment of
$55 per share and all accumulated and unpaid dividends to the
redemption date. The Series D Preference Stock may be redeemed in
whole or in part at the option of Dravo at any time after January
21, 1996, by the payment of $100 per share and all accumulated
and unpaid dividends to the redemption date, so long as the
current market price (as defined in the Certificate of
Designations, Preferences and Rights for the Series D Preference
Stock) of the common stock on the date the Board decides to
redeem the shares is at least 175 percent of the then effective
conversion price for the Series D Preference Stock. Commencing
on the first quarterly dividend payment date after September 21,
1998 and annually thereafter, Dravo is required to redeem 50,000
shares of Series D Preference Stock in cash at the redemption
price of $100 per share plus all accumulated and unpaid
dividends. Dravo is also required (unless certain conditions are
met) to redeem all of the then outstanding shares of Series D
Preference Stock in cash at $100 per share plus all accumulated
and unpaid dividends (a) if Dravo declares or pays or sets apart
for payment any dividends or makes any other distribution in cash
or other property on or in respect of the common stock or any
other class or series of the capital stock of Dravo ranking
junior to the Series D Preference Stock as to payment of
dividends ("Junior Dividend Stock"), or sets apart money for any
sinking fund or analogous fund for the redemption or purchase of
any Junior Dividend Stock and (b) upon any merger or
consolidation of Dravo if, in connection therewith, the holders
of the common stock receive cash, debt instruments or preference
stock of the surviving entity which ranks on a parity with or
senior to the Series D Preference stock with respect to
liquidation, dissolution or winding up or dividends. There are
no sinking fund provisions with respect to the common stock, the
Series B Preference Stock or the Series D Preference Stock.
-10-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters (continued)
Conversion
The Series B Preference Stock is presently convertible at any
time prior to redemption at the option of the holder into common
stock on the basis of 3.216 shares of common stock for each share
of Series B Preference Stock, subject to equitable adjustment in
the event of certain changes affecting the common stock. The
Series D Preference Stock is presently convertible at any time
prior to redemption at the option of the holder into common stock
on the basis of 8.0 shares of common stock for each share of
Series D Preference Stock, subject to adjustment in the event of
certain changes affecting the common stock. The Series D
Preference Stock is convertible or exchangeable in whole at any
time by Dravo for an equal face amount of Dravo Senior
Subordinated Convertible Notes due September 21, 2001 containing
the same conversion rights, transfer restrictions and other terms
(other than voting rights) as the Series D Preference Stock.
There are no conversion rights with respect to the common stock.
Other Information
Dravo may purchase shares of the Preference Stock whether or not
any dividend arrearage shall exist with respect thereto, and may
hold and dispose of such shares in such manner as it may elect.
The holders of the preference stock who comply with applicable
provisions of law and object to a merger or consolidation
involving Dravo shall have all of the legal rights of objecting
shareholders in a merger or consolidation whether or not they
constitute a class otherwise entitled to such rights.
The transfer agent and registrar for the common stock is
Continental Stock Transfer & Trust Company, New York, NY.
-11-
Item 6. Selected Financial Data
Information required by this item, with the exception of common
stock dividends declared, is incorporated by reference to the
information set forth under the caption "Five-Year Summary" on
page 35 of the 1996 Annual Report to Shareholders which
accompanies this report. Dravo has declared no common stock
dividends in the five-year period ending December 31, 1996.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information required by this item is incorporated by reference to
the information set forth under the captions "Overview", "Results
of Operations", "Financial Position and Liquidity" and "Outlook"
on pages 12 through 15 of the 1996 Annual Report to Shareholders
which accompanies this report, to the information set forth under
the caption Note 2: "Discontinued Operations" on page 23, Note 3:
"Dispositions" on pages 23 and 24, Note 7: "Commitments" on page
25, Note 8: "Contingent Liabilities" on pages 25 and 26, Note 13:
"Income Taxes" on pages 31 and 32 and Note 14: "Extraordinary
Item" on page 32 in the Notes to Consolidated Financial
Statements of the 1996 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference to
the financial statements and notes thereto set forth on pages 16
through 33, and the Independent Auditors' Report set forth on
page 34 of the 1996 Annual Report to Shareholders which
accompanies this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
-12-
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item as to Directors and nominees
for Director is incorporated by reference to the information set
forth under the caption "Information Concerning Directors and
Nominees for Director" in the Registrant's Proxy Statement for
the Annual Meeting of Shareholders on April 24, 1997.
