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 1,520 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.
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 by the company and other association members.
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 have been concluded and a decision by the FMC is not expected until 1996.
In March 1992, 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. In July 1994, the decision of dismissal was affirmed by the U.S. Court of Appeals for the Circuit of the District of Columbia. That dismissal has become final.
In April 1994, a lawsuit, Hockert Pressman & Flohr Money Purchase Plan, et. al. vs. American President Companies, Ltd., et. al., was filed against the company and certain of its officers in United States District Court for the Northern District of California. The suit alleges that the company and certain officers made false and misleading statements about the company's operating and financial performance in violation of federal securities laws, and seeks unspecified damages on behalf of a purported class of stockholders who purchased shares of the company's common stock during the period October 7, 1993 through March 30, 1994. The company believes that it has meritorious defenses and intends to defend itself vigorously against this lawsuit.
Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential 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 1994.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The company's Common Stock is listed 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 46.
On March 1, 1995, the company had 3,938 common stockholders of record.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the ten years ending December 30, 1994 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, 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-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 13.3%, 16.8%, 12.1%, 11.0%, (13.3%), (5.2%) and 12.8% in 1994, 1993, 1992, 1991, 1990, 1989 and 1988, respectively, and Total Debt to Equity would be 86.1%, 72.9%, 108.6%, 123.9%, 122.5%, 106.3% and 103.3% in 1994, 1993, 1992, 1991, 1990, 1989, and 1988, respectively. (4) Cash Flow represents Cash Flows from Operating Activities.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Although pretax income declined in 1994 compared with 1993, and increased in 1993 compared with 1992, included in these amounts are items that are not part of the company's base transportation business. These items are: sales of the company's real estate holdings, which were completed in 1994 and contributed $9 million, $11 million, and $5 million to pretax income in 1994, 1993 and 1992, respectively; Desert Storm per diem collections, which contributed $10 million, $6 million and $41 million to pretax income in 1994, 1993 and 1992, respectively; gains on sales of the company's investment in the common stock of Amtech Corporation, which contributed $9 million and $8 million to pretax income in 1993 and 1992, respectively; and expenses related to the company's corporate initiatives to improve its financial and order cycle processes, which totaled $31 million and $9 million in 1994 and 1993, respectively. Excluding these items, the company's pretax income was $122 million, $114 million and $68 million in 1994, 1993, and 1992, respectively.
In 1994, the company benefited from improvements in North America stacktrain volumes and stacktrain revenue per forty-foot equivalent unit ("FEU") compared with 1993. Volumes of the company's U.S. import and intra-Asia cargo also increased in 1994. Gains on sales of a crane and certain containers contributed approximately $6 million to the 1994 results. Transportation operating expenses per FEU rose in 1994 compared with 1993, primarily due to higher stevedoring and fuel costs, and an unfavorable currency exchange rate in Japan. Additionally, the company's 1993 income and volumes were positively impacted by the fact that the 1993 fiscal year was 53 weeks, compared with 52 weeks in 1994 and 1992.
The improvements in the company's 1993 results compared with 1992 were due to higher freight volumes in all the company's markets, higher operating margins in the company's North America stacktrain market, and lower net interest expense. Lower rates in the company's U.S. export and intra-Asia markets partially offset these improvements. Also contributing to the increase in earnings in 1993 were gains totaling $9 million from sales of three of the company's older steamships and certain containers.
(1)Volumes and average 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.
The company's U.S. import volumes increased in 1994 compared with 1993 primarily due to service enhancements in the People's Republic of China that resulted in higher volumes from that country in 1994, and higher volumes of refrigerated and military cargo. Volumes of U.S. export cargo were unchanged in 1994 from 1993. Volumes of refrigerated cargo in the company's U.S. export market improved, but were offset by a decline in military dry volumes resulting from the loss of the company's position as preferred carrier of military dry cargo in June 1994. Intra-Asia volumes for 1994 increased compared with 1993 as a result of the company's expanded service to and from China and the growing economies in Southeast and West Asia and the Middle East in 1994. Additionally, volumes of refrigerated cargo in this market have grown substantially since last year.
The increase in the company's import volumes in 1993 compared with 1992 resulted primarily from expanded service from the People's Republic of China in 1993. The company's export volumes increased due to higher military volumes from June 1, 1993, when the company became the preferred carrier of U.S. military cargo for a period of 12 months. The increase in export military shipments was partially offset by a decline in the company's commercial refrigerated shipments in this market compared with 1992. The company's intra- Asia volumes increased in 1993 compared with 1992, due to expanded service to the People's Republic of China and the growing trade in Southeast and West Asia.
Utilization of the company's containership capacity in 1994 was 89% and 94% for import and export shipments, respectively, compared with 89% and 92% in 1993, and 89% and 90% in 1992. Import capacity was increased in 1994 by the additional vessel space purchased from Orient Overseas Container Line ("OOCL"), a Hong Kong shipping company.
Average revenue per FEU for the company's U.S. import shipments was relatively unchanged in 1994, compared with 1993, as competitive pressures in this market have continued to hold import rates down. In 1994, average revenue per FEU in the company's U.S. export market was lower than 1993 due to reduced rates in the first half of the year resulting from weak market conditions and increased competition. Average revenue per FEU in the company's intra-Asia market increased slightly in 1994 compared with 1993, primarily attributable to an increase in higher-rated commercial refrigerated cargo, partially offset by competitive rate pressures in this market.
In 1993, average revenue per FEU for the company's U.S. import shipments increased compared with 1992 due to higher rates and a greater proportion of higher-rated commercial cargo carried by the company. Average revenue per FEU for the company's U.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. In its intra-Asia market, the company's average revenue per FEU declined in 1993 compared with 1992, resulting from competitive pressures in this market and a higher proportion of lower-rated short-haul cargo in the intra-Asia trade during 1993.
