April 26, 1994
For Immediate Release
ESOP PARTICIPANTS SEEK SUPPORT For more information
contact:
FOR SIX SHAREHOLDER RESOLUTIONS Ed Durkin - 202-546-6206
Randy Barber - 202-775-9072
AVONDALE INDUSTRIES' EMPLOYEE-OWNERS WAGE
PROXY SOLICITATION FOR CORPORATE GOVERNANCE REFORM
A proxy contest is underway at Avondale Industries, Inc.
("Avondale" or "Company") pitting participants in the Company's
Employee stock Ownership Plan ("ESOP") against Company management.
A series of shareholder resolutions ("Resolutions") seeking
corporate governance reforms have been proposed by the Avondale
Shareholder Committee ("Committee"), a group of record shareholders
and ESOP participants, which is conducting a full scale proxy
solicitation to gather support for the reform Resolutions. (A copy
of the Committee's proxy statement is attached).
The six Resolutions that will be presented for a vote at the
annual meeting of shareholders on Friday, May 6, 1994, call for
reforms in the Company's governance structure that would provide
the following: A Board of Directors composed of a majority of
independent, non-management directors; establishment of a
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Nominating Committee of the Board; confidential proxy voting;
declassification of the Board; cumulative voting in director
elections, and a reconstitution of the Board's Compensation
Committee.
"We're owners of this Company, and we're going to start
asserting our rights as owners", said Ed Armstrong, one of many
ESOP participants active in the Avondale Shareholder Committee. "As
Avondale owners and employees, the performance of the Company is
vitally important to the security of our job and retirement. We are
no longer going to stand by and watch our ownership interests
eroded by mismanagement", continued Ed Armstrong.
Avondale has dramatically underperformed both a peer group of
companies and the NASDAQ index, while suffering net losses in each
of the last four years totalling $186.7 million or $12.86 per
share. "We strongly believe that the Company's underperformance
relative to its peer group is a direct result of mismanagement, not
market forces", said John Meese, President of the Metal Trades
Department, AFL-CIO, which has joined the ESOP participants in
conducting the solicitation. "Our resolutions will increase
management's accountability to the owners of the Company, which we
think that will improve the prospects for a return to
profitability", said Meese.
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The Avondale ESOP was created in 1985, when the Ogden
Corporation sold Avondale to the newly-created ESOP. The ESOP paid
$282 million for 100% of the Company's common stock ($33.21 per
share). The ESOP used $92 million in "excess" assets from existing
defined benefit pension plans and $190 million in bank loans to
finance the stock purchase. In 1988, the Company went public with
an initial public offering at a price of $15 per share. The ESOP
maintained a majority ownership position, presently holding 50.4%
of the Company's outstanding common stock which is trading at
7 1/4. There are 11,000 ESOP participants who are either current or
former Company employees.
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Attachement to Press Release
THE INFORMED AVONDALE SHAREHOLDER QUIZ
WHAT PRICE DID THE AVONDALE ESOP PAY FOR AVONDALE STOCK WHEN
AVONDALE INDUSTRIES WAS SPUN-OFF FROM OGDEN IN 1985?
In September 1985, Avondale Industries was sold by Ogden to the
newly-created Avondale Employee Stock Ownership Plan (ESOP). The
ESOP paid $282 million for 100% of Avondale's common stock. This
price translated into $33.21 per share for Avondale's 8.5 million
outstanding shares of common stock.
HOW DID THE ESOP FINANCE THE PURCHASE OF AVONDALE STOCK?
The ESOP used $92 million in "excess" assets extracted from
Avondale's pension plans and it borrowed $190 million from a group
of banks.
LESS THAN A YEAR AFTER THE ESOP BOUGHT 100% OF AVONDALE INDUSTRIES,
WHAT DID AN INDEPENDENT FINANCIAL ADVISOR INFORM THE ESOP TRUSTEES
THE TRUE VALUE OF AVONDALE STOCK WAS?
In 1986, an independent financial advisor hired by the ESOP
Trustees valued Avondale's common stock at $10 per share instead of
the $33.21 per share the ESOP had paid in September 1985.
