ITEM 3. LEGAL PROCEEDINGS
The company is a party to various pending legal proceedings, claims and assessments arising in the course of its business activities, including actions relating to trade practices, personal injury or property damage, alleged breaches of contracts, torts, labor matters, employment practices, tax matters and miscellaneous other matters. Some of these proceedings involve claims for punitive damages, in addition to other specific relief.
Among these actions are approximately 710 cases pending against the company, together with numerous other ship owners and equipment manufacturers, involving injuries or illnesses allegedly caused by exposure to asbestos or other toxic substances on ships. In one case, Miller, Administrator of Estate of Moline vs. American Mail Line, et. al., U.S. District Court, Northern District of Ohio, C86-821, a judgment was entered in May 1991 awarding punitive damages of $50,000 per named defendant, along with compensatory damages aggregating $166,000. In March 1993, the U.S. Court of Appeals for the Sixth Circuit vacated the punitive damages award, holding that punitive damages are not available in a general maritime unseaworthiness action for wrongful death of a seaman, remanded the case for consideration of defendants' claims for indemnity and contribution, and otherwise affirmed the judgment of the District Court. The plaintiff filed a petition for certiorari with the U.S. Supreme Court in August 1993. The court refused review of the case without comment on October 12, 1993.
The company insures its potential liability for bodily injury to seamen through mutual insurance associations. Industry-wide resolution of asbestos- related claims at significantly higher than expected amounts could result in additional contributions to those associations.
In December 1989, the government of Guam filed a complaint with the Federal Maritime Commission ("FMC") alleging that American President Lines, Ltd. and an unrelated company charged excessive rates for carrying cargo between the U.S. and Guam, in violation of the Shipping Act, 1916 and the Intercoastal Shipping Act of 1933, and seeking an undetermined amount of reparations. Three private shippers are also complainants in this proceeding. Evidentiary hearings are continuing and a decision by the FMC is not expected until late 1994 or 1995.
In March 1992, in connection with the same matter, the government of Guam and four private shippers filed a class action complaint in the United States District Court, District of Columbia, based on the same allegations, seeking an undetermined amount of damages on behalf of all shippers of cargo to and from Guam on the company's vessels and the vessels of the other named defendant. In January 1993, the class action complaint was dismissed. An appeal of the dismissal was filed in the U.S. Court of Appeals for the Circuit of the District of Columbia in February 1993.
Based upon information presently available, and in light of legal and other defenses and insurance coverage and other sources of payment available to the company, management does not expect the legal proceedings described, individually or in the aggregate, to have a material adverse impact on the company's consolidated financial position or operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the company's security holders during the fourth quarter of 1993.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The company's Common Stock is traded on the New York and Pacific Stock Exchanges using the symbol APS. The reported high and low closing sales prices per share of the company's Common Stock and cash dividends declared for the preceding eight fiscal quarters are set forth in Note 12 to the consolidated financial statements, Part II, Item 8, on page 40.
On March 1, 1994, the company had 3,880 common stockholders of record.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the ten years ending December 31, 1993 are derived from the consolidated financial statements of the company, which have been examined and reported upon by the company's independent public accountants as set forth in their report included elsewhere herein. This information should be read in conjunction with the Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.
(1) The company's fiscal year ends on the last Friday in December. All years presented above were 52 weeks long, except for 1993 and 1988 which were 53- week years. (2) Earnings Per Common Share, Cash Dividends Per Common Share and Book Value Per Common Share have been computed for all periods retroactively reflecting the effect of a 3% stock dividend distributed on May 4, 1984, a 3-for-2 stock split effected on May 30, 1985, and a 2-for-1 stock split effected on December 31, 1993. Earnings Per Common Share also reflect the repurchase of 3.7 million, 7.8 million, 2.9 million, 1.0 million and 8.8 million shares of the company's common stock during 1992, 1991, 1990, 1989 and 1988, respectively, on a post-split basis. In 1989, 2.0 million shares of the company's Series B Preferred Stock were converted into common stock. (3) Redeemable Preferred Stock is included in Equity for the purpose of calculating these ratios. If Redeemable Preferred Stock were a component of Debt instead of Equity, Return on Equity would be 16.8%, 12.1%, 11.0%, (13.3%), (5.2%) and 12.8% in 1993, 1992, 1991, 1990, 1989 and 1988, respectively, and Total Debt to Equity would be 72.9%, 108.6%, 123.9%, 122.5%, 106.3% and 103.3% in 1993, 1992, 1991, 1990, 1989, and 1988, respectively.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The company's pretax income increased to $125 million in 1993 from $81 million in 1992, excluding the impact of $6 million and $41 million from the collection of Desert Storm container detention charges in 1993 and 1992, respectively. All detention claims with the U.S. government have been settled and a payment of $8 million was received and recorded as income by the company on January 31, 1994. Additional payments of up to $2 million are expected to be received in 1994.
The improvements in the company's 1993 results compared with 1992 were due to higher freight volumes in all of the company's markets, higher operating margins in the company's North America stacktrain market, lower net interest expense and increased real estate income. Lower rates in the U.S. export and intra-Asia markets partially offset these improvements. Also contributing to the increase in earnings in 1993 were gains totaling $7 million from the sales of three of the company's older steamships and certain containers. Additionally, the company's 1993 income and volumes were positively impacted by the fact that its 1993 fiscal year was 53 weeks long, compared with 52 weeks in 1992 and 1991.
(1) Volumes and revenue per FEU data are based upon shipments originating during the period, which differ from the percentage-of-completion method used for financial reporting purposes. (2)Excluding trans-Pacific Desert Storm volumes of 19.4 and average revenue per FEU of $5,309.
The increase in the company's import volumes in 1993 compared with 1992 resulted primarily from expanded direct transportation of commercial dry cargo from the North and Central regions of the People's Republic of China. Also, volumes of textiles, footwear, auto parts and electronic goods in the company's import market improved in 1993 compared with 1992. The company's export volumes increased due to higher military volumes, particularly since June 1, 1993, when, as a result of its successful bid, the company became the preferred carrier of U.S. military cargo for a period of 12 months. The increase in volumes due to military shipments was partially offset by a
decline in commercial refrigerated cargo. The company's intra-Asia volumes increased in 1993, due to expanded service to the People's Republic of China and the growing trade in Southeast and West Asia.
In 1992, import volumes were slightly above those for 1991 due to increases in shipments of garments, electronic goods and refrigerated cargo, partially offset by a decline in shipments of auto parts from Japan. Export volumes declined in 1992 compared with 1991, primarily due to a decrease in non- Desert Storm military shipments and generally lower demand for U.S. goods, partially offset by an increase in volumes of refrigerated cargo. Volumes improved in the intra-Asia market in 1992 due to strong demand in the Middle East and India compared with 1991.
Utilization of the company's containership capacity in 1993 was 89% and 92% for import and export shipments, respectively, compared with 89% and 90% in 1992, and 93% and 95% in 1991. Utilization includes the effects of shipments related to Operation Desert Storm in 1991. Transportation of Operation Desert Storm military cargo contributed $103 million to the company's international transportation revenues in 1991.
Average revenue per forty foot equivalent unit ("FEU") for the company's import shipments increased in 1993 compared with 1992 due to higher rates and a higher proportion of textiles, auto parts and refrigerated cargo carried by the company. Increased volumes of higher-rated intermodal cargo also contributed to the increase in average revenue per FEU in the company's import market. Average revenue per FEU for the company's export shipments decreased in 1993 compared with 1992 due to strong competition in this market and a decrease in the proportion of higher-rated commercial refrigerated cargo carried by the company. The company's average revenue per FEU for its intra-Asia shipments declined in 1993 compared with 1992, resulting from competitive pressures in this market. Also, the company carried a higher proportion of lower-rated short-haul cargo in the intra-Asia trade during 1993 compared with 1992.
Average revenue per FEU for the company's import shipments increased in 1992 from 1991 due to improved rates and a higher proportion of garments, refrigerated and intermodal cargo carried by the company in 1992. Average revenue per FEU for the company's export shipments increased in 1992 compared with 1991 due to a higher proportion of refrigerated cargo and intermodal shipments. In the company's intra-Asia market, average revenue per FEU was unchanged in 1992 compared with 1991, as a higher proportion of refrigerated cargo was offset by a lower proportion of longer distance shipments.
Since 1991, the company and Orient Overseas Container Line, a Hong Kong shipping company ("OOCL"), have been parties to agreements enabling them to exchange vessel space and coordinate vessel sailings until 1996. The agreements permit both companies to offer faster transit times, more frequent sailings between key markets in Asia and the U.S. West Coast, and sharing of terminals and several feeder operations within Asia. In February 1994, the company and OOCL agreed to extend the term of the agreements through 2005 and to explore certain other opportunities, including the addition of an Asia-to- Europe service route. The new contracts are subject to certain conditions, including U.S. government approval.
The company is party to an Operating-Differential Subsidy ("ODS") agreement with the U.S. government, expiring on December 31, 1997, which provides for payment by the U.S. government to partially compensate the company for the relatively greater expense of vessel operation under U.S. registry. ODS payments to the company, which were approximately $65 million in 1993, are expected to terminate at the end of 1997. The Clinton Administration and Congress are actively reviewing U.S. maritime policy. On November 4, 1993, the U.S. House of Representatives passed the "Maritime
Security and Competitiveness Act of 1993," H.R. 2151, which would, among other things, extend the U.S. government's maritime support program for up to ten years, but would substantially reduce the amount of support payments per participating vessel from current levels. Similar legislation has not yet been addressed by the Senate. Accordingly, the company is unable to predict whether maritime reform legislation will be enacted, or whether enacted legislation, if any, will have terms similar to H.R. 2151.
