<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 2, 1999
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: 33-47101
---------
U.S. INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 22-3568449
incorporation or organization) (I.R.S.Employer Identification No.)
101 WOOD AVENUE SOUTH
ISELIN, NJ 08830
(Address of principal executive offices)
(732) 767-0700
(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 / /
As of February 1, 1999, U.S. Industries, Inc. had one class of common stock,
of which 98,697,717 shares were outstanding.
<PAGE>
U.S. INDUSTRIES, INC.
INDEX
Page
No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Operations
for the Three Months Ended December 31, 1998 and 1997 1
Consolidated Balance Sheets, December 31, 1998
and September 30, 1998 2
Consolidated Statements of Cash Flows
for the Three Months Ended December 31, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
<PAGE>
PART I. FLNANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS
U.S. INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 796 $ 744
Operating costs and expenses:
Cost of products sold 556 511
Selling, general and administrative expenses 185 163
-------- --------
Operating income 55 70
Interest expense 18 16
Interest income (1) (2)
-------- --------
Income before income taxes and discontinued operations 38 56
Provision for income taxes 15 24
-------- --------
Income from continuing operations 23 32
Loss from discontinued operations, net of tax - (1)
-------- --------
Net Income $ 23 $ 31
======== ========
Earnings (loss) per basic share:
Income from continuing operations $ 0.24 $ 0.34
Loss from discontinued operations - (0.01)
-------- --------
Net income $ 0.24 $ 0.33
======== ========
Earnings (loss) per diluted share:
Income from continuing operations $ 0.23 $ 0.33
Loss from discontinued operations - (0.01)
-------- --------
Net income $ 0.23 $ 0.32
======== ========
Cash dividend declared per share $ 0.05 $ 0.05
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
U.S. INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
-------- --------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 51 $ 44
Trade receivables, net 562 652
Inventories 606 589
Deferred income taxes 81 81
Other current assets 77 77
-------- --------
Total current assets 1,377 1,443
Property, plant and equipment, net 539 538
Deferred income taxes 14 14
Other assets 219 222
Goodwill, net 588 595
-------- --------
$ 2,737 $ 2,812
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 13 $ 15
Current maturities of long-term debt 4 4
Trade accounts payable 204 264
Accrued expenses and other liabilities 274 313
Income taxes payable 54 40
-------- --------
Total current liabilities 549 636
Long-term debt 938 947
Other liabilities 273 269
-------- --------
Total liabilities 1,760 1,852
Commitments and contingencies
Stockholders' equity 977 960
-------- --------
$ 2,737 $ 2,812
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
U.S. INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS-UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Income from continuing operations $ 23 $ 32
Adjustments to reconcile income from continuing operations to net cash
provided by operating activities of continuing operations:
Depreciation and amortization 26 24
Provision for doubtful accounts 1 1
Gain on sale of excess real estate - (3)
Changes in operating assets and liabilities,
excluding the effects of acquisitions and dispositions (10) (25)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS 40 29
-------- --------
Loss from discontinued operations - (1)
Increase in net assets held for disposition - (34)
-------- --------
NET CASH USED IN DISCONTINUED OPERATIONS - (35)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 40 (6)
-------- --------
INVESTING ACTIVITIES:
Proceeds from sale of net assets held for disposition - 10
Acquisition of companies, net of cash acquired - (34)
Purchases of property, plant and equipment (25) (24)
Proceeds from sale of excess real estate - 6
Proceeds from sales of property, plant and equipment 2 10
Other investing activities 4 4
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (19) (28)
-------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt 466 332
Repayment of long-term debt (473) (275)
Repayment of notes payable, net (1) (4)
Payment of dividends (5) (5)
Proceeds from exercise of stock options - 2
Purchase of treasury stock - (20)
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (13) 30
-------- --------
Effect of exchange rate changes on cash (1) (2)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7 (6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 44 67
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51 $ 61
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-BASIS OF PRESENTATION
In June of 1998, U.S. Industries, Inc. ("USI") merged with Zurn
Industries, Inc. ("Zurn"), hereafter collectively referred to as the Company, in
a transaction accounted for as a pooling of interest. Accordingly, all periods
are presented as if USI and Zurn had always been combined. The Company
manufactures and distributes a broad range of consumer and industrial products.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information,
Article 10 of Regulation S-X and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The interim financial data for the three months ended December 31, 1998 and 1997
are unaudited and, in the opinion of management, reflect all necessary
adjustments for a fair presentation of the financial position and results of
operations for the interim periods on a consistent basis. Such adjustments were
of a normal and recurring nature. The results of operations for the three months
period ended December 31, 1998 are not necessarily indicative of those for the
full fiscal year ending October 2, 1999. For further information, refer to the
Consolidated Financial Statements and footnotes thereto included in the USI
Annual Report on Form 10-K for the year ended September 30, 1998.
The Company's fiscal year ends on the Saturday nearest to September 30.
All three month data contained herein reflect results of operations for the
13-week period and 14-week period ended on the Saturday closest to December 31,
1998 and 1997, respectively, but are presented as of such date for convenience.
NOTE 2-INVENTORIES
Inventories consist of the following:
(IN MILLIONS)
DECEMBER 31, SEPTEMBER 30,
1998 1998
---------- ----------
(UNAUDITED)
Finished products $ 314 $ 295
Work-in process 102 111
Raw materials 190 183
---------- ----------
$ 606 $ 589
========== ==========
4
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 3-LONG-TERM DEBT
Long-term debt consists of the following:
(IN MILLIONS)
DECEMBER 31, SEPTEMBER 30,
1998 1998
---------- ----------
(UNAUDITED)
7.125% Senior Notes, net $ 247 $ -
7.25% Senior Notes, net 123 123
Revolving credit facility,
US dollar 350 300
Revolving credit facility,
foreign currencies 153 156
Short-term committed note 17 200
Other long-term debt 52 172
---------- ----------
942 951
Less current maturities (4) (4)
---------- ----------
Long-term debt $ 938 $ 947
========== ==========
In October 1998, USI and USI American Holdings, Inc. ("USIAH"), a
wholly owned subsidiary, jointly issued $250 million aggregate principal amount
of Senior Notes due October 15, 2003, which bear interest at 7.125%, payable
semiannualy (the "7.125% Notes"). The net cash proceeds of $247 million, after
transaction fees and discounts, were used to repay a $200 million short-term
note and $47 million in borrowings under uncommitted bank credit lines. In
January 1999, the Company filed a registration statement with the Securities and
Exchange Commission to exchange the 7.125% Notes, which were not registered
under the Securities Act of 1933, for registered notes having substantially the
same terms.
The 7.25% Notes and the 7.125% Notes (collectively, the Notes) and
revolving credit facility are unsecured and guaranteed by USI Atlantic (see Note
9). The Notes are redeemable at the option of the Company.
