FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended August 31, 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 1-5767
CIRCUIT CITY STORES, INC.
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 54-0493875
(State of Incorporation) (IRS Employer
Identification No.)
9950 MAYLAND DRIVE, RICHMOND, VIRGINIA 23233
(Address of Principal Executive Offices and Zip Code)
(804) 527-4000
(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
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1994
Common Stock, par value $0.50 96,346,063 Shares
An Index is included on Page 2 and a separate Index for Exhibits is included on
Page 11.
Page 1 of 12
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
INDEX
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
August 31, 1994 and February 28, 1994 3
Consolidated Statements of Earnings -
Three Months and Six Months Ended
August 31, 1994 and 1993 4
Consolidated Statements of Cash Flows -
Six Months Ended August 31, 1994 and 1993 5
Note to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Page 2 of 12
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)
<TABLE> <
August 31, 1994 February 28, 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $47,607 $75,194
Net accounts and notes receivable 212,473 188,990
Merchandise inventory 916,552 721,348
Prepaid expenses and other current assets 11,927 11,476
Total current assets 1,188,559 997,008
Property and equipment, net 518,814 438,096
Deferred income taxes 107,969 105,388
Other assets 14,724 14,172
TOTAL ASSETS $1,830,066 $1,554,664
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $1,733 $1,819
Accounts payable 596,252 419,037
Accrued expenses and other current 83,672 86,826
liabilities
Accrued income taxes 13,719 38,582
Total current liabilities 695,376 546,264
Long-term debt, excluding current 128,555 29,648
installments
Deferred revenue and other liabilities 242,668 268,360
TOTAL LIABILITIES 1,066,599 844,272
Stockholders' equity:
Common stock, $0.50 par value 48,166 48,040
Capital in excess of par value 66,023 64,485
Retained earnings 649,278 597,867
TOTAL STOCKHOLDERS' EQUITY 763,467 710,392
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,830,066 $1,554,664
See accompanying note to consolidated financial statements.
</TABLE>
Page 3 of 12
<TABLE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
(Amounts in thousands except per share data)
Three Months Ended Six Months Ended
August 31, August 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales and operating revenues $1,218,572 $906,678 $2,267,267 $1,705,628
Cost of sales, buying and warehousing 908,955 665,914 1,693,973 1,249,798
Gross profit 309,617 240,764 573,294 455,830
Selling, general and administrative
expenses 250,985 198,220 482,811 385,146
Interest expense 942 577 1,295 1,368
Total expenses 251,927 198,797 484,106 386,514
Earnings before income taxes 57,690 41,967 89,188 69,316
Provision for incomes taxes 21,635 14,000 33,445 24,119
Net earnings $36,055 $27,967 $55,743 $45,197
Weighted average common shares
and common share equivalents 97,513 97,647 97,418 97,574
Net earnings per share $0.37 $0.29 $0.57 $0.46
Dividends paid per common share $0.025 $0.020 $0.045 $0.040
See accompanying note to consolidated financial statements.
</TABLE>
Page 4 of 12
<TABLE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Six Months Ended
August 31,
1994 1993
<S> <C> <C>
Operating Activities:
Net earnings $55,743 $45,197
Adjustments to reconcile net earnings to net
cash (used in) provided by operating activities:
Depreciation and amortization 32,358 25,182
Loss on sales of property and equipment 1,613 425
Provision for deferred income taxes (2,581) (7,285)
(Decrease) increase in deferred revenue
and other liabilities (25,692) 8,309
(Increase) decrease in accounts and notes receivable (23,483) 25,584
Increase in merchandise inventory, prepaid expenses
and other current assets (195,655) (159,215)
Increase in other assets (552) (1,442)
Increase in accounts payable, accrued expenses
and other current liabilities 129,198 90,159
Net cash (used in) provided by operating activities (29,051) 26,914
Investing Activities:
Purchases of property and equipment (146,677) (100,937)
Proceeds from sales of property and equipment 31,988 54,215
Net cash used in investing activities (114,689) (46,722)
Financing Activities:
Proceeds from issuance of long-term debt 100,000 -
Proceeds from issuance of short-term debt 20,000 -
Principal payments on long-term debt (1,179) (61,141)
Proceeds from issuance of common stock, net 1,664 4,189
Dividends paid (4,332) (3,832)
Net cash provided by (used in)
financing activities 116,153 (60,784)
Decrease in cash and cash equivalents (27,587) (80,592)
Cash and cash equivalents at beginning of year 75,194 141,412
Cash and cash equivalents at end of period $47,607 $60,820
See accompanying note to consolidated financial statements.