The following information indicates the position and age at March
22, 1997 of the non-director executive officers of Dravo
Corporation and their business experience during the last five
years:
Marshall S. Johnson, Age 55, Vice President, Operations and
Engineering since December, 1994; Vice President, Operations,
Dravo Lime Company from April, 1992 to December 1994; prior
thereto Regional Operations Manager, Dravo Lime Company.
Ernest F. Ladd III, Age 56, Executive Vice President, Chief
Financial Officer since December, 1994; Executive Vice President,
Finance and Administration from December, 1989 to December, 1994.
John R. Major, Age 52, Vice President, Administration since
January, 1989.
James J. Puhala, Age 54, Vice President, General Counsel and
Secretary since September, 1987.
Richard E. Redlinger, Age 45, Vice President, Corporate
Development, and Treasurer since July, 1995; prior thereto Vice
President, Finance and Planning, Dravo Lime Company.
Donald H. Stowe, Jr., Age 45, Vice President Sales and Technology
since December 1994; Executive Vice President, Sales and
Technology, Dravo Lime Company from March, 1992 to December,
1994; prior thereto Sr. Vice President, Sales and Technology,
Dravo Lime Company.
Larry J. Walker, Age 44, Vice President and Controller since
July, 1995; Controller since December, 1989.
-13-
Item 11. Executive Compensation
Information required by this item is incorporated by reference to
the information set forth under the caption "Executive
Compensation" in the Registrant's Proxy Statement for the Annual
Meeting of Shareholders on April 24, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information required by this item is incorporated by reference to
the information set forth under the captions "Security Ownership
of Certain Beneficial Owners" and "Ownership by Management of
Equity Securities" in the Registrant's Proxy Statement for the
Annual Meeting of Shareholders on April 24, 1997.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated by reference to
the information set forth under the caption "Information
Concerning Directors and Nominees for Director" in the
Registrant's Proxy Statement for the Annual Meeting of
Shareholders on April 24, 1997.
-14-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the
Registrant are filed pursuant to Item 8 of this Form 10-K
and are incorporated herein by reference to the page numbers
indicated below in the 1996 Annual Report to Shareholders
which accompanies this report.
Description Page No.
Consolidated Balance Sheets at December 31, 1996 and 1995 16, 17
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 18
Consolidated Statements of Retained Earnings for the years
ended December 31, 1996, 1995 and 1994 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 20, 21
Notes to Consolidated Financial Statements 22 - 33
Independent Auditors' Report 34
2. Financial Statement Schedules
The following financial statement schedules of the Registrant
are required and are filed pursuant to this item in this
Form 10-K.
Schedule Page No.
Independent Auditors' Report 23
Schedule I. Condensed Financial Information of 24 - 31
Registrant
Schedules other than those listed above have been omitted because they
are not applicable or because the required information is reported in
the financial statements or notes.
-15-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(a) 3. Exhibits
(3) Articles of Incorporation and By-laws
(i) Articles of Amendment restating Dravo
Corporation's Articles of Incorporation in their
entirety and all subsequent amendments thereto
including but not limited to the Statement with
Respect to Shares of Dravo Corporation as filed
with the Secretary of the Commonwealth of
Pennsylvania on January 27, 1992 are incorporated
by reference to Exhibit 3.1 of the February 12,
1992 Form 8-K of the Registrant.
(ii) By-laws of the Registrant as amended are incorporated by
reference to Exhibit 3 (ii) of the December 31,
1995 Form 10-K of the Registrant.
(4) Instruments Defining the Rights of Security
Holders, including Indentures
(i) Articles of Amendment restating Dravo
Corporation's Articles of Incorporation,
described in Exhibit (3)(i) in this Form 10-K of
the Registrant.
