<PAGE>
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 30, 1999.
( ) 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 333-32825
SFW HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 52-2014682
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 75/th/ Ave. Landover, Maryland, 20785
------------------------------------------
(Address of principal executive office) (Zip Code)
(301) 226-1200
-----------------
(Registrant's telephone number, including area code)
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 ___
---
At December 14, 1999, the registrant had 1,000 shares of common stock. The
common stock of SFW Holding Corp. is not publicly traded.
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
1
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
The consolidated financial statements included herein have been prepared by SFW
Holding Corp. ("SFW Holding" or the "Company") without audit (except for the
consolidated balance sheet as of January 30, 1999, which has been derived from
the audited consolidated balance sheet as of that date) pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted, although Shoppers believes that the disclosures are adequate to make
the information presented not misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in SFW Holding's Annual Report on Form 10-K for the fiscal year ended
January 30, 1999.
2
<PAGE>
SFW HOLDING CORP. AND SUBISIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------------------- --------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $215,815 $220,431 $655,668 $658,956
Cost of sales 162,018 165,278 491,287 500,566
-------- -------- -------- --------
Gross profit 53,797 55,153 164,381 158,390
Selling and administrative expenses 43,605 42,711 131,504 127,627
Depreciation and amortization 3,618 3,200 11,341 9,900
-------- -------- -------- --------
Operating income 6,574 9,242 21,536 20,863
Interest
Interest income 1,186 949 2,912 3,235
Interest expense 3,944 4,113 12,602 14,279
-------- -------- -------- --------
Net interest expense 2,758 3,164 9,690 11,044
Earnings before income taxes 3,816 6,078 11,846 9,819
Provision for income taxes 2,215 2,925 6,630 5,337
-------- -------- -------- --------
Net earnings $ 1,601 $ 3,153 $ 5,216 $ 4,482
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
SFW HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
October 31, January 30,
1999 1999
--------------- ---------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,184 $ 6,602
Accounts receivable, net 7,721 13,263
Merchandise inventories 36,256 31,477
Other current assets 8,033 5,044
--------------- ---------------
Total current assets 56,194 56,386
Property, plant and equipment, net 59,508 52,901
Goodwill, net 308,030 311,371
Lease rights 28,231 29,031
Note receivable and other assets 42,419 40,100
--------------- ---------------
Total assets $494,382 $489,789
=============== ===============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 15,599 $ 12,283
Accrued payroll and benefits 4,865 5,401
Due to affiliates 45,433 26,038
Accrued interest 7,175 2,378
Other accrued expenses 13,063 14,577
--------------- ---------------
Total current liabilities 86,135 60,677
Senior notes due 2004 182,592 211,764
Capital lease obligations 12,182 12,709
Deferred income taxes 16,824 12,832
Other liabilities 6,453 6,827
Stockholders' equity:
Common stock, voting, par value $0.01 per share, 1,000
shares authorized, issued and outstanding.
Additional paid-in capital 179,091 179,091
Retained earnings 11,105 5,889
--------------- ---------------
Total stockholders' equity 190,196 184,980
--------------- ---------------
Total liabilities and stockholders' equity $494,382 $489,789
=============== ===============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE>
SFW HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Thirty-nine weeks ended
---------------------------------------
October 30, October 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 5,216 $ 4,482
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 11,341 9,900
Amortization of deferred financing costs - 763
Amortization of bond premium (2,515) (1,608)
Increase in deferred rent liability - 706
Changes in assets and liabilities:
Accounts receivable 5,542 (4,203)
Merchandise inventories (4,779) 3,608
Other assets (5,251) 1,158
Accounts payable 3,316 (11,599)
Due to affiliates 19,395 (3,626)
Accrued expenses (104) 7,655
Deferred income and income taxes 4,758 (654)
------------- ------------
Net cash provided by operating activities 36,919 6,582
------------- ------------
Cash Flows from Investing Activities:
Capital expenditures (12,219) (5,604)
Purchase of short-term investments - (3,604)
Sales/maturities of short-term investments - 4,121
Purchase of bonds and bond premium (26,657) -
------------- ------------
Net cash used in investing activities (38,876) (5,087)
Cash Flows from Financing Activities:
Payments for acquisition and deferred financing costs - (294)
Principal payments under capital lease obligations (461) (261)
------------- ------------
Net cash used in financing activities (461) (555)
Net increase (decrease) in cash and cash equivalents (2,418) 940
Cash and cash equivalents at beginning of period 6,602 4,027
------------- ------------
Cash and cash equivalents at end of period $ 4,184 $ 4,967
============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
SFW HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Accordingly, actual results could differ from those
estimates.
The accompanying consolidated financial statements of the Company as of October
30, 1999, and for the 13 and 39 weeks ended October 30, 1999, and October 31,
1998, have not been audited. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles ("GAAP") have been condensed or omitted
from the accompanying consolidated financial statements.