</TABLE>
Page 5 of 12
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Note to Consolidated Financial Statements
1. The consolidated financial statements conform to generally accepted
accounting principles. The interim period financial statements are
unaudited; however, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary for a fair
presentation of the consolidated financial statements have been included.
The consolidated financial statements included herein should be read in
conjunction with the notes to consolidated financial statements included
in the Company's 1994 annual report to stockholders.
Page 6 of 12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Sales and Operating Revenues and General Comments
Sales for the second quarter of fiscal 1995 were $1.22 billion, a 34 percent
increase from $906.7 million in the same period last year. The total sales
growth includes the sales from 44 Superstores opened during the past year and a
comparable store sales increase of 14 percent during the second quarter. The
second quarter sales results exceeded management's expectations and reflect a
generally healthy climate for hard goods retailers and the continued appeal of
the Company's consumer offer.
For the six months ended August 31, 1994, total sales grew 33 percent to $2.27
billion from $1.71 billion in the same period last year.
Comparable store sales increases for the second quarter and the first six months
of fiscal years 1995 and 1994 were as follows:
FY 95 2nd Quarter Six Months
JUN JUL AUG FY 95 FY 94 FY 95 FY 94
12% 14% 16% 14% 6% 13% 7%
Management believes that its marketing programs and a continuation of the
current hard goods retail sales environment will again produce strong comparable
store sales growth in the second half. However, increased competition in some
markets or a slower sales pace for hard goods retailers in general could limit
the comparable store sales increases.
During the quarter, Circuit City opened 13 Superstores, including its first
three stores in New Orleans, La.; its first two stores in Little Rock, Ark.; and
its first store in Columbia, Mo. The Company added stores in Atlanta, Ga.;
Dallas and Houston, Texas; Los Angeles, Calif.; and Minneapolis, Minn. In
Nashville, Tenn., a new Superstore replaced an existing Superstore and in
Louisville, Ky., a new Superstore replaced a consumer electronics-only store.
The Company s fiscal 1995 expansion program is on target with approximately 40
more Superstores scheduled for the second half.
The table below details store openings since the second quarter of fiscal 1994:
Stores Open At End of Estimate
Quarter
August 31, August 31, Feb. 28, Feb. 28,
1994 1993 1995 1994
Superstore 271 228 311 251
Circuit City 2 0 5 2
Electronics- 5 7 5 7
Only
Mall Store 32 38 35 34
TOTAL 310 273 356 294
For the Company's electronics and appliance business, gross dollar sales from
all extended warranty programs were 5.9 percent of sales in the second quarter
of both fiscal year 1995 and 1994. The total extended warranty revenue that is
reported in total sales was 6.2 percent of sales in this year's second quarter
Page 7 of 12
versus 5.0 percent in the second quarter of last year. Third-party warranty
revenue rose to 2.7 percent of sales in this year's second quarter from 0.5
percent in the same period last year.
Total sales by merchandise categories are listed below:
2nd Quarter Six Months
Fiscal Fiscal Fiscal Fiscal
1995 1994 1995 1994
TV 18% 20% 18% 20%
VCR/Camcorders 15 17 15 17
Audio 20 21 21 21
Home Office 16 9 16 9
Appliances 20 23 19 22
Other * 11 10 11 11
TOTAL 100% 100% 100% 100%
*Includes such products as telephones, portable radios, portable
tape players and entertainment software.
Home office continues to be the strongest growing product category, reflecting
the Company's increased emphasis and the industry growth in this area.
The Company's operations, in common with other retailers in general, are subject
to seasonal influences. Historically, the Company has realized more of its net
sales and net earnings in the final fiscal quarter, which includes the Christmas
season, than in any other fiscal quarter. The net earnings of any interim
quarter are seasonally disproportionate to net sales since administrative and
certain operating expenses remain relatively constant during the year.
Therefore, interim results should not be relied upon as necessarily indicative
of results for the entire fiscal year.
Cost of Sales, Buying and Warehousing
As anticipated, the gross profit margin decreased from 26.6 percent in the
second quarter of last year to 25.4 percent in the second quarter of fiscal
1995. The gross margins for the six-month periods ended August 31, 1994 and
1993, were 25.3 and 26.7 percent, respectively.
The lower margins reflect increased competition in some markets and a higher
level of home office and music software, which carry lower gross profit margins,
in the Company's sales mix. Management expects that during the second half of
fiscal 1995 these factors will continue to lower margins on a year-over-year
basis.
