Document byMNybr2ykVZkRppQVxX7k8Ey

'NANGIAL REVIEW -aton Corporation A summary of long-term debt, excluding the cunrent portion, follows: December 31 (Millions of dollars* 9% notes payable, due 2001 8% debentures, due 2006 (due 1996 ai option of debenture holder) 8.9% debentures, due 2006 7% debentures, due 2011. net of unamonized discount of $95 million in 1993 and $96 million in 1992 (effective interest rale 14.6%) 8-7/8% debentures, due 2019 (due 2004 at option of debenture holder) 8.1% debentures, due 2022 Notes payable of Employee Stock Ownership Plan due through 1999 8.5% sinking fund debentures 9% sinking fund debentures Other 1993 1992 SI(X) $100 86 86 l(X) too 105 104 38 38 100 100 82 38 $649 % 89 74 46 $833 During 1993, the Company called for redemption the $74 million out standing balance of its 9% debentures and the $89 million outstand ing balance of its 8.5% debentures, resulting in an extraordinary loss pt$7 million. ,s payable of the Employee Stock Ownership Plan (ESOP), which are guaranteed by the Company, consist of $65 million at a floating interest rate (3.00% at December 31, 1993) based on LIBOR and $31 million at a fixed interest rate of 7.62%. The Company has entered into a series of interest rate swaps, which expire ratably through 1999. and which change the interest rate on the $31 million of fixed inter est rate notes payable to fixed interest rates of 7.07% and 6.85% as to $9 million and$l8 million, respectively, and to a floating interest rate (2.075% at December 31. 1993) based on LIBOR as to $4 million. In 1991, an unrelated party exercised its option under a 1990 agree ment to enter into an interest rate swap expiring in 2000 with the Company. The agreement effectively converts $100 million of float ing rate debt into fixed rate obligations. Payments are received at a floating interest rate (3.375% at December 31. 1993) based on LIBOR and are made at a fixed interest rate of 9%. Aggregate mandatory sinking fund requirements and annual maturi ties of long-term debt are as follows (in mil!ions):~l994. $| 10. 1995. $21; 1996.5106: 1997. $21: and 1998. $22. The amount for 1994 includes $89 million of 8.5% debentures called for redemption in January 1994. The amount for 1996 includes $86 million of 8% debentures due in 1996 at the option of the debenture holder. Interest cost capitalized as part of acquisition or construction of major assets (in millions) was $12. S8. and $7 in 1993. 1992 and 1991, respectively. Interest paid (in millions) was $90. S94 and 581 in 1993. I921.and 1991. respectively. A cember 31. 1993. the Company held foreign currency forward exchange contracts and options, which primarily mature in 1994. for purchase or sale of largely European and Canadian currencies to hedge foreign currency transactions and net investment positions Open purchase contracts totaled 563 million and open sales contracts totaled $290 million. Counterparties to various hedging instruments arc a number of major international financial institutions. While the Company may be exposed to credit losses in the event of nonperformance by these counterparties, it does not anticipate losses due to its control over the limit of positions entered into with any one party and the strong credit ratings of these institutions. The following table summarizes the carrying amount and lair value of financial instruments: December 31 1993 Carrying Fair amount value (Millions of dollar*) Cash and short-term investments Equity investments and marketable securities, included in other assets Short-term debt Long-term debt and current portion of long-term debt Foreign currency forward exchange contracts and options Interest rate derisanxes S M JO S 300 55 61 ||4| tUl 175>>i <1 (941 I : l \ .' > 1992 Carrying Fair amount value S 216 $216 54 67 130) l3()i (852) (954i 8 14 112) The fair value of equity investments, marketable securities, long-term debt and interest rate derivatives was principally based on quoted market prices. The fair value of foreign currency forward exchange contracts and options was estimated based on quoted market prices of comparable contracts, adjusted through interpolation where neces sary for maturity differences. The carrying amount of financial instruments is not affected by the fair value measurement. PROTECTION OF THE ENV IRONMENT The Company has been named a potentially responsible party (PRP) under the Federal Superfund law at a number of waste disposal sites. Although this law technically imposes joint and several liability upon each PRP at each site, the extent of the Company 's required financial contribution to the cleanup of these sites is expected to be limited based on the number and financial strength of the other named PRP's and the volumes of waste involved which might be attributable to the Company The Company is also involved in remedial response and voluntary ensironmemal cleanup expenditures at a number of other sites which are not the subject of any Superfund lass proceeding, including cenain of its currently-owned or formerly-owned plants. Although it is difficult to quantify the potential financial impact of compliance with environmental protection laws. management esti mates that there is a reasonable possibility that the remediation and other costs associated with all of these sites may range between SI0 million and S6X million, and that Mich coMs would be incurred user a period of seseral sears. The Company accrues for these costs when it is probable that a liability has been incurred and the amount of the loss can he reasonably estimated. .At December 31. 1993. the Company balance sheet included an accrual lor the estimated remediation and other environmental costs of approximately SI4 million. Actual costs to be incurred at identified sites in future periods may sarv from the estimates, given inherent uncertainties in evaluating ens ironmental exposures. Subject to the difficulty m estimating future ens ironmen tal costs, the Company expects that ans sum it may be required to T