In the opinion of the Company, the accompanying consolidated financial
statements reflect all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position of the Company as of October
30, 1999, and the results of its operations for the 13 and 39 week periods ended
October 30, 1999, and October 31, 1998. As a result of the Dart Acquisition on
May 18, 1998, in which Richfood Holdings, Inc. ("Richfood") acquired all of the
outstanding stock of Dart Group Corporation, the Company's parent, the results
of operations for the 13 and 39 week periods ended October 30, 1999 are not
necessarily indicative of the results that may be achieved for the fiscal year
ending January 29, 2000.
NOTE 2 - ACQUISITION/MERGER
On August 31, 1999, Richfood was acquired in a merger by a wholly-owned
subsidiary of SUPERVALU INC., a Delaware corporation ("SUPERVALU"), and the
Company became an indirect, wholly-owned subsidiary of SUPERVALU at that time.
Certain financial statement and related footnote amounts for periods prior to
the Richfood acquisition may not be comparable to corresponding amounts
subsequent to the acquisition. In addition, the results of operations for the
13 and 39 week periods ended October 30, 1999 are not necessarily indicative of
the results that may be achieved for the fiscal year ended January 29, 2000.
NOTE 3 - INCOME TAXES
The Company's effective income tax rate increased to 58.0% and 56.0% for the 13
and 39 weeks ended October 30, 1999, respectively, from 48.1% and 54.4% for the
13 and 39 weeks ended October 31, 1998, respectively. The increase is primarily
attributable to decreased taxable earnings in relation to the fixed amount of
acquisition non-deductible goodwill associated with the Dart Acquisition.
6
<PAGE>
NOTE 4 - TRANSACTIONS WITH AFFILIATES
The October 30, 1999 Consolidated Balance Sheet includes $45.3 million due to
affiliates. This amount consists primarily of amounts due to affiliates for the
purchase of bonds and amounts due for income taxes, inventory purchases and
general and administrative expenses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
Outlook
Except for historical information, statements in this Management's Discussion
and Analysis of Results of Operations and Financial Condition are forward-
looking within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Actual results may differ materially due to a variety of factors, including the
Company's ability to open new stores and the effect of regional economic
conditions. The Company undertakes no obligation and does not intend to update,
revise or otherwise publicly release any revisions to these forward-looking
statements that may be made to reflect future events or circumstances, other
than through its regular quarterly and annual reports filed with the Securities
and Exchange Commission.
On August 31, 1999, Richfood was acquired in a merger by a wholly-owned
subsidiary of SUPERVALU INC., a Delaware corporation, ("SUPERVALU") and the
Company became an indirect, wholly-owned subsidiary of SUPERVALU at that time.
Results of Operations
The Company's operations are conducted primarily through its wholly-owned
subsidiary, Shoppers Food Warehouse Corp. ("Shoppers").
Sales decreased by $4.6 million, or 2.1%, from $220.4 million during the 13
weeks ended October 31, 1998 to $215.8 million during the 13 weeks ended October
30, 1999. This decrease was due primarily to the closing of one store during
the first quarter ($3.4 million) and competitive new store openings. Sales
decreased by $3.3 million, or 0.5%, from $659.0 million during the 39 weeks
ended October 31, 1998, to $655.7 million during the 39 weeks ended October 30,
1999. The sales decrease for the 39 weeks ended October 30, 1999 was due
primarily to the closure of one store in the 39 week period ended October 30,
1999, offset, in part, by the opening of one new store during the 1998 period,
and competitive new store openings recently in the area. Comparable store sales
decreased 0.5% and 1.4% for the 13 weeks and 39 weeks ended October 30, 1999,
respectively, compared to the corresponding periods in the prior year. The
decreases in comparable store sales were due primarily to the opening of a new
Shoppers store cannibalizing existing stores, as well as increased competition.
Gross profit decreased by $1.4 million, or 2.5%, from $55.2 million during the
13 weeks ended October 31, 1998, to $53.8 million during the 13 weeks ended
October 30, 1999. Gross profit increased by approximately $6.0 million, or
3.8%, from $158.4 million during the 39 weeks ended October 31, 1998, to $164.4
million during the 39 weeks ended October 30, 1999. Gross profit, as a
percentage of sales, remained essentially unchanged at 24.9% during the 13 weeks
ended October 30, 1999, compared to 25.0% during the 13 weeks ended October 31,
1998. Gross profit, as a percentage of sales, increased to 25.1% during the 39
weeks ended
7
<PAGE>
October 30, 1999, compared to 24.0% during the 39 weeks ended October 31, 1998.
The increase in the gross profit percentage during the 39 week period of the
current year over the comparable period of the prior year was primarily
attributed to a reduction of the number of items offered on special
discount, better buying and the reduction of product shrinkage losses.
Selling and administrative expenses increased by $0.9 million, from $42.7
million during the 13 weeks ended October 31, 1998, to $43.6 million during the
13 weeks ended October 30, 1999. Selling and administrative expenses increased
by approximately $3.9 million, from $127.6 million during the 39 weeks ended
October 31, 1998, to $131.5 million during the 39 weeks ended October 30, 1999.
The increases in these periods are primarily attributable to higher labor and
benefits costs, as well as increased advertising cost during the current period.