Page 8 of 12
Selling, General and Administrative Expenses
The Company's selling, general and administrative expense ratio improved from
21.9 percent in the second quarter of last year to 20.6 percent for the same
period this year. For the six-month period ended August 31, 1994, the expense
ratio was 21.3 percent versus 22.6 percent in the same period last year.
The improvement in the ratio reflects strong comparable store sales growth and
increased store operating efficiency. The Company expects that improvements in
the SG&A ratio will continue in the second half and will again reflect the rate
of comparable store sales growth and improved store efficiency.
Interest Expense
Interest expense for the second quarter and first six months of fiscal 1995 was
0.1 percent of sales. The Company does not anticipate a significant change in
the interest expense ratio during the last six months of fiscal 1995.
Income Taxes
The effective income tax rate increased from 33.4 percent in the second quarter
of last year to 37.5 percent in the second quarter of fiscal 1995. For the six-
month period ended August 31, 1994, the effective tax rate was 37.5 percent
versus 34.8 percent in the same period last year. The change was due to the
increase in the corporate statutory federal income tax rate enacted in August
1993 which produced a rise in the Company s deferred tax asset as prescribed by
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. The increased tax benefit from the deferral reduced the Company s
effective tax rate in the second quarter of last year. The Company expects an
effective tax rate of approximately 37.5 percent for the remainder of fiscal
1995.
Net Earnings
Net earnings for the quarter ended August 31, 1994, were $36.1 million, an
increase of 29 percent from $28.0 million in the same period last year. Net
earnings per share rose 28 percent to 37 cents from 29 cents.
Net earnings for the six months ended August 31, 1994, were $55.7 million, an
increase of 23 percent from $45.2 million in the same period last year. Net
earnings per share rose 24 percent to 57 cents from 46 cents.
At the beginning of the current fiscal year, the Company anticipated that a more
aggressive marketing stance and the acceleration in the Superstore expansion
program would result in no material earnings growth for the year. However,
stronger than anticipated comparable store sales growth in the first six months
produced earnings above expectations. The Company should achieve modest earnings
growth during the second half even if comparable store sales growth moderates
slightly.
Page 9 of 12
Liquidity and Capital Resources
Total assets at August 31, 1994, were $1,830.1 million, up $275.4 million or 18
percent since February 28, 1994. The largest contributor to the asset growth
was a $195.2 million inventory increase to support expected higher seasonal
sales volume and new store openings. Property and equipment has increased by
$80.7 million since the end of fiscal 1994. This net increase is due largely to
the planned store openings. Accounts payable has increased $177.2 million or 42
percent since February 28, 1994, due to the increase in inventory and expenses
associated with new store openings.
Long-term debt has increased $98.9 million since the end of fiscal 1994. The
Company has borrowed $100 million pursuant to the terms of a seven-year $100
million senior unsecured term loan agreement, which it entered into with a group
of banks as of July 28, 1994. Principal is due in full at maturity with
interest payable monthly at a variable rate based on LIBOR. The Company intends
to repay interest and principal as scheduled from net cash provided by current
operations. This debt replaces the $60 million in subordinated debt repaid in
August 1993 and will be used for general corporate purposes.
The Company expects to continue its current long-term capitalization strategy
throughout fiscal 1995. Management anticipates that capital expenditures will
be funded through a combination of internally generated funds, sale-leaseback
transactions, operating leases, and proceeds from the recent $100 million in
long-term debt. At August 31, 1994, the Company maintained a multi-year $100
million unsecured revolving credit facility and $255 million in seasonal lines
that are renewed annually with various banks.
Page 10 of 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Index to Exhibits:
(3) Bylaws of the Company, amended and restated as of August 16,
1994.
(4) $100,000,000 term loan agreement dated July 28, 1994 between the
Company and The Long-Term Credit Bank of Japan, Limited, as agent.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, in lieu of filing
a copy of such agreement, Registrant agrees to furnish a copy of
such agreement to the Commission upon request.
(27) Financial Data Schedules
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended August 31, 1994.
Page 11 of 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CIRCUIT CITY STORES, INC.
(Company)
By: s/Richard L. Sharp
Richard L. Sharp
Chairman and Chief
Executive Officer
By: s/Michael T. Chalifoux
Michael T. Chalifoux
Senior Vice President and
Chief Financial Officer
By: s/Keith D. Browning
Keith D. Browning
Corporate Controller and
Chief Accounting Officer
October 10, 1994
Page 12 of 12
CIRCUIT CITY STORES, INC.