While the company continues to support efforts to enact new maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, on July 16, 1993, the company filed applications with the United States Maritime Administration ("MarAd") to operate under foreign flag its six C11-class containerships, which are now under construction and will be delivered to the company in 1995, and to transfer to foreign flag seven of the 15 U.S.-flag containerships currently operating in its trans-Pacific fleet. Enactment of maritime reform legislation, if any, may influence the company's decision whether to operate these ships under foreign flag, should its applications be approved. Management of the company believes that, in the absence of ODS or an equivalent government support program, it is generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner carriers. The company continues to evaluate its strategic alternatives in light of the expiration of its ODS agreement and the uncertainties as to whether a new U.S. government maritime support program will be enacted or the company's application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support.
(1)Volumes and revenue per FEU data are based upon shipments originating during the period, which differ from the percentage-of-completion method used for financial reporting purposes. (2) In addition to domestic third party business, the transportation of containers for the company's international customers is a significant component of the company's stacktrain operations. The effect of these shipments on domestic operations is eliminated in consolidation and therefore excluded above in Revenues and Stacktrain Average Revenue per FEU.
Revenues and volumes from the company's North America stacktrain operations increased in 1993 from 1992 due to an increase in stacktrain services to Mexico and Canada and an overall improvement in demand for transportation services in the North America stacktrain market. Additionally, key competitors in this market were adversely affected by equipment shortages, which diverted some shipments to the company. Non-stacktrain volumes declined as the company converted its automotive shipments to its stacktrains. Stacktrain average revenue per FEU decreased in 1993 compared with 1992 due to the company's efforts to reduce stacktrain services that are less profitable.
Overall revenues from the company's North America transportation operations declined in 1992 compared with 1991, due primarily to the continuing effects of the recession and the company's efforts to redirect its non-stacktrain business. Volumes in the company's North America stacktrain operations were down in 1992 compared with 1991 due to the continuing weak U.S. economy and the company's withdrawal from the Midwest-Texas lane, partially offset by improvements in stacktrain automotive volumes. Average revenue per FEU for the company's North America stacktrain business increased in 1992 compared with 1991 due to an improvement in cargo mix.
For 1994, the company expects continued growth in the North America stacktrain markets and in intra-Asia shipping. Rate levels, especially in the U.S. export trade, ended 1993 at a depressed level and are not expected to improve significantly in the near term.
The company's transportation operating expenses per FEU declined in 1993, compared with 1992, reflecting improvements in the North America stacktrain cost structure and the company's continued cost control efforts. Land transportation expenses were relatively unchanged in 1993 compared with 1992 despite a 9% increase in North America stacktrain volume, reflecting benefits realized from the renegotiation of rail contracts in 1992. Cargo handling expenses increased in 1993 compared with 1992 due to higher cargo volumes and contract rate increases at certain Asian and U.S. ports. In 1993, vessel expenses increased because of increased charter hire activity resulting from expanded service to China and the Philippines, partially offset by savings from four fewer ships in service during the year. In 1993, transportation equipment costs increased from the prior year primarily due to higher maintenance, repair and lease costs, partially offset by cost savings from changes in the company's rail cost structure. Other operating expenses increased in 1993 from 1992, primarily due to higher salary and fringe costs in North America and Asia operations, partially offset by gains of $7 million from the sale of three vessels and certain containers, and certain fixed cost savings in the North America stacktrain operations.
Total transportation operating expenses increased only 3% in 1992 from 1991, despite the significant rise in operating costs in Asia. Land transportation costs decreased in 1992 compared with 1991 as a result of the company's renegotiated rail contracts and a decline in conventional rail costs due to lower non-stacktrain volumes. Cargo handling costs rose substantially in 1992, mainly due to contract rate increases at ports in Asia and the use of OOCL terminals on the West Coast and in Japan. Vessel expenses declined in 1992 compared with 1991, primarily due to lower fuel costs. The increase in transportation equipment costs in 1992 compared with 1991 reflects the increase in lease costs for refrigerated containers and dry containers related to OOCL activity, partially offset by equipment cost savings resulting from the renegotiated rail contracts. Information systems costs increased in 1992, due to increases in salaries and fringe benefits and costs for systems
projects. Other operating expenses rose in 1992 from 1991 as a result of increased freight consolidation activities, OOCL start-up costs and increased agency fees.
General and administrative expenses increased 9% in 1993 compared with 1992. In 1993, the company incurred approximately $9 million in costs related to certain corporate initiatives to improve company-wide systems and processes. Partially offsetting these costs in 1993 were cost savings at the corporate level. Expenditures on corporate initiatives are expected to be approximately $27 million during 1994. Anticipated cost savings resulting from these initiatives are expected to be realized in future years, but no assurances can be given as to the timing or amount of these savings. Depreciation and amortization expense increased 2% in 1993 from 1992 due to capital spending activity.
General and administrative expense declined 2% in 1992 compared with 1991 as the company continued its cost savings efforts in this area. Depreciation and amortization expense increased 1% in 1992 from 1991 resulting from capital spending during the year.
Net interest expense declined to $11 million in 1993 from $26 million in 1992. This decline was due to the company's restructuring of its long-term liabilities in late 1992 and early 1993, when the company retired certain capital lease obligations and redeemed its 11% Public Notes, and lower interest rates in 1993. Net interest expense in 1992 decreased $10 million from 1991, reflecting lower debt balances, lower interest rates on refinanced debt and higher cash balances.
The effective tax rates applicable to the company were 39%, 35% and 38% in 1993, 1992 and 1991, respectively. The 1993 effective tax rate reflects a one percent federal corporate tax increase that was effective at the beginning of the year, and the related $2.7 million impact on the company's deferred tax balances.
In 1992, the company changed its method of recognizing revenues and expenses to conform with new transportation industry guidelines established by the Financial Accounting Standards Board's Emerging Issues Task Force. Under the new method, the company recognizes revenues on a percentage-of-completion basis and expenses as incurred. The company previously recorded revenues and variable expenses at the time freight was loaded. In 1992, the company recorded a one-time charge of $22 million, after taxes of $13 million, for the effect of this change in accounting on prior years' results.
In 1992, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes"("SFAS 109"), the effects of which were applied retroactively to the beginning of fiscal 1989. SFAS 109 requires the company to compute deferred taxes based upon the amount of taxes payable in future years, after considering known changes in tax rates and other statutory provisions that will be in effect in those years.
The company adopted SFAS 106 in 1991, which requires the company to recognize the cost of providing health care and other benefits to retirees over the term of employee service, as opposed to the company's previous method of recognizing those costs when incurred. The cumulative effect of this accounting change resulted in a one-time charge to earnings in 1991 of $10 million after income taxes.
(1) Includes current and long-term portions.
In November 1993, the company issued $150 million 10-year Senior Notes at an effective interest rate of 7.3%, and in January 1994, issued $150 million 30- year Senior Debentures at an effective interest rate of 8.2%. A portion of the proceeds from the issuance of this debt was used to repay $72 million of bank borrowings, and the remainder will be used to finance vessel purchases and other capital expenditures.
In 1992 and early 1993, the company restructured its long-term liabilities to reduce its high-cost debt and eliminate restrictions on the use of subsidiary cash. In January 1993, the company purchased the remaining two vessels previously leased under leveraged leases and retired the related debt guaranteed by MarAd, eliminating MarAd's restrictions on the payment of dividends to the company by its wholly-owned subsidiary, American President Lines, Ltd. The purchase price of these vessels was $131 million, $110 million of which retired the related capital lease obligations. Also in January 1993, the company retired $95 million of 11% Public Notes.
In 1993, the company began a fleet modernization program pursuant to which it has placed orders for the construction of six new C11-class containerships ("C11") and three new Kl0-class containerships ("K10") for an aggregate cost of approximately $730 million. The C11s are similar in design to the company's C10-class vessels, and each is designed to have a capacity of approximately 4,800 TEUs and a service speed of approximately 25 knots. Delivery of the C11s is scheduled for 1995. Each K10 is designed to have a capacity of approximately 3,600 TEUs and a service speed of approximately 24 knots. Delivery of the K10s is scheduled for 1996.
The company presently expects the C11s to be deployed in its trans- Pacific service. OOCL is in the process of negotiating the purchase of six vessels similar in size and speed to the company's C11s. OOCL has agreed to deploy these new vessels in its coordinated trans-Pacific service with the company under the recent amendment to the slot-sharing agreement between the parties. The deployment of the 12 new C11-type vessels by the company and OOCL, replacing 16 older vessels, will increase the combined trans-Pacific capacity of the company and OOCL by approximately 15%. The company expects growth in demand in the trans-Pacific market and believes that the increase in combined capacity will be sufficient to permit the company and OOCL to maintain their combined relative market share in that market. However, no assurances can be given with respect to anticipated growth or the utilization
or impact of capacity. The K10s, in combination with capacity from the six C11s, will replace four L9-class vessels chartered by the company and used in its West Asia/Middle East service. The charters of the L9s will expire in 1996. Deployment of the company's C11s and K10s is subject to U.S. government approval.
The C11 vessels are being constructed by Howaldtswerke-Deutsche Werft AG, of Germany (three ships) and Daewoo Shipbuilding and Heavy Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated project cost for constructing the vessels is $535 million. A payment of $52 million was made to the shipyards in 1993. The remaining payments are due in two 5% installments in 1994 and 80% upon delivery of the vessels. The company has obtained commitments from a group of European banks to finance approximately $400 million of the purchase price. Principal payments on any draw-downs would be due in semi- annual installments over a 12-year period commencing six months after the delivery of each vessel. Interest rates would be based upon various margins over LIBOR or the banks' cost of funds as elected by the company. The remaining cost of these vessels would be financed with the company's public debt and cash from operations.