Other international transportation revenues, which primarily comprises cargo handling, freight consolidation and per diem revenues, were $281 million in 1994 compared with $254 million in 1993. This increase was primarily due to an increase in Asia cargo handling related to the OOCL and TMM contracts, discussed below, and an increase in feeder services in Asia provided to other carriers. Other international transportation revenues declined in 1993 to $254
million from $261 million in 1992, primarily due to a decrease of $35 million in collections of detention charges from the U.S. government for containers used in Operation Desert Storm and held beyond an allowed time. Partially offsetting the 1993 decrease was an increase in cargo handling revenues related to the OOCL contract. As of the end of 1994, all Desert Storm detention claims have been settled with the U.S. government and all payments have been received.
The company and OOCL are parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. 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 to share terminals and several feeder operations within Asia. Since December 1993, the company has been required to purchase additional vessel space from OOCL for approximately $7 million annually, accrued ratably over each year. This commitment reduces as the company increases the capacity it can exchange with OOCL, which is expected to begin with the scheduled delivery of the company's C11-class vessels in 1995.
In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers currently expect to commence service under this agreement in late 1995 or early 1996. This agreement is subject to government approvals in the U.S. and Japan.
The three carriers and Nedlloyd Lines B.V. ("NLL") signed a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-U.S. East Coast trade via Panama for a minimum of three years. The four carriers currently expect to initiate service under this agreement in March 1995, and weekly service is currently expected to commence by August 1995.
Additionally, in September 1994, the four carriers and Malaysian International Shipping Corporation BHD signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001. The carriers currently expect to commence service under the agreement in January 1996. Prior to the commencement of this alliance, the company will enter the Asia-Europe trade by chartering vessel space through MOL beginning in March 1995.
The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe alliance agreements are all expected to be implemented by late 1995 or early 1996. Under the terms of the three agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The value of vessel space provided by the company to the alliance is less than the value of the total capacity allocated to it through the alliance, resulting in an annual net cash purchase commitment from the company to its alliance partners currently estimated to be $29 million, beginning in 1996. For 1995, the company currently estimates its net purchase commitment to its alliance partners for vessel space in the Asia-U.S. East Coast and Asia-Europe trades to be approximately $35 million. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the company's net cash commitment, if any, to the alliance partners for these services cannot be determined at this time.
In April 1994, the company and Transportacion Maritima Mexicana ("TMM"), a Mexican transportation company, entered into an agreement enabling them to reciprocally charter vessel space for a period of three years. Under the agreement, cargo is transported between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. Each party is committed to purchase
a minimum amount of vessel space at contract rates and may buy available extra space as needed. The company's minimum space purchase commitment exceeds that of TMM by approximately $5 million per year.
Recently, proposals have been made to substantially repeal the Shipping Act of 1984 (the "Act"), which provides the company with certain immunity from antitrust laws, and eliminate the Federal Maritime Commission, which administers the Act. Related hearings have been held before a subcommittee of the U.S. House of Representatives Transportation and Infrastructure Committee. The company is unable to predict whether or to what extent efforts to eliminate or amend the Act may be successful, but the repeal of the Act could have a material adverse impact on the competitive environment in which the company operates and on the company's results of operations.
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 were approximately $61 million, $65 million and $70 million in 1994, 1993 and 1992, respectively.
In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994 was not enacted. The Administration's 1995 budget includes a proposal for a 10-year subsidy program with $100 million in annual payments to be requested and appropriated on a year-to-year basis. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted.
While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with the United States Maritime Administration ("MarAd") to operate under foreign flag its six C11-class containerships, presently under construction, and to transfer to foreign flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. On November 15, 1994, MarAd issued a waiver that will allow the company to operate its C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted.
Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be 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 vessels. The company continues to evaluate its strategic alternatives in light of the pending 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, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining 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.
In 1995, lawsuits were filed against the company and the U.S. Department of Transportation by certain of its unions and union members challenging MarAd's November 15, 1994 action granting the company the waiver allowing it to operate its C11-class vessels under foreign flag. While no assurances can be given, management believes these legal challenges will not be successful.
On January 5, 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia would provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice.
The company expects to incur incremental operating expenses and a loss of ocean freight revenues during 1995 resulting from the earthquake in Kobe on January 17, 1995. The ocean terminal leased by the company was damaged and will require extensive repairs. Business interruption insurance is expected to provide coverage for most of the related first quarter revenue shortfall and expenses, but the company expects an impact on pretax income of approximately $2 million for the quarter. In 1994, cargo moving through the Kobe terminal accounted for approximately 6% of the company's international revenues. On February 4, 1995, the company and OOCL announced resumption of limited service to Kobe, and the company and OOCL have adjusted their shared trans-Pacific schedule to and from Japan. The company cannot estimate the extent to which its operating results will be affected by the damage caused by the earthquake in future quarters, which will depend upon the timing of port repairs, the recovery of the infrastructure and economy in the region and the company's ability to make alternative arrangements to service the area.
The new C11-class vessels are scheduled to be delivered beginning in May 1995, and the new alliances are scheduled to begin in March 1995. Start-up expenses related to these programs are expected to be incurred in the first half of 1995, with limited related revenues. The company currently expects soft earnings in the first half of 1995, with improvement in the second half based on the company's expectation of utilization of its new capacity. However, utilization depends to a great extent upon the level of demand for transportation services and competition among carriers in the company's markets, and there is no assurance that such utilization will materialize.
(1)Volumes and average 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 North America third party business, the transportation of containers for the company's international customers is a significant component of its stacktrain operations. These shipments are represented above as International Stacktrain Volumes and, since they are eliminated in consolidation, are excluded in Revenues and Stacktrain Average Revenue per FEU.
Revenues from the company's North America transportation operations increased in 1994 compared with 1993, as a result of higher North America stacktrain volumes and revenue per FEU. The increase in stacktrain volumes in 1994 was due to the improvement in the U.S. economy, increases in Mexican and Canadian shipments, particularly automotive shipments between the U.S. and Mexico, and competitor equipment shortages. The company added 1,800 containers to its fleet during 1994, which enabled it to meet increasing demand. Stacktrain average revenue per FEU increased in 1994 compared with 1993 due to an improvement in cargo mix and increased rates in certain stacktrain markets. The company's North America non-stacktrain revenues also improved in 1994 compared with 1993, primarily due to increased volumes resulting from an improved U.S. economy.