B Y - L A W S
As Amended and Restated as of August 16, 1994
OFFICES RECORDS
1. Place 32. Form of Stock Certificate
33. Lost Certificates
STOCKHOLDERS MEETINGS 34. Transfer of Stock
35. Registered Stockholders
2. Place of Meeting
3. Annual Meetings OTHER MATTERS
4. Special Meetings
5. Notices 36. Notices
6. Adjourned Meetings 37. Registered Office and
7. Voting Agent
8. Stockholders Entitled 38. Corporate Records
to Vote 39. Request for Financial
9. Quorum Statement
40. Voting Stock in Other
DIRECTORS Corporations
41. Seal
10. Responsibility of Directors 42. Amendment of By-Laws
11. Number of Directors 43. Fiscal Year
12. (a) Directors' Nominations 44. General
(b) Directors' Terms
13. Directors' Meetings
14. Notice of Meetings
15. Compensation
16. Director Emeritus
17. Executive Committee
18. Audit Committee
19. Compensation and Personnel Committee
20. Nominating and Structure Committee
21. Other Committees
OFFICERS
22. Officers
23. Election of Officers
24. Chairman of the Board
(a) Vice Chairman of the Board
25. President
26. Vice Presidents
27. Secretary
28. Assistant Secretary
29. Treasurer
30. Other Officers
31. Compensation<PAGE>
CIRCUIT CITY STORES, INC.
B Y - L A W S
OFFICES
1. PLACE: The principal office of the Corporation shall be in the
County of Henrico, State of Virginia.
STOCKHOLDERS
2. PLACE OF MEETING: Meetings of the stockholders shall be held
at the principal office of the Corporation or at such other place
which shall be approved by the Board of Directors and designated in
the notice of the meeting. Meetings may be held either within or
without the State of Virginia.
3. ANNUAL MEETING: Commencing with the year 1979, the annual
meeting of the stockholders of the Corporation shall be held on the
third Wednesday in June of each year, or at such other time and
place which shall be approved by the Board of Directors and
designated in the notice of meeting. Such meetings may be held
either within or without the State of Virginia. At the annual
meeting the stockholders shall elect a Board of Directors and
transact such other business as may properly be brought before
them.
4. SPECIAL MEETINGS: Special meetings of the stockholders may be
called by the Board of Directors, the Chairman of the Board and the
President of the Corporation.
5. NOTICES: Written notice by mail shall be given in accordance
with Section 36, stating the place, date and hour of a meeting of
stockholders and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given to each
stockholder of record entitled to vote at the meeting not less than
ten (10) nor more than fifty (50) days before the date of the
meeting, by or at the direction of the President, the Secretary, or
the officer or persons calling the meeting. The notice shall be
deemed to be given when it is deposited with postage prepaid in the
United States mail addressed to the stockholder at the address as
it appears on the stock transfer books of the Corporation. Notice
of a meeting to act on an amendment of the Articles of
Incorporation or on reduction of stated capital or on a plan of
merger, consolidation or exchange shall be given in the manner
provided above not less than twenty-five (25) nor more than fifty
(50) days before the date of the meeting. Such notice shall be
accompanied by a copy of the proposed amendment or plan of
reduction or merger, consolidation or exchange.
6. ADJOURNED MEETINGS: If a meeting is adjourned for lack of a
quorum, any matter which might have properly come before the
original meeting may came before the adjourned meeting when
reconvened.
7. VOTING: Each share of stock shall have one vote on all matters
on which stockholders are entitled to vote. A stockholder may vote
either in person or by proxy executed in writing by the stockholder
or a duly authorized attorney-in-fact.
8. STOCKHOLDERS ENTITLED TO VOTE: In lieu of closing the stock
transfer books, the Board of Directors shall fix a date which is
not more than fifty (50) days in advance of the date on which the
particular action is to be taken as the record date for any such
determination of stockholders.
9. QUORUM: A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of
stockholders. Treasury shares and shares held by a corporation of
which the Corporation owns a majority of the shares entitled to
vote for the directors thereof shall not be entitled to vote or to
be counted in determining the total number of outstanding shares
entitled to vote. If a quorum is present, action on a matter,
other than the election of directors, is approved if the votes cast
favoring the action exceed the votes cast opposing the action. In
the election of directors, those receiving the greatest number of
votes shall be deemed elected even though not receiving a majority.
At each election for directors, every stockholder entitled to vote
shall have the right to vote the number of shares owned by him for
as many persons as there are directors to be elected at that time
and for whose election he has a right to vote.