NOTE 4-COMMITMENTS AND CONTINGENCIES
The Company is subject to a wide range of environmental protection
laws. The Company has remedial and investigatory activities underway at
approximately 36 sites. In addition, the Company has been named as a Potentially
Responsible Party ("PRP") at 19 "Superfund" sites pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or comparable
statutes.
It is often difficult to estimate the future impact of environmental
matters, including potential liabilities. The Company accrues for losses
associated with environmental remediation obligations when such losses are
probable and reasonably estimable. This practice is followed whether the claims
are asserted or unasserted. Reserves for estimated losses from environmental
remediation are, depending on the site, based primarily upon internal or third
party environmental studies, and estimates as to the number, participation level
and financial viability of any other PRP's, to the extent of contamination and
the nature of required remedial actions. Such reserves are adjusted as further
information develops or circumstances
5
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 4-COMMITMENTS AND CONTINGENCIES (CONTINUED)
change. Costs of future expenditures for environmental remediation obligations
are not discounted to their present fair value. Recoveries of environmental
remediation costs from other parties are recognized as assets when their receipt
is deemed probable. Management expects that the amount accrued will be paid out
over the periods of remediation for the applicable sites which range up to 30
years and that all such reserves are adequate based on all current data. Each of
the sites in question is at various stages of investigation or remediation;
however, no information currently available reasonably suggests that projected
expenditures associated with remedial action or compliance with environmental
laws, for any single site or for all sites in the aggregate, will have a
material adverse affect on the Company's financial condition, results of
operations or cash flows.
At December 31, 1998, the Company had accrued $19 million for known
environmental related matters. The Company believes that the range of liability
for such matters is between $9 million and $27 million.
In the normal course of business, financial and performance guarantees
are made in connection with engineering and construction contracts and a
liability is recognized when a probable loss occurs.
Also, certain of the Company's subsidiaries are defendants or
plaintiffs in lawsuits that have arisen in the normal course of business. While
certain of these matters involve substantial amounts, it is management's
opinion, based on the advice of counsel, that the ultimate resolution of such
litigation will not have a material adverse effect on the Company's financial
condition, results of operations or cash flows.
NOTE 5-COMPREHENSIVE INCOME
In the quarter ended December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in the financial statements. Reclassification of
financial statements for prior periods is required. Comprehensive income is net
income and other items, which may include foreign currency translation
adjustments, minimum pension liability adjustments, and unrealized gains and
losses on marketable securities classified as available-for-sale. The Company's
total comprehensive income was as follows:
(IN MILLIONS - UNAUDITED)
FOR THE THREE MONTHS
ENDED DECEMBER 31,
1998 1997
------ ------
Net income $ 23 $ 31
Foreign currency translation adjustment (2) (3)
------ ------
Total comprehensive income $ 21 $ 28
====== ======
6
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 6-EARNINGS PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share calculation:
<TABLE>
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE) (IN MILLIONS EXCEPT PER SHARE)
(UNAUDITED) (UNAUDITED)
INCOME FROM PER INCOME FROM PER
CONTINUING SHARE CONTINUING SHARE
OPERATIONS SHARES AMOUNT OPERATIONS SHARES AMOUNT
---------- ------ ------ ---------- ------ ------
(FOR THE THREE MONTHS ENDED (FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998) DECEMBER 31, 1997)
----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings per basic share $ 23 96.6 $ 0.24 $ 32 92.8 $ 0.34
Effect of dilutive securities
Stock options .7 1.7
Nonvested restricted stock .7 1.6
---- ---- ------ ---- ---- ------
Earnings per diluted share $ 23 98.0 $ 0.23 $ 32 96.1 $ 0.33
==== ==== ====== ==== ==== ======
</TABLE>
Diluted common shares include shares that would be outstanding assuming the
fulfillment of conditions that would remove the restriction on nonvested
shares and the exercise of stock options. Options to purchase 1,900,131
shares in the three months ended December 31, 1998 and options to purchase
32,100 shares in the three months ended December 31, 1997 were not included
in the computation of earnings per share because the options exercise prices
were greater than the average market price of the common shares.
NOTE 7-RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted beginning in fiscal 2000. The statement will require
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
items is recognized in earnings. Management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or
the financial position of the Company.
NOTE 8-SUBSEQUENT EVENTS
In February of 1999, the Company signed a non-binding letter of intent
relating to the sale of its toy business. The sale, which is subject to final
due diligence, completion of a definitive purchase agreement, regulatory
approval and other closing conditions, is expected to close by April of 1999.
7
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 8-SUBSEQUENT EVENTS (CONTINUED)
In January of 1999, the Company entered into a definitive agreement to sell the
remaining interest in its Power Systems Segment. The transaction is expected to
close during the second fiscal quarter of 1999.
In February of 1999, the Company reached an agreement with Huffy Corporation,
Inc. to acquire the assets of True Temper Hardware Company for $100 million in
cash. The transaction is subject to post-closing adjustments as well as
customary regulatory review and is expected to be completed in March.
NOTE 9-SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
The following represents the supplemental consolidating condensed
financial statements of USI and USIAH which are the jointly obligated issuers of
the Notes, and USI Atlantic, which is the guarantor of the Notes, and their
non-guarantor subsidiaries, as of December 31, 1998 and September 30, 1998 and
for three months ended December 31, 1998 and 1997. USI Atlantic was the parent
company prior to the Merger in 1998 (see Note 1).
