UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 1, 1994
---------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 1-8016
------
TULTEX CORPORATION
---------------------
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
- - - - ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
- - - - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 703-632-2961
------------
- - - - ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
29,806,793 shares of Common Stock, $1 par value, as of November 4, 1994
- - - - ---------- -- ----------------
PART I. FINANCIAL INFORMATION
Item 1.
Tultex Corporation
Consolidated Statement of Income (Unaudited - $000's omitted except in shares
and per share data)
October 1, 1994 (and October 2, 1993)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
October 1, 1994 October 2, 1993 October 1, 1994 October 2, 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Sales and
Other Income $ 208,931 $ 187,109 $ 397,125 $ 378,369
--------------- --------------- --------------- ----------------
Costs and Expenses:
Cost of Products Sold 59,373 143,025 298,701 278,623
Depreciation 5,773 5,780 18,220 16,773
Selling, General and
Administrative 26,887 26,217 67,885 64,813
Interest 4,974 4,650 13,203 12,337
--------------- --------------- --------------- ---------------
Total Cost and
Expenses 197,007 179,672 398,009 372,546
--------------- --------------- --------------- ---------------
Income (Loss) Before
Income Taxes 11,924 7,437 (884) 5,823
Provision for Income
Taxes (Note 3) 4,531 2,767 (336) 2,161
--------------- --------------- --------------- ---------------
Net Income (Loss) 7,393 4,670 (548) 3,662
Preferred Dividend
Requirement (Note 4) (284) (284) (851) (851)
--------------- --------------- --------------- ---------------
Balance Applicable to
Common Stock $ 7,109 $ 4,386 $ (1,399) $ 2,811
=============== =============== =============== ===============
Weighted Average
Number of Common
Shares Outstanding 29,806,793 28,998,882 29,643,801 28,932,633
=============== =============== =============== ===============
Net Income (Loss) Per
Common Share
(Notes 4 and 5) $ .24 $ .15 $ (.05) $ .10
=============== =============== =============== ===============
Dividends Per Common
Share (Note 4) $ .00 $ .05 $ .05 $ .15
=============== =============== =============== ===============
Tultex Corporation
Consolidated Balance Sheet (Unaudited - $000's omitted)
October 1, 1994 (and January 1, 1994)
Assets October 1, 1994 January 1, 1994
- - - - ------ --------------- ---------------
Current Assets:
Cash $ 14,726 $ 6,754
Accounts Receivable - Net of
allowances for doubtful accounts
and returns of $1,835 (October) and
$2,374 (January) 180,395 116,383
Inventories (Note 2) 165,593 157,278
Prepaid Expenses 15,040 8,276
--------------- ---------------
Total Current Assets 375,754 288,691
Fixed Assets - Net Book Value 140,660 151,775
Intangible Assets 27,071 27,983
Other Assets 6,021 6,516
--------------- ---------------
Total Assets $ 549,506 $ 474,965
=============== ===============
Liabilities and Stockholders' Equity
- - - - ------------------------------------
Current Liabilities:
Notes Payable to Banks $ 3,000 $ -
Current Maturities of Long-Term Debt
(Note 7) 28,346 8,524
Accounts Payable 25,180 18,170
Federal and State Income Taxes
Payable (Note 3) 889 2,785
Other Accounts Payable and Accrued
Expenses 18,917 15,659
--------------- ---------------
Total Current Liabilities 76,332 45,138
Long-Term Debt, Less Current
Maturities (Note 7) 277,321 230,914
Other Liabilities 18,490 19,716
Stockholders' Equity:
Five Percent Cumulative Preferred
Stock (Note 4) 198 198
Series B Preferred Stock (Note 4) 15,000 15,000
Common Stock (Note 4) 29,807 29,053
Capital in Excess of Par Value 5,279 1,889
Retained Earnings 130,783 133,107
--------------- ---------------
181,067 179,247
Less Notes Receivable -
Stockholders (Note 6) 3,704 50
--------------- ---------------
Total Stockholders' Equity 177,363 179,197
--------------- ---------------
Total Liabilities and Stockholders'
Equity $ 549,506 $ 474,965
=============== ===============
Tultex Corporation
Consolidated Statement of Cash Flows (Unaudited - $000's omitted)
Nine Months Ended October 1, 1994 (and October 2, 1993)
Nine Months Ended
-----------------------------------
October 1, 1994 October 2, 1993
--------------- ---------------
Operations:
Net Income (Loss) $ (548) $ 3,662
Items not Requiring (Providing) Cash:
Depreciation 18,220 16,773
Amortization of Intangible Assets 912 912
Deferred Income Taxes - -
Other Deferrals (1,226) (187)
Changes in Assets and Liabilities:
Accounts Receivable (64,012) (49,717)
Inventories (8,315) (59,137)
Prepaid Expenses (6,764) (1,328)
Accounts Payable and Accrued Expenses 10,268 13,487
Income Taxes Payable (1,896) (1,450)
--------------- ---------------
Cash Provided (Used) by Operations (53,361) (76,985)
--------------- ---------------
Investing Activities:
Additions to Property, Plant and
Equipment (7,105) (20,556)
Additions to Other Assets 495 (1,456)
---------------- ---------------
Cash Provided (Used) by Investing
Activities (6,610) (22,012)
--------------- ---------------
Financing Activities
Issuance of Short-Term Borrowings 3,000 103,500
Issuance of Long-Term Debt 73,019 -
Payments on Long-Term Debt (6,790) (139)
Cash Dividends Paid (Note 4) (1,774) (5,195)
Proceeds From Stock Plans (Note 6) 488 1,358
--------------- ---------------
Cash Provided (Used) by Financing
Activities 67,943 99,524
--------------- ---------------
Net Increase in Cash 7,972 527
Cash at End of Prior Year 6,754 3,603
--------------- ---------------
Cash at End of Period $ 14,726 $ 4,130
=============== ===============
TULTEX CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
October 1, 1994
NOTE 1 - In the opinion of the Company, the accompanying consolidated
financial statements furnished in this quarterly 10-Q Report reflect all
adjustments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair statement of the results of the
interim periods. This balance sheet, statement of income and statement of
cash flows have been prepared from the Company's records and are subject to
audit and year-end adjustments.