Selling and administrative expenses, as a percentage of sales, increased from
19.4% for both the 13 weeks and 39 weeks ended October 31, 1998, to 20.2% and
20.1% during the 13 weeks and 39 weeks ended October 30, 1999, respectively.
Depreciation and amortization increased by $1.4 million from $9.9 million during
the 39 weeks ended October 31, 1998, to $11.3 million during the 39 weeks ended
October 30, 1999. The increase was primarily due to additional amortization of
goodwill as a result of the Dart Acquisition.
Interest income increased approximately $0.3 million, from $0.9 million for the
13 weeks ended October 31, 1998, to $1.2 million for the 13 weeks ended October
30, 1999. For the 39 weeks ended October 30, 1999, interest income decreased
approximately $0.3 million, from $3.2 million for the 39 weeks ended October 31,
1998, to $2.9 million for the current period.
The Company's effective income tax rate increased to 58.0% and 56.0% for the 13
and 39 weeks ended October 30, 1999, respectively, from 48.1% and 54.4% for the
13 and 39 weeks ended October 31, 1998, respectively. The increase is primarily
attributable to decreased taxable earnings in relation to the fixed amount of
acquisition non-deductible goodwill associated with the Dart Acquisition.
Liquidity and Capital Resources
The Company's principal source of liquidity is expected to be cash flows from
operations. It is anticipated that Shoppers' principal uses of liquidity will
be to provide working capital, finance capital expenditures and meet debt
service requirements.
During the 39 weeks ended October 30, 1999, operating activities generated net
cash of $36.9 million, compared to generating net cash of $6.6 million during
the 39 weeks ended October 31, 1998. The increase was primarily due to the
increase in the balance due to affiliates. The balance due to affiliates was
$45.4 million at October 30, 1999 compared to $26.0 million at January 31, 1999.
During the 39 weeks ended October 30, 1999, investing activities used
approximately $12.2 million of capital expenditures primarily for store remodels
and $26.7 million for the purchase of bonds. For the 39 weeks ended October 31,
1998, investing activities used approximately $5.6 million for capital
expenditures.
8
<PAGE>
Financing activities used $0.5 million of the Company's funds during the 39 week
period ended October 30, 1999, compared to $0.6 million during the 39 weeks
ended October 31, 1998.
The Company believes that cash flows from Shoppers' operations will be adequate
to meet its anticipated requirements for working capital and debt service.
Year 2000 Compliance
References herein to Richfood are based on information provided by Richfood to
the Company.
The "Year 2000" issue is the result of computer systems and software programs
using two digits rather than four to define a year. As a result, computer
systems that have date-sensitive software and embedded systems may recognize a
date using "00" as the year 1900 rather than the year 2000. Unless remedied,
the Year 2000 issue could result in system failures, miscalculations, and the
inability to process necessary transactions or engage in similar normal business
activities.
As a result of the Dart Acquisition, the Company's computer systems and software
programs were incorporated into Richfood's systems and programs. Richfood has
developed and implemented a strategic, long-term information technology plan
(the "Strategic Plan") to upgrade its core application systems. Concurrently,
Richfood has developed and implemented a plan (the "Y2K Plan") to ensure that
its information systems are Year 2000 compliant. The Y2K Plan focuses on the
following three major areas:
[] Information technology systems ("IT"),
[] Embedded technology and other systems ("Non-IT"), and
[] Key third party relationships.
Based on the Strategic Plan and assessments conducted as part of the Y2K Plan,
Richfood determined that it would be necessary to modify or replace portions of
its software and certain hardware systems so that such systems will properly
recognize dates beyond December 31, 1999. Richfood presently believes that with
the modification or replacement of existing software and certain hardware
systems, the Year 2000 issue will be significantly mitigated.
Richfood's Y2K Plan, as it pertains to the Company, involves the following three
phases:
[] Assessment -- locating, listing and prioritizing the specific
technology that is potentially subject to Year 2000 issues,
assessing the actual exposure of such technology to the Year 2000
issue, and planning/scheduling the allocation of internal and third
party resources for the remediation effort.
9
<PAGE>
[] Remediation/Testing of non-compliant systems - selecting and executing
the method necessary to resolve the Year 2000 issues that were
identified, including replacement, upgrade, repair or abandonment, and
testing the remediated or converted technology to determine the
efficacy of the resolutions.
[] Implementation - placing remediated technology into operation.
The assessment phase has been completed with respect to IT and Non-IT systems
that Richfood believes could be adversely affected by the Year 2000 issue. The
assessment indicated that many of the Company's significant information systems
could be adversely affected, particularly the general ledger, human resources,
payroll, and point of sale systems. Non-IT systems, including telephones, loss-
prevention and food production systems, have also been validated; however, the
Company believes that non-compliance of the Non-IT systems would not pose a
significant risk to the Company's financial condition or results of operations.
With respect to IT systems, the remediation/testing phase and the implementation
phase have been substantially completed. Certain point of sale software systems
and all time and attendance systems have been upgraded or replaced during 1999.