<TABLE>
<CAPTION>
(IN MILLIONS - UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
-------------------------------------------------------------------------
USI NONGUARANTOR
USI ATLANTIC USIAH SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ - $ - $ - $ 796 $ $ 796
Operating costs and expenses:
Cost of products sold - - - 556 556
Selling, general and
administrative expenses 5 - - 180 185
------------------------------------------------------------------------
Operating income (Loss) (5) - 60 55
Interest expense 6 - 9 3 18
Interest income - - - (1) (1)
Intercompany interest, net (3) (13) 16 -
Equity in earnings of investees, net (28) (20) (17) - 65 -
------------------------------------------------------------------------
Income before income taxes 20 20 21 42 (65) 38
Provision for income taxes (3) - 1 17 15
------------------------------------------------------------------------
Net income $ 23 $ 20 $ 20 $ 25 $ (65) $ 23
========================================================================
</TABLE>
8
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 9-SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(IN MILLIONS - UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
USI NONGUARANTOR
ATLANTIC USIAH SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $ - $ 744 $ $ 744
Operating costs and expenses:
Cost of products sold - - 511 511
Selling, general and
administrative expenses 1 6 156 163
-----------------------------------------------------------------------
Operating income (Loss) (1) (6) 77 70
Interest expense - 10 6 16
Interest income - - (2) (2)
Intercompany interest, net - (15) 15 -
Equity in earnings of investees, net (32) (25) - 57 -
-----------------------------------------------------------------------
Income before income taxes and
discontinued operations 31 24 58 (57) 56
Provision for income taxes - - 24 24
-----------------------------------------------------------------------
Income from continuing operations 31 24 34 (57) 32
Loss from discontinued operations,
net of tax - - (1) (1)
-----------------------------------------------------------------------
Net income $ 31 $ 24 $ 33 $ (57) $ 31
=======================================================================
</TABLE>
9
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 9-SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(IN MILLIONS - UNAUDITED)
AT DECEMBER 31, 1998
-------------------------------------------------------------------------------
USI NONGUARANTOR
USI ATLANTIC USIAH SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ - $ - $ 51 $ $ 51
Trade receivables, net - - - 562 562
Inventories - - - 606 606
Deferred income taxes 45 - - 36 81
Other current assets 3 - - 74 77
-------------------------------------------------------------------------------
Total current assets 48 - - 1,329 - 1,377
Property, plant and equipment, net - - - 539 539
Deferred income taxes 8 - - 6 14
Other assets - - - 219 219
Goodwill, net - - - 588 588
Investments in subsidiaries 1,074 805 1,291 - (3,170) -
Intercompany receivable (payable), net 217 32 186 (435) -
-------------------------------------------------------------------------------
Total assets $1,347 $ 837 $1,477 $2,246 $(3,170) $2,737
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ - $ - $ 13 $ $ 13
Current maturities of long-term debt - - - 4 4
Trade accounts payable 1 - - 203 204
Accrued expenses and other liabilities 8 - 26 240 274
Income taxes payable 47 - 7 54
-------------------------------------------------------------------------------
Total current liabilities 56 26 467 549
Long-term debt 314 - 576 48 938
Other liabilities - - 70 203 273
-------------------------------------------------------------------------------
Total liabilities 370 672 718 1,760
Stockholders' equity 977 837 805 1,528 (3,170) 977
-------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 1,347 $ 837 $1,477 $2,246 $(3,170) $2,737
===============================================================================
</TABLE>
10
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 9-SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(IN MILLIONS)
AT SEPTEMBER 31, 1998
------------------------------------------------------------------------------
USI NONGUARANTOR
USI ATLANTIC USIAH SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ - $ - $ 44 $ $ 44
Trade receivables, net - - - 652 652
Inventories - - - 589 589
Deferred income taxes 45 - - 36 81
Other current assets - - 11 66 77
------------------------------------------------------------------------------
Total current assets 45 - 11 1,387 - 1,443
Property, plant and equipment, net - - - 538 538
Deferred income taxes 8 - - 6 14
Other assets - - 7 215 222
Goodwill, net - - - 595 595
Investments in subsidiaries 996 745 1,221 - (2,962) -
Intercompany receivable (payable), net (51) 277 245 (471) -
------------------------------------------------------------------------------
Total assets $ 998 $1,022 $1,484 $2,270 $(2,962) $2,812
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ - $ - $ 15 $ $ 15
Current maturities of long-term debt - - - 4 4
Trade accounts payable - 2 - 262 264
Accrued expenses and other liabilities 5 6 43 259 313
Income taxes payable 33 - - 7 40
------------------------------------------------------------------------------
Total current liabilities 38 8 43 547 - 636
Long-term debt - 270 629 48 947
Other liabilities - - 67 202 269
------------------------------------------------------------------------------
Total liabilities 38 278 739 797 - 1,852
Stockholders' equity 960 744 745 1,473 (2,962) 960
------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $ 998 $1,022 $1,484 $2,270 $(2,962) $2,812
==============================================================================
</TABLE>
11
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 9-SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(IN MILLIONS - UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
--------------------------------------------------------------------------
USI NONGUARANTOR
USI ATLANTIC USIAH SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 10 $ (8) $ 7 $ 31 $ - $ 40
INVESTING ACTIVITIES:
Acquisition of companies, net of cash - - - - -
acquired
Purchases of property, plant and equipment - - - (25) (25)
Proceeds from sale of excess real estate - - - - -
Proceeds from sales of property, plant and - - - 2 2
equipment
Net transfers with subsidiaries (49) - 6 - 43 -
Other investing activities - - - 4 4
--------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (49) - 6 (19) 43 (19)
FINANCING ACTIVITIES:
Proceeds from long-term debt 430 - 36 - 466
Repayment of long-term debt (386) - (87) - (473)
Repayment of notes payable, net - - - (1) (1)
Payment of dividends (5) - - - (5)
Proceeds from exercise of stock options - - - - -
Purchase of treasury stock - - - - -
Net transfers with parent - 8 41 (6) (43) -
--------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES 39 8 (10) (7) (43) (13)
Effect of exchange rate changes on cash - - (3) 2 (1)
INCREASE IN CASH AND CASH EQUIVALENTS - - - 7 7
Cash and cash equivalents at beginning of
period - - - 44 44
--------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ - $ - $ 51 $ - $ 51
==========================================================================
</TABLE>
12
<PAGE>
U.S. INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
NOTE 9-SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(IN MILLIONS - UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
-----------------------------------------------------------------
USI NONGUARANTOR
ATLANTIC USIAH SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ (7) $ 7 $ (6) - $ (6)
INVESTING ACTIVITIES:
Proceeds from sale of net assets held for - - 10 10
disposition
Acquisition of companies, net of cash - - (34) (34)
acquired
Purchases of property, plant and equipment - - (24) (24)
Proceeds from sale of excess real estate - - 6 6
Proceeds from sales of property, plant and - - 10 10
equipment
Net transfers with subsidiaries 30 (125) - 95 -
Other investing activities - - 4 4
------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 30 (125) (28) 95 (28)
FINANCING ACTIVITIES:
Proceeds from long-term debt - 329 3 332
Repayment of long-term debt - (210) (65) (275)
Repayment of notes payable, net - - (4) (4)
Payment of dividends (5) - - (5)
Proceeds from exercise of stock options 2 - - 2
Purchase of treasury stock (20) - - (20)
Net transfers with parent - (30) 125 (95) -
------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (23) 89 59 (95) 30
Effect of exchange rate changes on cash - (1) (1) (2)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - (30) 24 (6)
Cash and cash equivalents at beginning of
period - 35 32 67
------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 5 $ 56 $ 61
==================================================================
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In June of 1998, U.S. Industries, Inc. ("USI") merged with Zurn
Industries, Inc. ("Zurn"), hereafter collectively referred to as the Company, in
a transaction accounted for as a pooling of interest. Accordingly, all periods
are presented as if USI and Zurn had always been combined. The Company's
operations are grouped into four segments: USI Bath and Plumbing Products,
Lighting Corporation of America, USI Hardware and Tools and USI Diversified. The
results of all operations sold or classified as discontinued, are excluded from
the table below for all periods presented and are discussed separately under
Discontinued Operations.