The K10s are being constructed by Daewoo. The total project cost for constructing these vessels is $195 million. A payment of $18 million was made to the shipyard in 1993. The remaining payments are due in two 10% installments in 1995 and 70% upon delivery of the vessels.
Other than progress payments on the C11s and K10s, and the purchase of the previously leased ships, the company's 1993 capital expenditures were primarily for purchases of refrigerated containers. In 1992, the company's capital expenditures were primarily for purchases of refrigerated containers and the expansion of terminals and operating facilities. Capital expenditures in 1994 are expected to be approximately $200 million, including $52 million for vessel progress payments. The balance will be used primarily for refrigerated containers, chassis, terminal improvements in North America and Asia, and computer systems. At December 31, 1993, the company had outstanding purchase commitments to acquire facilities, equipment and services totaling $56 million.
The company is in the process of expanding its two major West Coast ports' facilities and extending their lease terms. The company has entered into a contract with the Port of Los Angeles to lease a new 226-acre terminal facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon completion of construction. The minimum annual rent expense under the new lease is estimated to be between $22 million and $26 million, depending upon the final scope of development. The annual rent for the company's current 129-acre terminal in Los Angeles was approximately $19 million in 1993. The company has agreed to purchase at least six gantry cranes and certain intermodal handling equipment for use at this terminal facility, the cost of which is not known at this time.
The company also is negotiating with the Port of Seattle for the improvement and expansion of its existing terminal facility. Under the proposed plan, the facility would be expanded from 83 acres to approximately 160 acres by 1997 and the lease term would be 30 years from completion. The lease for the existing facility expires in 2015.
In 1993, the company sold its remaining investment in the common stock of Amtech Corporation ("Amtech"), from which it realized a pretax gain of $9 million. In 1992, the company sold approximately one-half of its investment in Amtech, from which it realized a pretax gain of $8 million.
Effective December 31, 1993, the company effected a two-for-one stock split in the form of a stock dividend. On a post-split basis, the company repurchased 3,715,928 and 7,774,344 of its outstanding common stock in 1992 and 1991, respectively. The average per share cost of these repurchases were $20.94 and $10.38 in 1992 and 1991, respectively.
The company has a revolving credit agreement with a group of banks to provide an aggregate commitment of $100 million, which expires December 31, 1996. The revolving credit agreement contains various financial covenants which require the company to meet certain levels of fixed charge coverage, leverage and net worth. The agreement restricts the amount of increases in the company's cash dividends and restricts certain other corporate transactions. Borrowings under the agreement bear interest at rates based upon various indices as elected by the company. Any outstanding borrowings under this agreement are classified as long-term.
The company borrowed under the revolving credit agreement during 1993 to partially finance the purchase of the leased vessels and for general corporate purposes. Also during 1993, the company borrowed under uncommitted lines of credit with certain banks for general corporate purposes. All outstanding bank borrowings were repaid with a portion of the proceeds from the issuance of $150 million 10-year Senior Notes in November 1993.
The company is negotiating with a group of banks to replace its existing revolving credit agreement with a $200 million, five-year revolving credit agreement. While no assurances can be given, the company expects the new agreement to be finalized in the first fiscal quarter of 1994.
ITEM 8.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
To the Stockholders:
The financial statements have been prepared by the company, and we are responsible for their content. They are prepared in accordance with generally accepted accounting principles, and in this regard we have undertaken to make informed judgments and estimates, where necessary, of the expected effect of future events and transactions. The other financial information in the annual report is consistent with that in the financial statements.
The company maintains and depends upon a system of internal controls designed to provide reasonable assurance that our assets are safeguarded, that transactions are executed in accordance with management's intent and the law, and that the accounting records fairly and accurately reflect the transactions of the company. The company has an internal audit program which reviews the adequacy of the internal controls and compliance with them.
The company engaged Arthur Andersen & Co. as independent public accountants to provide an objective, independent audit of our financial statements.
There is an Audit Committee of the Board of Directors which is composed solely of outside directors. The committee meets whenever necessary to monitor and review with management, the internal auditors and the independent public accountants, the company's financial statements and accounting controls. Both the independent public accountants and the internal auditors have access to the Audit Committee, without management being present, to discuss internal controls, auditing and financial reporting matters.
To help assure that its affairs are properly conducted, management has established policies regarding standards of corporate behavior. The company regularly reminds its key employees of significant policies and requires them to confirm their compliance.
/s/ John M. Lillie John M. Lillie Chairman of the Board, President and Chief Executive Officer
/s/ Will M. Storey Will M. Storey Executive Vice President and Chief Financial Officer
/s/ William J. Stuebgen William J. Stuebgen Vice President, Controller and Chief Accounting Officer
Oakland, California February 11, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of American President Companies, Ltd.
We have audited the accompanying consolidated balance sheet of American President Companies, Ltd. (a Delaware corporation) and subsidiaries as of December 31, 1993 and December 25, 1992 and the related consolidated statements of income, cash flows and changes in stockholders' equity for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American President Companies, Ltd. and subsidiaries as of December 31, 1993 and December 25, 1992 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, the company has changed its method of recognizing revenues and expenses effective as of December 28, 1991. In addition, as explained in Note 7 to the financial statements, the company has changed its method of accounting for postretirement benefits effective December 29, 1990.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen & Co. Arthur Andersen & Co.
San Francisco, California February 11, 1994
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Fiscal Year The consolidated financial statements include the accounts of American President Companies, Ltd. and its majority-owned subsidiaries (the "company"), after eliminating intercompany accounts and transactions. The company's fiscal year ends on the last Friday in December. The company's 1993 fiscal year was 53 weeks, compared with 52 weeks for 1992 and 1991.
Stock Split Effective December 31, 1993, the company effected a two-for-one stock split in the form of a stock dividend. All references to the number of common shares and per common share amounts for prior periods have been restated to reflect the split.
Revenues and Expenses In 1992, the company changed its method of recognizing revenues and expenses to conform with new transportation industry guidelines established by the Financial Accounting Standards Board's Emerging Issues Task Force. Under the new method, the company recognizes revenues on a percentage-of-completion basis and expenses as incurred. The company previously recorded revenues and variable expenses at the time freight was loaded. As of the beginning of fiscal 1992, the company recorded a one-time charge of $21.6 million, after taxes of $13.2 million, for the effect of this change in accounting on prior years.
If the change in accounting had not been implemented, net income for the year ended December 25, 1992 would have been $75.7 million, or $2.27 per share, fully diluted. Conversely, if the change had been applied retroactively to the year ended December 27, 1991, Income Before the Cumulative Effect of Accounting Change and related Earnings Per Share would have been $70.4 million, or $1.97 per share, fully diluted.
Detention revenue is recognized when cash is received.
Foreign Currency Transactions Foreign currency transactions and balances are translated to U.S. dollars. Included in Operating Income for 1993, 1992 and 1991 are net losses on foreign currency transactions and translations of $1.1 million, $2.0 million and $7.9 million, respectively. The 1991 loss includes the company's write-down of its assets in India due to the devaluation of the rupee.
The company periodically enters into contracts to buy foreign currencies in the future to hedge the impact of foreign currency fluctuations on certain operating commitments. The gains or losses on these contracts are deferred and recognized when the related operating expenses are incurred, and are recorded as a decrease or increase in operating expenses in the accompanying Consolidated Statement of Income.
In 1993, the company entered into foreign currency contracts to buy Deutsche marks in the future to lock in the U.S. dollar cost of constructing German-built vessels. These contracts are discussed in Note 10.
Cash, Cash Equivalents and Short-Term Investments Cash and Cash Equivalents comprise cash balances and investments with maturities of three months or less at the time of purchase. Short-Term Investments are carried at cost, which approximates market.
Property and Equipment Property and Equipment are recorded at historical cost. For assets financed under capital lease arrangements, an amount equal to the present value of the future minimum lease payments is recorded at the date of acquisition as Property and Equipment with a corresponding amount recorded as a capital lease obligation. Depreciation and Amortization are computed using the straight-line method based upon the following estimated useful lives:
Maintenance and repair expenditures of $110.3 million, $101.6 million and $93.9 million have been charged to expense in 1993, 1992 and 1991, respectively, as they were incurred. Major periodic dry dockings and rail car overhauls totaling $18.2 million, $21.2 million and $19.7 million at December 31, 1993, December 25, 1992, and December 27, 1991, respectively, have been deferred and are being amortized over two to five years.
Long-Term Investments The company has certain investments, long-term deposits and receivables, which are included in Investments and Other Assets. The fair value of these assets approximates their carrying value at December 31, 1993. For certain other investments, it was not practicable to determine fair value, as no quoted market prices were available.
Software Costs Costs related to purchased and internally developed software are charged to expense as incurred.
Capitalized Interest Interest costs of $1.5 million relating to cash paid for the construction of vessels were capitalized in 1993. No interest costs were capitalized in 1992 and 1991.
Reclassifications Certain 1992 and 1991 amounts have been reclassified to conform to the 1993 presentation.