WHAT IS THE LOWEST PRICE AVONDALE STOCK HAS EVER REACHED? WHEN?
During 1992, Avondale's stock declined to $0.875 per share, its
all-time low.
WHAT TOP AVONDALE OFFICIAL WAS ONCE FIRED BY THE AVONDALE ESOP
TRUSTEES? AND WHY?
In September 1986, the Trustees of the Avondale ESOP voted to
remove Albert L. Bossier, Jr. from avondale's Board of Directors.
Bossier was then president of Avondale Shipyards and one of four
ESOP-elected Directors of Avondale Industries (Ogden at that time
had the right to appoint three Avondale Directors). At a September
16, 1986 Board of Directors meeting, Bossier voted with the three
Ogden Directors to oust then-Avondale Industries Chairman William
F. Connell and replace him with Bossier. The ESOP Trustees accused
Bossier of trying to "switch the balance" on Avondale's Board "to
a 4-3 margin controlled by Ogden." The ESOP Administrative
Committee and Trustees said they were concerned that an Ogden-
controlled Board would force the ESOP to settle "unfavorably" a
lawsuit against Ogden for more than $100 million that the ESOP
claimed it had overpaid for Avondale stock.
HOW MUCH, IN TOTAL, DID THE ESOP PAY OUT TO PURCHASE THE INITIAL
AVONDALE STOCK (Including Interest on a Loan)?
$333 million. The ESOP paid out $92 million from the "excess"
pension assets for about one-third of all Avondale stock, $190
million in principal on a loan to purchase Avondale stock, and $51
million in interest on that loan.
WHAT IS THE AVONDALE ESOP WORTH TODAY?
While the ESOP hasn't yet reported its year-end 1993 value, we
estimate that its total assets are about $75 million (even
accounting for Avondale's recent stock price increase).
HOW MUCH MONEY HAS AVONDALE INDUSTRIES LOST SINCE 1989?
Avondale Industries lost $186.7 million during the four year period
1990-1993. This translates into losses of $12.86 per share, or 70%
more than Avondale stock is trading for today.
HOW MUCH HAS AVONDALE INDUSTRIES "TOTAL SHAREHOLDER EQUITY"
DECLINED SINCE 1989?
$149 million or about 57%. At year-end 1989, Avondale shareholders'
total equity was $263 million. At year-end 1993, it was just $114
million.
HOW MUCH WOULD $1 INVESTED IN AVONDALE ON DECEMBER 31, 1988 HAVE
BEEN WORTH ON DECEMBER 31, 1993?
$0.575
HOW MUCH WOULD $1 INVESTED IN AVONDALE'S COMPETITORS ON DECEMBER
31, 1988 HAVE BEEN WORTH ON DECEMBER 31, 1993?
$1.895
WHAT TOP AVONDALE OFFICIAL HAS A SON WHOSE LAW FIRM WAS PAID OVER
$2 MILLION BY AVONDALE DURING 1992 AND 1993 ALONE?
Albert L. Bossier, Jr.'s son is a partner in the law firm (Blue
Williams, L.L.P.) which was paid slightly more than $2 million by
Avondale during 1992 and 1993.
WHICH AVONDALE DIRECTOR'S LAW FIRM WAS PAID OVER $1.7 MILLION BY
AVONDALE DURING 1992 AND 1993 ALONE?
Anthony J. Correrro, III is a partner in a law firm (Jones, Walker,
Waechter, Poitevent, Carrere & Denegre) which was paid about $1.7
million by Avondale during 1992 and 1993.
WHICH AVONDALE DIRECTOR WHOSE FIRM HAS BEEN PAID OVER $1.7 MILLION
DURING THE PAST TWO YEARS SERVES ON WHAT BOARD OF DIRECTORS
COMMITTEE, SELECTED BY WHOM, AND SETS WHOSE SALARY?
Anthony J. Correrro, III is one of two members of the Avondale
Board of Directors Compensation Committee. Under Avondale's By-
Laws, the members of the Compensation Committee are selected
exclusively by Avondale's Chairman of the Board, Chief Executive
Officer and President. Albert J. Bossier, Jr., who holds these
three titles, personally selected the two members of this
committee. In turn, the Compensation Committee determines Mr.