NOTE 2 - During the fourth quarter of 1993 the company changed its method of
valuing the majority of its inventories from the last-in, first-out (LIFO)
method to the first-in, first-out (FIFO) method. All prior periods have been
restated for comparative purposes. A summary by component follows.
(In thousands of dollars) October 1, 1994 January 1, 1994
--------------- ---------------
Raw Materials $ 25,581 $ 29,291
Supplies 3,679 3,735
Work-in-process 18,628 11,956
Finished Goods 117,705 112,296
--------------- ---------------
Total Inventory $ 165,593 $ 157,278
=============== ===============
NOTE 3 - Income taxes are provided based upon income reported for financial
statement purposes. Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
company's assets and liabilities.
NOTE 4 - Five percent cumulative preferred stock is $100 par value, 22,000
shares authorized, shares issued and outstanding 1,975 shares (1994 and 1993).
There were no dividends declared on the company's five percent cumulative
preferred stock for the three month period ended October 1, 1994. Prior to
second quarter 1994 all regular dividends on the five percent cumulative
preferred stock had been declared and paid. Cumulative dividends that have not
been declared or paid as of October 1, 1994 amounted to $5 thousand.
Series B preferred stock is cumulative, convertible preferred stock, $7.50
Series B, $100 stated value, 150,000 shares authorized, issued and outstanding
(1994 and 1993). There were no dividends declared on the company's Series B
preferred stock for the three month period ended October 1, 1994. Prior to
second quarter 1994 all regular dividends on the Series B cumulative preferred
stock had been declared and paid. Cumulative dividends that have not been
declared or paid as of October 1, 1994 amounted to $562,500.
Common stock, $1 par value, 60,000,000 shares authorized, shares issued and
outstanding 29,806,793 (October 1, 1994) and 29,043,626 (October 2, 1993).
There were no dividends declared on the company's common stock for the three
month period ended October 1, 1994. A dividend of $.05 per common share was
declared and paid for the first quarter of 1994.
NOTE 5 - Income (loss) per common share is computed using the weighted average
number of common shares outstanding in the first nine months of 1994 and 1993
of 29,643,801 and 28,932,633, respectively. Although the cumulative preferred
dividends of $567 thousand were not declared for either of the last two
quarters, they have been reflected in the calculation of income (loss) per
common share.
NOTE 6 - In February 1994, the company initiated the Salaried Employees'
Stock Purchase Plan. Under the plan, certain employees elected to purchase
shares of the company's common stock, in lieu of a salary reduction, in amounts
ranging from 20-30% of their annual salary. Employees will pay for the stock
through payroll deductions over a 60-month period. The shares are being held
by the company and interest of 6% per annum will be charged until the end of
the 60-month period. The price of the shares was fixed at $5.50 per share.
NOTE 7 - The company's term loan agreement, senior notes and revolving credit
facility contain provisions regarding the company's financial performance and
condition. At October 1, 1994, the company was in compliance or had obtained
waivers for any violations of the covenants.
Tultex Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations
October 1, 1994
Results of Operations
- - - - ---------------------
The company changed its method for determining cost of inventories from the
last-in, first-out (LIFO) method to the first-in, first-out (FIFO) method during
the fourth quarter of 1993. This change has been applied by retroactively
restating all prior periods presented.