(ii) Statement with Respect to Shares -
Domestic Business Corporation amending Section
3(a) of the Certificate of Designations,
Preferences and Rights of Series D Cumulative
Convertible Exchangeable Preference Stock is
incorporated by reference to exhibit (4) (ii) of
the June 30, 1990 Form 10-Q of the Registrant.
(iii) Form of indemnification agreement
between Dravo Corporation and members of its Board
of Directors incorporated by reference to Exhibit
(10)(xvii) of the December 31, 1987 Form 10-K of
the Registrant.
(iv) Statement with respect to amended rules
for Form S-8 is incorporated by reference to
Exhibit (4)(x) of the December 31, 1990 Form 10-K
of the Registrant.
-16-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(a) 3. Exhibits (continued)
(4)(v) Credit and Note and Stock Purchase
Agreement dated as of September 21, 1988 by and
among Dravo Corporation, its wholly-owned
subsidiaries, Dravo Lime Company and Dravo Basic
Materials Company, Inc. and The Prudential
Insurance Company of America and Prudential
Interfunding Corp. is incorporated by reference to
Exhibit (4)(i) of the September 27, 1988 Form 8-K
of the Registrant and amendment dated March 13,
1990 to said agreement is incorporated by
reference to Exhibit (4)(v) of the December 31,
1989 Form 10-K of the Registrant.
(vi) Registration agreement dated as of
September 21, 1988 between Dravo Corporation and
The Prudential Insurance Company of America, is
incorporated by reference to Exhibit (4)(vi) of
the September 27, 1988 Form 8-K of the Registrant.
(vii) (a) Revolving Line of Credit
Agreement with all attendant schedules and
exhibits dated as of September 20, 1990, by
and among Dravo Corporation, Dravo Lime
Company, Dravo Basic Materials Company, Inc.,
Regions Bank of Alabama (formerly First
Alabama Bank), and PNC Bank, N. A. (formerly
Pittsburgh National Bank) is incorporated by
reference to Exhibit (4)(i) of the September
30, 1990 Form 10-Q of the Registrant.
(b) Amendment dated September
20, 1990 to Credit and Note and Stock Purchase
Agreement dated as of September 21, 1988 is
incorporated by reference to Exhibit (4) (ii)
of the September 30, 1990 Form 10-Q of the
Registrant.
(c) First amendment to the
Companies' Pledge Agreement dated September
20, 1990 of the Credit and Note and Stock
Purchase Agreement dated September 21, 1988 is
incorporated by reference to Exhibit (4)(iii)
of the September 30, 1990 Form 10-Q of the
Registrant.
(d) First amendment to the
Second Intercreditor Agreement dated September
20, 1990 of the Credit and Note and Stock
Purchase Agreement dated September 21, 1988 is
incorporated by reference to Exhibit (4)(iv)
of the September 30, 1990 Form 10-Q of the
Registrant.
(e) Intercreditor Agreement
dated September 20, 1990 by and among The
Prudential Insurance Company of America,
Regions Bank of Alabama (formerly First
Alabama Bank), PNC Bank, N. A. (formerly
Pittsburgh National Bank), Mellon Bank, N. A.,
and the Royal Bank of Canada is incorporated
by reference to Exhibit (4) (v) of the
September 30, 1990 Form 10-Q of the
Registrant.
-17-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(a) 3. Exhibits (continued)
(4)(viii) Loan Agreement dated as of December 1, 1978
between Dravo Equipment Company and County
of Harrison, Ohio.
The Registrant hereby agrees to furnish to the
Commission upon request a copy of the instrument listed
under exhibit (4)(ix). The instrument does not authorize
the issuance of securities in excess of 10 percent of total
assets of the Registrant and its subsidiaries on a
consolidated basis.
(ix) Override Agreement, dated January 21,
1992, between Dravo Corporation, The Prudential
Insurance Company of America, Regions Bank of
Alabama (formerly First Alabama Bank), PNC Bank,
N. A. (formerly Pittsburgh National Bank) and Bank
of America Illinois (formerly Continental Bank, N.
A.) is incorporated by reference to Exhibit 10.1
of the February 12, 1992 Form 8-K of the
Registrant.
(x) First Amendment, dated March 10, 1993,
to the Override Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xi) of
the December 31, 1992 Form 10-K of the Registrant.