In 1993, revenues and volumes from the company's North America stacktrain operations increased from 1992 due to an overall improvement in demand for North America stacktrain services and an increase in stacktrain services to Mexico and Canada. 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 were less profitable.
For 1995, the company expects growth in demand in the North America stacktrain markets as the U.S. economy continues to improve and more cargo converts from long-haul trucking to stacktrain service. There can be no assurances, however, that such demand will materialize. Additionally, growth in demand for stacktrain services to and from Mexico is dependent upon conditions in the Mexican economy, which have been extremely volatile recently, and the extent to which U.S. automakers continue to operate there, among other factors.
(1) Operating expenses used in this calculation include costs associated with certain International and North America revenues that are not volume related.
Land transportation expenses increased in 1994 from 1993, due to higher North America stacktrain volumes in 1994. The increase in cargo handling expenses in 1994 compared with 1993 is attributable to increased stevedoring costs, which were impacted by higher labor rates in Asia and the U.S. and handling of increased cargo to and from China, West Asia and Southeast Asia. The weakening of the U.S. dollar relative to Asian currencies, particularly the Japanese yen, also resulted in higher cargo handling expenses. These increases were partially offset by a favorable land rent reduction in Taiwan. Vessel expenses increased in 1994 compared with last year due to increased charter hire
activity resulting from expanded service to China, an increase in Latin American activity and additional vessel space purchased from OOCL and TMM in 1994. Vessel expenses were also impacted by a 6% increase in fuel cost in 1994 and the collision of one of the company's vessels during 1994, the uninsured cost of which was approximately $2 million. Transportation equipment costs increased in 1994 compared with 1993 due to the addition of 1,800 leased containers during 1994 for use in North America stacktrain operations, and increased repair and maintenance costs. Other operating expenses increased in 1994 compared with 1993 due to an increase of $9 million in the provision for potentially uncollectible accounts receivable, primarily in the People's Republic of China. This provision was made because of the continuing deterioration of currency liquidity in that country, which may, among other factors, impact the ability of shippers to pay. Also contributing to the increase in other operating expenses were higher employee and telecommunications costs, particularly in Asia. Other operating expenses for 1994 are net of gains of $6 million from sales of a crane and certain containers, and for 1993, are net of gains of $9 million from sales of three vessels and certain containers.
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 $9 million from the sale of three vessels and certain containers, and certain fixed cost savings in the North America stacktrain operations.
General and administrative expenses increased 21% in 1994 compared with 1993, primarily due to expenditures of $31 million in 1994 on corporate initiatives to improve the company's financial and order cycle processes. Expenditures on corporate initiatives are currently estimated to be $33 million in 1995 and $12 million in 1996. The company currently anticipates that during 1995 and 1996, between 550 and 900 positions will be eliminated as a result of order cycle process changes, and approximately 50 positions will be eliminated as a result of financial process changes. The actual number of position reductions, however, will not be finally determined until design and implementation of the new processes in 1995 and 1996, and costs associated with eliminating these positions cannot yet be estimated. 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. The company also expects to eliminate its administrative offices in Hong Kong by the second quarter of 1995, and to combine certain functions with those performed in Oakland. Costs associated with eliminating or relocating these positions are estimated to be between $1 million and $2 million.
General and administrative expenses increased 9% in 1993 compared with 1992. In 1993, the company incurred approximately $9 million in costs related to corporate initiatives to improve the company's financial and order cycle processes. Partially offsetting these costs in 1993 were cost savings at the corporate level.
Depreciation and amortization expense decreased 3% in 1994 from 1993 as certain assets reached the end of their depreciable lives in 1994. Depreciation and amortization expense increased 2% in 1993 from 1992 due to capital spending activity during the year. Depreciation and amortization expense is expected to increase to approximately $127 million in 1995 due to the increased level of capital spending.
Net interest expense increased 13% in 1994 compared with 1993, due to interest expense on two public debt offerings totaling $300 million in November 1993 and January 1994, which was partially offset by increased interest income on higher cash balances and higher interest rates in 1994. Net interest expense declined to $11 million in 1993 from $26 million in 1992, 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.
The effective tax rates applicable to the company were 33%, 39% and 35% in 1994, 1993 and 1992, respectively. The 1994 effective tax rate includes the effect of revisions of prior years' estimated tax liabilities. The 1993 effective tax rate includes an adjustment of $2.7 million to reflect the effect of an increase in the maximum corporate federal income tax rate to 35%. The effective tax rate for 1995 is expected to be approximately 38%.
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.
(1) Includes current and long-term portions.
In November 1993, the company issued $150 million of 10-year Senior Notes at an effective interest rate of 7.3%, and in January 1994, issued $150 million of 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, other capital expenditures and for general corporate purposes. The remaining proceeds have been invested in commercial paper and other cash instruments.
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 ("C11s") and three new Kl0-class containerships ("K10s") for an aggregate cost of approximately $730 million. OOCL has placed orders to purchase six vessels similar in size and speed to the company's C11s. The company's C11s and OOCL's similar vessels are scheduled to be delivered during 1995 and 1996. The company and OOCL have agreed to initially operate six and five of these vessels, respectively, under their existing trans-Pacific coordinated sailing and slot-sharing agreements, and in late 1995 or early 1996, under their Asia-U.S. West Coast alliance agreement with MOL. The company's deployment under the latter agreement will require U.S. government approval, and no assurances can be given as to whether approval will be granted. The deployment of the 11 new C11-type vessels by the company and OOCL, replacing 14 older vessels, will increase the combined trans-Pacific capacity of the company and OOCL by approximately 15%. The company currently expects growth in demand in the trans-Pacific market and believes that the increase in combined capacity should be sufficient to permit the company and OOCL to maintain their combined relative market share in that market. However, other competing ocean carriers have also placed orders for the construction of new vessels, and no assurances can be given with respect to anticipated growth in demand, utilization of the increased capacity or the potential negative impact of the increased capacity on rates. Additionally, no assurances can be made that the company and OOCL will be able to maintain their combined market share.