NOTE 2. UNITED STATES MARITIME ADMINISTRATION AGREEMENTS
The company and the United States Maritime Administration ("MarAd") are parties to an Operating-Differential Subsidy ("ODS") agreement expiring December 31, 1997, which provides for payment by the U.S. government to partially compensate the company for the relatively greater expense of vessel operation under United States registry and requires the company to replace the capacity of its existing vessels as they reach the end of their statutory lives if a construction differential subsidy, provided by the U.S. government, is made available. This subsidy has not been made available since 1981. The ODS amounts for 1993, 1992 and 1991 were $64.7 million, $69.7 million and $69.4 million, respectively, and have been included as a reduction of operating expenses.
ODS payments to the company are expected to terminate at the end of 1997. The Clinton Administration and Congress are actively reviewing U.S. maritime policy. On November 4, 1993, the U.S. House of Representatives passed the "Maritime Security and Competitiveness Act of 1993," H.R. 2151, which would, among other things, extend the U.S. government's maritime support program for up to ten years, but would substantially reduce the amount of support payments per participating vessel from current levels. Similar legislation has not yet been addressed by the Senate. Accordingly, the company is not able to predict whether maritime reform legislation will be enacted or whether enacted legislation, if any, will have terms similar to H.R. 2151.
While the company continues to support efforts to enact new maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, on July 16, 1993, the company filed applications with MarAd to operate under foreign flag its six C11-class containerships and to transfer to foreign flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. Enactment of maritime reform legislation, if any, may influence the company's decision whether to operate these ships under foreign flag, should its applications be approved. Management of the company believes that, in the absence of ODS or an equivalent government support program, it is generally no longer commercially viable to own or operate containerships in foreign trade under the U.S. flag because of the higher labor costs and the more restrictive design, maintenance and operating standards applicable to U.S.-flag liner carriers. The company continues to evaluate its strategic alternatives in light of the expiration of its ODS agreement and the uncertainties as to whether a new U.S. government maritime support program acceptable to the company will be enacted or the company's application to flag its vessels under foreign registry will be approved. While no assurances can be given, management of the company believes that it will be able to structure its operations to enable it to continue to operate on a competitive basis without direct U.S. government support.
The company also has a Capital Construction Fund ("CCF") agreement with MarAd which provides funding for the future acquisition of vessels and other assets and for the repayment of other vessel acquisition debt. The CCF is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet, and there was no balance at December 31, 1993, and a balance of $2.7 million at December 25, 1992.
The company receives a federal income tax deduction for deposits made to the CCF, subject to certain restrictions. Withdrawals from the CCF for investment in vessels or related assets do not give rise to a tax liability, but reduce the depreciable bases of the assets for income tax purposes. At December 31, 1993, the total tax basis of assets purchased with CCF funds was approximately $69.3 million less than net book value. Deferred income taxes have been provided for CCF amounts on deposit or invested in vessels or related equipment.
NOTE 3. INCOME TAXES
The company adopted Statement of Financial Accounting Standards, "Accounting for Income Taxes", ("SFAS 109") in 1992, the effects of which were applied retroactively to the beginning of fiscal 1989. SFAS 109 requires the company to compute deferred taxes based upon the amount of taxes payable in future years, after considering known changes in tax rates and other statutory provisions that will be in effect in those years.
The reconciliation of the company's effective tax rate to the federal statutory tax rate is as follows:
Effective January 1, 1993, the maximum corporate federal income tax rate increased to 35%. As a result, an adjustment of approximately $2.7 million was recorded to reflect the effect of the tax rate increase on deferred taxes provided in prior periods.
The following is a summary of the company's provision for income taxes, net of $13.2 million and $6.4 million related to the cumulative effects of the accounting changes for revenue and expenses and postretirement benefits in 1992 and 1991, respectively, as restated:
The following table shows the tax effect of the company's cumulative temporary differences and carryforwards included on the company's Consolidated Balance Sheet as of December 31, 1993 and December 25, 1992:
The company used all federal alternative minimum tax credits in 1993 and has California alternative minimum tax credits of $0.8 million at December 31, 1993, which do not expire.
The amount of deferred tax assets and liabilities as of December 31,1993 and December 25, 1992 were as follows:
The net current deferred tax asset is included in Prepaid Expenses and Other on the accompanying Consolidated Balance Sheet.
NOTE 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts Payable and Accrued Liabilities at December 31, 1993 and December 25, 1992 were as follows:
NOTE 5. LONG-TERM DEBT
Long-term debt at December 31, 1993 and December 25, 1992 consisted of the following:
(1) In November 1993, the company filed a shelf registration to issue up to $400 million of debt securities in varying terms and amounts. Also in November 1993, the company issued 7 1/8% Senior Notes with a face amount of $150 million and an unamortized discount of $2.1 million as of December 31, 1993. The effective interest rate of this debt is 7.325%. A portion of the proceeds from the issuance of this debt was used to repay $72 million of bank borrowings and the remainder will be used for financing capital expenditures, including progress payments for the construction of the new vessels. In January 1994, the company issued 8% Senior Debentures with a face amount of $150 million, due on January 15, 2024. The effective interest rate on this debt is 8.172%. Proceeds from the issuance of this debt were $147.1 million and will be used to finance capital expenditures, including vessel progress payments.
(2) The Notes were redeemed by the company on January 15, 1993 using funds borrowed under the company's revolving credit agreement described below. (3) Principal payments are due in equal semiannual installments. The company has the option to issue Series II Bonds due sequentially in semiannual payments at the end of the term of the Series I Bonds in lieu of up to five cash payments, which it has not yet exercised. The bonds issued under this loan agreement are collateralized by the five C10-class vessels, which had a net book value of $185.9 million at December 31, 1993. Fair value of this debt is approximately $87 million at December 31, 1993 assuming a current interest rate of 5.23%. (4) The Bonds are redeemable on or after November 1, 1999 at a redemption price of 102% of the principal amount, reducing to 100% of the principal amount on or after November 1, 2001. (5) The interest rate at December 31, 1993 was 3.05%. The principal repayment is collateralized by a $6.6 million letter of credit. (6) The Note was used to finance the purchase of certain chassis and is collateralized by the chassis. At December 31, 1993, the net book value of these chassis was $4.3 million.
Carrying value of significant issues of long-term debt, other than the Series I Bonds, approximates fair value because the interest rates on outstanding debt approximates current interest rates that would be offered to the company for similar debt.
Principal payments scheduled on long-term debt during the next five years, on the basis that the company issues Series II Bonds totaling $23.8 million per year in lieu of the next five semiannual cash payments on the Series I Bonds, are as follows:
(In thousands)
1994 $ 993 1995 1,085 1996 13,098 1997 24,137 1998 23,823
The company has a revolving credit agreement with a group of banks to provide for an aggregate commitment of up to $100 million which expires December 31, 1996. The revolving credit agreement contains various financial covenants which require the company to meet certain levels of fixed charge coverage, leverage and net worth. The agreement restricts the amount of increases in the company's cash dividends and restricts certain other corporate transactions. Borrowings under the agreement bear interest at rates based upon various indices as elected by the company. Any outstanding borrowings under this agreement are classified as long-term. The current annual commitment fee is three-eighths of one percent of the available amount. The company had no outstanding borrowings under this agreement at December 31, 1993.
As an alternative to borrowing under its revolving credit agreement, the company has an option under that agreement to sell up to $150 million of certain accounts receivable to the banks. This alternative is subject to less restrictive financial covenants than the borrowing option.
NOTE 6. LEASES
The company leases equipment under capital leases expiring in three to seven years. Assets under capital lease included in Property and Equipment on the accompanying Consolidated Balance Sheet at December 31, 1993 and December 25, 1992 are as follows:
The following is a schedule of future minimum lease payments required under the company's leases that have initial noncancelable terms in excess of one year as of December 31, 1993:
In 1993, the company purchased two vessels which had been operated under capital lease agreements. The purchase price of these vessels totaled $130.8 million, of which $110.1 million retired the related capital lease obligation. The company financed this transaction with cash and borrowings under its revolving credit agreement. At December 25, 1992, the capital lease obligation for these vessels of $110.1 million was recorded as Current Portion of Capital Lease Obligation. The excess of the purchase price over the capital lease obligation was added to the net book value of the vessels and will be depreciated over their remaining useful lives.
Total rental expense for operating leases and short-term rentals was $289.5 million, $260.4 million and $243.1 million in 1993, 1992 and 1991, respectively.
NOTE 7. EMPLOYEE BENEFIT PLANS
Pension Plans The company has defined benefit pension plans covering most of its employees, which generally call for benefits to be paid to eligible employees at retirement based on years of credited service and average monthly compensation during the five years of employment with the highest rate of pay. The company's general policy is to fund pension costs at no less than the statutory requirement. Certain plans are funded through a grantor trust. The investment in this trust at December 31, 1993 was $15.5 million and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet.
The following table sets forth the pension plans' funded status and amounts recognized in the accompanying Consolidated Balance Sheet at December 31, 1993 and December 25, 1992:
The following assumptions were made in determining the company's net pension liability:
Net pension cost related to the company's pension plans included the following components:
The company also participates in collectively bargained, multi-employer plans that provide pension and other benefits to certain union employees. The company contributed $5.2 million in 1993, $6.5 million in 1992 and $9.6 million in 1991 to such plans. These contributions are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of hours worked and are expensed as incurred.
Postretirement Benefits Other than Pensions The company shares the cost of its health care benefits with the majority of its domestic shoreside retired employees. In 1991, the company adopted Statement of Financial Accounting Standard No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106") which requires the company to recognize the cost of providing health care and other benefits to
retirees over the term of employee service, which is a change from the company's previous method of recognizing these costs when incurred. The company recognized a one-time charge of $10.5 million, after taxes of $6.4 million, for the effect of this change in accounting on prior years.