(xi) Second Amendment, dated March 7, 1994,
to the Override Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xii)
of the December 31, 1993 Form 10-K of the
Registrant.
(xii) First Amendment, dated March 7, 1994, to
the Amended and Restated Revolving Credit
Agreement dated January 21, 1992 is incorporated
by reference to Exhibit 4 (xiii) of the December
31, 1993 Form 10-K of the Registrant.
(xiii) Four copies of the First Amendment, (one
each for The Prudential Insurance Company of
America, Regions Bank of Alabama (formerly First
Alabama Bank), PNC Bank, N.A. and Bank of America
Illinois (formerly Continental Bank N.A.), dated
March 7, 1994, to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992
are incorporated by reference to Exhibit 4 (xiv)
of the December 31, 1993 Form 10-K of the
Registrant.
(xiv) Amendment Agreement dated August 1, 1994
encompassing the Third Amendment to the Override
Agreement dated January 21, 1992 and the Second
Amendment to the Amended and Restated Revolving
Credit Agreement dated January 21, 1992 is
incorporated by reference to the August 18, 1994
Form 8-K of the Registrant.
-18-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(a) 3. Exhibits (continued)
(4)(xv) Amendment Agreement dated January 3,
1995 encompassing the Fourth Amendment to the
Override Agreement dated January 21, 1992 and the
Third Amendment to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xvii)
of the December 31, 1994 Form 10-K of the
Registrant.
(xvi) Amendment Agreement dated December 31,
1995 encompassing the Fifth Amendment to the
Override Agreement dated January 21, 1992 and the
Fifth Amendment to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xvii)
of the December 31, 1995 Form 10-K of the
Registrant. (Note: There is no Fourth Amendment
to the Amended and Restated Revolving Credit
Agreement due to a numbering error.)
(xvii) Amendment and Restatement of Articles
IV, V, VI and Appendix A dated February 15, 1996
of the Override Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4(xviii)
of the December 31, 1995 Form 10-K of the
Registrant.
(xviii) Amendment Agreement dated June 28,
1996 encompassing the Sixth Amendment to the
Amended and Restated Revolving Credit Agreement
dated January 21, 1992 is filed herein under
separate cover.
(10) Material Contracts
(All of the following, except item 10 (xiv),
are Management Contracts or Compensatory Plans or
Arrangements required to be filed as an Exhibit to this
Form 10-K.)
(i) Dravo Corporation Executive Death and
Disability Income Executive Benefits Plan (now
Executive Benefit Plan), approved by the Board of
Directors on October 23, 1980, incorporated by
reference to Exhibit 10 (i) of the December 31,
1980 Form 10-K of the Registrant, and amendment
thereto dated July 1, 1984, incorporated by
reference to Exhibit 10 (i) of the December 31,
1984 Form 10-K of the Registrant.
(ii) Dravo Corporation Stock Option Plan of
1978, as amended, incorporated by reference to
Exhibit 10 (vi) of the December 31, 1982 Form 10-K
of the Registrant.
(iii) Dravo Corporation Long-Term Incentive
Award Plan of 1983, as amended, incorporated by
reference to Exhibit 10 (iv) of the December 31,
1987 Form 10-K of the Registrant.
-19-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(a) 3. Exhibits (continued)
(10)(iv) Dravo Corporation Employee Stock Option Plan of
1988, incorporated by reference to the Proxy
Statement for the Annual Meeting of Shareholders
on April 28, 1988.
(v) Dravo Corporation Incentive Compensation
Plan is incorporated by reference to Exhibit 10
(v) of the December 31, 1995 Form 10-K of the
Registrant.
(vi) Dravo Corporation Stock Option Plan of
1994, as amended December, 1995, is incorporated
by reference to Exhibit 10 (vi) of the December
31, 1996 Form 10-K of the Registrant.
(vii) Dravo Corporation Non-Employee
Directors' Retainer Fee Plan, incorporated by
reference to the Registrant's Registration
Statement No. 333-01689 on Form S-8 dated March
13, 1996.
(viii) Dravo Corporation Stock Incentive
Compensation Plan, incorporated by reference to
the Registrant's Registration Statement No. 333-
01691 on Form S-8 dated March 13, 1996.