Additionally, human resources, payroll and general ledger system software
upgrades were completed in August 1999.
The majority of the Company's Non-IT systems are currently Year 2000 compliant;
however, certain systems, which include telephones, had to be upgraded or
replaced. The Non-IT systems remediation/testing phase was completed in November
1999.
Richfood's evaluation of the Year 2000 readiness of the Company's material
suppliers (Richfood is the Company's primary supplier), customers and other
third parties, has not identified any class of third party providers that could
materially impact the Company's results of operations in the event of their
failure to become Year 2000 compliant. However, there can be no assurance that
the failure of any unrelated third parties to become Year 2000 compliant in a
timely manner would not result in a material adverse effect on the Company's
results of operations or financial condition.
Total costs associated with the Company's Year 2000 remediation are
approximately $5.5 million to date. Of this amount, approximately $3.9 million
has been capitalized in accordance with GAAP. Of the remaining costs, all but
$0.1 million have been expensed to date, with the remainder planned to be used
for monitoring and supporting contingency and transition plans. All expenditures
by the Company related to the Y2K Plan will be funded by cash flows from
operations and are not expected to impact other operating or investment plans.
No material information technology projects have been deferred as a result of
the implementation of the Y2K Plan.
The aforementioned costs of the Y2K Plan and the completion dates are based on
management's best estimates, which were derived from assumptions of future
events, including the availability of resources, key third party modification
plans and other factors. There can be no assurance that these estimates will
prove to be accurate, and actual results could vary due to uncertainties.
10
<PAGE>
Although the Y2K Plan is expected to be adequate to address the Company's Year
2000 concerns, the Company could experience a material adverse effect on its
results of operations or financial condition if material suppliers, customers
and other businesses encounter serious problems in their Year 2000 remediation
efforts. Therefore, Richfood and the Company are in the process of developing
plans to address such contingencies, with a focus on mission critical systems.
The Company and Richfood expect to complete contingency plans by the end of
December 1999 and expect that such plans may include provisions relating to,
among other things, manual workarounds and adjusting staffing strategies as well
as communications, operations and IT activities that will be utilized if the
contingency plans must be executed.
Richfood's Year 2000 efforts are ongoing and the Y2K Plan will continue to
evolve as new information becomes available. The failure to correct a material
Year 2000 issue could result in an interruption in certain normal business
activities and operations. Due to the general uncertainty inherent in the Year
2000 issue, resulting in part from the uncertainty of the Year 2000 readiness of
third parties upon whom Richfood and the Company rely, the Company is unable to
determine at this time whether the consequences of Year 2000 failures will have
a material adverse effect on the Company's financial condition or results of
operations. However, the Company believes that, with the implementation of the
Y2K Plan as scheduled, the possibility of significant interruptions of normal
operations should be reduced.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Omitted
11
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Omitted
Item 3. Default Upon Senior Securities
Omitted
Item 4. Submission of Matters to a Vote of Security Holders
Omitted
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
3(ii) Bylaws, as adopted August 31, 1999.
27.1 Financial Data Schedule
(B) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
SFW HOLDING CORP.
Date: December 14, 1999 By: /s/ Pamela K. Knous
-------------------------------
Pamela K. Knous
Executive Vice President, Chief
Financial Officer (authorized
officer of the registrant and
principal financial officer)
13
<PAGE>
EXHIBIT 3(ii)
BYLAWS
------
SFW HOLDING CORPORATION
-----------------------
ARTICLE I.
OFFICES
Section 1.01. Offices. The corporation may have such offices, within or
-------
without the State of Delaware as the Directors shall from time to time
determine.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meetings. Meetings of the shareholders may
--------------------------
be held at any place, within or without the State of Delaware, designated by the
Directors and, in the absence of such designation, shall be held at the office
of the corporation in the State of Minnesota. The Directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at ten o'clock a.m.
Section 2.02. Annual Meetings.
---------------
(a) The first annual meeting of the shareholders shall be held on a day
designated by the Directors, which shall be not more than sixteen (16) months
after the date of incorporation. Each subsequent annual meeting, subject to the
power of the shareholders to change the date, shall be held on the same day or,
if that day shall fall upon a legal holiday, on the next succeeding business
day.
(b) At the annual meeting the shareholders, voting as provided in the
Articles of Incorporation, shall designate the number of Directors to constitute
the Board of Directors, shall elect Directors and shall transact such other
business as may properly come before them.
Section 2.03. Special Meetings. Special meetings of the shareholders may be
----------------
held at any time and for any purpose and may be called by the Chairman of the
Board, the President, any three Directors, or by one or more shareholders
holding ten percent (10%) or more of the shares entitled to vote on the matters
to be presented to the meeting.