RESULTS OF OPERATIONS
(IN MILLIONS)
THREE MONTHS ENDED
DECEMBER 31,
1998 1997
-------- --------
NET SALES
Bath and Plumbing Products ........... $ 264 $ 227
Lighting Corporation of America....... 192 189
Hardware and Tools.................... 101 69
Diversified........................... 239 259
-------- --------
TOTAL NET SALES.................... $ 796 $ 744
======== ========
OPERATING INCOME
Bath and Plumbing Products ........... $ 24 $ 24
Lighting Corporation of America ...... 11 12
Hardware and Tools.................... 4 3
Diversified........................... 21 38
-------- --------
60 77
Corporate expenses........................ (5) (7)
-------- --------
TOTAL OPERATING INCOME............. $ 55 $ 70
======== ========
DISCLOSURE CONCERNING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in
the following Management's Discussion or elsewhere in this Quarterly Report are,
or may be deemed to be, forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Such forward-looking statements include, without limitation, the
statements set forth in Outlook, below. Various economic and competitive factors
could cause actual results to differ materially from the expectations reflected
in such forward-looking statements, including factors which are outside the
control of the Company, such as interest rates, foreign currency exchange rates,
instability in domestic and foreign financial markets, consumer spending
patterns, availability of consumer and commercial credit, levels of residential
and commercial construction, levels of automotive production, changes in raw
material costs and Year 2000 issues, along with the other factors noted in this
Report and in
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other documents filed by the Company with the Securities and Exchange
Commission. In addition, the Company's future results are subject to
uncertainties relating to the Company's ability to consummate its business
strategy, including realizing market synergies and cost savings from the
integration of its acquired businesses. All subsequent written and oral
forward-looking statements attributable to the Company are expressly
qualified in their entirety by the foregoing factors.
THREE MONTHS ENDED DECEMBER 31, 1998
COMPARED TO THREE MONTHS ENDED DECEMBER 31, 1997
INTRODUCTION
The Company had sales of $796 million and operating income of $55 million
for the quarter ended December 31, 1998. Sales increased $52 million (6.9%)
and operating income decreased $15 million (21.4%) compared to the first
quarter of fiscal 1998.
The Bath and Plumbing Products Operations had sales of $264 million and
operating income of $24 million for the quarter ended December 31, 1998, a
sales increase of $37 million (16.2%), from the first quarter of fiscal 1998
while operating income remained flat. The increase in sales was primarily
attributable to the first time inclusion of Sundance Spas, acquired in June
1998. Sundance had minimal profit contribution due to normal seasonality.
Increased volume of lower margin products also contributed to the sales
increase while having little impact on operating income. Continued strength
in the European bath operations and improved performance by the North
American HVAC business was offset by reduced contributions from Asia, cost
overruns on certain construction projects, and increased costs and variances
from a model change and plant reconfiguration in the china products business,
competitive market conditions in the European HVAC business and shipping
delays due to system conversion problems at US Brass.
The Lighting Products Operations had sales of $192 million and operating
income of $11 million for the quarter ended December 31, 1998, an increase of
$3 million (1.5%) and a decrease of $1 million (8.3%), respectively. The
sales increase was driven by international commercial business and continued
growth of the domestic residential business. However, the profit contribution
from these businesses did not offset the competitive market conditions and
pricing pressure in the indoor fluorescent and recessed lighting operations
as profits declined modestly from the prior year.
The Hardware and Tools Operations had sales of $101 million and operating
income of $4 million for the quarter ended December 31, 1998, increases of
$32 million (46.3%), and $1 million (33.3%), respectively. The increase in
sales and operating income was primarily the result of a full quarter
inclusion of Spear and Jackson, which was acquired in December 1997, and the
first time inclusion of the metal components business which was acquired in
May 1998, and reduced operating losses at the company's restructured ladder
business. These contributions were largely offset by lower sales and profits
from reduced shipments of winter tools due to decreased snowfall in the
Northeast and Canada in the first quarter, and the inclusion of Hardware and
Tools corporate expenses.
The Diversified Operations had sales of $239 million and operating income
of $21 million for the quarter ended December 31 1998, decreases of $20
million (7.7%) and $17 million (44.7%), respectively. The vacuum cleaner
business experienced lower sales in both the international and domestic
markets, while the toy operations were affected by lower sales in the
European market. Sales at the automotive leather business were lower due to
management's decision to eliminate some low margin business. Results in the
textile operations were lower due to the elimination of the lace product line
in the fourth quarter of the prior fiscal year and lower tricot sales and
margins due to Asian competition. Footwear sales and operating income
decreased due to soft market conditions related to safety shoes and infant
footwear, and the prior year favorable settlement of certain environmental
litigation. The inclusion of the Diversified corporate expenses
15
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had a marginal negative impact on profits. These items were partially offset
by the first time inclusion of the Philips leadframe business acquired in
January 1998.
DISCONTINUED OPERATIONS
For the quarter ended December 31, 1997, the Company recorded operational
losses of $1 million from the Company's outdoor furniture operations.
In January of 1999, the Company entered into a definitive agreement to
sell the remaining interest in its Power Systems Segment. The transaction is
expected to close during the second fiscal quarter of 1999.
Management does not expect discontinued operations to have a material
impact on the future operations or liquidity of the Company.
INTEREST AND TAXES
Interest expense was $18 million for the quarter ended December 31, 1998,
a $2 million (12.5%) increase from the comparable period of fiscal 1998. The
increase is primarily due to higher average level of outstanding debt,
partially offset by a lower average interest rate. Interest income was $1
million for the quarter ended December 31, 1998, a $1 million decrease from
the comparable period of fiscal 1998.
The provision for income taxes on continuing operations was $15 million
for the quarter ended December 31, 1998, on pre-tax income of $38 million (an
effective tax rate of approximately 40%) as compared to a $24 million
provision on pre-tax income of $56 million (an effective tax rate of
approximately 43%) in the comparable period of fiscal 1998. The decrease in
the effective tax rate is attributable to continued tax planning.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources are cash
and cash equivalents, cash provided from operations and available borrowings
under the Company's revolving credit facility.
Cash from operating activities of continuing operations was $40 million
and $29 million for the three months ended December 31, 1998 and 1997,
respectively. The increase in cash flows from continuing operations resulted
from reduced tax payments in the first quarter of fiscal 1999 and the timing
of accounts receivables collection, partially offset by reduced net income
and increased working capital requirements in certain businesses.
