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, 1995
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, 1995
Common Stock, par value $0.50 97,234,034 Shares
An Index is included on Page 2 and a separate Index for Exhibits is
included on Page 11.
<PAGE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
INDEX
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
August 31, 1995 and February 28, 1995 3
Consolidated Statements of Earnings -
Three Months and Six Months Ended
August 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Six Months Ended August 31, 1995 and 1994 5
Note to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands except share data)
Aug. 31, 1995 Feb. 28, 1995
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 46,589 $ 46,962
Net accounts and notes receivable 424,924 264,565
Merchandise inventory 1,286,685 1,035,776
Deferred income taxes 21,966 25,696
Prepaid expenses and other current
assets 24,658 14,162
Total current assets 1,804,822 1,387,161
Property and equipment, net 715,553 592,956
Deferred income taxes 832 5,947
Other assets 21,127 17,991
TOTAL ASSETS $2,542,334 $2,004,055
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 2,353 $ 2,378
Accounts payable 716,718 576,578
Short-term debt 260,000 0
Accrued expenses and other current
liabilities 97,395 113,631
Accrued income taxes 9,971 13,533
Total current liabilities 1,086,437 706,120
Long-term debt, excluding current
installments 299,652 178,605
Deferred revenue and other liabilities 210,854 241,866
TOTAL LIABILITIES 1,596,943 1,126,591
Stockholders' equity:
Common stock, $0.50 par value 48,577 48,238
Capital in excess of par value 79,692 72,639
Retained earnings 817,122 756,587
TOTAL STOCKHOLDERS' EQUITY 945,391 877,464
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,542,334 $2,004,055
See accompanying note to consolidated financial statements.
<PAGE>
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,
1995 1994 1995 1994
Net sales and operating
revenues $1,600,805 $1,218,572 $2,992,463 $2,267,267
Cost of sales, buying
and warehousing 1,232,513 908,955 2,304,285 1,693,973
Gross profit 368,292 309,617 688,178 573,294
Selling, general and
administrative expenses 298,158 250,985 574,808 482,811
Interest expense 4,174 942 8,017 1,295
Total expenses 302,332 251,927 582,825 484,106
Earnings before income
taxes 65,960 57,690 105,353 89,188
Provision for income
taxes 24,714 21,635 39,489 33,445
Net earnings $ 41,246 $ 36,055 $ 65,864 $ 55,743
Weighted average common
shares and common
share equivalents 98,814 97,513 98,672 97,418
Net earnings per share $ 0.42 $ 0.37 $ 0.67 $ 0.57
Dividends paid per
common share $ 0.03 $ 0.025 $ 0.055 $ 0.045
See accompanying note to consolidated financial statements.
<PAGE>
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Six Months Ended
August 31,
1995 1994
Operating Activities:
Net earnings $ 65,864 $ 55,743
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization 38,296 32,358
Loss on sales of property and equipment 2,732 1,613
Provision for deferred income taxes 8,845 (2,581)
Decrease in deferred revenue and other
liabilities (31,012) (25,692)
Increase in net accounts and notes
receivable (160,359) (23,483)
Increase in merchandise inventory,
prepaid expenses and other current
assets (261,405) (195,655)
Increase in other assets (3,136) (552)
Increase in accounts payable, accrued
expenses and other current liabilities,
and accrued income taxes 120,342 129,198
Net cash used in operating activities (219,833) (29,051)
Investing Activities:
Purchases of property and equipment (245,409) (146,677)
Proceeds from sales of property and equipment 81,784 31,988
Net cash used in investing activities (163,625) (114,689)
Financing Activities:
Proceeds from issuance of short-term debt 260,000 20,000
Proceeds from issuance of long-term debt 122,000 100,000
Principal payments on long-term debt (978) (1,179)
Proceeds from issuance of common stock, net 7,392 1,664
Dividends paid (5,329) (4,332)
Net cash provided by financing activities 383,085 116,153
Decrease in cash and cash equivalents (373) (27,587)
Cash and cash equivalents at beginning of year 46,962 75,194
Cash and cash equivalents at end of period $ 46,589 $ 47,607
See accompanying note to consolidated financial statements.
<PAGE>
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 1995 annual report to
stockholders.
<PAGE>
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 1996 were $1.60 billion, a 31
percent increase from $1.22 billion in the same period last year. The
total sales growth reflects the net addition of 62 Superstores since
last year and a comparable store sales increase of 10 percent during the
second quarter.