1
<PAGE>
Section 2.04. Quorum, Adjourned Meetings. The holders of a majority of the
--------------------------
shares outstanding and entitled to vote shall constitute a quorum for the
transaction of business at any annual or special meeting. In case a quorum shall
not be present at a meeting, those present shall adjourn to such day as they
shall, by majority vote, agree upon, and a notice of such adjournment shall be
mailed to each shareholder entitled to vote at least five (5) days before such
adjourned meeting. If a quorum is present, a meeting may be adjourned from time
to time without notice other than announcement at the meeting. At adjourned
meetings at which a quorum is present, any business may be transacted which
might have been transacted at the meeting as originally noticed. If a quorum is
present, the shareholders may continue to transact business until adjournment
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 2.05. Voting. At each meeting of the shareholders at which a quorum
------
is present in person or by proxy, every shareholder having the right to vote
shall be entitled to vote either in person or by proxy. Each shareholder, unless
the Articles of Incorporation provide otherwise, shall have one vote for each
share having voting power registered in his name on the books of the
corporation. Upon the demand of any shareholder, the vote upon any question
before the meeting shall be by ballot. All questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote except where otherwise required by statute, the
Articles of Incorporation or these Bylaws.
Section 2.06. Closing of Books. The Board of Directors may fix a time, not
----------------
exceeding sixty (60) days preceding the date of any meeting of shareholders, as
a record date for the determination of the shareholders entitled to notice of,
and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the twentieth
(20th) day preceding the date of such meeting.
2
<PAGE>
Section 2.07. Notice of Meetings. There shall be mailed to each shareholder
------------------
shown by the books of the corporation to be a holder of record voting shares, at
his address as shown by the books of the corporation, a notice setting out the
time and place of each annual meeting and each special meeting, which notice
shall be mailed at least three (3) days prior thereof; except that notice of a
meeting at which an agreement of merger or consolidation is to be considered
shall be mailed to all shareholders of record, whether entitled to vote or not,
at least two (2) weeks prior thereto; and except that notice of a meeting at
which a proposal to dispose of all, or substantially all, of the property and
assets of the corporation is to be considered shall be mailed to all
shareholders of record, whether entitled to vote or not, at least ten (10) days
prior thereto; and except that notice of a meeting at which a proposal to
dissolve the corporation or to amend the Articles of Incorporation is to be
considered shall be mailed to all shareholders of record, whether entitled to
vote or not, at least ten (10) days prior thereto. Every notice of any special
meeting shall state the purpose or purposes for which the meeting has been
called, pursuant to Section 2.03, and the business transacted at all special
meetings shall be confined to the purpose stated in the call.
Section 2.08. Waiver of Notice. Notice of any annual or special meeting may
----------------
be waived either before, at, or after such meeting in a writing signed by each
shareholder or representative thereof entitled to vote the shares so
represented.
Section 2.09. Written Action. Any action which might be taken at a
--------------
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders.
ARTICLE III.
DIRECTORS
Section 3.01. General Powers. The property affairs and business of the
--------------
corporation shall be managed by the Board of Directors.
Section 3.02. Number, Qualification and Term of Office. The number of
----------------------------------------
Directors shall be established by resolution of the shareholders (subject to the
authority of the Board of Directors to increase the number of Directors as
permitted by law) but shall not be less than the lesser of (i) the number of
shareholders of record and beneficially, or (ii) two (2). In the absence of such
shareholder resolution, the
3
<PAGE>
number of Directors shall be the number last fixed by the shareholders or the
Board of Directors or the Articles of Incorporation. Directors need not be
shareholders. Each of the Directors shall hold office until the annual meeting
of shareholders next held after his election and until his successor shall have
been elected and shall qualify, or until he shall resign, or shall have been
removed as hereinafter provided.
Section 3.03. Annual Meeting. As soon as practicable after each annual
--------------
election of Directors, the Board of Directors shall meet at the registered
office of the corporation, or at such other place within or without the State of
Delaware as may be designated by the Board of Directors, for the purpose of
electing the officers of the corporation and for the transaction of such other
business as shall come before the meeting.
Section 3.04. Regular Meetings. Regular meetings of the Board of Directors
----------------
shall be held from time to time at such time and place within or without the
State of Delaware as may be fixed by resolution adopted by a majority of the
whole Board of Directors.
Section 3.05. Special Meetings. Special meetings of the Board of Directors
----------------
may be called by the Chairman of the Board, the President, the Secretary or by
any two of the Directors and shall be held from time to time at such time and
place as may be designated in the notice of such meeting.
Section 3.06. Notice of Meetings. No notice need be given of any annual or
------------------
regular meeting of the Board of Directors. Notice of each special meeting of the
Board of Directors shall be given by the Secretary who shall give at least
fortyeight (48) hours' notice thereof to each Director by mail, telephone,
telegram or in person.
Section 3.07. Waiver of Notice. Notice of any meeting of the Board of
----------------
Directors may be waived either before, at or after such meeting in writing
signed by each Director. A Director, by his attendance and participation in the
action taken at any meeting of the Board of Directors, shall be deemed to have
waived notice of such meeting.
Section 3.08. Quorum. A majority of the whole Board of Directors shall
------
constitute a quorum for the transaction of business except that when a vacancy
or vacancies exist, a majority of the remaining
4
<PAGE>
Directors (provided such majority consists of not less than the lesser of (i)
the number of Directors required by Section 3.02, or (ii) two (2) Directors)
shall constitute a quorum.