Cash used by discontinued operations in the first quarter of fiscal 1998
primarily consists of tax payments in connection with the sale of certain
discontinued operations as well as the seasonal working capital requirements
of the outdoor furniture operations.
Investing activities used net cash of $19 million in the three months
ended December 31, 1998, which primarily consisted of cash used for capital
expenditures. In the three months ended December 31, 1997, the Company used
net cash of $28 million, which included net cash used for the acquisitions of
SiTeco and Spear & Jackson of $34 million and capital expenditures of $24
million, partially offset by the cash proceeds from the sale of Tommy Armour
Golf of $10 million, proceeds from real estate transactions of $6 million and
proceeds from sales of fixed assets of $10 million.
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Financing activities used net cash of $13 million in the three months
ended December 31, 1998. This included repayments of long-term debt and notes
payable in excess of proceeds of $8 million, and dividend payments of $5
million. In the corresponding period of the prior year financing activities
provided net cash of $30 million which included net proceeds under long-term
debt and notes payable in excess of repayments of $53 million, the purchase
of $20 million of the Company's common stock for treasury and dividend
payments of $5 million.
In October 1998, USI and USI American Holdings, Inc. jointly issued
$250 million aggregate principal amount of Senior Notes due October 15, 2003,
which bear interest at 7.125%, payable semiannualy (the "7.125% Notes"). The
net cash proceeds of $247 million, after transaction fees and discounts, were
used to repay a $200 million short-term note and $47 million in borrowings
under uncommitted bank credit lines. In January 1999, the Company filed a
registration statement with the Securities and Exchange Commission to
exchange the 7.125% Notes, which were not registered under the Securities Act
of 1933, for registered notes having substantially the same terms.
During the three months ended December 31, 1998, the Company paid
approximately $6 million, principally severance, related to its restructuring
plan announced in fiscal 1998. There have been no material changes in the
nature or costs of the restructing.
In February 1999, the Board of Directors authorized a share repurchase
program to permit the purchase of up to $100 million of the outstanding stock
of the Company. These purchases may be made at prices deemed acceptable to
management.
MARKET RISK EXPOSURES
The Company, in the normal course of doing business, is exposed to
the risks associated with changes in interest rates and currency exchange
rates. To limit the risks from such fluctuations, the Company enters into
various hedging transactions that have been authorized pursuant to the
Company's policies and procedures and does not engage in such transactions
for trading purposes.
To manage exposure to interest rate movements the Company uses
interest rate protection agreements. Based on the Company's overall exposure
to interest rate changes, a hypothetical change of 100 basis points across
all maturities of the Company's floating rate debt obligations, after
considering interest rate protection agreements, would be immaterial to the
Company's pre-tax earnings in fiscal 1999.
The Company utilized foreign currency-denominated borrowings to
selectively hedge its net investments in subsidiaries in foreign countries.
Such borrowings at December 31, 1998 are denominated in German marks, British
pounds, Dutch guilders and Hong Kong dollars. A 10% change in the relevant
currency exchange rates is estimated to have an impact of $17 million on the
fair value of such borrowings. This quantification of the Company's exposure
to the market risk of foreign exchange sensitive financial instruments is
necessarily limited, as it does not take into account the offsetting impact
of the company's underlying investment exposures.
The Company is also exposed to foreign currency exchange risk
related to its international operations as well as its U.S. businesses which
import or export goods. The Company has made limited use of financial
instruments to manage this risk.
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YEAR 2000 READINESS DISCLOSURE
Many computer systems and other equipment with embedded technology
use only two digits to define the applicable year and may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
failures or miscalculations causing disruptions of normal business activities
and operations (the "Year 2000 issue").
The Company is actively addressing the Year 2000 issue. The
compliance program is led by information technology staff at each operating
company, with assistance from the finance and manufacturing staffs and
outside technology consultants where necessary. Progress is being monitored
by each operating company president and reported to USI management. The
Company uses outside technology consultants to provide independent reviews of
Year 2000 readiness. The independent reviews of Year 2000 readiness by these
consultants is expected to be completed by March 1999.
The Company's Year 2000 efforts focus on three areas: information
technology ("IT") related systems and processes, such as operating systems,
applications and programs; embedded logic ("non-IT") systems and processes,
such as manufacturing machinery, telecommunications equipment and security
devices; and compliance efforts of third parties (such as customers,
suppliers and service providers). Within each of the IT and non-IT areas, the
project spans four phases: assessment of programs and devices to identify
those that are affected by the Year 2000 issue; development of remediation
strategies; testing such strategies; and implementing the solutions. The
third party aspect of the project includes, among other things, obtaining
Year 2000 readiness certifications, obtaining Year 2000 disclosures contained
in SEC filings, and where applicable, testing interfaced systems as well as
having discussions with critical vendors in order to determine and mitigate
the risk to the Company from third parties' failures to satisfactorily
address their Year 2000 issues.
The Company has completed an assessment of its critical IT systems
and, as a result, the operating companies have decided to modify, upgrade or
replace portions of their systems. The remediation efforts achieved
significant progress to date, and remain underway. The Company expects that
the remediation, testing and implementation of all critical IT systems will
be completed by October 1999. The Company is continuing the process of
assessing and remediating critical non-IT systems, as well, and expects that
the assessment, remediation, testing and implementation phases with respect
to such systems will be completed by the fourth quarter of calendar year 1999.
Year 2000 costs for computer equipment, software and outside
consultants incurred through December 31, 1998 are approximately $25 million,
of which $4 million was expensed and $21 million was capitalized. Estimated
future costs to complete the Year 2000 program are $16 million, of which $7
million are expected to be expensed as incurred and the remaining $9 million
are expected to be capitalized. These costs have been, and will continue to
be, funded from operating cash flow and available credit facilities. Most of
the costs are for new systems and improved functionality. These costs include
approximately $5 million of internal payroll costs for employees who are
involved in the Year 2000 program.
The Company is developing contingency plans to address the
possibility of failure by the Company or third parties to complete their Year
2000 initiatives on a timely basis. The Company expects that preliminary
plans will be in place by March 1999, with further refinements anticipated
through the end of calendar year 1999 based on the Company's ongoing
evaluation of its readiness as well as the status of compliance by third
parties. Such contingency plans may include using alternative processes, such
as manual procedures to substitute for non-compliant systems; arranging for
alternate suppliers and service providers; increasing inventory levels; and
developing procedures internally and in conjunction with significant third
parties to address compliance issues as they arise.