Postretirement benefit costs recognized under SFAS 106 in the accompanying Consolidated Statement of Income for the years ended December 31, 1993 and December 25, 1992 were as follows:
The following table sets forth the postretirement benefit obligation recognized in the accompanying Consolidated Balance Sheet at December 31, 1993 and December 25, 1992:
The expected cost of the company's postretirement benefits is assumed to increase at an annual rate of 12% in 1994. This rate is assumed to decline approximately 1% per year to 5% in the year 1999 and remain level thereafter. The health care cost trend rate assumption has a significant impact on the amounts reported. An increase in the rate of 1% in each year would increase the accumulated postretirement benefit obligation at December 31, 1993 by $3.5 million and the aggregate of the service and interest cost for 1993 by $0.6 million. The weighted average discount rate used to determine the accumulated postretirement benefit obligation was 7%. The company has not funded the liability for these benefits.
Profit-Sharing Plans The company has defined contribution profit-sharing plans covering certain non- union employees. Under the terms of these plans, the company has agreed to make matching contributions equal to those made by the participating employees up to a maximum of 6% of each employee's base salary. The company's total contributions to the plans for 1993, 1992 and 1991 were $6.0 million, $5.7 million and $5.1 million, respectively.
NOTE 8. REDEEMABLE PREFERRED STOCK
Shares of 9% Series C Cumulative Convertible Preferred Stock ("Series C Preferred Stock") are convertible into shares of the company's common stock at the rate of 2.641 shares of common stock for each share of Series C Preferred Stock, or a conversion price of $18.9325 per share of common stock. Holders of this stock have one vote for each share of common stock into which Series C Preferred Stock is convertible and have agreed to vote in accordance with the recommendations of the company's Board of Directors on certain matters. The holders of the Series C Preferred Stock also have a class vote with respect to mergers, recapitalizations, or other similar transactions which are not approved by a majority of the independent directors of the company.
The Series C Preferred Stock is exchangeable at the option of the holder into shares of 9% Series D Convertible Preferred Stock, which have the same economic rights as the Series C Preferred Stock, but no voting rights except as required by law. The holders of the Series C Preferred Stock have agreed to certain transfer restrictions which do not apply to the Series D Preferred Stock. On or after July 31, 1995, the company may redeem shares of the Series C or Series D Preferred Stock outstanding, if any, and must redeem all such shares on January 31, 2001 at their stated value.
The Series C Preferred Stock carries liquidation rights equal to the greater of 110% of the stated value per share, plus dividends accrued to the date of payment, or the current market value of the common stock into which the Series C Preferred Stock outstanding is convertible.
NOTE 9. STOCKHOLDERS' EQUITY
Common Stock On December 3, 1993 the Board of Directors of the company authorized a two-for- one stock split effected in the form of a stock dividend payable January 28, 1994 to stockholders of record on December 31, 1993. On January 28, 1994, the Board of Directors declared a cash dividend of $0.10 per common share payable on February 28, 1994 to stockholders of record on February 15, 1994.
On a post-split basis, the company repurchased 3,715,928 and 7,774,344 of its outstanding common stock in 1992 and 1991, respectively. The average per share cost of these repurchases were $20.94 and $10.38 in 1992 and 1991, respectively.
The excess of the purchase price of the common stock over its stated value has been reflected as a decrease in Additional Paid-In Capital.
Earnings Per Common Share For the periods presented, primary earnings per common share were computed by dividing net income, reduced by the amount of preferred stock dividends, by the weighted average number of common shares and common equivalent shares outstanding during the year. Common equivalent shares consist of stock options granted. Fully diluted earnings per common share were computed based on the assumption that the Series C Preferred Stock was converted. The number of shares used in these computations was as follows:
Stockholder Rights Plan The company's stockholder rights agreement provides that rights become exercisable when a person acquires 20% or more of the company's common stock or announces a tender offer which would result in the ownership of 20% or more of the company's common stock, or if a person who has been declared "adverse" by the independent directors of the company exceeds a threshold stock ownership established by the Board, which may not be less than 10%. The rights will be attached to all common stock, Series C Preferred Stock and Series D Preferred Stock certificates at the rate of one right per common share and one right for each common share into which Series C and Series D Preferred Stock is convertible. Once exercisable, each right entitles its holder to purchase two one-hundredths of a share ("unit") of Series A Junior Participating Preferred Stock at a purchase price of $130 per unit, subject to adjustment.
Upon the occurrence of certain other events related to changes in the ownership of the company's outstanding common stock, each holder of a right would be entitled to purchase shares of the company's common stock or an acquiring corporation's common stock having a market value of two times the exercise value of the right. Rights that are, or were, beneficially owned by an acquiring or adverse person will be null and void. In addition, the Board of Directors may, in certain circumstances, require the exchange of each outstanding right for common stock or other consideration with a value equal to the exercise price of the rights. The company has reserved 500,000 shares of preferred stock for issuance pursuant to the exercise of the rights in the future. The rights expire November 29, 1998 and, subject to certain conditions, may be redeemed by the Board of Directors at any time at a price of $0.025 per right.
Stock Incentive Plans On July 27, 1993, the Compensation Committee of the Board of Directors approved stock option grants under the company's 1989 Stock Incentive Plan (the "Plan") for 1,878,192 shares of the company's common stock to 384 key employees of the company. The options have an exercise price of $22.38 per share, a 10-year term and vest over a two- to nine-year period based upon the achievement of stock price appreciation targets. The percentage of the options that vest during specified time periods will depend on the amount of stock price appreciation in those time periods. After five years, the options will vest as to 60% of the covered shares if not otherwise vested, and after nine years, the options will vest as to the remaining 40% if not otherwise vested. These option grants are expected to be part of a two-part program replacing annual stock option grants for five years. To complete the program, the company intends to request stockholder approval at its 1994 Annual Meeting of Stockholders for an increase in the number of shares reserved under the Stock Incentive Plan to provide shares for a second grant of approximately 1,252,108 options with similar vesting conditions, and certain other grants.
Previous stock option grants under the Plan become exercisable in three to four equal annual installments commencing one year after grant. The Plan also provides for awards of restricted shares of common stock and stock units to officers and other key employees. Recipients of restricted shares must pay the par value of $0.01 for each restricted share of common stock received. Restricted shares are not transferable until vested, but the recipient enjoys full voting and dividend rights. Vesting ordinarily occurs in five unequal annual installments increasing from 10 percent in the first year to 30 percent in the fifth year. The liability for these awards is based upon the market value of the shares at the date of award and is included in Stockholders' Equity.
The 1992 Directors Stock Option Plan provides for the granting of options to purchase shares of common stock to non-employee members of the company's Board of Directors. The aggregate number of options which may be granted under this plan is 200,000. Options become exercisable in three equal installments on the first three anniversaries of the date of grant.
The following is a summary of the transactions in the plans during 1993:
At December 31, 1993, a total of 164,392 shares were available for future grants of stock options, restricted shares and stock units under these plans.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Commitments In May 1993, the company entered into contracts for the construction and purchase of six new C11-class containerships from Howaldtswerke-Deutsche Werft AG, of Germany (three ships) and Daewoo Shipbuilding and Heavy Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated project cost for the construction of these vessels is $535 million. A payment of $52 million was made to the shipyards in 1993. The remaining payments are due in two 5% installments in 1994 and 80% upon delivery of the vessels, which is scheduled for 1995. The company has obtained commitments from European banks to finance approximately $400 million of the purchase price of the six C11-class vessels. Principal payments on any draw-downs would be due in semi-annual installments over a 12 year period commencing six months after the delivery of each vessel. Interest rates would be based upon various margins over LIBOR or the banks' cost of funds as elected by the company. The remaining cost of these vessels would be financed with the company's public debt and cash from operations.
In connection with the construction and purchase of the ships from Howaldtswerke-Deutsche Werft AG, the company entered into foreign currency contracts to buy Deutsche marks in the future to lock in the U.S. dollar cost of the Deutsche-mark denominated price of the German-built vessels. Any gains or losses on these contracts will be deferred and recognized as an adjustment to the cost basis of the ships when the related payments are made. At December 31, 1993, the company had contracts to purchase $241.5 million in Deutsche marks. At December 31, 1993, the carrying value of such contracts was an asset of $2.3 million and the fair market value, based on quoted market prices of comparable instruments, was a liability of $2.0 million. The value of the contracts upon ultimate settlement is dependent upon actual currency exchange rates at the various maturity dates in 1994 and 1995.
In December 1993, the company entered into contracts with Daewoo for the construction and purchase of three diesel-powered K10-class containerships to be delivered in 1996. The total estimated project cost for construction of these vessels is $195 million. A payment of $18 million was made to the shipyard in 1993. The remaining payments are due in two 10% installments in 1995 and 70% upon delivery of the vessels. The project will be financed by funds from the recent debt offerings and internally generated cash flows.
At December 31, 1993, the company had outstanding purchase commitments to acquire facilities, equipment and services totaling $56.4 million. In addition, the company had commitments to purchase terminal services for its major Asian operations. These commitments range from one to ten years and the amount of the commitments under these contracts is based upon the actual services performed. Also, the company had letters of credit totaling $10.4 million outstanding, which guarantee the company's performance under certain of its commitments.
The company has entered into a contract with the Port of Los Angeles to lease a new 226-acre terminal facility for 30 years. Occupancy of the new facility is scheduled for 1997 upon completion of construction. The minimum annual rent expense under the new lease is estimated to be between $22 million and $26 million, depending upon the final scope of development. The annual rent for the company's current 129-acre terminal in Los Angeles was approximately $18.5 million in 1993. The company has agreed to purchase at least six gantry cranes and certain intermodal handling equipment for use at the new Los Angeles terminal, the cost of which is not known at this time.