The company's K10s were ordered to replace four L9-class vessels chartered by the company for use in its West Asia/Middle East service. Delivery of the K10s is scheduled for 1996, which is when the charters of the L9s will expire. The alliance agreements with MOL, NLL and OOCL may impact the deployment and/or the ultimate ownership of the K10s. Deployment of the company's K10s may also be subject to U.S. government approval. No assurances can be given that such approval will be granted.
The C11-class vessels are being constructed by Howaldtswerke-Deutsche Werft AG, of Germany ("HDW") (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 $52 million progress payment was made in 1993, and progress payments of $31 million were made in 1994. A progress payment of $20 million is due in early 1995, with the remaining 80% of each vessel's purchase price due upon delivery of each vessel scheduled beginning in May 1995. In March 1994, the company entered into a loan agreement with 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 semiannual 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 costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations.
The K10s are being constructed by Daewoo. The total estimated project cost for construction of these vessels is $195 million. A progress payment of $18 million was made to Daewoo in 1993. The remaining progress payments are due in two $18 million installments in 1995, with the remaining 70% of each vessel's purchase price due upon delivery of each vessel in 1996. The costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations.
Other than vessel progress payments of $31 million, the company's capital expenditures in 1994 totaled $97 million and were primarily for purchases of chassis and terminal and leasehold improvements. In 1993, the company made $70 million in progress payments on the C11s and K10s, and spent $21 million on the purchase of previously leased vessels. In addition to the vessel expenditures in 1993, the company's capital expenditures of $65 million were primarily for purchases of refrigerated containers and terminal and leasehold improvements. Capital expenditures in 1995 are expected to be approximately $555 million, including $477 million of vessel costs. The balance will be spent primarily on terminal equipment in North America and Asia, terminal improvements in North America and chassis and computer systems. The company has outstanding purchase commitments to acquire cranes, facilities, equipment and services totaling $99 million.
The company is in the process of expanding its two major West Coast ports' facilities and has extended 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 1994.
In June 1994, the company and the Port of Seattle signed a lease amendment for the improvement and expansion of its existing terminal facility. Under the amended lease, the facility would be expanded from 83 acres to approximately 160 acres. The expansion is expected to be completed during 1997, and the lease term would be 30 years from completion. In addition, the company has the option to expand the terminal by an additional 30 acres. The annual rent payment for the company's existing facility was approximately $6 million in 1994. The minimum annual rent payment, for the first full year after completion, under the amended lease is estimated to be $13 million, depending upon the final scope of development and consumer price index increases. The minimum annual rent payment increases in five year increments over the term of the lease, to approximately $40 million in the 29th and 30th years, also depending upon the final scope of development and consumer price index increases.
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.
In September 1994, the company made a deposit of $37 million to its Capital Construction Fund ("CCF"). Also in September 1994, the company sold an undivided interest in $40 million of its trade accounts receivable to its CCF for $37 million in cash.
In March 1994, the company entered into a credit agreement with a group of banks that provides for an aggregate commitment of up to $200 million through March 1999. The credit agreement contains, among other things, various financial covenants that require the company to meet certain levels of interest coverage, leverage and net worth. The borrowings bear interest at rates based upon various indices as elected by the company. The annual commitment fee is a maximum of one-half of one percent of the available amount. There have been no borrowings under this agreement.
As an alternative to borrowing under its credit agreement, the company has an option under that agreement to sell up to $150 million of certain of its accounts receivable to the banks. This alternative is subject to less restrictive financial covenants than the borrowing option.
The company borrowed under its previous 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.
ITEM 8.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management 25 Report of Independent Public Accountants 26 Consolidated Financial Statements Statement of Income 27 Balance Sheet 28 Statement of Cash Flows 29 Statement of Changes in Stockholders' Equity 30 Notes to Consolidated Financial Statements 31-46 Financial Statement Schedule Schedule II 47
REPORT OF MANAGEMENT
To the Stockholders of American President Companies, Ltd.:
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 consolidated 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 LLP 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 10, 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders 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 30, 1994 and December 31, 1993, 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 30, 1994. These consolidated financial statements and the schedule referred to below are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule 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 30, 1994 and December 31, 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 30, 1994, 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.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is 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 LLP Arthur Andersen LLP
San Francisco, California February 10, 1995
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 1994 and 1992 fiscal years were 52 weeks, compared with 53 weeks for 1993.
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. At 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.
Detention revenue is recognized when cash is received.
Foreign Currency Transactions Foreign currency transactions and balances were translated to U.S. dollars. Included in Operating Income on the accompanying Consolidated Statement of Income for 1994, 1993 and 1992 are net gains (losses) on foreign currency transactions and translations of $0.5 million, $(1.1) million and $(2.0) million, respectively.
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 consist of commercial paper and other cash instruments and are carried at cost, which approximates fair value.
Allowance for Doubtful Accounts The provision for doubtful accounts, included in Operating Expenses on the accompanying Consolidated Statement of Income, for 1994, 1993 and 1992 was $13.2 million, $4.3 million and $5.9 million, respectively. At December 30, 1994 and December 31, 1993 the allowance for doubtful accounts, included in Trade and Other Receivables on the accompanying Consolidated Balance Sheet, amounted to $21.9 million and $10.4 million, respectively.
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 $117.3 million, $110.3 million and $101.6 million have been charged to expense in 1994, 1993 and 1992, respectively, as they were incurred. Major periodic dry dockings and rail car overhauls totaling $12.6 million, $18.2 million and $21.2 million at December 30, 1994, December 31, 1993, and December 25, 1992, 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 on the accompanying Consolidated Balance Sheet. The fair value of these assets approximates their carrying value at December 30, 1994.
Software Costs Costs related to purchased and internally developed software are charged to expense as incurred.
Capitalized Interest Interest costs of $6.3 million and $1.5 million relating to cash paid for the construction of vessels were capitalized in 1994 and 1993, respectively. No interest costs were capitalized in 1992.