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No amount of preparation and testing can guarantee Year 2000
compliance. However, the Company believes it is taking appropriate preventive
measures and will be successful in avoiding any material adverse effect on
the Company's operations or financial condition. Nevertheless, the Company
recognizes that failing to resolve its Year 2000 issues on a timely basis
would, in a worst case scenario, significantly limit its ability to
manufacture and distribute its products and process its daily business
transactions for a period of time, especially if such failure is coupled with
third party or infrastructure failures. Similarly, the ability to conduct
operations without interruption after calendar 1999 may be significantly
affected by the failure of one or more significant suppliers, customers or
components of the infrastructure to conduct their respective operations
without interruption after 1999. Because of the difficulty of assessing the
Year 2000 compliance of such third parties, the Company considers the
potential disruptions caused by such parties to present the most reasonably
likely worst-case scenarios. Adverse effects on the Company could include
business disruption, increased costs, loss of sales and other similar
ramifications.
The costs of the Company's Year 2000 initiatives, the dates on which the
Company believes that it will complete such activities and the Company's
evaluation of third-party effects are estimates and subject to change. Actual
results could differ from those currently anticipated. Factors that could
cause such differences include, but are not limited to, the availability of
key Year 2000 personnel, the Company's ability to respond to unforeseen Year
2000 complications, the readiness of third parties, the accuracy of third
party assurances regarding Year 2000 compliance and similar uncertainties.
OUTLOOK
Assuming the completion of the sale of the Company's toy business and the
continued softness in the Asian and Latin American economies, management
believes that earnings per share from continuing operations for the full year
will be in the range of $1.55 to $1.65.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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PART II. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 (ii) Amended and restated By-Laws of the Company, dated
February 9, 1999.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The company filed a current report on Form 8-K on October 16, 1998,
responsive to item 5 of such form, relating to the distribution of
Preferred Stock Purchase Rights. No financial statements were filed.
20
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. INDUSTRIES, INC.
Date: February 16, 1999
/s/ James O'Leary
--------------------------------
James O'Leary
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Robert P. Noonan
--------------------------------
Robert P. Noonan
Corporate Controller
(Principal Accounting Officer)
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Exhibit 3(ii)
AMENDED AND RESTATED
BY-LAWS
U.S. INDUSTRIES, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. (a) All annual meetings of the Stockholders
for the election of directors shall be held at such place as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting.
(b) Annual meetings of Stockholders shall be held on such date and at such
time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. At the annual meeting, a Board of Directors
shall be elected or, during such time as the Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation") provides for a classified Board
of Directors, that class of directors the term of which shall expire at the
meeting shall be elected and the Stockholders shall transact such other business
as may properly be brought before the meeting.
(c) Written notice of the annual meeting stating the place, date, and hour
of the meeting shall be given to each Stockholder entitled to vote at such
meeting not less than ten days nor more than sixty days prior to the date of the
meeting. A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting in person or by proxy
shall constitute a waiver of notice of such meeting, except when the person
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
(d) The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of Stockholders,
a complete list of the Stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each Stockholder and the number
of shares registered in the name of each Stockholder. Such list shall be open
to the examination of any Stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either
<PAGE>
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any Stockholder who is present. The stock ledger shall be the only
evidence as to the Stockholders entitled to examine the stock ledger, the list
required by this section or the books of the Corporation, or to vote in person
or by proxy at any meeting of Stockholders.
SECTION 2. SPECIAL MEETINGS. (a) Special meetings of the Stockholders,
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation of the Corporation, shall be called by the
Chairman, President or Secretary only upon direction of the Board of Directors
pursuant to a resolution adopted by a majority of the Directors then in office.
Such request shall state the purpose or purposes of the proposed meeting.
(b) Written notice of a special meeting stating the place, date, and hour
of the meeting and, in general terms, the purpose or purposes for which the
meeting is called, shall be given not less than ten days nor more than sixty
days prior to the date of the meeting, to each Stockholder entitled to vote at
such meeting. Special meetings may be held at such place as shall be designated
by the Board of Directors. Whenever the directors shall fail to fix such place,
the meeting shall be held at the principal executive offices of the Corporation.
(c) Business transacted at any special meeting of Stockholders, other than
procedural matters and matters relating to the conduct of the meeting, shall be
limited to the purpose or purposes stated in the notice.
SECTION 3. QUORUMS. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the Stockholders for the
transaction of business except as otherwise provided by the Delaware General
Corporation Law ("Delaware Law") or by the Certificate of Incorporation. Unless
these By-Laws otherwise require, when a meeting is adjourned to another time or
place, whether or not a quorum is present, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting,
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a notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting. When a quorum is once present it is not broken
by the subsequent withdrawal of any Stockholder.
SECTION 4. ORGANIZATION. Meetings of Stockholders shall be presided over
by the Chairman, if any, or if none or in the Chairman's absence, the President,
if any, or if none or in the President's absence, by a Chairman to be chosen by
the Stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as Secretary of every meeting and keep the
minutes thereof, but if neither the Secretary nor an Assistant Secretary is
present, the presiding officer of the meeting shall appoint any person present
to act as secretary of the meeting. The order of business at all meetings of
stockholders shall be as determined by the Chairman of the meeting.
SECTION 5. VOTING; PROXIES; REQUIRED VOTE. (a) At each meeting of
Stockholders, every Stockholder shall be entitled to vote in person or by proxy
appointed by an instrument in writing, subscribed by such Stockholder or by such
Stockholder's duly authorized attorney-in-fact (but no such proxy shall be voted
or acted upon after three years from its date, unless the proxy provides for a
longer period) and, unless Delaware Law or the Certificate of Incorporation
(including resolutions designating any class or series of preferred stock
pursuant to Article IV of the Certificate of Incorporation) provides otherwise,
shall have one vote for each share of stock entitled to vote registered in the
name of such Stockholder on the books of the Corporation on the applicable
record date fixed pursuant to these By-Laws. Except as otherwise required by
law or the Certificate of Incorporation, at all elections of directors the
voting may but need not be by ballot and a plurality of the votes entitled to
vote thereon that are cast shall elect directors. Except as otherwise required
by law or the Certificate of Incorporation, any other action shall be authorized
by a majority of the votes entitled to vote thereon that are cast.
(b) Where a separate vote by a class or classes is required on a matter by
law or the Certificate of Incorporation, a majority of the outstanding shares of
such class or classes, present in person or represented by proxy, shall
constitute a quorum entitled to vote on that matter, and the affirmative vote of
the majority of shares of such class or classes entitled to vote thereon that
are cast shall be the act of such class, unless otherwise provided in the
Certificate of Incorporation.
3
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SECTION 6. INSPECTOR OF ELECTION. The Board of Directors, in advance of
any meeting, may, but need not, unless required by Delaware Law, appoint one or
more inspectors of election to act at the meeting or any adjournment thereof.