Income and Expenses as a Percentage of Sales
Three Months Ended Nine Months Ended
------------------ ------------------
10/01/94 10/02/93 10/01/94 10/02/93
-------- -------- -------- --------
Net Sales and Other Income 100.0% 100.0% 100.0% 100.0%
Cost of Products Sold 76.3 76.4 75.2 73.6
Depreciation 2.7 3.1 4.6 4.4
Selling, General and Administrative 12.9 14.0 17.1 17.1
Interest 2.4 2.5 3.3 3.3
-------- -------- -------- --------
Total Costs and Expenses 94.3 96.0 100.2 98.4
-------- -------- -------- --------
Income Before Taxes 5.7 4.0 (.2) 1.6
Provision for Income Taxes 2.2 1.5 (.1) .6
-------- -------- -------- --------
Net Income 3.5% 2.5% (.1)% 1.0%
======== ======== ======== ========
Net sales and other income for the three months ended October 1, 1994 increased
$22 million, or 12% over the third quarter of 1993 due to sales growth in
non-decorated activewear sales (up 21%) and headwear revenues (up 28%). These
improvements were partially offset by lower licensed sports apparel sales
(down 3%) due to the effects of the Major League Baseball strike and the
National Hockey League lockout, and to some softening in the licensed sports
apparel marketplace.
For the nine months to date consolidated net sales and other income were up
$19 million or 5% over the comparable period last year due to gains in our
non-decorated activewear and headwear lines which more than offset a decline
in licensed apparel sales. Revenues from the sale of non-decorated activewear
for the nine months were up 4% this year over last and headwear sales increased
52%. Licensed sports apparel sold through our Logo 7 division was down 5%. In
July the company announced a 4% price increase for its jersey lines. The
company's Discus Athletic (registered trademark) brand continues to gain
recognition in the marketplace as evidenced by 48% sales growth over last year.
In October the company increased some activewear prices.
Margins and operating results in 1994 also show improvement over the
comparable third quarter and nine-month period of last year. Cost of sales
during the three months ended October 1, 1994, increased proportionately with
sales and thus margins were not materially impacted compared to the same
period a year earlier. For the comparative nine-month periods, cost as a
percentage of sales were up in 1994 from 74% to 75%. This margin erosion was
due mainly to higher raw material cost for cotton and polyester, which are
expected to remain at current levels for the balance of 1994, and reduced
operating schedules late in 1993 and early in 1994. Depreciation expense for
the nine months to date this year is up $1 million or 9% due to normal fixed
asset additions and the completion of approximately $9 million of capital
projects which were in-progress last year at this time. For the third quarter,
depreciation expense did not vary significantly from year to year.
As a percentage of sales, selling, general and administrative expenses (S,G&A)
were 17% for the first nine months of 1994 and 1993, respectively. During the
third quarter of 1994 S,G&A expenses as a percentage of sales were reduced to
13% from 14% for the comparable period of the prior year. The three-month
percentage decrease was due to higher sales which covered slightly higher S,G&A
expenses.
Interest expense is up 7% when comparing both the third quarter and nine
months of 1994 to the comparable periods of last year due to higher average
rates and higher average borrowings to finance working capital requirements.
The nature of the company's primary businesses requires extensive seasonal
borrowings to support its working capital needs. As of October 7, 1993, the
company entered into a $225 million revolving credit facility which replaced
its short term credit lines. For the first nine months of last year, short-term
borrowings averaged $120 million at average rates of 3.7%. Under the new
facility average borrowings and interest rates for the nine months ended
October 1, 1994, were $152 million at 4.9%.
The effective rate for combined federal and state income taxes was 38% for
both the quarter and nine-month period ended October 1, 1994, versus 37% for
the comparable periods last year. The increase is due solely to a change in
the estimated federal income tax on 1994 expected pretax earnings.
Net income and earnings per share for the third quarter of 1994 are up
dramatically over the same time last year due to a combination of higher
activewear prices and sales volume, improving manufacturing efficiencies and
quality levels and growing market penetration in our headwear division.
However, the nine months results in the current year do not compare favorably
with 1993 due to poor business conditions which surfaced in the fourth quarter
of 1993 and continued through the first half of 1994. Excess capacity and
inventories exerted downward pressure on selling prices while escalating
prices drove costs up.
Management believes the company is now well positioned to continue the progress
of the past quarter. Our Strategic Process Management and Quality Improvement
Programs continue to reveal cost reduction opportunities and provide a focus on
value-added customer service. The company has been able to increase prices
on many of its products during the last four months. The Discus Athletic
(registered trademark) and Logo Athletic (registered trademark) brands have both
experienced significant sales growth and steady consumer demand is expected for
these successful branded products. Due to the company's extensive capital
spending during the past five years only minimal capital expenditures of
$10 - 15 million are planned over the next five quarters. Also, inventory
management efforts continue to improve turns and lower working needs.
In August, employees at the company's Martinsville facility voted for
representation by the Amalgamated Clothing and Textile Workers Union.
Preliminary negotiating sessions have begun, with emphasis on increased
productivity and value-added customer service as the key to the company's
success.