Reclassifications Certain 1993 and 1992 amounts have been reclassified to conform to the 1994 presentation.
NOTE 2. UNITED STATES MARITIME ADMINISTRATION AGREEMENTS
Operating-Differential Subsidy Agreement 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. The ODS amounts for 1994, 1993 and 1992 were $60.8 million, $64.7 million and $69.7 million, respectively, and have been included as a reduction of operating expenses.
In June 1992, the Bush Administration announced that no new ODS agreements would be entered into and existing ODS agreements would be allowed to expire. The Clinton Administration and Congress have been reviewing U.S. maritime policy. Proposed maritime support legislation introduced in 1994 was not enacted. The Administration's 1995 budget includes a proposal for a 10-year subsidy program with $100 million in annual payments to be requested and appropriated on a year-to-year basis. The company is not able to predict whether or when maritime support legislation will be enacted or what terms such legislation may have, if enacted.
While the company continues to encourage efforts to enact maritime support legislation, prospects for passage of a program acceptable to the company are unclear. Accordingly, in July 1993, the company filed applications with MarAd to operate under foreign flag its six C11-class containerships, presently under construction, and to transfer to foreign flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet. On November 15, 1994, MarAd issued a waiver that will allow the company to operate its C11-class vessels under foreign registry on the condition that the vessels be returned to U.S.-flag in the event acceptable maritime reform legislation is enacted. The remaining application is still pending and no assurances can be given as to whether, or when, the authority will be granted.
Management of the company believes that, in the absence of ODS or an equivalent government support program, it will be 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 vessels. The company continues to evaluate its strategic alternatives in light of the pending 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, whether sufficient labor efficiencies can be achieved through the collective bargaining process, and whether the company's remaining 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.
In 1995, lawsuits were filed against the company and the U.S. Department of Transportation by certain of its unions and union members challenging MarAd's November 15, 1994 action granting the company the waiver allowing it to operate its C11-class vessels under foreign flag. While no assurances can be given, management believes these legal challenges will not be successful.
Capital Construction Fund The company also has an agreement with MarAd pursuant to which the company has established a Capital Construction Fund ("CCF") to which the company makes contributions to provide funding for certain U.S.-built assets and for the repayment of certain vessel acquisition debt. In 1994, the company made a deposit of $36.9 million to its CCF and sold an undivided interest in $40 million of its trade accounts receivable to its CCF for $36.9 million in cash. At December 30, 1994, the CCF totaled $37.8 million, and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. There was no balance in the CCF at December 31, 1993.
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 30, 1994, the total tax basis of assets purchased with CCF funds was approximately $58.6 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 No. 109, "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:
The following is a summary of the company's provision for income taxes, net of $13.2 million related to the cumulative effect of the accounting change for revenues and expenses in 1992:
The following table shows the tax effect of the company's cumulative temporary differences and carryforwards included on the company's Consolidated Balance Sheet at December 30, 1994 and December 31, 1993:
The amount of deferred tax assets and liabilities at December 30, 1994 and December 31, 1993 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 30, 1994 and December 31, 1993 were as follows:
NOTE 5. LONG-TERM DEBT
Long-term debt at December 30, 1994 and December 31, 1993 consisted of the following:
(1) In November 1993, the company filed a shelf registration statement covering the issuance from time to time of up to $400 million of debt securities of varying terms and amounts. Pursuant to this registration statement the company issued 7 1/8% Senior Notes and 8% Senior Debentures in November 1993 and January 1994, respectively. Interest payments are due semiannually. The Senior Notes had an effective interest rate of 7.325%, and an unamortized discount of $1.9 million and $2.1 million at December 30, 1994 and December 31, 1993, respectively. The Senior Debentures had an effective interest rate of 8.172%, and an unamortized discount of $2.9 million at December 30, 1994. Fair value of the Senior Notes and Senior Debentures was approximately $129 million and $123 million, respectively, at December 30, 1994 based on quoted dealer prices for similar issues. (2) 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 of the remaining 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 $177.6 million at December 30, 1994. Fair value of this debt is approximately $59 million at December 30, 1994 assuming a current interest rate of 8.65%. (3) 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. (4) The interest rate at December 30, 1994 was 5.7%. The principal repayment is collateralized by a $6.6 million letter of credit. (5) The Note was used to finance the purchase of certain chassis and is collateralized by the chassis. At December 30, 1994, the net book value of these chassis was $3.7 million.
Carrying value of significant issues of long-term debt, other than the Series I Bonds, Senior Notes and Senior Debentures, 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 up to five of the remaining semiannual cash payments on the Series I Bonds, are as follows:
(In thousands) 1995 $ 1,085 1996 1,365 1997 14,696 1998 23,913 1999 19,103
The company has a credit agreement with a group of banks that provides for an aggregate commitment of up to $200 million through March 1999. The credit agreement contains, among other things, various financial covenants that require the company to meet certain levels of interest coverage, leverage and net worth. The borrowings bear interest at rates based upon various indices as elected by the company. The annual commitment fee is a maximum of one-half of one percent of the available amount. There have been no borrowings under this agreement.
As an alternative to borrowing under its credit agreement, the company has an option under that agreement to sell up to $150 million of certain of its 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 two to six years. Assets under capital lease included in Property and Equipment on the accompanying Consolidated Balance Sheet at December 30, 1994 and December 31, 1993 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 at December 30, 1994:
In 1993, the company 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 1994.
In 1994, the company and the Port of Seattle signed a lease amendment for the improvement and expansion of its existing terminal facility. Under the amended lease, the facility would be expanded from 83 acres to approximately 160 acres. The expansion is expected to be completed during 1997, and the lease term would be 30 years from completion. In addition, the company has the option to expand the terminal by an additional 30 acres. The annual rent payment for the company's existing facility was approximately $6.3 million in 1994. The minimum annual rent payment, for the first full year after completion, under the amended lease is estimated to be $13 million, depending upon the final scope of development and consumer price index increases. The minimum annual rent payment increases in five year increments over the term of the lease, to approximately $39.6 million in the 29th and 30th years, also depending upon the final scope of development and consumer price index increases.
