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, 1997
Commission file number 1-5642
DRAVO CORPORATION
A PENNSYLVANIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NUMBER 25-0447860
11 STANWIX STREET
PITTSBURGH, PENNSYLVANIA 15222
TELEPHONE (412) 995-5500
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, 1998: 14,713,509
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 20, 1998: $161,848,599
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
1997 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 23, 1998 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 Transactions14
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 Registrant24 - 31
Table of Contents for documents filed herein as Exhibits
10, 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 11 Stanwix Street, Pittsburgh, Pennsylvania 15222, and its
telephone number is 412-995-5500. As used herein, the term Dravo includes its
consolidated subsidiaries unless otherwise indicated.
Dravo is 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 & 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 Cinergy Corp. - each accounted for 10
percent or more of consolidated revenue in 1997. All reserves are located on
properties physically accessible for purposes of mining and processing
limestone into lime. Liabilities associated with non-natural resource
businesses sold or disposed of in the late 1980s are presented as a component
of discontinued operations in the financial statements.
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.
With the completion of a fourth kiln at Maysville, Kentucky in 1997, annual
quicklime capacity totals approximately 3,400,000 tons.
The Maysville plant is a four kiln, 1,400,000 tons-per-year facility located
along the Ohio River and produces a material marketed under the trade name
Thiosorbic Lime. Thiosorbic Lime has a chemistry ideally suited for removing
sulfur dioxide from power plant stack gases. Most 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 four kiln operation in excess of eighty
years.
Dravo Lime's Black River facility produces Thiosorbic quicklime, high calcium
pebble and pulverized quicklime, and bulk and bagged hydrated lime. Located
along the Ohio River at Butler, Kentucky, Black River has an annual quicklime
capacity of 1,400,000 tons-per-year. Of that total, forty 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 current
capacity, reserves are considered adequate to sustain production levels for
more than seventy years.
-3-
Item 1. Business (continued)
The company's Longview facility, located near Birmingham, Alabama, has three
kilns that produce 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 has secured the necessary permits and plans to start construction of a
fourth kiln at Longview in 1998. In early 1997, a number of land parcels
adjacent to the Longview quarry were purchased that doubled limestone reserves.
Recoverable reserves are estimated to last approximately forty-five 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.
An aggregates processing plant at the Longview facility annually produces
between 500,000 to 1,000,000 tons of aggregates. 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. A major aggregates company has the exclusive
distributorship rights for certain aggregates by-products produced by the
company.
Dravo Lime products are distributed through quicklime distribution terminals
located in Donora and Monaca, Pennsylvania; Porterfield, Ohio; Brunswick,
Georgia; and Tampa, Fort Lauderdale, Jacksonville 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 flue gas
treatment technologies give it certain competitive advantages.
Dravo's research and development expenditures were $6.5 million in 1997 and
$3.7 million in 1996. Expenditures in 1997 and 1996 included $4.2 million and
$1.0 million, respectively, related to construction of the first commercial
scale ThioClear flue gas desulfurization (FGD) system. ThioClear is a second
generation proprietary FGD technology. The system's construction costs plus
interest will be repaid to the company by the owner, AES Beaver Valley, Inc.
Research and development spending in 1998 is expected to total $2.5 million.
The company anticipates the research, much of which is being conducted jointly
with utility customers, will lower both the capital and operating costs
associated with flue gas treatment. 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
-4-
Item 1. Business (continued)
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. 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.
Dravo Corporation is a domestic natural resource business primarily involved in
the production, processing and supply of lime for environmental, metallurgical,
pulp & paper, municipal, construction and miscellaneous chemical and industrial
applications as well as the development and marketing of related environmental
technologies, products and services. Standards promulgated by the 1990 Clean
Air Act Amendments bolstered Dravo's position as the world's leading producer
of lime for FGD applications.
Further information required by this item is incorporated by reference to the
information set forth under the captions indicated below in the 1997 Annual
Report to Shareholders which accompanies this report:
Caption in Annual Report Page No.
Results of Operations 13 - 15
Note 15: Research and Development 34
Employees at Year-End 37
-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
Jacksonville, Florida Leased
Sanford, Florida Leased
Tampa, Florida Owned/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,
1997 and tons mined by Dravo Lime in 1997.
(Tons in millions)
Recoverable 1997
Reserves Production
Underground mines 586.7 6.3
Quarries 67.8 1.4
654.5 7.7
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 27 and 28 of the 1997
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, 1997.