The company also is negotiating with the Port of Seattle for the improvement and expansion of its existing terminal facility. Under the proposed plan, the facility would be expanded from 83 acres to approximately 160 acres by 1997 and the lease term would be 30 years from completion. The lease for the existing facility expires in 2015.
Since 1991, the company and Orient Overseas Container Line, a Hong Kong shipping company ("OOCL"), have been parties to agreements enabling them to exchange vessel space and coordinate vessel sailings until 1996. In February 1994, the company and OOCL reached agreements to extend the term of the agreements through 2005 and to explore certain other opportunities, including the addition of an Asia to Europe service route. The new contracts are subject to certain conditions, including U.S. government approval. Currently, each party is guaranteed vessel space and buys extra space as needed. Starting in December 1993, the company was required to increase the vessel space it purchases from OOCL and will compensate OOCL for this additional space at a rate currently calculated at $6.6 million per year. This commitment reduces as the company increases the capacity it can exchange with OOCL, which is expected to begin with the delivery of the C11s in 1995.
The company has entered into employment agreements with certain of its executive officers. The agreements provide for certain payments to each officer upon termination of employment, other than as a result of death, disability in most cases, or justified cause, as defined. The aggregate estimated commitment under these agreements was $15 million at December 31, 1993.
Contingencies The company is a party to various legal proceedings, claims and assessments arising in the course of its business activities, none of which in management's opinion is expected to have a material adverse impact on its consolidated financial position or operations.
NOTE 11. BUSINESS SEGMENT INFORMATION
The company provides container transportation services in North America, Asia and the Middle East through an intermodal system combining ocean, rail and truck transportation. In addition, the company has real estate holdings which are being developed and sold.
Depreciation expense and capital expenditures were related only to transportation operations in 1993, 1992 and 1991.
The following table shows the percentage of ocean transportation revenues by country:
Operating income, net income and identifiable assets cannot be allocated on a geographic basis due to the nature of the company's business.
1) In 1992, the company changed its method of revenue and expense recognition to a percentage of completion method for revenue, and expenses as incurred from recording revenue and variable expenses when cargo was loaded. The cumulative effect of this change on prior years was recognized as a one-time charge at the beginning of the year.
SCHEDULE II. AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
The company makes loans represented by promissory notes to certain employees primarily for the purpose of assisting in the employee's relocation. Generally, these notes are due in five annual installments. In 1990 and 1991 certain notes were amended to extend the payment of the unpaid current portion to one year after the end of the original term of the note.
(1) Interest at 8.5%, unsecured. (2) Interest at 11%, unsecured, repaid in 1991. (3) Interest at 10%, unsecured, due through July 1994. (4) Interest at 11.5%, unsecured, written-off in 1991 after employment with the company was terminated. (5) Interest at 11%, unsecured, repaid in 1992 after employment with the company was terminated.
SCHEDULE III. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
SCHEDULE III. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY), continued
All material intercompany transactions and account balances are eliminated in consolidation.
(1)The accounting change for Revenue and Expenses is described in Note 1 to the consolidated financial statements. (2)The accounting change for Postretirement Benefits is described in Note 7 to the consolidated financial statements. (3)For an analysis of Stockholders' Equity, see Consolidated Statement of Changes in Stockholders' Equity and Note 9 to the consolidated financial statements.
SCHEDULE V. PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI. ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE IX. SHORT-TERM BORROWINGS
(1) The average amount outstanding was calculated based on an average daily balance.
(2) The weighted average interest rate during the period was computed by dividing the actual interest expense by the average short-term debt outstanding.
(3) These borrowings were made from various banks at prevailing interest rates.
(4) This borrowing was made under the company's previous $100 million revolving credit agreement.
ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to Directors and certain executive officers of the company appearing under the caption "Election of Directors - Information With Respect to Nominees and Directors" in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 28, 1994 is hereby incorporated herein by reference.
The following sets forth certain information with respect to the remaining executive officers of the company:
Maryellen B. Cattani, age 50, elected Senior Vice President, General Counsel and Secretary of the company in July 1991. Prior to joining the company, she was a partner in the law firm of Morrison & Foerster from 1989 to 1991 and Senior Vice President, General Counsel and Secretary of Transamerica Corporation from 1983 to 1989.
James S. Marston, age 60, elected Senior Vice President and Chief Information Officer of the company in September 1987, served as Vice President and then President of AMR Corporation-Technical Training Division from June 1982 to June 1986 and from June 1986 to September 1987, respectively.
William J. Stuebgen, age 46, elected Vice President, Controller of the company in October 1990. Prior to that, he served as Vice President, Treasurer of the company from October 1988 to September 1990 and Vice President, Controller from April 1987 to March 1989.
The executive officers of the company are elected by the Board of Directors. Each officer holds office until his or her successor has been duly elected and qualified, or until the earliest of his or her death, resignation, retirement or removal by the Board.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the caption "Compensation of Executive Officers and Directors" and "Description of Plans" in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 28, 1994, is hereby incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Election of Directors- Stock Ownership of Directors and Officers" and "Certain Beneficial Ownership of Securities" in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 28, 1994, is hereby incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the captions "Compensation of Executive Officers and Directors -- Employment Agreements and Certain Transactions" in the company's definitive proxy statement for the annual meeting of stockholders to be held on April 28, 1994, is hereby incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this report:
1. Financial Statements and Schedules
The following report of independent public accountants, consolidated financial statements and notes to the consolidated financial statements of American President Companies, Ltd. and subsidiaries are contained in Part II, Item 8:
a. Report of Independent Public Accountants b. Consolidated Statement of Income c. Consolidated Balance Sheet d. Consolidated Statement of Cash Flows e. Consolidated Statement of Changes in Stockholders' Equity f. Notes to Consolidated Financial Statements
2. The following schedules are contained in Part II, Item 8:
a. Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters and Employees Other than Related Parties b. Schedule III - Condensed Financial Information of Registrant (Parent Company) c. Schedule V - Property, Plant and Equipment d. Schedule VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment e. Schedule IX - Short-Term Borrowings
3. Exhibits required by Item 601 of Regulation S-K
The following documents are exhibits to this Form 10-K
Exhibit No. Description of Document ______________________________________________________________________________
3.1* Certificate of Incorporation, filed as Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated May 14, 1985.
3.2* Certificate of Amendment of Certificate of Incorporation, filed as Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated March 11, 1988.
3.3* By-Laws, as amended, filed as Exhibit 3.1 to the company's Form SE (File No. 1-8544), dated March 27, 1991 and electronically filed as Exhibit 3.1 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993.
3.4* Amendment to the By-laws dated June 25, 1993 filed as Exhibit 3.2 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993.
4.1* Amended and Restated Rights Agreement dated October 22, 1991, between the company and The First National Bank of Boston, as Rights Agent, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated October 22, 1991.
4.2* Trust Indenture between American President Lines, Ltd., Issuer, and Security Pacific National Bank, Trustee, dated as of April 22, 1988, President Truman Issue, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated July 26, 1988.
4.3* Forms of Series I and Series II Bonds, filed as part of Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated July 26, 1988.
4.4* Certificate of Designation, Preferences, and Rights of the 9% Series C Cumulative Convertible Preferred Stock, filed with the Delaware Secretary of State on September 20, 1988, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated September 21, 1988.
4.5* Specimen Certificate of the company's 9% Series C Cumulative Convertible Preferred Stock, par value $.01 per share, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated August 1, 1989.
4.6* Preferred Stock Purchase Agreement among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated as of August 3, 1988, and amendments 1 through 3, dated September, 1988 (without exhibits), filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated February 17, 1989.
4.7* Amendment of Preferred Stock Purchase Agreement among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated March 15, 1989, filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated March 14, 1990.
4.8* Registration Rights Agreement, among the company, Hellman & Friedman Capital Partners, Hellman & Friedman Capital Partners International (BVI), and APC Partners; dated as of August 3, 1988, as amended (without exhibits), filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated February 17, 1989.
4.9* Refunding Revenue Bonds Loan Agreement, dated October 1, 1989, by and between American President Lines, Ltd. and Alaska Industrial Development and Export Authority, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
4.10* Trust Indenture between Alaska Industrial Development and Export Authority, Issuer, and Security Pacific National Bank, Trustee, dated October 1, 1989, to the Refunding Revenue Bonds, Series 1989, filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
4.11* Refunding Revenue Bonds Guaranty Agreement by and between the company and Security Pacific National Bank and Alaska Industrial Development and Export Authority, filed as Exhibit 4.3 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
4.12* Specimen Certificate of the company's Refunding Revenue Bonds, Series 1989, filed as Exhibit 4.4 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
4.13* Refunding Revenue Bonds Loan Agreement between American President Lines, Ltd. and Alaska Industrial Development and Export Authority dated October 1, 1991, filed as Exhibit 4.1 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
4.14* Trust Indenture between Alaska Industrial Development and Export Authority, Issuer, and Security Pacific National Bank, Trustee, dated October 1, 1991, to the Refunding Revenue Bonds Series 1991, filed as Exhibit 4.2 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
4.15* Irrevocable Direct Pay Letter of Credit and Reimbursement Agreement between American President Lines, Ltd., American President Companies, Ltd. and The Industrial Bank of Japan, Limited, dated October 3, 1991, filed as Exhibit 4.3 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
4.16* Certificate of Elimination with Respect to the $3.50 Series B Convertible Exchangeable Preferred Stock of American President Companies, Ltd., dated June 22, 1992, filed as Exhibit 4.1 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993.