Section 3.09. Vacancies; Newly Created Directorships. Vacancies in the
--------------------------------------
Board of Directors of this corporation occurring by reason of death,
resignation, increase in the number of Directors by the shareholders to the
minimum number required by Section 3.02 or otherwise, shall be filled for the
unexpired term by a majority of the remaining Directors of the Board although
less than a quorum; newly created directorships resulting from an increase in
the authorized number of Directors by action of the Board of Directors as
permitted by Section 3.02 may be filled by two-thirds (2/3) vote of the
Directors serving at the time of such increase; and each person so elected shall
be a Director until his successor is elected by the shareholders, who may make
such election at their next annual meeting or at any meeting duly called for
that purpose.
Section 3.10. Removal. The entire Board of Directors or any individual
-------
Director may be removed from office, with or without cause, by a vote of the
shareholders holding a majority of the shares entitled to vote at an election of
Directors. In the event that the entire Board or any one or more Directors be so
removed, new Directors shall be elected at the same meeting.
Section 3.11. Executive Committee. The Board of Directors, by unanimous
-------------------
affirmative action of the entire Board, may establish an Executive Committee
consisting of two (2) or more Directors. Such Committee may meet at stated times
or on notice to all given by any of their own number. During the intervals
between meetings of the Board of Directors, such Committee shall advise and aid
the officers of the corporation in all matters concerning the business and
affairs of the corporation and, generally, perform such duties and exercise such
powers as may be directed or delegated by the Board of Directors from time to
time. The Board of Directors may, by unanimous affirmative action of the entire
Board, delegate to such Committee authority to exercise all the powers of the
Board of Directors, except the power to amend the Bylaws, while the Board of
Directors is not in session. Vacancies in the membership
5
<PAGE>
of the Committee shall be filled by the Board of Directors at a regular meeting
or at a special meeting called for that purpose.
Section 3.12. Other Committees. The Board of Directors may establish other
----------------
committees from time to time making such regulations, as it deems advisable,
with respect to the membership, authority and procedures of such committees.
Section 3.13. Written Action. Any action which might be taken at a meeting
--------------
of the Board of Directors may be taken without a meeting if done in writing and
signed by the number of Directors that would be required to take the same action
at a meeting of the Board of Directors at which all Directors were present. Any
action which may be taken at a meeting of any duly constituted committee of the
Board of Directors may be taken without a meeting if done in writing and signed
by all of the committee members.
Section 3.14. Conference Communications. Directors may participate in any
-------------------------
meeting of the Board of Directors, or of any duly constituted committee thereof,
by means of a conference telephone conversation or other comparable
communication technique whereby all persons participating in the meeting can
hear and communicate to each other. For the purpose of establishing a quorum and
taking any action at the meeting, such Directors participating pursuant to this
Section 3.14 shall be deemed present in person at the meeting; and the place of
the meeting shall be the place or origination of the conference telephone
conversation or other comparable communication technique.
Section 3.15. Compensation. Directors shall receive no compensation for
------------
attendance at Board meetings except as may be determined from time to time by
vote of the shareholders. All Directors shall receive their expenses, if any, of
attendance at meetings of the Board of Directors or any committee thereof.
Nothing herein contained shall be construed to preclude any Director from
serving this corporation in any other capacity and receiving proper compensation
therefor.
6
<PAGE>
ARTICLE IV.
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of a
------
Chairman of the Board (if one is elected by the Board); the President, who shall
be the chief executive officer of the corporation; one or more Vice Presidents
(if desired by the Board); a Secretary; a Treasurer, and such other officers and
agents as may from time to time be elected by the Board of Directors. Any two
offices, except those of President and Vice President, may be held by one
person.
Section 4.02. Election, Term of Office and Qualifications. At each annual
-------------------------------------------
meeting of the Board of Directors, the Board shall elect, from within or without
their number, the President, the Secretary, the Treasurer, and such other
officers as may be deemed advisable. Such officers shall hold office until the
next annual meeting of the Directors or until their successors are elected and
qualify.
Section 4.03. Removal and Vacancies. Any officer may be removed from his
---------------------
office by a majority of the whole Board of Directors, with or without cause. If
there be a vacancy among the officers of the corporation by reason of death,
resignation or otherwise, such vacancy shall be filled for the unexpired term by
the Board of Directors.
Section 4.04. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside at all meetings of the shareholders and Directors and
shall have such other duties as may be prescribed from time to time by the Board
of Directors.
Section 4.05. President. The President shall have general active management
---------
of the business of the corporation. In the absence of the Chairman of the Board,
he shall preside at all meetings of the shareholders and Directors. He shall be
the chief executive officer of the corporation and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall be ex-
officio a member of all standing committees. He may execute and deliver, in the
name of the corporation, any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the corporation and, in general, shall
perform all duties usually incident to the office of President. He shall have
such other duties as may from time to time be prescribed by the Board of
Directors.