-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 1997 Annual
Report to Shareholders which accompanies this report:
Caption in Annual Report Page No.
Common Stock Market Price 16
Shareholders at year-end 37
Dividends 16, 37
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, 1997 issued preference and common shares were 218,386
and 15,103,249, respectively and there were 397,413 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 18,386 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 25 and 26 of the 1997 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 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 37 of the 1997 Annual Report to
Shareholders which accompanies this report. Dravo has declared no common stock
dividends in the five-year period ending December 31, 1997.
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 13 through 17 of the
1997 Annual Report to Shareholders which accompanies this report, to the
information set forth under the caption Note 2: "Discontinued Operations" on
page 25, Note 3: "Dispositions" on page 25, Note 7: "Commitments" on pages 26
and 27, Note 8: "Contingent Liabilities" on pages 27 and 28 and Note 13:
"Income Taxes" on pages 33 and 34 in the Notes to Consolidated Financial
Statements of the 1997 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 18 through 35, and the
Independent Auditors' Report set forth on page 36 of the 1997 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 captions
"Nominees For Terms To Expire in 2001", "Directors Whose Terms Expire in 2000"
and "Directors Whose Terms Expire in 1999" in the Registrant's Proxy Statement
for the Annual Meeting of Shareholders on April 23, 1998.
The following information indicates the position and age at March 20, 1998 of
the non-director executive officers of Dravo Corporation and their business
experience during the last five years:
Earl J. Bellisario, Age 48, Senior Vice President, Chief Financial Officer and
Secretary since January, 1998; prior thereto Vice President, Chief Financial
Officer & Secretary, Vikimatic Sales Inc. from September, 1996 to January,
1998. Prior thereto, Senior Vice President and Chief Financial Officer, Acme-
Cleveland Corporation from May, 1992 to September, 1996.
John R. Major, Age 53, Senior Vice President, Chief Operating Officer since
November, 1997; prior thereto Vice President, Administration.
Richard E. Redlinger, Age 46, Vice President, Corporate Development and
Treasurer since July, 1995; prior thereto Vice President, Finance and Planning,
Dravo Lime Company.
Larry J. Walker, Age 45, Vice President and Controller since July, 1995; prior
thereto, Controller.
-13-
Item 11. Executive Compensation
Information required by this item is incorporated by reference to the
information set forth under the captions "Compensation Committee Interlocks and
Insider Participation," "Executive Officers' Compensation," "Options/SAR Grants
In Last Fiscal Year," Aggregated Option/SAR Exercises In Last Fiscal Year And
Fiscal Year-End Option/SAR Values," "Severance Arrangements," "Performance
Graph" and "Executive Benefit Plan" in the Registrant's Proxy Statement for the
Annual Meeting of Shareholders on April 23, 1998.
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 "Beneficial Security Ownership Of
Directors And Executive Officers" and "Stock Ownership Of Certain Beneficial
Owners" in the Registrant's Proxy Statement for the Annual Meeting of
Shareholders on April 23, 1998.
Item 13. Certain Relationships and Related Transactions
Not applicable.
-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 1997 Annual Report to Shareholders which accompanies
this report.
Description Page No.
Consolidated Balance Sheets at December 31, 1997 and 1996 18, 19
Consolidated Statements of Earnings for the years ended
December 31, 1997, 1996 and 1995 20
Consolidated Statements of Retained Earnings for the years
ended December 31, 1997, 1996 and 1995 21
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 22, 23
Notes to Consolidated Financial Statements 24 - 35
Independent Auditors' Report 36
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
Registrant 24-31
Schedules other than those listed above have been omitted because they
are either not applicable, immaterial or 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
American National Trust & Savings Association (successor by
merger to 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) First Amendment 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 Fourth Amendment (see note below) 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: The Fourth Amendment to the Amended and Restated
Revolving Credit Agreement was originally incorrectly
designated as the Fifth Amendment. The numbering error was
corrected in the Sixth Amendment dated July 31, 1997.)
(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
Fifth Amendment (see note below) to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992 is
incorporated by reference to Exhibit 4(xviii) of the
December 31, 1996 Form 10-K of the Registrant. (Note: The
Fifth Amendment to the Amended and Restated Revolving Credit
Agreement was originally incorrectly designated as the Sixth
Amendment. The numbering error was corrected in the Sixth
Amendment dated July 31, 1997.)