4.17* Certificate of Designation, Preferences and Rights of the 9% Series D Convertible Preferred Stock of American President Companies, Ltd., dated June 29, 1992, filed as Exhibit 4.2 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993.
4.18* Indenture, dated as of November 1, 1993, between American President Companies, Ltd. and The First National Bank of Boston as Trustee, filed as Exhibit 4.1 to the company's Form 8K (File No. 1-8544) dated November 29, 1993.
4.19* Form of 7-1/8% Senior Note Due 2003 of American President Companies, Ltd., filed as Exhibit 4.2 to the company's Form 8K (File No. 1-8544) dated November 29, 1993.
4.20 Form of 8% Senior Debentures Due 2024 of American President Companies, Ltd.
10.1* Operating-Differential Subsidy Agreement (No. MA/MSB-417), effective as of January 1, 1978, between the United States and American President Lines, Ltd., and Addenda Nos. 1 through 79 thereto, excluding Nos. 16, 52, 56, 67, 72, 73, 76 and 77, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.2* Capital Construction Fund Agreement (No. MA/CCF-306), dated as of December 8, 1976, between the United States and American President Lines, Ltd., and Addenda Nos. 1 through 15 thereto, excluding No. 10, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.3* Sealift Readiness Agreement (No. SRP 10-83), dated January 1, 1991, between the Department of the Navy, Military Sealift Command, and American President Lines, Ltd., filed as Exhibit 10.4 to the company's Registration Statement on Form 10 (File No. 1-8544), which became effective on September 1, 1983.
10.4* Lease Agreement, dated June 1, 1988, between Monsanto Company and American President Intermodal Company, Ltd., filed as Exhibit 10.14 to the company's Form SE (File No. 1-8544), dated July 26, 1988.
10.5* Lease Agreement, dated June 1, 1988, between Consolidated Rail Corporation and American President Intermodal Company, Ltd., filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March 14, 1990.
10.6* Lease and Preferential Assignment Agreement dated January 6, 1971, and First Supplemental Agreement dated February 24, 1971, between the City of Oakland and Seatrain Terminals of California, Inc., filed as Exhibit 10.32 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.7* Second Supplemental Agreement to Lease and Preferential Assignment Agreement, dated May 3, 1988, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 14, 1990.
10.8* Preferential Assignment dated February 23, 1972, between the City of Oakland and Seatrain Terminals of California, Inc., filed as Exhibit 10.33 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.9* Assignment, Designation of Secondary Use and Consent, dated December 11, 1974, among Seatrain Terminals of California, Inc., American President Lines, Ltd., the City of Oakland and Seatrain Lines, Inc., filed as Exhibit 10.34 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.10* Acknowledgment of Termination of Consent to Secondary Use and Sublease and Assumption of Entire Combined Premises and Cranes dated December 18, 1981, between the City of Oakland and American President Lines, Ltd., filed as Exhibit 10.35 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.11* Supplemental Agreement dated July 6, 1982, between the City of Oakland and American President Lines, Ltd., filed as Exhibit 10.36 to the company's Registration Statement on Form S-l, Registration No. 2- 93718, which became effective on November 1, 1984.
10.12* Permit No. 441, dated November 26, 1980, Second Amendment to Permit No. 441, dated February 7, 1983, and Third Amendment to Permit No. 441, dated May 10, 1984, between the City of Los Angeles and American President Lines, Ltd., filed as Exhibit 10.37 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.13* Fourth Amendment to Permit No. 441, dated as of October 29, 1986 between the City of Los Angeles and American President Lines, Ltd., filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 23, 1987.
10.14* Financing and Security Agreement, dated March 27, 1984, between American President Lines, Ltd. and the City of Los Angeles, California, filed as Exhibit 10.38 to the company's Registration Statement on Form S-1, Registration No. 2-93718, which became effective on November 1, 1984.
10.15* Lease, dated July 31, 1972, Lease Agreement, dated September 1, 1980, Memorandum, dated September 1, 1980, and two letters dated July 3, 1981 and July 14, 1981, respectively, between Hanshin Port Development Authority and American President Lines, Ltd., filed as Exhibit 10.39 to the company's Registration Statement on Form S-1, Registration No. 2-93718, which became effective on November 1, 1984.
10.16* Pre-engagement Agreement for Lease dated March 17, 1983, Supplemental Agreement dated March 17, 1983 and form of Wharf Lease Agreement between Yokohama Port Terminal Corporation and American President Lines, Ltd., filed as Exhibit 10.41 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.17* Lease Contract of Wharfs Nos. 68 & 69 of Container Terminal No. 3 Kaohsiung Harbor, Taiwan, Republic of China, dated December 31, 1987 and Equipment Agreement between the Kaohsiung Harbor Bureau and APL, dated December 31, 1987, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 11, 1988.
10.18* Lease dated April 28, 1978, Memorandum of Understanding, Addendum to Lease dated May 9, 1978, Addendum No. 2 to Lease dated July 28, 1978, and Addendum No. 3 to Lease dated March 27, 1984, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.44 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.19* Addendum No. 4 dated April 19, 1985 to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated December 12, 1985.
10.20* Addendum No. 5 dated July 25, 1986 to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated March 11, 1988.
10.21* Addendum No. 6, dated May 1, 1988, to Lease dated April 28, 1978, between Sunset Cahuenga Building, a Joint Venture, and American President Lines, Ltd., filed as Exhibit 10.13 to the company's Form SE (File No. 1-8544), dated July 26, 1988.
10.22* Lease Agreement between Port of Seattle and American President Lines, Ltd. at Terminal 5 dated September 26, 1985, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated December 12, 1985.
10.23* Lease Agreement between the company and Bramalea Pacific, Inc. dated April 18, 1988, and Amendments 1 through 5, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 27, 1991.
10.24* Deferred Compensation Plan For Directors of the company, filed as Exhibit 10.49 to the company's Registration Statement on Form S-l, Registration No. 2-93718, which became effective on November 1, 1984.
10.25* Executive Survivors' Benefits Plan, dated November 29, 1988, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.26* 1989 Stock Incentive Plan of the company, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 14, 1990.
10.27* Amendment to 1989 Stock Incentive Plan of the company, filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated October 31, 1990.
10.28* Credit agreements dated as of February 12, 1987, between American President Lines, Ltd. and Kreditanstalt Fuer Wiederaufbau, filed as Exhibit 10.9 to the company's Form SE (File No. 1-8544), dated March 23, 1987.
10.29* Guarantees dated as of February 12, 1987, by the company in favor of Kreditanstalt Fuer Wiederaufbau, filed as Exhibit 10.10 to the company's Form SE (File No. 1-8544), dated March 23, 1987.
10.30* 1988 Deferred Compensation Plan dated November 29, 1988, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated February 17, 1989.
10.31* Grantor Trust Agreement with U.S. Trust Company of California, N.A., effective April 10, 1989, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated August 1, 1989.
10.32* Employment Agreement as amended, dated January 29, 1991 between the company and John M. Lillie, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
10.33* Employment Agreement, dated March 4, 1991 between Will M. Storey and the company, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
10.34* Employment Agreement, dated July 30, 1991 between Joji Hayashi and the company, filed as Exhibit 10.1 to the company's Form SE (File No. 1- 8544), dated October 22, 1991.
10.35* Employment Agreement, dated July 30, 1991 between James S. Marston and the company, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated October 22, 1991.
10.36* Employment Agreement, dated July 30, 1991 between Timothy J. Rhein and the company, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated October 22, 1991.
10.37* Agreement dated May 6, 1991 between the company and Richard L. Tavrow, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.38* Form of Indemnity Agreement dated March 11, 1988 between the company and W. B. Seaton, Charles S. Arledge, John H. Barr, Calvin S. Hatch, J. Hayashi, Forrest N. Shumway and Barry L. Williams, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated February 17, 1989.
10.39* Form of Indemnity Agreements dated April 25, 1991 between the company and F. Warren Hellman, John M. Lillie, Timothy J. Rhein, Will M. Storey, filed as Exhibits 10.3 through 10.6 to the company's Form SE (File No. 1-8544), dated May 8, 1991.
10.40* Trans-Pacific Stabilization Agreement, a Cooperative Working Agreement among Ocean Common Carriers, including American President Lines, Ltd., signed November 22, 1988, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated August 1, 1989.
10.41* Assignment Agreement from United States Lines, Inc. to American President Lines, Ltd. with attached supplements, dated September 16, 1987, filed as Exhibit 10.8 to the company's Form SE (File No. 1- 8544), dated March 14, 1990.
10.42* Receivables Purchase Agreement, dated August 29, 1991 between American President Domestic Company, Ltd. and J.P. Morgan Delaware, Morgan Guaranty Trust Company of New York, Bank of America National Trust and Savings Association, Barclays Bank PLC, Citibank, N.A., The First National Bank of Boston, The First National Bank of Chicago, Security Pacific National Bank and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.04 to the company's Form SE (File No. 1- 8544), dated October 22, 1991.
10.43* Receivables Purchase Agreement, dated August 29, 1991 between American President Lines, Ltd. and J.P. Morgan Delaware, Morgan Guaranty Trust Company of New York, Bank of America National Trust and Savings Association, Barclays Bank PLC, Citibank, N.A., The First National Bank of Boston, The First National Bank of Chicago, Security Pacific National Bank and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.05 to the company's Form SE (File No. 1-8544), dated October 22, 1991.