For the six months ended August 31, 1995, total sales grew 32 percent to
$2.99 billion from $2.27 billion in the same period last year.
Comparable store sales increases for the second quarter and the first
six months of fiscal years 1996 and 1995 were as follows:
<TABLE>
FY '96 2nd Quarter Six Months
JUN JUL AUG FY '96 FY '95 FY '96 FY '95
<S> <C> <C> <C> <C> <C> <C>
8% 12% 9% 10% 14% 10% 13%
</TABLE>
Comparable store sales increases continue to be driven by the rapidly
growing home office category. Management believes that total and
comparable store sales growth reflects a strong competitive position in
a softer retail climate.
During the second quarter, the Company opened 15 new Superstores. The
openings included the Company's first two Superstores in Denver, Colo.,
and its first Superstores in Bloomington and Springfield, Ill.; Midland,
College Station and Waco, Texas; Winchester, Va.; and Jacksonville, N.C.
The Company added three stores in Seattle, Wash., and one each in
Portland, Ore.; and in San Antonio and Houston, Texas. During the
quarter, the Company also replaced one store in Miami, Fla., and another
in Palm Springs, Calif., with its largest Superstore format.
The Company plans to open approximately 65 Superstores in fiscal 1996 in
new and existing markets. In addition, the Company plans to replace
approximately 14 stores with its newest and largest format, the "D"
Superstore.
<PAGE>
The table below details Circuit City retail units:
<TABLE>
Stores Open At End of Quarter Estimate
Aug. 31, 1995 Aug. 31, 1994 Feb. 29, 1996 Feb. 28, 1995
Superstore
<S> <C> <C> <C> <C>
"D" Superstore 29 - 61 12
"C" Superstore 260 236 259 257
"B" Superstore 39 33 45 37
"A" Superstore 7 4 11 6
Electronics-Only 5 5 5 5
Mall Store 32 32 37 35
TOTAL 372 310 418 352
</TABLE>
With the addition of a second Atlanta, Ga., location, the Company
also expanded the test of CarMax, a retail Superstore format selling
late-model used cars, to four Superstores.
For the Company's Circuit City operations, gross dollar sales from all
extended warranty programs rose to 6.0 percent of sales in the second
quarter of fiscal year 1996 from 5.9 percent in the same period last
year. Third-party warranty revenue was 3.0 percent of sales in this
year's second quarter versus 2.7 percent in the same period last year.
The total extended warranty revenue that is reported in total sales was
5.4 percent of sales in this year's second quarter versus 6.2 percent
in the second quarter of last year.
Total sales by merchandise categories are listed below:
<TABLE>
2nd Quarter Six Months
Fiscal 1996 Fiscal 1995 Fiscal 1996 Fiscal 1995
<S> <C> <C> <C> <C>
TV 16% 18% 16% 18%
VCR/Camcorders 13 15 14 15
Audio 17 20 18 21
Home Office 24 16 24 16
Appliances 18 20 17 19
Other * 12 11 11 11
TOTAL 100% 100% 100% 100%
</TABLE>
*Includes such products as telephones, portable radios, portable tape
players and entertainment software.
<PAGE>
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 25.4 percent in
the second quarter of last year to 23.0 percent in the second quarter of
fiscal 1996. The gross margins for the six-month periods ended August
31, 1995 and 1994, were 23.0 and 25.3 percent, respectively.
The lower margins reflect more intense competition, a higher percentage
of personal computer and music software sales and additional CarMax
sales. Management expects that during the second half of fiscal 1996
these factors will continue to lower margins on a year-over-year basis.
Selling, General and Administrative Expenses
The Company's selling, general and administrative expense ratio improved
from 20.6 percent in the second quarter of last year to 18.6 percent for
the same period this year. For the six-month period ended August 31,
1995, the expense ratio was 19.2 percent versus 21.3 percent in the
same period last year.
The Company expects that sales growth, leverage from store additions in
existing markets, an ongoing focus on productivity, and the lower expense
structure for CarMax will continue to produce improvements in the SG&A
ratio during the second half of the fiscal year.
Interest Expense
Interest expense increased to 0.3 percent of sales in both the second
quarter and first six months of fiscal 1996 from 0.1 percent in the same
periods of fiscal 1995. The increase reflects higher interest rates and
borrowing levels resulting from the Company's growth.