(ix) Agreement dated June 1, 1993 between
Dravo Corporation and Ernest F. Ladd III is
incorporated by reference to Exhibit 10 (viii) of
the December 31, 1993 Form 10-K of the Registrant.
(x) Agreement dated June 1, 1993 between
Dravo Corporation and Carl A. Gilbert is
incorporated by reference to Exhibit 10 (ix) of
the December 31, 1993 Form 10-K of the Registrant.
(xi) Agreement dated June 1, 1993 between
Dravo Corporation and John R. Major is
incorporated by reference to Exhibit 10 (xi) of
the December 31, 1993 Form 10-K of the Registrant.
(xii) Agreement dated June 1, 1993 between
Dravo Corporation and James J. Puhala is
incorporated by reference to Exhibit 10 (xii) of
the December 31, 1995 Form 10-K of the Registrant.
(xiii) Agreement dated January 1, 1995 between
Dravo Corporation and Donald H. Stowe, Jr., is
incorporated by reference to Exhibit 10 (xiii) of
the December 31, 1995 Form 10-K of the Registrant.
(xiv) Noncompetition and Nondisclosure
Agreement dated January 3, 1995 by and among Dravo
Corporation, Dravo Basic Materials Company, Inc.,
Dravo Lime Company and Martin Marietta Materials,
Inc. is incorporated by reference to Exhibit 10.1
of the January 17, 1995 Form 8-K of the
Registrant.
-20-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(a) 3. Exhibits (continued)
(11) Statement Re Computation of Per Share Earnings
filed under separate cover.
(13) 1996 Annual Report to Shareholders attached to
this report under separate cover. Except for the pages
and information thereof expressly incorporated by
reference in this Form 10-K, the Annual Report to
Shareholders is provided solely for the information of
the Securities and Exchange Commission and is not to be
deemed "filed" as part of the Form 10-K.
(21) Subsidiaries of the Registrant filed under separate cover.
(23) Consent of Independent Auditors filed under separate cover.
(24) Powers of Attorney are filed herein under separate cover.
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended
December 31, 1996.
-21-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DRAVO CORPORATION
March 26, 1997 By:/s/ CARL A. GILBERT
Carl A. Gilbert, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date
indicated.
Signature Title Date
/s/ CARL A. GILBERT President, Chief Executive
Carl A. Gilbert Officer and Director March 26, 1997
/s/ ERNEST F. LADD III Executive Vice President,
Ernest F. Ladd III Chief Financial Officer March 26, 1997
/s/ LARRY J. WALKER Vice President and
Larry J. Walker Controller March 26, 1997
*ARTHUR E. BYRNES Director March 26, 1997
Arthur E. Byrnes
*JAMES C. HUNTINGTON, JR. Director March 26, 1997
James C. Huntington, Jr.
*WILLIAM E. KASSLING Director March 26, 1997
William E. Kassling
*WILLIAM G. ROTH Director March 26, 1997
William G. Roth
*KONRAD M. WEIS Director March 26, 1997
Konrad M. Weis
/s/ ERNEST F. LADD III
*By Ernest F. Ladd III, Attorney-in-fact
-22-
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Dravo Corporation:
Under date of January 22, 1997, we reported on the consolidated
balance sheets of Dravo Corporation and subsidiaries as of
December 31, 1996, and 1995, and the related consolidated
statements of operations, retained earnings, and cash flows for
each of the years in the three-year period ended December 31,
1996, as contained in the 1996 annual report to shareholders. As
discussed in Note 10 to the consolidated financial statements,
the company adopted the method of accounting for postemployment
benefits prescribed by Statement of Financial Accounting
Standards No. 112 in 1994. These consolidated financial
statements and our report thereon are incorporated by reference
in the annual report on Form 10-K for the year 1996. In
connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial
statement schedule as listed in the accompanying index. The
financial statement schedule is the responsibility of the
company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
January 22, 1997
-23-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
(In thousands) December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 1,390 $ 279
Accounts receivable 517 879
Current income tax benefit from affiliates 6,104 4,724
Net assets of discontinued operations -- 923
Other current assets 183 434
Total current assets 8,194 7,239
Due from affiliates 23,094 --
Investments in affiliates 52,525 141,836
Deferred income tax benefit from affiliates 29,718 26,723
Other assets 23,561 19,532
Property, plant and equipment 123 6,832
Less accumulated depreciation and amortization 123 6,824
Net property, plant and equipment -- 8
Total assets $137,092 $195,338
See accompanying notes to financial statements.