If an inspector or inspectors are not so appointed, the person presiding at the
meeting may, but need not, unless required by Delaware Law, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors, if any, shall determine the number of shares of stock
outstanding and the voting power of each, the shares of stock represented at the
meeting, the existence of a quorum, and the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all Stockholders. On request
of the person presiding at the meeting, the inspector or inspectors, if any,
shall make a report in writing of any challenge, question or matter determined
by such inspector or inspectors and execute a certificate of any fact found by
such inspector or inspectors.
SECTION 7. STOCKHOLDER PROPOSALS AND NOMINATIONS. (a) No proposal for a
stockholder vote shall be submitted by a stockholder (a "Stockholder Proposal")
to the Corporation's stockholders unless the stockholder submitting such
proposal (the "Proponent") shall have filed a written notice in accordance with
subsection (c) hereof setting forth with particularity (i) the names and
business addresses of the Proponent and all persons or entities (collectively,
the "Persons") acting in concert with the Proponent; (ii) the name and address
of the Proponent and the Persons identified in clause (i), as they appear on the
Corporation's books (if they so appear); (iii) the class and number of shares of
the Corporation beneficially owned by the Proponent and the Persons identified
in clause (i); (iv) a description of the Stockholder Proposal containing all
material information relating thereto; and (v) such other information as the
Board of Directors reasonably determines is necessary or appropriate to enable
the Board of Directors and stockholders of the Corporation to consider the
Stockholder Proposal. The presiding officer at any stockholders' meeting may
determine that any Stockholder Proposal was not made in accordance with the
procedures prescribed in these By-Laws or is otherwise not in accordance with
law, and if it is so determined,
4
<PAGE>
such officer shall so declare at the meeting and the Stockholder Proposal shall
be disregarded.
(b) Only persons who are selected and recommended by the Board of
Directors or the committee of the Board of Directors designated to make
nominations (if any), or who are nominated by stockholders in accordance with
the procedures set forth in this Section 7, shall be eligible for election, or
qualified to serve, as directors. Nominations of individuals for election to
the Board of Directors of the Corporation at any annual meeting or any special
meeting of stockholders at which directors are to be elected may be made by any
stockholder of the Corporation entitled to vote for the election of directors at
that meeting by compliance with the procedures set forth in this Section 7.
Nominations by stockholders shall be made by written notice filed in accordance
with subsection (c) hereof (a "Nomination Notice"), which shall set forth (i) as
to each individual nominated, (A) the name, date of birth, business address and
residence address of such individual; (B) the business experience during the
past five years of such nominee, including his or her principal occupations and
employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on, and such other information as to the nature of his or her
responsibilities and level of professional competence as may be sufficient to
permit assessment of his or her prior business experience; (C) whether the
nominee is or has ever been at any time a director, officer or owner of 5% or
more of any class of capital stock, partnership interests or other equity
interest of any corporation, partnership or other entity; (D) any directorships
held by such nominee in any company with a class of securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or
subject to the requirements of Section 15(d) of such Act or any company
registered as an investment company under the Investment Company Act of 1940, as
amended; and (E) whether, in the last five years, such nominee has been
convicted in a criminal proceeding or has been subject to a judgment, order,
finding or decree of any federal, state or other governmental entity, concerning
any violation of federal, state or other law, or any proceeding in bankruptcy,
which conviction, order, finding, decree or proceeding may be material to an
evaluation of the ability or integrity of the nominee; and (ii) as to the Person
submitting the Nomination Notice and any Person acting in concert with such
Person, (x) the name and business address of such Person, (y) the name and
address of such Person as they appear on the Corporation's books (if they so
appear), and (z) the class and number of shares of the Corporation that are
beneficially owned by such Person. A written consent to being named in a proxy
statement as a nominee, and to serve as a director if elected, signed by the
nominee, shall be filed with any
5
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Nomination Notice. If the presiding officer at any stockholders' meeting
determines that a nomination was not made in accordance with the procedures
prescribed by these By-Laws, he shall so declare to the meeting and the
defective nomination shall be disregarded.
(c) Stockholder Proposals and Nomination Notices shall be delivered to the
Secretary at the principal executive office of the Corporation 120 days or more
before the date of the anniversary of the last annual stockholders= meeting if
such Stockholder Proposal or Nomination Notice is to be submitted at an annual
stockholders' meeting, unless the meeting is to be held more than 60 days in
advance of such anniversary date, in which event the Stockholder Proposal or
Nomination Notice shall be delivered to the Secretary at the principal executive
office of the Corporation no later than the close of business on the 15th day
following the day on which notice of the meeting was given. Nomination Notices
shall be delivered to the Secretary at the principal executive office of the
Corporation no later than the close of business on the 15th day following the
day on which notice of the date of a special meeting of stockholders was given
if the Nomination Notice is to be submitted at a special stockholders' meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business, property and affairs of the
Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. QUALIFICATION; NUMBER; TERM; REMUNERATION. (a) Each director
shall be at least 18 years of age. A director need not be a Stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
number of directors constituting the entire Board shall be such number as may be
fixed from time to time by the Board of Directors, but shall be not less than
three. One of the directors may be selected by the Board of Directors to be its
Chairman, who shall preside at meetings of the Stockholders and the Board of
Directors and shall have such other duties, if any, as may from time to time be
assigned by the Board of Directors. In the absence of formal selection, the
President of the Corporation shall serve as Chairman.
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The use of the phrase "entire Board" herein refers to the total number of
directors which the Corporation would have if there were no vacancies.
(b) Directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
Committees may be allowed like compensation for attending Committee meetings.
SECTION 3. QUORUM AND MANNER OF VOTING. Except as otherwise provided by
law, a majority of the entire Board of Directors shall constitute a quorum. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting from time to time to another time and place without notice.
The vote 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. When a meeting is
adjourned to another time or place, whether or not a quorum is present, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Board of Directors may transact any business which might have been
transacted at the original meeting.
SECTION 4. ANNUAL MEETING. At the next regular meeting following the
annual meeting of Stockholders, the newly elected Board of Directors shall meet
for the purpose of the election of officers and the transaction of such other
business as may properly come before the meeting.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times as the Board of Directors shall from time to time by
resolution determine. After the place and time of regular meetings of the Board
of Directors shall have been determined and notice thereof shall have been once
given to each member of the Board of Directors, regular meetings may be held
without further notice being given.
SECTION 6. SPECIAL MEETINGS. Notice of the date, time and place of each
special meeting shall be mailed by regular mail to each director at his
designated address at least six days before the meeting; or sent by overnight
courier to each director at his designated address at least two days before the
meeting (with delivery scheduled to occur no later than the day before the
meeting); or given orally by telephone or other means, or by telegraph or
telecopy, or by any other means
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comparable to any of the foregoing, to each director at his designated address
at least 24 hours before the meeting; provided, however, that if less than five
days' notice is provided and one third of the members of the Board of Directors
then in office object in writing prior to or at the commencement of the meeting,
such meeting shall be postponed until five days after such notice was given
pursuant to this sentence (or such shorter period to which a majority of those
who objected in writing agree), provided that notice of such postponed meeting
shall be given in accordance with this Section 6. The notice of the special
meeting shall state the general purpose of the meeting, but other routine
business may be conducted at the special meeting without such matter being
stated in the notice.