Income Taxes
The effective income tax rate was 37.5 percent in the second quarter and
first six months of both fiscal years 1996 and 1995. The Company does not
expect a change in the effective income tax rate for the remainder of
fiscal 1996.
<PAGE>
Net Earnings
Net earnings for the quarter ended August 31, 1995, were $41.2 million, an
increase of 14 percent from $36.1 million in the same period last year.
Net earnings per share rose 14 percent to 42 cents from 37 cents.
Net earnings for the six months ended August 31, 1995, were $65.9 million,
an increase of 18 percent from $55.7 million in the same period last year.
Net earnings per share rose 18 percent to 67 cents from 57 cents.
The Company expects to continue its trend of earnings growth for fiscal
1996.
Liquidity and Capital Resources
Total assets at August 31, 1995, were $2,542.3 million, up $538.3 million
or 27 percent since February 28, 1995. The largest contributor to the
asset growth was a $250.9 million inventory increase to support expected
higher seasonal sales volume and new store openings. Property and
equipment has increased by $122.6 million since the end of fiscal 1995.
This net increase is due largely to the planned and completed store
openings. Net accounts and notes receivable have increased $160.4 million
since February 28, 1995, primarily due to an increase in credit card
accounts generated by the Company's credit card bank subsidiary.
Accounts payable has increased $140.1 million and short-term debt has
increased $260.0 million since the end of fiscal 1995 to support the
purchase of inventory, the increase in credit card receivables and new
store expansion.
Long-term debt has increased $121.0 million since the end of fiscal 1995
due to the $175 million senior unsecured term loan agreement entered into
in the first quarter of fiscal year 1996. At February 28, 1995, the
Company classified $53 million in short-term debt as long term in
anticipation of this transaction.
The Company's credit card bank subsidiary has a master trust securitization
facility for its private-label credit card that allows the transfer of up
to $1,060 million in receivables through private placement and the public
market. The master trust vehicle permits further expansion of the
securitization program to meet future needs. In addition, the Company's
credit card bank subsidiary has an asset securitization program that allows
the transfer of up to $700 million in receivables related to its other bank
card programs. For the Company's used car business, an asset securitization
program allows the transfer of up to $75 million in auto loan receivables.
<PAGE>
The Company expects to continue its existing long-term capitalization
strategy during fiscal 1996. 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 long-term debt agreement and that
securitization transactions will be used to finance the growth in credit
card and auto loan receivables. At August 31, 1995, the Company
maintained a multi-year, $100 million unsecured revolving bank credit
facility and $270 million in seasonal lines that are renewed annually
with various banks.
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 15, 1995.
(4) $100,000,000 amended and restated revolving credit
agreement dated June 30, 1995, between the Company,
the banks listed therein and Signet Bank/Virginia as
administrative 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, 1995.
<PAGE>
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 of the Board,
President and Chief
Executive Officer
By: s/Michael T. Chalifoux
Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer
and Corporate Secretary
By: s/Keith D. Browning
Keith D. Browning
Vice President, Corporate
Controller and Chief
Accounting Officer
October 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1996
<PERIOD-END> AUG-31-1995
<CASH> 46,589
<SECURITIES> 0
<RECEIVABLES> 424,924
<ALLOWANCES> 0
<INVENTORY> 1,286,685
<CURRENT-ASSETS> 1,804,822
<PP&E> 1,006,795
<DEPRECIATION> 291,242
<TOTAL-ASSETS> 2,542,334
<CURRENT-LIABILITIES> 1,086,437
<BONDS> 299,652
<COMMON> 48,577
0
0
<OTHER-SE> 896,814
<TOTAL-LIABILITY-AND-EQUITY> 2,542,334
<SALES> 2,992,463
<TOTAL-REVENUES> 2,992,463
<CGS> 2,304,285
<TOTAL-COSTS> 2,304,285
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,017
<INCOME-PRETAX> 105,353
<INCOME-TAX> 39,489
<INCOME-CONTINUING> 65,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,864
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
CIRCUIT CITY STORES, INC.
B Y - L A W S
As Amended and Restated as of August 15, 1995
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
<PAGE>
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 ten (10).
Except as provided in Section 12(b), directors shall be elected at the
annual meeting of stockholders or at a special meeting of the
stockholders called for such a purpose. The number of directors 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
<PAGE>
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,
<PAGE>
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 may 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.
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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.
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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 outside
directors. The functions of this Committee shall include the following:
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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 Treasurer, 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
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