-24-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
(In thousands) December 31,
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 1,038 $ 1,566
Accrued retirement contribution 1,785 2,423
Net liabilities of discontinued operations 6,299 --
Other current liabilities 637 641
Total current liabilities 9,759 4,630
Advances from affiliates -- 75,046
Net liabilities of discontinued operations 6,786 9,517
Other liabilities 6,632 6,290
Redeemable preference stock:
Par value $1, issued 200,000 shares: Series D,
cumulative, convertible, exchangeable
(entitled in liquidation to $20.0 million) 20,000 20,000
Shareholders' equity:
Preference stock, par value $1, authorized
1,878,870 shares: Series B, $2.475 cumulative,
convertible, issued 20,386 and 25,386 shares
(entitled in liquidation to $1.1 million
and $1.4 million); 20 25
Series D, reported above
Common stock, par value $1, authorized 35,000,000
shares; issued 15,096,817 and 15,055,237
shares 15,097 15,055
Other shareholders' equity 78,798 64,775
Total shareholders' equity 93,915 79,855
Total liabilities and shareholders' equity $137,092 $195,338
See accompanying notes to financial statements.
-25-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Statements of Operations
Years ended December 31,
(In thousands) 1996 1995 1994
General and administrative
expenses $ (709) $ (961) $ (1,433)
Other expense (4) -- --
Interest expense -- (9) (16)
Interest income 10 -- 9
Loss from continuing operations
before taxes and affiliate earnings (703) (970) (1,440)
Income tax benefit (provision) 4,142 2,038 (4,107)
Earnings (loss) from continuing
operations before affiliate earnings 3,439 1,068 (5,547)
Equity in affiliate earnings 10,689 9,913 1,544
Earnings (loss) from
continuing operations 14,128 10,981 (4,003)
Loss from discontinued operations -- -- (6,554)
Net earnings (loss) $14,12 8 $10,981 $(10,557)
See accompanying notes to financial statements.
-26-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Statements of Cash Flows
(In thousands) Years ended December 31,
1996 1995 1994
Cash flows from operating activities:
Earnings (loss) from continuing
operations $14,128 $ 10,981 $ (4,003)
Adjustments to reconcile earnings (loss) from
continuing operations to net cash provided
(used) by continuing operations activities:
Depreciation and amortization 4 6 9
Loss on disposal of assets 4 -- --
Equity in earnings of affiliates (10,689) (9,913) (1,544)
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable 362 726 (1,036)
Decrease (increase) in current income
tax benefits (1,381) (2,783) 2,542
Decrease (increase) in other current
assets 318 1,151 (1,269)
Increase in other assets (1,991) (3,517) (7,791)
Decrease (increase) in deferred
income taxes (2,995) 9,689 1,591
Increase (decrease) in accounts payable
and accrued expenses (1,062) (1,404) 961
Increase in other liabilities 342 390 3,352
Net cash provided (used) by continuing
operations activities (2,960) 5,326 (7,188)
Loss from discontinued operations -- -- (6,554)
Increase (decrease) in net liabilities of
discontinued operations 4,491 (13,099) (4,592)
Proceeds from repayment of notes receivable
from sale of discontinued operations -- 2,200 1,600
Net cash provided (used) by discontinued
operations activities 4,491 (10,899) (9,546)
Net cash provided (used) by operating
activities $ 1,531 $(5,573) $(16,734)
See accompanying notes to financial statements.
-27-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Statements of Cash Flows
(In thousands) Years ended December 31,
1996 1995 1994
Cash flows from investing activities:
Increase (decrease) in advances from
subsidiaries $(98,140) $(77,757) $19,187
Dividends received from affiliates 100,000 88,000 --
Other, net 1 -- 266
Net cash provided (used) by investing
activities 1,861 10,243 19,453
Cash flows from financing activities:
Proceeds from issuance of common stock 248 557 42
Purchase of treasury stock -- (2,667) --
Dividends paid (2,529) (2,535) (2,544)
Net cash used by financing activities (2,281) (4,645) (2,502)
Net increase in cash and cash
equivalents 1,111 25 217
Cash and cash equivalents at beginning
of year 279 254 37
Cash and cash equivalents at end of year $ 1,390 $ 279 $ 254
See accompanying notes to financial statements.