Bossier's salary and other compensation (along with that of other
Avondale executive officers).
WHOSE MAXIMUM PENSION BENEFITS HAVE INCREASE BY 312% SINCE AVONDALE
INDUSTRIES WAS SPUN OFF FROM OGDEN IN 1985?
Albert J. Bossier, Jr. In 1985, the maximum pension payable to an
Avondale executive was $90,000 per year. Subsequently, a much more
generous executive retirement plan was adopted (providing up to
$450,000 per year in benefits). As of year-end 1993, Mr. Bossier
appears to be entitled to a pension of at least $371,000 per year,
or an increase 312% over the maximum which would have been
available to him under the 1985 plan.
WHOSE MAXIMUM PENSION BENEFITS HAVE INCREASED BY ONLY 5.6% SINE
1985?
Avondale employees who retire after 30 years of service with a
final five-year average wage of $18,000.
WHOSE MAXIMUM PENSION BENEFITS HAVE INCREASED BY ONLY 2.5% SINCE
1985?
Avondale employees who retire after 30 years of service with a
final five-year average wage of $36,000.
HOW MUCH MONEY DOES THE AVONDALE PENSION PLAN HAVE TODAY?
The Avondale pension plan is worth about $46 million today (or
about one-half the value of the $92 million in "excess" pension
assets used to purchase Avondale stock for $33.21 per share in
1985.
HOW MUCH WOULD THE $92 MILLION EXTRACTED FROM THE AVONDALE PENSION
PLANS BE WORTH TODAY IF THEY HAD EARNED JUST 10% ANNUALLY SINCE
1985?
If the $92 million had been invested and earned 10% from late 1985
year-end 1993 (which is below the average for pension plan
investments during that period), it would be worth over $200
million today.
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Leaflet #4
EXERCISE YOUR RIGHTS - VOTE NOW
By now, you've received alot of information regarding the
important matters coming up for a vote at Avondale Industries'
shareholder meeting on May 6. Your fellow ESOP participants have
six shareholder resolutions that we believe will make Avondale a
better company. Avondale management has attacked our efforts. Below
are short explanations of the resolutions. What do you think?
Resolution #1: Independent Board: The resolution calls for a
Board of Directors made up of a majority of
independent non-management individuals. We
don't think the Board should be controlled by
a bunch of insiders. Vote "FOR" the
resolution.
Resolution #2: Nominating Committee: The resolution calls for
the creation of a Nominating Committee of the
Board of Directors. We don't think the
Director's nomination process should be
controlled by management insiders. Vote "FOR"
the resolution.
Resolution #3: Confidential Proxy Voting: When shareholders
at Avondale vote by proxy, that vote isn't
confidential. We don't think it's right that
management knows how shareholders vote. Vote
"FOR" the resolution.
Resolution #4: Board Declassification: This resolution calls
for Directors to be elected every year, not
every three years, as it is done now. We think
the directors should be accountable to the
shareholders every year. Vote "FOR" the
resolution.
Resolution #5: Cumulative Voting: This resolution calls for a
voting system that would help shareholders,
like us in the ESOP to elect our own
candidates to the Board of Directors. Vote
"FOR" the resolution.
Resolution #6: Reconstitution of the Board Compensation
Committee: Right now, Mr. Bossier, Company
Chairman CEO and President, picks the Board
Compensation Committee that then determines
Mr. Bossier's salary, bonuses, pension benefit
etc. Do you see something wrong with this? If
so, vote "FOR the resolution.
What the Shareholder Committee is pushing is a set of basic
changes that will make Avondale management more accountable to the
Company's shareholders. We think that's a good thing, and we hope
you agree.
Vote "FOR" the six Resolutions on the PINK Voting Instructions
card. YOUR VOTE IS SECRET, AVONDALE MANAGEMENT WILL NOT KNOW HOW
YOU VOTED. If you have any questions, please call us at 454-1552 or
885-3054.
Avondale Shareholder Committee