Total rental expense for operating leases and short-term rentals was $334.3 million, $289.5 million and $260.4 million in 1994, 1993 and 1992, 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 non-qualified plans are secured through a grantor trust. The investment in this trust at December 30, 1994 was $16.1 million and is included in Investments and Other Assets on the accompanying Consolidated Balance Sheet. The investments in the trust consist of life insurance policies and other cash instruments, which are carried at fair value.
The following table sets forth the pension plans' funded status and amounts recognized in the accompanying Consolidated Balance Sheet at December 30, 1994 and December 31, 1993:
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 $5.3 million in 1994, $5.2 million in 1993 and $6.5 million in 1992 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 and recognizes the cost of providing health care and other benefits to retirees over the term of employee service.
Postretirement benefit costs in the accompanying Consolidated Statement of Income for the years ended December 30, 1994 and December 31, 1993 were as follows:
The following table sets forth the postretirement benefit obligation recognized in the accompanying Consolidated Balance Sheet at December 30, 1994 and December 31, 1993:
The expected cost of the company's postretirement benefits is assumed to increase at an annual rate of 10.4% in 1995. 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 30, 1994 by $2.4 million and the aggregate of the service and interest cost for 1994 by $0.4 million. The weighted average discount rate used to determine the accumulated postretirement benefit obligation was 8%. 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 1994, 1993 and 1992 were $6.3 million, $6.0 million and $5.7 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 a post-split basis, the company repurchased 3,715,928 of its outstanding common stock in 1992 at an average per share cost of $20.94. 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 on the accompanying Consolidated Balance Sheet.
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 The Compensation Committee of the Board of Directors approved stock option grants under the company's 1989 Stock Incentive Plan (the "Plan") for shares of the company's common stock beginning in July 1993 to key employees of the company. The options have an exercise price of the greater of the fair market value on the date of grant or $22.38 per share, a term expiring July 26, 2003 and vest between 1995 and 2002 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.
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 on the accompanying Consolidated Balance Sheet.
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 1994:
At December 30, 1994, a total of 902,936 shares were available for future grants of stock options, restricted shares and stock units under these plans.
NOTE 10. COMMITMENTS AND CONTINGENCIES
Commitments
Ship Purchases and Related Financing 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 ("HDW") (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 $52 million progress payment was made in 1993, and progress payments of $31 million were made in 1994. A progress payment of $20 million is due in early 1995, with the remaining 80% of each vessel's purchase price due upon delivery of each vessel scheduled beginning in May 1995. In March 1994, the company entered into a loan agreement with 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 semiannual 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 costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations.
In connection with the construction and purchase of the ships from HDW, 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 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 30, 1994, the company had contracts to purchase $218.5 million in Deutsche marks. At December 30, 1994, the carrying value of such contracts was an asset of $6.6 million and the fair value, based on quoted market prices of comparable instruments, was an asset of $33.7 million. The value of the contracts upon ultimate settlement is dependent upon actual currency exchange rates at the various maturity dates in 1995.
On January 5, 1995, the company and Columbia Shipmanagement Ltd., a Cyprus company ("Columbia"), entered into an agreement under which Columbia would provide crewing, maintenance, operations and insurance for the company's six C11-class vessels for a per diem fee per vessel. The agreement may be terminated at any time by either party with notice.
In December 1993, the company entered into contracts with Daewoo for the construction and purchase of three diesel-powered K10-class containerships scheduled to be delivered in 1996. The total estimated project cost for construction of these vessels is $195 million. A progress payment of $18 million was made to Daewoo in 1993. The remaining progress payments are due in two $18 million installments in 1995, with the remaining 70% of each vessel's purchase price due upon delivery of each vessel in 1996. The costs of these vessels are expected to be financed with a portion of the net proceeds from the company's November 1993 and January 1994 public debt offerings and with cash from operations. The alliance agreements with Orient Overseas Container Line ("OOCL"), a Hong Kong shipping company, Mitsui OSK Lines, Ltd. ("MOL") and Nedlloyd Lines B.V. ("NLL") described below may impact the deployment and/or the ultimate ownership of the K10-class vessels.
Alliances The company and OOCL are parties to agreements enabling them to exchange vessel space and coordinate vessel sailings through 2005. Currently, each party is guaranteed vessel space and buys extra space as needed. Since December 1993, the company has been required to purchase additional vessel space from OOCL and to compensate OOCL for this space at a rate currently calculated at $6.6 million per year, accrued ratably over each year. This commitment reduces as the company increases the capacity it can exchange with OOCL, which is expected to begin with the scheduled delivery of the company's C11-class vessels in 1995.
In September 1994, the company, MOL, and OOCL signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-U.S. West Coast trade through 2005. The carriers currently expect to commence service under this agreement in late 1995 or early 1996. This agreement is subject to government approvals in the U.S. and Japan.
The three carriers and NLL signed a separate agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment in an all-water service in the Asia-U.S. East Coast trade via Panama for a minimum of three years. The four carriers currently expect to initiate service under this agreement in March 1995, and weekly service is currently expected to commence by August 1995.
Additionally, in September 1994, the four carriers and Malaysian International Shipping Corporation BHD signed an agreement to exchange vessel space, coordinate vessel sailings and cooperate in the use of port terminals and equipment for ocean transportation services in the Asia-Europe trade through 2001. The carriers currently expect to commence service under the agreement in January 1996. Prior to the commencement of this alliance, the company will enter the Asia-Europe trade by chartering vessel space through MOL beginning in March 1995.
The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe alliance agreements are all expected to be implemented by late 1995 or early 1996. Under the terms of the three agreements, alliance partners contribute and are allocated vessel space, which may be adjusted from time to time. The value of vessel space provided by the company to the alliance is less than the value of the total capacity allocated to it through the alliance, resulting in an annual net cash purchase commitment from the company to its alliance partners currently estimated to be $29 million, beginning in 1996. For 1995, the company currently estimates its net purchase commitment to its alliance partners for vessel space in the Asia-U.S. East Coast and Asia-Europe trades to be approximately $35 million. Agreements covering terminal and equipment sharing among the alliance partners have not been finalized, and the company's net cash commitment, if any, to the alliance partners for these services cannot be determined at this time.