7
<PAGE>
Section 4.06. Vice President. Each Vice President shall have such powers
--------------
and shall perform such duties as may be specified in the Bylaws or prescribed by
the Board of Directors or by the President. In the event of absence or
disability of the President, Vice Presidents shall succeed to his power and
duties in the order designated by the Board of Directors.
Section 4.07. Secretary. The Secretary shall be secretary of and shall
---------
attend all meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. The
Secretary shall give proper notice of meetings of shareholders and Directors.
The Secretary shall keep the seal of the corporation and shall affix the same to
any instrument requiring it and may, when necessary, attest the seal by the
Secretary's signature. The Secretary shall perform such other duties as may from
time to time be prescribed by the Board of Directors or by the President. In the
absence of the Secretary, any Assistant Secretary may perform the duties of the
Secretary.
Section 4.08. Treasurer. The Treasurer shall keep accurate accounts of all
---------
monies of the corporation received or disbursed. The Treasurer shall deposit all
monies, drafts and checks in the name of, and to the credit of, the corporation
in such banks and depositories as a majority of the whole Board of Directors
shall from time to time designate. The Treasurer shall have power to endorse,
for deposit, all notes, checks and drafts received by the corporation. The
Treasurer shall disburse the funds of the corporation, as ordered by the Board
of Directors, making proper vouchers therefor. The Treasurer shall render to the
President and the Directors, whenever required, an account of all his/her
transactions as Treasurer and of the financial condition of the corporation and
shall perform such other duties as may from time to time be prescribed by the
Board of Directors or by the President. In the absence of the Treasurer, any
Assistant Treasurer may perform the duties of the Treasurer.
Section 4.09. Compensation. The officers of this corporation shall
------------
receive such compensation for their services as may be determined from time to
time by resolution of the Board of Directors.
Section 4.10. Authority to Execute Agreements. The Chairman of the Board,
-------------------------------
President and Vice Presidents, and any one of them, are hereby authorized to
execute or cause to be executed in the name
8
<PAGE>
and on behalf of this corporation, all contracts, agreements, deeds, mortgages,
bonds, options, leases, lease and other guarantees of the obligations of others,
including subsidiary corporations and customers, stock transfer documents, and
such other instruments as may be necessary or desirable in the conduct of the
business of the corporation; and said officers are further authorized to sign
and affix, or cause to be signed and affixed, the seal of the corporation on any
instrument requiring the same, which seal shall be attested by the signature of
the Secretary, the Treasurer, any Assistant Secretary or any Assistant
Treasurer.
ARTICLE V.
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. Every owner of shares of the
-----------------------
corporation shall be entitled to a certificate, to be in such form as shall be
prescribed by the Board of Directors, certifying the number of shares of the
corporation owned by him. The certificates for such shares shall be numbered in
the order in which they shall be issued and shall be signed, in the name of the
corporation, by the President or a Vice President and by the Secretary or an
Assistant Secretary or by such officers as the Board of Directors may designate.
Such signatures may be by facsimile if authorized by the Board of Directors.
Every certificate surrendered to the corporation for exchange or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled, except in cases provided for in Section 5.04.
Section 5.02. Issuance of Shares. Subject to the preemptive rights of the
------------------
shareholders of this corporation as established and prescribed by the General
Corporation Law of Delaware, the Board of Directors is authorized to cause to be
issued shares of the corporation up to the full amount authorized by the
Articles of Incorporation in such amounts as may be determined by the Board of
Directors and as may be permitted by law. No shares shall be allotted except in
consideration of cash. The amount of consideration to be received in cash shall
not be less than the par value of the shares so allotted.
Section 5.03. Transfer of Shares. Transfer of shares on the books of the
------------------
corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or
9
<PAGE>
the shareholder's duly authorized attorney-in-fact, and upon surrender of the
certificate or the certificates for such shares. The corporation may treat, as
the absolute owner of shares of the corporation, the person or persons in whose
name shares are registered on the books of the corporation.
Section 5.04. Loss of Certificates. Any shareholder claiming a certificate
--------------------
for shares to be lost or destroyed shall make an affidavit of that fact in such
form as the Board of Directors shall require and shall, if the Board of
Directors so requires, give the corporation a bond of indemnity in form and
amount, and with one or more sureties satisfactory to the Board of Directors, to
indemnify the corporation against any claim which may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of shares as the one alleged to
have been destroyed or lost.
ARTICLE VI.
DIVIDENDS, SURPLUS, ETC.
Section 6.01. Dividends. Subject to the provisions of the Articles of
---------
Incorporation, of these Bylaws and of law, the Board of Directors may declare
dividends from paid-in surplus, earned surplus or from net earnings for the
current or preceding fiscal year of the corporation whenever, and in such
amounts as, in its opinion, the condition of the affairs of the corporation
shall render it advisable.