DIRECTORS
10. RESPONSIBILITY OF DIRECTORS: The affairs and business of the
Corporation shall be under the management of its Board of Directors
and such officers and agents as the Board of Directors may elect
and employ.
11. NUMBER OF DIRECTORS: The number of directors shall be nine
(9) and they shall be elected at the annual meeting of the
stockholders or at a special meeting of the stockholders called for
such a purpose. This number may be increased or decreased from
time to time by amendment to these by-laws to the extent permitted
by law and by the Corporation's Articles of Incorporation. They
shall be elected by the stockholders for terms of three (3) years
in the manner set forth in the Articles of Incorporation and shall
serve until the election of their successors.
12. (a) DIRECTORS' NOMINATIONS: Nominations for the election of
directors may be made by the Board of Directors or by any
stockholder entitled to vote in the election of directors
generally. However, any stockholder entitled to vote in the
election of directors generally may nominate one or more persons
for election as directors at a meeting only if written notice of
such stockholder's intent to make such nomination or nominations
has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not
later than (i) with respect to an election to be held at an annual
meeting of stockholders (other than the 1986 annual meeting), 120
days in advance of such meeting, (ii) with respect to an election
to be held at the 1986 annual meeting, March 1, 1986 and (iii) with
respect to a special meeting of stockholders for the election of
directors, the close of business on the seventh day following the
date on which notice of such meeting is first given to
stockholders.
Each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation
entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated,
or intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a director of the Corporation
if so elected. The Chairman may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure.
12. (b) DIRECTORS' TERM: No decrease in the number of directors
shall have the effect of changing the term of any incumbent
director. Unless a director resigns or is removed by the majority
vote of the stockholders, every director shall hold office for the
term elected or until a successor shall have been elected. Any
vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors though
less than a quorum of the Board of Directors; provided, however,
that the aggregate number of vacancies resulting from increases in
the number of directors which may be created and filled by action
of the Board of Directors between annual meetings of stockholders
shall be limited to two. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
13. DIRECTORS' MEETING: The annual meeting of the directors shall
be held immediately after the annual meeting of the stockholders.
The Board of Directors, as soon as may be convenient after the
annual meeting of the stockholders at which such directors are
elected, shall elect from their number a Chief Executive Officer
(CEO) who shall be the Chairman of the Board or the President, as
the Board shall designate. Special meetings may be called by the
CEO, the Board of Directors or any two directors by giving notice
of the time and place in accordance with Section 14. Special
meetings of the Board of Directors (or any committee of the Board)
may be held by telephone or similar communication equipment whereby
all persons participating in the meeting can hear each other, at
such time as my be prescribed, upon call of the CEO or any two
members of the Board. A quorum shall be a majority of the
directors. Action may be taken by the directors or a committee of
the Board of Directors without a meeting if a written consent,
setting forth the action, shall be signed by all of the directors
or committee members either before or after such action. Such
consent shall have the same force and effect as a unanimous vote.
14. NOTICE OF MEETING: At the annual meeting of the Board of
Directors each year and at any meeting thereafter, the Board shall
designate the dates, times and places of regular meetings of the
Board for the ensuing calendar year, and no notice of any kind need
be given thereafter with respect to such regular meetings. Notice
of any special meeting of the Board shall be by oral, telegraphic
or written notice duly given to each director not less than five
(5) days before the date of the proposed meeting, but a waiver of
notice of such meeting in writing, signed by a director of the
Corporation before or after the time stated in such notice, shall
be equivalent to the giving of such notice. Attendance at a
meeting shall be deemed a waiver of notice of such meeting, unless
the sole purpose of attending the meeting shall be to object to the
transaction of any business.
15. COMPENSATION: Directors shall not receive a stated salary for
their services, but directors may be paid a fixed sum and expenses
for attendance at any regular or special meeting of the Board of
Directors or any meeting of any Committee and such other
compensation as the Board of Directors shall determine. A director
may serve or be employed by the Corporation in any other capacity
and receive compensation thereafter.
16. DIRECTOR EMERITUS: The Board may appoint to the position of
Director Emeritus any retiring director who has served not less
than three years as a director of the Corporation. Such person so
appointed shall have the title of "Director Emeritus" and shall be
entitled to receive notice of, and to attend all meetings of the
Board, but shall not in fact be a director, shall not be entitled
to vote, shall not be counted in determining a quorum of the Board
and shall not have any of the duties or liabilities of a director
under law.