In April 1994, the company and Transportacion Maritima Mexicana ("TMM"), a Mexican transportation company, entered into an agreement enabling them to reciprocally charter vessel space for a period of three years. Under the agreement, cargo will be transported between major Asian ports and certain ports on the Pacific Coast of the U.S. and Mexico. Each party is committed to purchase a minimum amount of vessel space at contract rates and may buy available extra space as needed. The company's minimum space purchase commitment exceeds that of TMM by approximately $5.3 million per year.
Facilities, Equipment and Services The company has outstanding purchase commitments to acquire cranes, facilities, equipment and services totaling $99.4 million. In addition, the company has commitments to purchase terminal services for its major Asian operations. These commitments range from one to ten years, and the amounts of the commitments under these contracts are based upon the actual services performed. At December 30, 1994, the company had outstanding letters of credit totaling $11 million, which guarantee the company's performance under certain of its commitments.
Employment Contracts 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 $15.9 million at December 30, 1994.
Contingencies
The company is a party to various legal proceedings, claims and assessments arising in the course of its business activities. Based upon information presently available, and in light of legal and other defenses and insurance coverage and other potential sources of payment available to the company, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the company's 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 was engaged in real estate operations until 1994, when its remaining real estate holdings were sold.
Depreciation expense and capital expenditures were related only to transportation operations in 1994, 1993 and 1992.
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.
NOTE 12. QUARTERLY RESULTS (Unaudited)
(1) Collections of detention charges related to the company's containers used to transport Operation Desert Storm cargo contributed $0.7 million, $0.5 million, $0.7 million and $8.3 million to Operating Income for the fourth, third, second and first quarters of 1994, respectively, and $3.6 million, $0.6 million and $1.7 million to Operating Income for the fourth, third and second quarters of 1993, respectively.
(2) The gain on the sale of the company's remaining investment in the common stock Amtech Corporation contributed $8.9 million to Income Before Taxes in the second quarter of 1993.
(1) Uncollectible receivables written off, net of recoveries. (2) Reclassifications from/(to) other Balance Sheet accounts.
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 May 2, 1995 is hereby incorporated herein by reference.
The following sets forth certain information with respect to the remaining executive officers of the company:
John G. Burgess, age 50, elected Executive Vice President of American President Lines, Ltd. in December 1992. Prior to that, he served as Executive Vice President and Chief Operating Officer of American President Lines, Ltd. from May 1990 to November 1992.
Maryellen B. Cattani, age 51, elected Executive Vice President of the company in March 1995, and has served as Senior Vice President, Secretary and General Counsel of the company since 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.
L. Dale Crandall, age 53, elected Executive Vice President and Chief Financial Officer of the company, to become effective upon his becoming a full-time employee of the company which is expected to occur in May 1995. Mr. Crandall has been a Partner in the accounting firm of Price Waterhouse since 1974 and has been managing partner of the firm's Los Angeles office since 1990.
Michael Diaz, age 46, elected Executive Vice President of American President Lines, Ltd. in December 1992. Prior to that, he served as President, Asia Division of American President Lines, Ltd. from August 1992 to November 1992, and Executive Vice President and Chief Operating Officer of APL Land Transport Services, Inc. from July 1990 to July 1992.
James S. Marston, age 61, 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 47, elected Vice President, Controller and Chief Accounting Officer 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 in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995, 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 Executive Officers" and "Certain Beneficial Ownership of Securities" in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995, 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, Termination of Employment and Change-in-Control Arrangements and Certain Transactions" in the company's definitive proxy statement for the annual meeting of stockholders to be held on May 2, 1995, 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 - Valuation and Qualifying Accounts
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* 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.
4.10* 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.
4.11* 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.
4.12* 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.
4.13* Form of 8% Senior Debentures Due 2024 of American President Companies, Ltd., filed as Exhibit 4.20 to the company's Form 10K (File No. 1- 8544), dated March 9, 1994.
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* 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., filed as Exhibit 10.72 to the company's Form 10K (File No. 1-8544), dated March 9, 1994.
10.3* 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.
10.4* 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.
10.5* 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.
10.6* 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.
10.7* 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.
10.8* 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.
10.9* 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.
10.10* 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.
10.11* 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.
10.12* 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.
10.13* 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.
10.14* 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.
10.15* 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.
10.16* 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.
10.17* 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.
10.18* 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.
10.19* 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.
10.20* 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.
10.21* 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.
10.22* Amendment No. 6 to the Lease Agreement between Port of Seattle and American President Lines, Ltd. at Terminal 5, and assignment of the lease from American President Lines, Ltd. to Eagle Marine Services, Ltd. dated June 1, 1994, excluding exhibits and other related agreements, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated August 12, 1994.
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* Credit agreements dated as of February 12, 1987, between American President Lines, Ltd. and Kreditanstalt fur Wiederaufbau, filed as Exhibit 10.9 to the company's Form SE (File No. 1-8544), dated March 23, 1987.
10.25* Guarantees dated as of February 12, 1987, by the company in favor of Kreditanstalt fur Wiederaufbau, filed as Exhibit 10.10 to the company's Form SE (File No. 1-8544), dated March 23, 1987.
10.26* 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.
10.27* 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.
10.28* 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.
10.29* Contract for the Purchase of Containership Vessels dated May 10, 1993, between Howaldtswerke-Deutsche Werft and Aktungesellschaft and American President Lines, Ltd., filed as Exhibit 10.66 to the company's Form 10K (File No. 1-8544), dated March 9, 1994.
10.30* Contract for the Purchase of Containership Vessels dated May 10, 1993, between Daewoo Shipbuilding and Heavy Machinery, Ltd. and American President Lines, Ltd., filed as Exhibit 10.67 to the company's Form 10K (File No. 1-8544), dated March 9, 1994.