-28-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Notes to Financial Statements
Notes 1 through 3, 5 through 15, and 17 to Dravo Corporation's
Consolidated Financial Statements have relevance to the parent
company financial statements and should be read in conjunction
therewith. Certain reclassifications of previously reported
balances have been made to conform to the current year's
presentation.
Note 1: Commitments
There was no continuing operations rental expense for 1996, 1995
or 1994. The minimum future rentals under noncancelable
operating leases and minimum future rental receipts from
subleases to third parties as of December 31, 1996 are indicated
in the table below. Of the $4.0 million net minimum payments,
$3.3 million has been expensed in connection with discontinued
operations.
(In thousands)
1997 $10,555
1998 3,561
1999 --
2000 --
2001 --
After 2001 --
Total minimum payments required 14,116
Less: Minimum sublease rental
receipts (10,203)
Net minimum payments $ 3,913
Note 2: Income Taxes
Dravo Corporation files a consolidated federal income tax return
which includes the parent and consolidated subsidiaries. Dravo
Corporation parent company financial statements recognize current
income tax benefits to the extent the benefits are offset by
current income tax liabilities of the consolidated subsidiaries.
Long-term deferred income tax benefits are recognized to the
extent that it is more likely than not that the company will
generate sufficient consolidated taxable income to utilize net
operating loss carryforwards prior to their expiration.
-29-
Note 2: Income Taxes (continued)
The income tax benefit (provision) for the years ended December
31 are comprised of the following:
(In thousands) 1996 1995 1994
Provision to offset tax benefits
of subsidiaries $ -- $ -- $ (4,107)
Benefit to offset tax liabilities
of subsidiaries 4,142 2,038 --
$ 4,142 $ 2,038 $ (4,107)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31 are as follows:
(In thousands)
1996 1995
Deferred tax assets:
Provision for discontinued operations $ 4,580 $ 3,008
Net operating loss carryforwards 62,808 67,229
Investment tax credit carryforwards 791 1,411
Other 721 --
Total gross deferred tax assets 68,900 71,648
Less valuation allowance 34,829 36,381
Net deferred tax assets after
valuation allowance 34,071 35,267
Deferred tax liabilities:
Pension accrual 4,353 6,151
Other -- 2,393
Total gross deferred tax liabilities 4,353 8,544
Net deferred tax asset $29,718 $26,723
Management believes it is more likely than not that the net
deferred tax asset will be realized through the reversal of
temporary differences and through its subsidiaries future income.
In order to fully realize the net deferred tax asset, the parent
company and its subsidiaries will need to generate future taxable
income of approximately $70.9 million prior to the expiration of
its net operating loss carryforwards. There can be no assurance,
however, that the parent, or its subsidiaries, will generate
enough taxable income to realize the deferred tax asset prior to
the NOLs expiring.
-30-
Note 3: Dividends
Cash dividends paid to the Registrant for the respective years
ended December 31:
(In thousands)
1996 1995 1994
Consolidated affiliates $100,000 $88,000 $-0-
50 percent or less owned companies
accounted for by the equity method 1,090 916 792
-31-
EXHIBITS
Table of Contents
Exhibit (Exhibit No.) Page No.
4. Instruments Defining the Rights of Security Holders,
Including Indentures
(xviii) Amendment Agreement dated June 28,
1996 encompassing the Sixth Amendment
to the Amended and Restated Revolving
Credit Agreement. (4)(xviii)1-7
11. Statement RE Computation of Per Share Earnings (11) 1, 2
13. 1996 Annual Report (13) 12-35
21. Subsidiaries of the Registrant (21) 1
23. Consent of Experts and Counsel (23) 1
24. Powers of Attorney (24) 1-5
27. Financial Data Schedule (EDGAR filing only) (27) 1
-32-