17. EXECUTIVE COMMITTEE: With the approval of a majority of the
whole Board of Directors, two or more directors may be designated
to constitute an Executive Committee. The Executive Committee may
exercise all corporate powers of the Corporation and manage its
business and affairs to the same extent as the Board of Directors,
subject to the limitations set forth in Section 13.1-689 of the
Virginia Stock Corporation Act and any successor legislation
thereto. The Board of Directors may at any time, by resolution,
limit the powers of the Executive Committee. The Executive
Committee may meet at scheduled times or, upon notice to each
member, hold a special meeting. The Executive Committee shall keep
minutes of its meetings. Vacancies in the membership of the
Executive Committee shall be filled by the Board of Directors.
18. AUDIT COMMITTEE: The Board of Directors shall appoint each
year an Audit Committee, composed exclusively of outside directors,
which shall perform such duties as they consider necessary and
desirable to properly evaluate and generally supervise the
Corporation's accounting procedures including but not limited to
the following:
1. Recommend outside auditors to the Board.
2. Determine that the scope of the audit is adequate and
approve the audit fee.
3. Review audit results with the outside auditors.
4. Review and approve the retention of the outside auditors
to perform non-audit services and approve the fee
therefor.
5. Recommend policy for the scope, frequency, and method of
internal audit reports and review the results thereof.
Develop a direct line of communication with internal
auditors, if and when such are employed.
6. Review all filings with the Securities and Exchange
Commission.
7. Review pending lawsuits.
8. Review insurance coverage.
The Audit Committee should develop and follow a comprehensive
checklist so as to ensure that the Committee's inquiries of the
outside auditors and management are systematic in scope. This
Committee shall have free access to the outside auditors and to the
Corporation's general counsel. Meetings of the Committee should be
scheduled not less than three times each year, with a portion of
each meeting being held without management representatives present.
Minutes of such meetings should be kept and reports made to the
entire Board of Directors.
19. COMPENSATION AND PERSONNEL COMMITTEE: The Board of Directors
shall appoint each year a Compensation and Personnel Committee,
which shall be composed of three outside directors, and shall have
the following duties:
1. Review and recommend to the Board current management
compensation programs including salaries, bonuses and
fringe benefits and the creation of new officerships.
2. Review and report to the Board on the funding and
adequacy of existing retirement programs, and recommend
new programs, if appropriate. (This responsibility does
not include investment policy and other responsibilities
of the Trustees of the Profit Sharing Fund.)
3. Award and administer pursuant to existing authority, the
Corporation's Stock Option and Performance Share Programs
and review and recommend similar future programs, if any.
4. Review top management organization, assist the CEO in
determining that the Corporation has adequate depth and
breadth of management to carry out its expansion programs
and to provide for succession in the event of retirement
or the unanticipated departure of a key executive.
5. Review the Corporation's programs for attracting,
developing and compensating management personnel at lower
and middle levels.
20. NOMINATING AND STRUCTURE COMMITTEE: The Board of Directors
shall appoint each year a Nominating and Structure Committee, which
shall be composed of at least three members of the Board. A
majority of the members of the Nominating and Structure Committee
shall be non-management directors. The functions of this Committee
shall include the following:
1. Review the performance and contribution of existing
directors for the purpose of recommending whether they be
nominated for a successive term.
2. Recommend policies with regard to the size, composition
and function of the Board.
3. Suggest persons to fill vacancies on the Board and
maintain files on names submitted.
4. Assist the Chairman of the Board in carrying out an
orientation program for new directors.
5. Review and recommend to the Board changes and
improvements in the functioning of the Board.
6. Review and recommend compensation levels for outside
directors.
21. OTHER COMMITTEES: The Board of Directors may designate such
other committees as it deems advisable. Each committee shall
consist of at least two (2) directors and, to the extent provided
by the resolution of the Board of Directors, shall have and
exercise such powers of the Board of Directors in the management of
the business and affairs of the Corporation as may be lawfully
delegated.
OFFICERS
22. OFFICERS: The officers of the Corporation shall be a
President, a Secretary and a Treasure, each of whom shall be
elected by the Board of Directors. In addition, the Board of
Directors may elect or the President, if so authorized by the Board
of Directors, may appoint one or more Vice Presidents and other
officers or assistant officers as may be deemed necessary or
advisable to carry on the business of the Corporation. The
President shall be a member of the Board of Directors. Any two
offices may be combined in the same person except the offices of
President and Secretary.