Financial Condition, Liquidity and Capital Resources
- - - - ----------------------------------------------------
Net working capital at October 1, 1994 increased $56 million from year-end
1993 due mainly to higher receivables offset by current maturities of
long-term debt.
Net accounts receivable increased $64 million from January 1, 1994 to October 1,
1994 due to the seasonality of activewear shipments. Receivables normally
peak in September and October and begin to decline in December as shipment
volume decreases and cash is collected.
Inventories traditionally increase during the first half of the year to support
second-half shipments This year inventories peaked in early July at $206
million and since then have dropped to $166 million at the end of September.
1994's average inventory level was higher than usual due to excess capacity and
weak demand late in 1993 which continued through the spring of 1994. Compared
to the same time last year, inventories decreased approximately $24 million or
more than 12%, while sales increased 5%. The current ratio at October 1, 1994
was 4.9 compared to 6.4 at January 1, 1994 and 1.5 at October 2, 1993. The
drop in the ratio from the beginning of the year was mainly due to current
maturities of long term debt and the large difference from twelve months earlier
is due to the refinancing of short-term debt as described below.
On October 7, 1993, the company began operating with a two-year $225 million
revolving credit facility which replaced the company's short-term credit lines.
Total long-term debt at October 1, 1994, consisted primarily of unsecured
senior notes totaling $95 million, $192 million outstanding under the new
revolver and $18 million due under a term loan. The current portion of
long-term debt includes $19 million of the senior notes due on June 1,1995 and
a total of $9 million due in equal quarterly payments of approximately $2
million under the term loan. At the end of the third quarter of 1994 the
company was in compliance or had obtained waivers for all debt covenants.
Stockholders' equity decreased $1.8 million during the first nine months of
1994 primarily due to the net loss for the period of $0.5 million and cash
dividends of $1.8 million offset by $0.5 million net proceeds from a new
employee stock purchase plan. On April 21, 1994, the Board of Directors voted
to suspend further dividend payments until such time as cash flow and
profitability are sufficient to support them.
For the first nine months of 1994 net cash used by operations was $53 million
versus $77 million for the same period last year, a drop of $24 million. The
lower need for operating cash is due to a lesser inventory build-up partially
offset by higher accounts receivable financing. Cash used for capital asset
additions decreased approximately $15 million so far in 1994 compared to the
first nine months of 1993. Cash provided by financing activities was down
$32 million from the first nine months of 1993 as a result of lower net
borrowings offset by the lower dividend payments in 1994. The company expects
that annual cash flows from income and non-cash items, supplemented by the
revolving credit facility, will be adequate to support requirements for the
remainder of 1994. Starting in June of 1995 and continuing for four years
thereafter until fully repaid, annual principal payments of $19 million are due
on the $95 million notes. The outstanding balance of the term loan is being
repaid at approximately $2 million per quarter through July 1996. The $225
million revolver has an initial two-year term which expires in November 1995 and
is renewable annually for three additional one-year terms. The company has
initiated a request for extension of the term of the revolver, which is needed
to support working capital requirements and to meet in part the required
principal repayments for the term loans.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
3.3 By-Laws
(b) Reports on Form 8-K
-------------------
None
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TULTEX CORPORATION
------------------
(Registrant)
Date November 14, 1994 /s/ J. M. Franck
----------------- ----------------------------------
J. M. Franck, Chairman and Chief
Executive Officer
Date November 14, 1994 /s/ D. P. Shook
----------------- ----------------------------------
Vice President - Human and
Financial Services
Exhibit Index
-------------
Sequentially Numbered Page
--------------------------
3.3 By-Laws Pages 13 - 24
Tultex Corporation Exhibit 3.3
Bylaws -----------
October 27, 1994
ARTICLE I - OFFICERS
- - - - --------------------
Principal office of the Corporation shall be in the City of Martinsville, Henry
County, Virginia. The Corporation may also have offices at such places within
or without the State of Virginia as the Board may, from time to time, determine
or the business of the Corporation may require.
ARTICLE II - SHAREHOLDERS
- - - - -------------------------
1. Place of Meeting
----------------
Meetings of shareholders shall be held at the principal office of the
Corporation or at any such place within or without the State of Virginia as
the Board shall authorize.
2. Annual Meetings
---------------
The annual meeting of the shareholders entitled to vote shall be held for the
election of directors and the transaction of such other business as may properly
come before the meeting, in April of each year, normally on the third Thursday,
or on any other day (except Saturday, Sunday, or holiday), in that month as
determined by the Board of Directors, at the principal office of the Corporation
or at such other place, within or without the State of Virginia, as may be fixed
by the Board of Directors.
3. Special Meetings
----------------
Special meetings of the shareholders may be called by the Chairman of the Board,
the President, or by a majority of the Board of Directors. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at
a special meeting shall be confined to the purposes stated in the notice.