(xix) Amendment Agreement dated July 27, 1997 encompassing the
Seventh Amendment to the Override Agreement dated January
21, 1992 and the Sixth Amendment to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992 is
incorporated by reference to Exhibit 4(i) of the September
30, 1997 Form 10-Q of the Registrant.
-19-
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(10) Material Contracts
(All of the following, except item 10 (ix), 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.
(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) 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)
(x) Identical agreements dated September 15, 1997 between Dravo
Corporation and Carl A. Gilbert, Marshall S. Johnson, John
R. Major, James J. Puhala and Donald H. Stowe, Jr. are
incorporated by reference to Exhibit 10(i) of the September
30, 1997 Form 10-Q of the Registrant.
(xi) Agreement dated January 30, 1998 between Dravo Corporation
and Earl J. Bellisario is filed herein under separate cover.
(11) Statement Re Computation of Per Share Earnings filed under
separate cover.
(13) 1997 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 informational
purposes 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, 1997.
-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 27, 1998 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 27, 1998
/s/ EARL J. BELLISARIO Senior Vice President,
Earl J. Bellisario Chief Financial Officer March 27, 1998
and Secretary
/s/ LARRY J. WALKER Vice President and
Larry J. Walker Controller March 27, 1998
*ARTHUR E. BYRNES Director March 27, 1998
Arthur E. Byrnes
*JAMES C. HUNTINGTON, JR. Director March 27, 1998
James C. Huntington, Jr.
*WILLIAM E. KASSLING Director March 27, 1998
William E. Kassling
*PETER T. KROSS Director March 27, 1998
Peter T. Kross
*WILLIAM G. ROTH Director March 27, 1998
William G. Roth
*KONRAD M. WEIS Director March 27, 1998
Konrad M. Weis
/s/ CARL A. GILBERT
*By Carl A. Gilbert, Attorney-in-fact
-22-
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Dravo Corporation:
Under date of January 21, 1998, we reported on the consolidated balance sheets
of Dravo Corporation and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of earnings, retained earnings, and cash
flows for each of the years in the three-year period ended December 31, 1997,
as contained in the 1997 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1997. 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 21, 1998
-23-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
(In thousands) December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 388 $ 1,390
Accounts receivable 883 517
Current income tax benefit
from affiliates 3,999 6,104
Other current assets 306 183
Total current assets 5,576 8,194
Due from affiliates 21,387 23,094
Investments in affiliates 60,733 52,525
Deferred income tax benefit 34,654 29,718
Other assets 26,381 23,561
Property, plant and equipment 123 123
Less accumulated depreciation
and amortization 123 123
Net property, plant and equipment -- --
Total assets $148,731 $137,092
See accompanying notes to financial statements.
-25-
DRAVO CORPORATION (PARENT COMPANY)
Schedule 1 - Condensed Financial Information of Registrant
Balance Sheets
(In thousands) December 31,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 853 $ 1,038
Accrued retirement contribution -- 1,785
Net liabilities of discontinued operations3,613 6,299
Redeemable preference stock 5,000 --
Other current liabilities 812 637
Total current liabilities 10,278 9,759
Net liabilities of discontinued operations 5,401 6,786
Other liabilities 8,386 6,632
Redeemable preference stock:
Par value $1, issued 200,000 shares: Series D,
cumulative, convertible, exchangeable
(entitled in liquidation to $20.0 million)15,000 20,000
Shareholders' equity:
Preference stock, par value $1, authorized
1,878,870 shares: Series B, $2.475 cumulative,
convertible, issued 18,386 and 20,386 shares
(entitled in liquidation to $1.0 million
and $1.1 million, respectively); 18 20
Series D, reported above
Common stock, par value $1, authorized 35,000,000
shares; issued 15,103,249 and 15,096,817
shares 15,103 15,097
Other shareholders' equity 94,545 78,798
Total shareholders' equity 109,666 93,915
Total liabilities and
shareholders' equity $148,731 $137,092
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) 1997 1996 1995
General and administrative
expenses $ (464) $ (709) $ (961)
Other expense -- (4) --
Interest expense (98) -- (9)
Interest income -- 10 --
Loss before taxes
and affiliate earnings (562) (703) (970)
Income tax benefit 7,470 4,142 2,038
Earnings before affiliate earnings 6,908 3,439 1,068