Section 6.02. Use of Surplus, Reserves. Subject to the provisions of the
------------------------
Articles of Incorporation and of these Bylaws, the Board of Directors, in its
discretion, may use, and apply, any of the net assets or net profits of the
corporation applicable for such purpose in purchasing or acquiring any of the
shares of the corporation in accordance with law, or any of its bonds,
debentures, notes, scrip or other securities or evidences of indebtedness, or
from time to time may set aside from its net assets or net profits such sum or
sums as it, in its absolute discretion, may think proper as a reserve fund for
any purpose it may think proper.
Section 6.03. Unrealized Appreciation. The Board of Directors, in computing
-----------------------
the fair value of the assets of the corporation to determine whether the
corporation may pay a dividend or purchase its shares,
10
<PAGE>
shall not include unrealized appreciation of assets, except that readily
marketable securities of other issuers may be valued at not more than market
value.
Section 6.04. Record Date. Subject to any provisions of the Articles of
-----------
Incorporation, the Board of Directors may fix a date not exceeding forty (40)
days preceding the date fixed for the payment of any dividend as the record date
fixed for the determination of the shareholders entitled to receive payment of
the dividend and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such dividend notwithstanding any
transfer of shares on the books of the corporation after the record date. The
Board of Directors may close the books of the corporation against the transfer
of shares during the whole or any part of such period.
ARTICLE VII.
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.01. Books and Records. The Board of Directors of the
-----------------
corporation shall cause to be kept:
(1) A share register, giving the names and addresses of the shareholders,
the number and classes held by each and the dates on which the
certificates therefor were issued;
(2) Records of all proceedings of shareholders and Directors; and
(3) Such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business.
Section 7.02. Documents Kept at Registered Office. The Board of Directors
-----------------------------------
shall cause to be kept at the registered office of the corporation originals or
copies of:
(1) Records of all proceedings of shareholders and Directors;
(2) Bylaws of the corporation and all amendments thereto; and
(3) Reports made to any or all of the shareholders within the
next preceding three (3) years.
Section 7.03. Fiscal Year. The fiscal year of the corporation shall be
-----------
determined by the Board of Directors.
11
<PAGE>
ARTICLE VIII.
INSPECTION OF BOOKS
Section 8.01. Examination by Shareholders. Every shareholder of the
---------------------------
corporation and every holder of a voting trust certificate shall have a right to
examine, in person or by agent or attorney, at any reasonable time or times, for
any proper purpose, and at the place or places where usually kept, the share
register, books of account, and records of proceedings of the shareholders and
Directors and to make extracts therefrom.
Section 8.02. Information to Shareholders. Upon request by a shareholder
---------------------------
of the corporation, the Board of Directors shall furnish to him a statement of a
profit and loss for the last fiscal year and a balance sheet containing a
summary of the assets and liabilities as of the close of such fiscal year.
ARTICLE IX.
LOANS TO OFFICERS, DIRECTORS, SHAREHOLDERS
Section 9.01. The corporation shall not lend any of its assets to any
officer or Director of the corporation, nor shall it lend any of its assets to
shareholders upon the security of its shares. If any such loan be made, the
officers and Directors who make such loan, or assent thereto, shall be jointly
and severally liable for repayment or return thereof. The corporation shall not
take, as security for any debt, a lien upon its shares unless such lien be taken
to secure a debt previously contracted.
ARTICLE X.
AMENDMENTS
Section 10.01. These Bylaws may be amended or altered by a vote of the
majority of the whole Board of Directors at any meeting provided that notice of
such proposed amendment shall have been given to the Directors in the notice of
such meeting. Such authority in the Board of Directors is subject to the power
of the shareholders to change or repeal such Bylaws by a majority vote of the
shareholders present or represented at any annual or special meeting of
shareholders called for such purpose, and the Board of Directors shall not make
or alter any Bylaws fixing their qualifications, classifications, term of office
or number.
12
<PAGE>
ARTICLE XI.
Section 11.01. Except as otherwise stated herein or in the Articles of
Incorporation, this corporation, together with its Directors and Officers, shall
have all of the rights, powers, duties and responsibilities set forth in the
General Corporation Law of Delaware.
ARTICLE XII.
SEAL
Section 12.01. The Board of Directors may provide a corporate seal, but
whether or not such seal is provided, its use shall not be required in order to
validate any act or instrument.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEK PERIOD ENDED
OCTOBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 4,184
<SECURITIES> 2,816
<RECEIVABLES> 8,279
<ALLOWANCES> 558
<INVENTORY> 36,256
<CURRENT-ASSETS> 56,194
<PP&E> 67,718
<DEPRECIATION> 8,210
<TOTAL-ASSETS> 494,382
<CURRENT-LIABILITIES> 86,135
<BONDS> 182,592
0
0
<COMMON> 167
<OTHER-SE> 190,029
<TOTAL-LIABILITY-AND-EQUITY> 494,382
<SALES> 655,668
<TOTAL-REVENUES> 655,668
<CGS> 491,287
<TOTAL-COSTS> 491,287
<OTHER-EXPENSES> 142,845
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,690
<INCOME-PRETAX> 11,846
<INCOME-TAX> 6,630
<INCOME-CONTINUING> 5,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,216
<EPS-BASIC> 156.48
<EPS-DILUTED> 156.48
</TABLE>