4. Fixing Record Date
------------------
For the purpose of determining the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or to express
consent to or dissent from any proposal without a meeting, or for the purpose
of determining shareholders entitled to receive payment of any dividend, or
the allotment of any rights, or for the purpose of any other action, the Board
shall fix, in advance, a date as of the record date for any such determination
of shareholders. Such date shall not be more that seventy nor less than twenty
days before the date of such meeting, nor more than seventy days prior to any
other action. If no record date is fixed, it shall be determined in accordance
with the provisions of law.
Bylaws
Page 2
5. Notice of Meetings of Shareholders
----------------------------------
Written notice of each meeting of shareholders shall state the purpose or
purposes for which the meeting is called, the place, date and hour of the
meeting and unless it is the annual meeting, shall indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
Notice shall be given either personally or by mail to each shareholder entitled
to vote at such meeting, not less than twenty nor more than fifty days before
the date of the meeting unless some different period shall be specified by law.
If action is proposed to be taken that might entitle shareholders to payment
for their shares, the notice shall include a statement of that purpose and to
that effect. If mailed, the notice is given when deposited in the United States
mail, with postage thereon prepaid, directed to shareholders at their addresses
as they appear on the record of shareholders, or, if they shall have filed with
the Secretary a written request that notices to them be mailed to some other
address, then directed to them at such other address.
6. Waiver
------
Notice of meeting need not be given to any shareholders who sign a waiver of
notice, in person or by proxy, whether before of after the meeting. Any
shareholder who attends a meeting, in person or by proxy, shall be deemed to
have had timely and proper notice of the meeting unless he attends for the
express purpose of objecting to transaction of business because the meeting is
not lawfully called or convened.
7. Quorum of Shareholders
----------------------
The holders of a majority of the shares entitled to vote thereat shall
constitute a quorum at a meeting of shareholders for the transaction of any
business, provided that when a specified item of business is required to be
voted on by a class or classes, the holders of a majority of the shares of
such class or classes shall constitute a quorum for the transaction of such
specified item of business. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of a
quorum.
8. Voting
------
At any meeting of the shareholders, each shareholder of a class entitled to
vote on any matter coming before the meeting shall, as to such matter, have
one vote, in person or by proxy, for each share of capital stock of such
class standing in his name on the books of the Corporation on the date, not
more than seventy days prior to such meeting, fixed by the Board of Directors
as the record date for the purpose of determining shareholders entitled to
vote. Every proxy shall be in writing, dated and signed by the shareholder
entitled to vote or his duly authorized attorney-in-fact.
Bylaws
Page 3
9. Inspectors
----------
An appropriate number of inspectors for any meeting of shareholders may be
appointed by the Chairman of such meeting. Inspectors so appointed will open
and close the polls, will receive and take charge of proxies and ballots, and
will decide all questions as to the qualifications of voters, validity of
proxies and ballots, and the number of votes cast.
ARTICLE III - DIRECTORS
- - - - -----------------------
1. Board of Directors
------------------
The business of the Corporation shall be managed by its Board of Directors,
each of whom shall be at least 21 years of age and need not be a shareholder.
2. Number of Directors
-------------------
The number of directors which shall constitute the entire Board of Directors
shall be 10. This number may be increased or decreased by amendment of the
Bylaws; provided that in no event shall such number be less than three; and
provided further that any such resolution effecting a change in the number of
directors shall be approved by the vote of the majority of the entire Board;
and provided further that no decrease in the number of directors shall shorten
the term of any incumbent director.
3. Election and Term of Directors
------------------------------
At each annual meeting of shareholders, the shareholders shall elect directors
to hold office until the next annual meeting. Each director shall hold office
until the expiration of the term for which he is elected and until his successor
has been elected and qualified, or until his prior resignation or removal.
4. Newly Created Directorships and Vacancies
-----------------------------------------
Newly created directorships resulting from an increase by not more than two in
the number of directors and vacancies occurring in the Board for any reason
may be filled by a vote of a majority of the directors then in office, although
less than a quorum exists. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his predecessor.
5. Age of Directors
----------------
If at any annual meeting of shareholders at which a director would stand for
reelection such director shall have attained the age of 72, he shall be
ineligible for reelection.
Bylaws
Page 4
6. Removal of Directors
--------------------
At a meeting expressly called for that purpose, any or all of the directors
may be removed with or without cause by vote of the shareholders.
7. Resignation
-----------
A director may resign at any time by giving written notice to the Chairman of
the Board, the President or the Secretary of the Corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the Board or such officer, and the acceptance of the resignation shall not
be necessary to make it effective.
8. Quorum of Directors
-------------------
A majority of the entire Board shall constitute a quorum for the transaction of
business or of any specified item of business.
9. Action of the Board
-------------------
The vote of a majority of the directors present at the time of the vote, if a
quorum is present at such time, shall determine and constitute the action of
the Board. Each Director shall have one vote regardless of the number of
shares, if any, which he may hold.