10.44* Master Slot Charter Agreement between American President Lines, Ltd. and Orient Overseas Container Line Inc. dated July 24, 1991, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.45* Reciprocal Slot Exchange and Coordinated Sailing Agreement between American President Lines, Ltd. and Orient Overseas Container Line Inc. dated July 24, 1991, filed as Exhibit 10.6 to the company's Form SE (File No. 1-8544), dated March 17, 1992.
10.46* Agreement dated January 2, 1992 between the company and W.B. Seaton, filed as Exhibit 10.01 to the company's Form SE (File No. 1-8544), dated May 5, 1992.
10.47* Amendment No. 1, dated March 17, 1992, to the Receivables Purchase Agreement between APL Land Transport Services, Inc. and the Purchasers, J.P. Morgan Delaware and Morgan Guaranty Trust Company of New York, as agents, filed as Exhibit 10.02 to the company's Form SE (File No. 1-8544), dated May 5, 1992.
10.48* Amendment No. 1, dated March 17, 1992, to the Receivables Purchase Agreement, between American President Lines, Ltd. and the Purchasers, J.P. Morgan Delaware, Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.03 to the company's Form SE (File No. 1- 8544), dated May 5, 1992.
10.49* Amended and Restated Credit Agreement and APC Subordination Agreement, dated March 17, 1992 among American President Lines, Ltd., borrower, American President Companies, Ltd., guarantor, and J.P. Morgan Delaware, Morgan Guaranty Trust Company of New York, Bank of America National Trust and Savings Association, Barclays Bank PLC, Citibank, N.A., The First National Bank of Boston, The First National Bank of Chicago, Security Pacific National Bank and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.05 to the company's Form SE (File No. 1-8544), dated May 5, 1992.
10.50* 1992 Directors' Stock Option Plan, dated March 17, 1992, filed as Exhibit 10.06 to the company's Form SE (File No. 1-8544), dated May 5, 1992.
10.51* Amendment No. 1 dated May 5, 1992 to the Amended and Restated Credit Agreement dated March 17, 1992 among American President Lines, Ltd., borrower, American President Companies, Ltd., guarantor, and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.01 to the company's Form SE (File No. 1-8544), dated July 28, 1992.
10.52* Amended and Restated Retirement Plan for the Directors of American President Companies, Ltd., dated September 15, 1992, filed as Exhibit 10.01 to the company's Form SE (File No. 1-8544), dated October 20, 1992.
10.53* Amendment No. 1 dated July 28, 1992 to the Employment Agreement as amended, between the company and John M. Lillie, filed as Exhibit 10.1 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.54* Amendment No. 2 dated January 26, 1992 to the Employment Agreement as amended, between the company and John M. Lillie, filed as Exhibit 10.2 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.55* Amendment No. 1 to the 1988 Deferred Compensation Plan, effective January 1, 1992, filed as Exhibit 10.3 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.56* Addenda Nos. 16 and 17 to the Capital Construction Fund Agreement (No. MA/CCF-306), dated as of December 8, 1976, between the United States and American President Lines, Ltd., filed as Exhibit 10.4 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.57* Vessel Sale Agreement for the President Lincoln, dated October 30, 1992 among American President Lines, Ltd., the Purchaser, and Xerox Credit Corporation, Owner Participant, filed as Exhibit 10.5 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.58* Vessel Sale Agreement for the President Washington and President Monroe, dated November 17, 1992 among American President Lines, Ltd., the Purchaser, Bank of American National Trust and Savings Association, not in its individual capacity but solely as Owner Trustee under the related trust agreements for the benefit of the Trustors named and General Electric Credit Corporation of Georgia, Owner Participant, filed as Exhibit 10.6 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.59* Amendment No. 2 dated December 9, 1992 to the Amended and Restated Credit Agreement dated March 17, 1992 among American President Lines, Ltd., borrower, American President Companies, Ltd., guarantor, and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.7 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.60* Amendment No. 2 dated December 9, 1992 to the APD Receivables Purchase Agreement dated August 29, 1991 among APL Land Transportation Services, Inc., seller, J.P. Morgan Delaware, as administrative agent, and Morgan Guaranty Trust Company of New York, as co-agent, filed as Exhibit 10.8 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.61* Amendment No. 2 dated December 9, 1992 to the APL Receivables Purchase Agreement dated August 29, 1991 among American President Companies, Ltd., seller, J.P. Morgan Delaware, as administrative agent, and Morgan Guaranty Trust Company of New York, as co-agent, filed as Exhibit 10.9 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.62* Amendment No. 1 to the Executive Survivors' Benefits Plan, effective December 4, 1992, filed as Exhibit 10.10 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.63* Excess-Benefit Plan of the company, amended and restated effective January 1, 1993, filed as Exhibit 10.11 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.64* American President Companies, Ltd. SMART Plan, amended and restated effective January 1, 1993, filed as Exhibit 10.12 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.65* American President Companies, Ltd. Retirement Plan, amended and restated effective January 1, 1993, filed as Exhibit 10.13 to the company's Form SE (File No. 1-8544), dated March 24, 1993.
10.66 Contract for the Purchase of Containership Vessels dated May 10, 1993, between Howaldtswerke-Deutsche Werft and Aktungesellschaft and American President Lines, Ltd.
10.67 Contract for the Purchase of Containership Vessels dated May 10, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd.
10.68 Commitment Letter from Kreditanstalt fur Wiederaufbau to American President Companies, Ltd.
10.69* Amendment No. 1 to the Contract for the Purchase of Containership Vessels, dated June 3, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd., filed as Exhibit 10.4 to the company's Form 10Q (File No. 1-8544, dated August 3, 1993.)
10.70* Addendum No. 17 to the Capital Construction Fund Agreement (No. MA/CCF- 306), dated April 22, 1993, between the United States and American President Lines, Ltd. filed as Exhibit 10.5 to the company's Form 10Q (File No. 1-8544), dated August 3, 1993.
10.71* Permit No. 733, dated September 10, 1993, between the City of Los Angeles and Eagle Marine Services, Ltd., and the Guaranty of Agreement made by American President Lines, Ltd., excluding exhibits, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated November 18, 1993.
10.72 Addenda Nos. 87 and 89 dated August 16, 1991 and March 19, 1992, respectively to the Operating-Differential Subsidy Agreement (No. MA/MSB-417), effective as of January 1, 1978, between the United States and American President Lines, Ltd.
10.73 Amendments Nos. 3, 4 and 5 dated March 1, 1993, December 2, 1993 and February 1, 1994, respectively, to the Amended and Restated Credit Agreement dated March 17, 1992 among American President Lines, Ltd., as borrower, American President Companies, Ltd., as guarantor, and Morgan Guaranty Trust Company of New York, as agent, and the banks named therein.
10.74 Indemnity Agreement dated October 5, 1993 between the company and Toni Rembe.
10.75 Amendment No. 1 dated January 31, 1994 to the Reciprocal Slot Exchange and Coordinated Sailing Agreement between American President Lines, Ltd. and Orient Overseas Container Line Inc. dated July 24, 1991.
10.76* Indemnity Agreement dated March 17, 1992 between the company and John J. Hagenbuch, filed as Exhibit 10.04 to the company's Form SE (File No. 1-8544), dated May 5, 1992.
11.1 Computation of Earnings Per Share.
21.1 Subsidiaries of the company.
23.1 Consent of Independent Public Accountants.
24.1 Powers of Attorney
*Incorporated by Reference
Pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, the company agrees to furnish to the Securities and Exchange Commission upon its request copies of documents pertaining to United States Merchant Marine Bonds secured by mortgages on certain vessels owned by the company described in the Consolidated Financial Statements of American President Companies Ltd. and Subsidiaries. Documents pertaining to such bonds, other than United States Merchant Marine Bonds, are substantially identical to those set forth as Exhibit 4.2 and 4.3 hereto.
Pursuant to Instruction 2 Item 601 of Regulation S-K, the company has omitted the Contract for the Purchase of Containership Vessels dated December 2, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd. Such document is substantially identical to the Contract for the Purchase of Containership Vessels dated May 10, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd., except with respect to prices and dates of delivery, set forth as Exhibit 10.67.
(b) Reports on Form 8-K during the fourth quarter:
On December 6, 1993, the company filed a Form 8K, dated November 29, 1993, for sale of $150 million aggregate principal amount of its 7-1/8% Senior Notes Due 2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN PRESIDENT COMPANIES, LTD. (Registrant)
By /s/ William J. Stuebgen William J. Stuebgen Vice President, Controller and Chief Accounting Officer March 9, 1994
Pursuant to the requirements of the Securities and 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 dates indicated.
/s/ John M. Lillie* March 9, 1994 John M. Lillie Chairman of the Board of Directors, President and Chief Executive Officer
/s/ Charles S. Arledge* March 9, 1994 Charles S. Arledge Director
/s/ John H. Barr* March 9, 1994 John H. Barr Director
/s/ John J. Hagenbuch* March 9, 1994 John J. Hagenbuch Director
/s/ Joji Hayashi* March 9, 1994 Joji Hayashi Director
/s/ F. Warren Hellman* March 9, 1994 F. Warren Hellman Director
/s/ Toni Rembe* March 9, 1994 Toni Rembe Director
/s/ Timothy J. Rhein* March 9, 1994 Timothy J. Rhein Director
W. B. Seaton Director
/s/ Forrest N. Shumway* March 9, 1994 Forrest N. Shumway Director
/s/ Will M. Storey* March 9, 1994 Will M. Storey Executive Vice President, Chief Financial Officer and Director
/s/ Barry L. Williams* March 9, 1994 Barry L. Williams Director
*By: /s/ Maryellen B. Cattani March 9, 1994 Maryellen B. Cattani Attorney-in-fact