10.31* 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.
10.32* 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.
10.33* Loan Agreement dated March 14, 1994 by and among Kreditanstalt fur Wiederaufbau (as Agent and Lender); Commerzbank AG, Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank-Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate); and American President Lines, Ltd. (as Borrower); including Appendices and Schedules thereto, filed as Exhibit 10.4 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994 and as Exhibit 10.4a to the company's Form 10-K/A (file No. 1-8544), dated December 6, 1994.
10.34* Guarantee dated as of March 14, 1994 by American President Companies, Ltd. (as Guarantor); in favor of Kreditanstalt fur Wiederaufbau (as Agent and Lender); and Commerzbank AG Hamburg (as Syndicate Agent); Commerzbank AG (Kiel Branch), Dresdner Bank AG in Hamburg, Vereins-und Westbank AG, Deutsche Schiffsbank AG, Norddeutsche Landesbank- Girozentrale, Deutsche Verkehrs-Bank AG, Banque Internationale a Luxembourg S.A. (as the Syndicate), including Schedule 1 thereto, filed as Exhibit 10.5 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994.
10.35* Credit Agreement, dated March 25, 1994 among American President Companies, Ltd., borrower, and Morgan Guaranty Trust Company of New York, J.P. Morgan Delaware, Bank of America National Trust and Savings Association, The First National Bank of Boston, Barclays Bank PLC, ABN AMRO Bank N.V., The First National Bank of Chicago and Morgan Guaranty Trust Company of New York, as agent, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994.
10.36* 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.**
10.37* 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.**
10.38* 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.**
10.39* 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.**
10.40* 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.**
10.41* 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.**
10.42* 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.**
10.43* 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.**
10.44* 1989 Stock Incentive Plan of the company, as amended and restated effective April 28, 1994, filed with the company's Proxy Statement (File No. 1-8544) for the Annual Meeting of Shareholders held on April 28, 1994.**
10.45 American President Companies, Ltd. SMART Plan, second amendment and restatement effective January 1, 1995.**
10.46 Excess-Benefit Plan of the company, amended and restated effective December 31, 1994.**
10.47 1995 Deferred Compensation Plan of the company, effective January 1, 1995.**
10.48 1995 Supplemental Executive Retirement Plan of the company, effective January 1, 1995.**
10.49* 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.**
10.50* 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.**
10.51* 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.**
10.52* Employment Agreement between the company and Maryellen B. Cattani dated April 28, 1994, filed as Exhibit 10.10 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994.**
10.53* Employment Agreement between the company and Will M. Storey dated March 4, 1994, filed as Exhibit 10.11 to the company's Form 10Q (File No. 1-8544), dated May 20, 1994.**
10.54* Employment Agreement between the company and Timothy J. Rhein dated July 28, 1992, filed as Exhibit 10.1 to the company's Form 10Q (File No. 1-8544), dated November 4, 1994.**
10.55* Employment Agreement between the company and Joji Hayashi dated July 28, 1992, filed as Exhibit 10.2 to the company's Form 10Q (File No. 1- 8544), dated November 4, 1994.**
10.56* Employment Agreement between the company and James S. Marston dated July 28, 1992, filed as Exhibit 10.3 to the company's Form 10Q (File No. 1-8544), dated November 4, 1994.**
10.57* Employment Agreement between the company and John G. Burgess dated July 28, 1992, filed as Exhibit 10.4 to the company's Form 10Q (File No. 1-8544), dated November 4, 1994.**
10.58* Employment Agreement between the company and Michael Diaz dated July 28, 1992, filed as Exhibit 10.5 to the company's Form 10Q (File No. 1- 8544), dated November 4, 1994.**
10.59* Form of Indemnity Agreements 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.** 10.60* 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.**
10.61* Indemnity Agreement dated October 5, 1993 between the company and Toni Rembe, filed as Exhibit 10.74 to the company's Form 10K (File No. 1- 8544), dated March 9, 1994.**
10.62 Form of Indemnity Agreement dated April 28, 1994 between the company and G. Craig Sullivan.**
10.63 Form of Indemnity Agreement dated June 20, 1994 between the company and Tully M. Friedman.**
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.
27 Financial Data Schedules filed under Article 5 of Regulation S-X for the year ended December 30, 1994.
*Incorporated by Reference
**Denotes management contract or compensatory plan.
Pursuant to Instruction 2 to 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 10.30.
Pursuant to Item 601 (b)(4)(iii)(A) of Regulation S-K, certain instruments defining the rights of holders of the long-term debt of the company and its consolidated subsidiaries have not been filed because the amount of securities authorized under each such instrument does not exceed ten percent of the total assets of the company and its subsidiaries on a consolidated basis. A copy of any such instrument will be furnished to the Commission upon request.
(b) Reports on Form 8-K during the fourth quarter:
No current report on Form 8-K was filed during the quarter for which this report on Form 10-K is filed.
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 10, 1995
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 10, 1995 John M. Lillie Chairman of the Board of Directors, President and Chief Executive Officer
/s/ Charles S. Arledge* March 10, 1995 Charles S. Arledge Director
/s/ John H. Barr* March 10, 1995 John H. Barr Director
/s/ Tully M. Friedman March 10, 1995 Tully M. Friedman Director
/s/ Joji Hayashi* March 10, 1995 Joji Hayashi Director
/s/ F. Warren Hellman* March 10, 1995 F. Warren Hellman Director
/s/ Toni Rembe* March 10, 1995 Toni Rembe Director
/s/ Timothy J. Rhein* March 10, 1995 Timothy J. Rhein Director
/s/ Forrest N. Shumway* March 10, 1995 Forrest N. Shumway Director
/s/ G. Craig Sullivan* March 10, 1995 G. Craig Sullivan Director
/s/ Will M. Storey* March 10, 1995 Will M. Storey Executive Vice President, Chief Financial Officer and Director
/s/ Barry L. Williams* March 10, 1995 Barry L. Williams Director
*By: /s/ Maryellen B. Cattani March 10, 1995 Maryellen B. Cattani Attorney-in-fact