Equity in affiliate earnings 8,208 10,689 9,913
Net earnings $15,116 $14,128 $10,981
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,
1997 1996 1995
Cash flows from operating activities:
Net earnings $15,116 $ 14,128 $ 10,981
Adjustments to reconcile net earnings
to net cash provided (used) by
continuing operations activities:
Depreciation and amortization -- 4 6
Loss on disposal of assets -- 4 --
Equity in earnings of affiliates (8,208) (10,689) (9,913)
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable (366) 362 726
Decrease (increase) in current income
tax benefits 2,105 (1,381) (2,783)
Decrease (increase) in other current
assets (61) 318 1,151
Decrease (increase) in other assets 938 (1,991) (3,517)
Decrease (increase) in deferred
income taxes (4,936) (2,995) 9,689
Decrease in accounts payable
and accrued expenses (1,734) (1,062) (1,404)
Increase in other liabilities 1,754 342 390
Net cash provided (used) by continuing
operations activities 4,608 (2,960) 5,326
Increase (decrease) in net liabilities of
discontinued operations (4,071) 4,491 (13,099)
Proceeds from repayment of notes receivable
from sale of discontinued operations -- -- 2,200
Net cash provided (used) by discontinued
operations activities (4,071) 4,491 (10,899)
Net cash provided (used) by operating
activities $ 537 $ 1,531 $(5,573)
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,
1997 1996 1995
Cash flows from investing activities:
Increase (decrease) in advances from
subsidiaries $1,707 $(98,140) $(77,757)
Dividends received from affiliates -- 100,000 88,000
Other, net -- 1 --
Net cash provided by investing
activities 1,707 1,861 10,243
Cash flows from financing activities:
Proceeds from issuance of common stock -- 248 557
Purchase of treasury stock (729) -- (2,667)
Dividends paid (2,517) (2,529) (2,535)
Net cash used by financing activities (3,246) (2,281) (4,645)
Net increase (decrease) in cash and cash
equivalents (1,002) 1,111 25
Cash and cash equivalents at beginning
of year 1,390 279 254
Cash and cash equivalents at end of year $ 388 $ 1,390 $ 279
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 14, and 16 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 1997, 1996 or 1995. The
minimum future rentals under noncancelable operating leases and minimum future
rental receipts from subleases to third parties as of December 31, 1997 are
indicated in the table below. All of the $1.0 million net minimum payments
were previously expensed in connection with discontinued operations.
(In thousands)
1998 $3,631
1999 --
2000 --
2001 --
2002 --
After 2002 --
Total minimum payments required3,631
Less: Minimum sublease rental
receipts (2,582)
Net minimum payments $1,049
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 for the years ended December 31 are
comprised of the following:
(In thousands) 1997 1996 1995
Benefit to offset tax liabilities
of subsidiaries $ 2,534 $ 1,147 $ 11,727
Change in net deferred tax asset 4,936 2,995 (9,689)
$ 7,470 $ 4,142 $ 2,038
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)
1997 1996
Deferred tax assets:
Provision for discontinued operations $ 3,066 $ 4,580
Net operating loss carryforwards 59,024 62,808
Investment tax credit carryforwards 666 791
Alternative minimum tax credit 750 350
Other 3,553 371
Total gross deferred tax assets 67,059 68,900
Less valuation allowance 23,435 34,829
Net deferred tax assets after
valuation allowance 43,624 34,071
Deferred tax liabilities:
Pension accrual 8,970 4,353
Total gross deferred tax liabilities 8,970 4,353
Net deferred tax asset $34,654 $29,718
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 $98 million prior to the expiration of its net
operating loss carryforwards. The company's cumulative taxable earnings for
the past two years total $22.3 million.
-30-
Note 3: Dividends
Cash dividends paid to the Registrant for the respective years ended December
31:
(In thousands)
1997 1996 1995
Consolidated affiliates $ -- $100,000 $ 88,000
50 percent or less owned companies
accounted for by the equity method 647 1,090 916
-31-
EXHIBITS
Table of Contents
Exhibit (Exhibit No.) Page No.
10. Material Contracts
(xi) Agreement dated January 30, 1998
between Dravo Corporation and Earl J.
Bellisario is filed herein under separate
cover. (10)(xi) 1-5
11. Statement RE Computation of Per Share Earnings (11) 1
13. 1997 Annual Report (13) 13-37
21. Subsidiaries of the Registrant (21) 1
23. Consent of Experts and Counsel (23) 1
24. Powers of Attorney. Identical documents were signed
by Arthur E. Byrnes, James C. Huntington, Jr.,
William E. Kassling, Peter T. Kross,
William G. Roth and Konrad M. Weis. (24) 1
27. Financial Data Schedule (EDGAR filing only) (27) 1
-32-