23. ELECTION AND REMOVAL OF OFFICERS, TERM: Officers shall be
elected at the annual meeting of the Board of Directors immediately
following the annual meeting of stockholders or appointed at the
time thereof, and may be elected or appointed at such other time or
times as the Board of Directors or the persons authorized to make
appointments shall determine. All officers shall hold office,
unless removed, until the time of the next annual meeting of the
Board of Directors or until their successors are elected. Any
officer may resign at any time upon written notice to the President
or the Board of Directors, and such resignation shall be effective
when notice is delivered unless the notice specifies a later
effective date. Elected officers may be removed, with or without
cause, at any time by the Board of Directors. Appointed officers
may be similarly removed by the persons having the authority to
appoint them or by the Board of Directors.
24. CHAIRMAN OF THE BOARD: The Chairman of the Board, if one is
designated by the Board of Directors, shall preside at all meetings
of the Board and of stockholders and perform such other duties as
the Board shall assign from time to time.
(a) VICE CHAIRMAN OF THE BOARD: The Vice Chairman of the
Board, if one is designated by the Board of Directors, shall at the
request of or in the absence of the Chairman of the Board, preside
at meetings of the Board and of stockholders and, when requested to
do so, by the Board, shall perform all of the functions of the
Chairman of the Board during the absence or incapacity of the
latter.
25. PRESIDENT: The President, in the absence of the Chairman of
the Board and the Vice Chairman of the Board, shall preside at all
meetings of the Board of Directors and stockholders, shall have
power to call special meetings of the stockholders and directors
for any purpose; may hire, appoint and discharge, subject to the
approval of the Board of Directors, employees and agents of the
Corporation and fix their compensation; may make and sign deeds,
mortgages, deeds of trust, notes, leases, contracts and agreements
in the name and on behalf of the Corporation; shall have power to
carry into effect all directions of the Board of Directors; and
shall have general supervision of the business of the Corporation;
and shall have general supervision of the business of the
Corporation, except as may be limited by the Board of Directors,
the Articles of Incorporation, or these bylaws.
26. VICE PRESIDENT: Such Vice Presidents, in the order designated
by the Board of Directors from time to time, shall exercise all of
the functions of the President during the absence or incapacity of
the latter.
27. SECRETARY: The Secretary shall be the ex-officio clerk of the
Board of Directors and shall give, or cause to be given, notices of
all meetings of stockholders and directors, and all other notices
required by law or by these by-laws. The Secretary shall record
the proceedings of the meetings of the stockholders and directors
in a book kept for that purpose and shall keep the seal of the
Corporation and attach it to all documents requiring such
impression unless some other officer is designated to do so by the
Board of Directors. The Secretary shall also perform such other
duties as may be assigned by the Board of Directors.
28. ASSISTANT SECRETARY: There may be one or more Assistant
Secretaries who shall exercise all of the functions of the
Secretary during the absence or incapacity of the latter and such
other duties as may be assigned from time to time by the Board of
Directors.
29. TREASURER: The Treasurer shall keep or cause to be kept full
and accurate books of account, and may make and sign deeds,
mortgages, deeds of trust, notes, leases, contracts and agreements
in the name and on behalf of the Corporation. Whenever required by
the Board of Directors or the President, the Treasurer shall render
a financial statement showing all transactions of the Treasurer and
the financial condition of the Corporation.
30. OTHER OFFICERS: There may be one or more Assistant Vice
Presidents, Assistant Treasurers, Controller or Assistant
Controllers, who shall perform such duties as may be assigned from
time to time by the Board of Directors.
31. COMPENSATION: The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.
RECORDS
32. FORM OF STOCK CERTIFICATE: The certificates of stock of the
Corporation shall be numbered and entered in the books of the
Corporation as they are issued. They shall be signed manually or
by the use of a facsimile signature, by the Chairman of the Board,
by the President or a Vice President designated by the Board of
Directors and countersigned by the Secretary or an Assistant
Secretary. They shall bear the corporate seal or a facsimile
thereof. The Board of Directors of the Corporation may issue scrip
in registered or bearer form, which shall entitle the holder to
receive a certificate for a full share. Scrip shall not entitle
the holder to exercise voting rights or to receive dividends
thereon or to participate in any of the assets of the Corporation
in the event of liquidation. The Board may cause scrip to be
issued subject to the condition that it shall become void if not
exchanged for certificates representing full shares before a
specified date or subject to any other conditions that it may deem
advisable. No fractional shares shall be issued.