10. Place and Time of Board Meetings
--------------------------------
The Board may hold its meetings at the office of the Corporation or any such
other places, either within or without the State of Virginia, as it may, from
time to time, determine.
11. Regular Annual Meetings
-----------------------
A regular annual meeting of the Board shall be held immediately following the
annual meeting of shareholders.
12. Notice of Meetings of the Board - Adjournment
---------------------------------------------
(a) Regular meetings of the Board may be held without notice at such time and
place as it shall, from time to time, determine. Special meetings of the Board
shall be held upon notice to the directors and may be called by the Chairman of
the Board upon at least five days' notice to each Director either personally or
by mail or by wire; special meetings shall be called by the Chairman of the
Board or by the Secretary in a like manner on written request of four directors.
Bylaws
Page 5
Notice of a meeting need not be given to any director who submits a waiver of
notice whether before or after the meeting or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place. Notice of the adjournment
shall be given all Directors who were absent at the time of the adjournment,
and, unless such time and place are announced at the meeting, to the other
directors.
13. Chairman
--------
The Chairman and Chief Executive Officer shall preside at all meetings of the
Board where he is present. In his absence the President shall preside. At any
Board meeting, the Board shall have the right to select any director as
presiding officer.
14. Executive and Other Committees
------------------------------
The Board, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees,
each consisting of two or more directors. Each such committee shall have the
powers and authority conferred in the resolution creating it, and the members
of such committee shall serve at the pleasure of the Board.
15. Compensation
------------
Directors may be compensated for services as determined by the Board and shall
be reimbursed for reasonable expenses incurred in attending meetings of the
Board or committees thereof. Directors who are officers or employees of the
Corporation or any of its subsidiaries shall not be entitled to such
compensation. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefore.
ARTICLE IV - OFFICERS
- - - - ---------------------
1. Offices, Election, Term
-----------------------
(a) The Board may elect a Chairman of the Board, a President, one or more
Vice Presidents, a Secretary, a Treasurer, a Controller, and such other officers
as it may determine, who shall have duties, powers and functions as hereinafter
provided.
(b) All officers shall hold office at the pleasure of the Board.
Bylaws
Page 6
2. Removal, Resignation, Salary, etc.
----------------------------------
(a) Any officer elected or appointed by the Board may be removed by the Board
with or without cause.
(b) In the event of the death, resignation or removal of an officer, the Board
in its discretion may elect or appoint a successor to fill the unexpired term.
(c) Any two or more offices may be held by the same person, except the offices
of the Chairman of the Board, or President, and Secretary.
(d) The salaries of the Chief Executive Officer and the Chief Operating Officer
shall be fixed by the Board upon recommendation of the Executive Compensation
Committee. All other salaries shall be the responsibility of the Chief
Executive Officer and the Chief Operating Officer.
(e) The directors may require any officer to give security for the faithful
performance of his duties.
3. Chairman of the Board
---------------------
The Chairman of the Board shall be the Chief Executive Officer of the Company.
He shall be responsible for the leadership and direction of the Corporation.
4. President
---------
The President shall be the chief operating officer of the Corporation. He
shall be responsible for the effective administration of the operations of the
Corporation and for the interpretation, application and implementation of the
policies and decisions of the Board.
5. Vice President
--------------
During the absence or disability of the Chairman and the President, the Vice
President, or if there are more than one, the Executive Vice President, shall
have all the powers and functions of the Chairman and the President. Each Vice
President shall perform such other duties as the Board shall prescribe.
6. Vice President-Finance
----------------------
The Vice President-Finance shall be the chief financial officer of the
Corporation. He shall develop and recommend to the Board financial policies
for the Corporation. He shall also supervise and direct the Treasurer and
Controller. He shall render a full financial report at the annual meeting of
shareholders as so requested.
Bylaws
Page 7
The Vice President-Finance may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other instruments, except in cases where
the signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation
or shall be required by law or otherwise to be signed or executed.
7. Secretary
---------
The Secretary shall:
(a) Attend all meetings of the Board and of the shareholders;
(b) Record all votes and minutes of all proceedings in a book to be kept for
that purpose;
(c) Give or cause to be given notice of all meetings of shareholders and
special meetings of the Board;
(d) Keep in safe custody the seal of the Corporation and affix it to any
instrument when authorized by the Board;
(e) When required, prepare or cause to be prepared and available at each
meeting of shareholders, a certified list in alphabetical order of the names
of shareholders entitled to vote thereat, indicating the number of shares of
each respective class held by each.
(f) Keep all the documents and records of the Corporation as required by law
or otherwise in a proper and safe manner; and
(g) Perform such other duties as may be prescribed by the Board.
8. Assistant Secretary
-------------------
During the absence or disability of the Secretary, the Assistant Secretary, or
if there are more than one, the one so designated by the Secretary or by the
Board, shall have all the powers and functions of the Secretary.
9. Treasurer
---------
The Treasurer shall: subject to the supervision and direction of the Vice
President-Finance:
(a) Have the custody of the corporate funds and securities;
(b) Keep full and accurate accounts of bank receipts and disbursements;
(c) Deposit all money and other valuables in the name and to the credit of the
Corporation and such
Bylaws
Page 8
depositories as may be designated by the Board;
(d) Disburse the funds of the Corporation as may be ordered or authorized by
the Board and preserve proper vouchers for such disbursement;
(e) Perform such other duties as are given to him by these Bylaws or as, from
time to time are assigned to him by the Chairman of the Board, the President,
or the Vice President-Finance.
10. Assistant Treasurer
-------------------
During the absence or disability of the Treasurer, the assistant Treasurer, or
if there are more than one, the one so designated by the Board shall have all
the powers and functions of the Treasurer.
11. Controller
----------
The Controller shall be the chief accounting officer of the Corporation. The
Controller shall:
(a) Maintain adequate accounts and records of all assets, liabilities and
transactions of the Corporation in accordance with generally accepted accounting
practices;
(b) Exhibit his accounts and records to any of the directors, the President and
the Vice President-Finance at any time upon request at the office of the
Corporation;
(c) Render such statements and reports of his accounts and records and of the
financial condition of the Corporation to the Board, the President and the Vice
President-Finance as often and in such manner as they may require:
(d) Be furnished by all corporate officers and agents, at his request, with
such reports and statements as he may require as to all financial transactions
of the Corporation;
(e) Make and file (or supervise the making and filing of) all tax returns
required by law; and
(f) Perform such other duties as are given to him by the Board, the President,
or the Vice President-Finance.
ARTICLE V - CERTIFICATES FOR SHARES
- - - - -----------------------------------
1. Certificates
------------
The seal of the Corporation on certificates for shares of its capital stock
may be facsimile. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by a registrar other than the Corporation itself or its employee. In case any
officer who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer before such certificate is
Bylaws
Page 9
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of issue.
2. Lost or Destroyed Certificates
------------------------------
The Chairman of the Board or Secretary may cause a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation, alleged to have been lost or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate or certificates to be lost or destroyed. When authorizing the
issuance of a new certificate or certificates, the Chairman of the Board or
Secretary shall have discretionary authority to require, as a condition
precedent to the issuance thereof, that the claimant of such allegedly lost or
destroyed certificate or certificates give the Corporation and/or its transfer
agent or registrar, if any, a bond in such sum, on such terms and with such
surety or sureties as may be satisfactory to the Chairman of the Board or the
Secretary as indemnity against any claim that may be made against the
Corporation and/or its transfer agent or registrar, if any, with respect to
the certificate or certificates alleged to have been lost or destroyed.
3. Transfer of Shares
------------------
(a) Upon surrender to the Corporation or the transfer agent of the Corporation,
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the
transfer book of the Corporation which shall be kept at the office of its
transfer agent.
(b) The Corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof and, accordingly, shall not be found to
recognize any equitable or other claim to or interest in such share on the
part of any other persons whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of Virginia.
(c) To the extent that any provision of the Rights Agreement between the
Corporation and Sovran Bank, N.A., as Rights Agent, dated as of March 22, 1990,
is deemed to constitute a restriction on the transfer to any securities of the
Corporation, including, without limitation, the Rights, as defined therein,
such restriction is hereby authorized by the Bylaws of the Corporation.
ARTICLE VI - DIVIDENDS
- - - - ----------------------
Subject to the provisions of the Articles of Incorporation and to applicable
law, dividends on the outstanding shares of the Corporation may be declared in
such amounts and at such time or times as the Board may determine consistently
with the provisions of the Articles of Incorporation governing the payment of
dividends on preferred stock. Before payment of any dividend, there may be set
aside out of the net profits of the Corporation available for dividends such
Bylaws
Page 10
sum or sums as the Board from time to time in its absolute discretion deems
proper as a reserve fund to meet contingencies, or for repairing or
maintaining any property of the Corporation, or for such other purposes as the
Board shall think conducive to the interests of the Corporation, and the
Board may modify or abolish any such reserve.
ARTICLE VII - CORPORATE SEAL
- - - - ----------------------------
The seal of the Corporation shall be circular in form and bear the name of the
Corporation, the year of its organization and the word "Virginia." The seal may
be used by causing it to be impressed directly on the instrument or writing to
be sealed or upon adhesive substance affixed thereto. The seal on the
certificates for shares or on any corporate obligation for the payment of money
may be a facsimile, engraved or printed.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
- - - - ---------------------------------------
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or officers or other
person or persons as the Board may from time to time designate.
ARTICLE IX - FISCAL YEAR
- - - - ------------------------
The fiscal year shall end on the Saturday nearest to the 31st day of December
in each year.