33. LOST CERTIFICATES: The President or Secretary may direct a
new certificate or certificates to be issued in place of any lost
or destroyed certificate or certificates previously issued by the
Corporation if the person or persons who claim the certificate or
certificates make an affidavit stating the certificates of stock
have been lost or destroyed. When authorizing the issuance of a
new certificate or certificates, the Corporation may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or
certificates, or the legal representative, to advertise the same in
such manner as the Corporation shall require and/or to give the
Corporation a bond, in such sum as the Corporation may direct, to
indemnify the Corporation with respect to the certificate or
certificates alleged to have been lost or destroyed.
34. TRANSFER OF STOCK: Upon surrender to the Corporation, or to
the Transfer Agent of the Corporation, if any, of a certificate for
shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the Corporation
shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its
books.
35. REGISTERED STOCKHOLDERS: The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the
owner thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on
the part of any other person. The Corporation shall not be liable
for registering any transfer of shares which are registered in the
name of a fiduciary unless done with actual knowledge of facts
which would cause the Corporation's action in registering the
transfer to amount to bad faith.
OTHER MATTERS
36. NOTICES: Each stockholder, director and officer shall furnish
in writing to the Secretary of the Corporation the address to which
notices of every kind may be delivered or mailed. If such person
fails to furnish an address, and the Post Office advises the
Corporation that the address furnished is no longer the correct
address, the Corporation shall not be required to deliver or mail
any notice to such person. Whenever notice is required by
applicable law, the Articles of Incorporation or these by-laws, a
written waiver of such notice signed before or after the time
stated in the waiver or, in the case of a meeting, the attendance
of a stockholder or director (except for the sole purpose of
objecting) or, in the case of a unanimous consent, the signing of
the consent, shall be deemed a waiver of notice.
37. REGISTERED OFFICE AND AGENT: The Corporation shall at all
times have a registered office and a registered agent.
38. CORPORATE RECORDS: The Corporation shall keep correct and
complete books and records of accounts and minutes of the
stockholders' and directors' meetings, and shall keep at its
registered office or principal place of business, or at the office
of its transfer agent, if any, a record of its stockholders,
including the names and addresses of all stockholders and the
number, class, and series of the shares held by each. Any person
who shall have been a stockholder of record for at least six months
immediately preceding demand, or who shall be the holder of record
of at least five percent (5%) of all the outstanding shares of the
Corporation, upon written request stating the purpose therefor,
shall have the right to examine, in person or by agent or attorney,
at any reasonable time or times, for any proper purpose, the books
and records of account of the Corporation, minutes and record of
stockholders, and to make copies or extracts therefrom.
39. REQUEST FOR FINANCIAL STATEMENT: Upon the written request of
any stockholder, the Corporation shall mail to the stockholder its
most recent published financial statement.
40. VOTING STOCK IN OTHER CORPORATIONS: Unless otherwise provided
by the Board of Directors, the President, in the name and on behalf
of the Corporation, may appoint from time to time himself or any
other person (or persons) proxy, attorney or agent for the
Corporation to cast the votes which the Corporation may be entitled
to cast as a stockholder or otherwise in any other corporation,
domestic or foreign, whose stock or securities are held by the
Corporation, or to consent in writing to any action by such other
corporation, or to exercise any or all other powers of this
Corporation as the holder of the stock or other securities of such
other corporation. The President may instruct the person or
persons so appointed as to the manner of casting such votes or
giving such consent and may execute or cause to be executed on
behalf of the Corporation and under its corporate seal such written
proxies, consents, waivers, or other instruments as may be deemed
necessary or proper. The President may attend any meeting of the
holders of stock or other securities of any such other corporation
and vote or exercise any or all other powers of this corporation as
the holder of the stock or other securities of such other
corporation.
41. SEAL: The seal of the Corporation shall be a flat faced
circular die containing the word "SEAL" in the center and the name
of the Corporation around the circumference.
42. AMENDMENT OF BY-LAWS: The power to alter, amend or repeal the
by-laws or adopt new by-laws shall be vested in the Board of
Directors unless otherwise provided in the Articles of
Incorporation. By-laws adopted by the Board of Directors may be
repealed or changed or new by-laws adopted by the stockholders, and
the stockholders may prescribe that any by-law adopted by them may
not be altered, amended or repealed by the Board of Directors.
43. FISCAL YEAR: The fiscal year of the Corporation shall end on
the last day of February in each year.
44. GENERAL: Any matters not specifically covered by these by-
laws shall be governed by the applicable provisions of the Code of
Virginia in force at the time.
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