ARTICLE X - REFERENCES TO ARTICLES OF INCORPORATION
- - - - ---------------------------------------------------
Reference to the Articles of Incorporation in these Bylaws shall include all
amendments thereto or changes thereof unless specifically excepted.
ARTICLE XI - BYLAW CHANGES, AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS
- - - - ------------------------------------------------------------------------------
(a) The Bylaws may be amended, repealed or adopted by vote in person or by
proxy of the holders of a majority of the shares of capital stock at the time
entitled to vote in the election of any directors. The Bylaws may also be
amended, repealed, or adopted by the Board but any bylaw adopted by the Board
may be amended by the shareholders entitled to vote thereon as herein provided.
(b) If any bylaw is adopted, amended or repealed by the Board, there shall be
set forth in the notice of the next meeting of shareholders for the election
of directors the bylaw so adopted, amended or repealed together with a
concise statement of the changes made.
Bylaws
Page 11
ARTICLE XII - EMERGENCY BYLAWS
- - - - ------------------------------
The Emergency Bylaws provided in this Article XII shall be operative during
any emergency, notwithstanding any different provision in the preceding
Articles of these Bylaws or in the Articles of Incorporation of the Corporation
or in the Virginia Stock Corporation Act (other than those provisions relating
to emergency Bylaws). An emergency exists if a quorum of the Corporation's
Board of Directors cannot readily be assembled because of some catastrophic
event. To the extent not inconsistent with these Emergency Bylaws, the Bylaws
provided in the preceding Articles shall remain in effect during such emergency
and upon the termination of such emergency the Emergency Bylaws shall cease to
be operative unless and until another such emergency shall occur.
During any such emergency:
(a) Any meeting of the Board of Directors may be called by any officer of the
Corporation or by any director. The notice thereof shall specify the time and
place of the meeting. To the extent feasible, notice shall be given in accord
with Section II 3 above, but notice may be given only to such of the directors
as it may be feasible to reach at the time, by such means as may be feasible at
the time, including publication or radio, and at a time less than twenty-four
hours before the meeting if deemed necessary by the person giving notice.
Notice shall be similarly given, to the extent feasible, to the other persons
referred to in (b) below.
(b) At any meeting of the Board of Directors, a quorum shall consist of a
majority of the number of directors fixed at the time by Article III of the
Bylaws. If the directors present at any particular meeting shall be fewer than
the number required for such quorum, other persons present as referred to below,
to the number necessary to make up such quorum, shall be deemed directors for
such particular meeting as determined by the following provisions and in the
following order of priority referred to below, to the number necessary to make
up such quorum, shall be deemed directors for such particular meeting as
determined by the following provisions and in the following order of priority:
(i) Vice Presidents not already serving as directors, in the order of
their seniority of first election to such offices, or if two or more shall have
been first elected to such offices on the same day, in the order of their
seniority in age;
(ii) All other officers of the Corporation in the order of their
seniority of first election to such offices, or if two or more shall have been
first elected to such offices on the same day, in the order of their seniority
in age; and
(iii) Any other persons that are designated on a list that shall have been
approved by the Board of Directors before the emergency, such persons to be
taken in such order of priority and subject to such conditions as may be
Bylaws
Page 12
provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any such emergency, may
provide, and from time to time modify, lines of succession in the event that
during such an emergency any or all officers or agents of the Corporation shall
for any reason be rendered incapable of discharging their duties.
(d) The Board of Directors, during as well as before any such emergency, may,
effective in the emergency, change the principal office, or designate several
alternative offices, or authorize the officers so to do.
No officer, director or employee shall be liable for action taken in good
faith in accordance with these Emergency Bylaws.
These Emergency Bylaws shall be subject to repeal or change by further action
of the Board of Directors or by action of the shareholders, except that no such
repeal or change shall modify the provisions of the next preceding paragraph
with regard to action or inaction prior to the time of such repeal or change.
Any such amendment of these Emergency Bylaws may make any further or different
provision that may be practical and necessary for the circumstances of the
emergency.
ARTICLE XIII - VOTING OF SHARES HELD
- - - - ------------------------------------
Unless otherwise provided by resolution of the Board of Directors or of the
Executive Committee, if any, the President may appoint an attorney or agent of
the Corporation to cast the vote to which the Corporation may be entitled to
cast as a shareholder or otherwise in any other corporation any of those
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation, or to vote by proxy or
consent in writing to any action by any such other corporation. The President
shall instruct the person so appointed as to the manner of casting such votes,
completing such proxy, or giving such consent and may execute or cause to be
executed by such other person on behalf of Corporation such written proxies,
consents, waivers or other instruments as may be necessary or proper in the
premises. In lieu of such appointment, the President may attend any meetings
of holders of shares or other securities of any such other corporation and
exercise all powers of the Corporation as the holder of such shares or other
securities of such other corporation.
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