SECTION 7. ORGANIZATION. At all meetings of the Board of Directors, the
Chairman or in the Chairman's absence or inability to act, the President, or in
the President's absence, a Chairman chosen by the directors, shall preside. The
Secretary of the Corporation shall act as secretary at all meetings of the Board
of Directors when present, and, in the Secretary's absence, the presiding
officer may appoint any person to act as Secretary.
SECTION 8. RESIGNATION AND REMOVAL. Any director may resign at any time
upon written notice to the Corporation and such resignation shall take effect
upon receipt thereof by the Chairman or Secretary, unless otherwise specified in
the resignation. Directors may be removed only in the manner provided in the
Certificate of Incorporation.
SECTION 9. VACANCIES. Unless otherwise provided in these By-Laws or the
Certificate of Incorporation, vacancies on the Board of Directors, whether
caused by resignation, death, disqualification, removal, an increase in the
authorized number of directors or otherwise, may be filled by the affirmative
vote of a majority of the remaining directors, although less than a quorum, or
by a sole remaining director.
SECTION 10. PREFERRED DIRECTORS. Notwithstanding anything else contained
herein, whenever the holders of one or more classes or series of Preferred Stock
shall have the right, voting separately as a class or series, to elect
directors, the election, term of office, filling of vacancies, removal and other
features of such directorships shall be governed by the terms of the Certificate
of Incorporation.
ARTICLE III
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COMMITTEES
SECTION 1. APPOINTMENT; POWERS. The Board of Directors may, by resolution
passed by a majority of the whole board, designate one or more Committees, each
Committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any Committee, who may replace any absent or disqualified member at any meeting
of the Committee. In the absence or disqualification of a member of a
Committee, the member or members present at any meeting and not disqualified
from voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
Committee, to the extent provided in the resolution, shall, have and may
exercise, to the extent permitted by Delaware Law, the powers of the Board of
Directors in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such Committee shall have the power or authority to: (i)
approve or adopt, or recommend to the stockholders, any action or matter
required to be submitted to the stockholders for approval, (ii) adopt, amend or
repeal any By-Law or (iii) take any action that it is not permitted to take
pursuant to Delaware Law. Such Committee or Committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors.
SECTION 2. PROCEDURES, QUORUM AND MANNER OF ACTING. Each Committee shall
fix its own rules of procedure, and shall meet where and as provided by such
rules or by resolution of the Board of Directors. Except as otherwise provided
by law, the presence of a majority of the then appointed members of a Committee
shall constitute a quorum for the transaction of business by that Committee, and
in every case where a quorum is present the affirmative vote of a majority of
the members of the Committee present shall be the act of the Committee. Each
Committee shall keep minutes of its proceedings, and actions taken by a
Committee shall be reported to the Board of Directors.
SECTION 3. TERMINATION. In the event any person shall cease to be a
director of the Corporation, such person shall simultaneously therewith cease to
be a member of any Committee appointed by the Board of Directors.
ARTICLE IV
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OFFICERS
SECTION 1. ELECTION AND QUALIFICATIONS. The Board of Directors at its
first meeting held after each annual meeting of Stockholders shall elect the
officers of the Corporation, which shall include a President and a Secretary,
and may include, by election or appointment, a Chairman of the Board, one or
more Vice-Presidents (any one or more of whom may be given an additional
designation of rank or function), a Treasurer and such Assistant Secretaries,
such Assistant Treasurers and such other officers as the Board of Directors may
from time to time deem proper. Each officer shall have such powers and duties
as may be prescribed by these By-Laws and as may be assigned by the Board of
Directors or the President. Any two or more offices may be held by the same
person.
SECTION 2. TERM OF OFFICE AND REMUNERATION. The term of office of all
officers shall be until their respective successors have been elected and
qualified or their earlier death, resignation or removal. The remuneration of
all officers of the Corporation may be fixed by the Board of Directors or in
such manner as the Board of Directors shall provide.
SECTION 3. RESIGNATION; REMOVAL. Any officer may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in the
resignation. Any officer shall be subject to removal, with or without cause, at
any time by the Board of Directors. Any vacancy in any office shall be filled
in such manner as the Board of Directors shall determine.
SECTION 4. POWERS AND DUTIES OF OFFICERS.
(a) The Chairman of the Board of Directors, if there be one, shall preside
at all meetings of the Board of Directors and shall have such other powers and
duties as may from time to time be assigned by the Board of Directors. The
Chairman of the Board of Directors, if there be one, shall be the chief
executive officer of the Corporation and shall preside at all meetings of the
Stockholders and the Board of Directors and shall have general management of and
supervisory authority over the property, business and affairs of the Corporation
and its other officers. The Chairman of the Board may execute and deliver in
the name of the Corporation powers of attorney, contracts, bonds and other
obligations and instruments, and shall have such
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other authority and perform such other duties as from time to time may be
assigned by the Board of Directors. The Chairman of the Board shall see that
all orders and resolutions of the Board of Directors are carried into effect and
shall perform such additional duties that usually pertain to the office of chief
executive officer.
(b) If there be no Chairman of the Board, the President shall be the chief
executive officer and shall exercise the powers listed in (a) above. Otherwise,
the President may execute and deliver in the name of the Corporation powers of
attorney, contracts, bonds and other obligations and instruments, and shall have
such other authority and perform such other duties as from time to time may be
assigned by the Board of Directors or the Chairman of the Board.
(c) A Vice President may execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations and
instruments, and shall have such other authority and perform such other duties
as from time to time may be assigned by the Board of Directors, the Chairman of
the Board or the President.
(d) The Treasurer shall in general have all duties and authority incident
to the position of Treasurer and such other duties and authority as may be
assigned by the Board of Directors, the Chairman of the Board or the President.
The Treasurer shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by or at the direction of the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, the Chairman of the Board or the President,
and shall render, upon request, an account of all such transactions.
(e) The Secretary shall in general have all the duties and authority
incident to the position of Secretary and such other duties and authority as may
be assigned by the Board of Directors, the Chairman of the Board or the
President. The Secretary shall attend all meetings of the Board of Directors
and all meetings of Stockholders and record all the proceedings thereat in a
book or books to be kept for that purpose. The Secretary shall give, or cause
to be given, notice of all meetings of the Stockholders and special meetings of
the Board of Directors. The Secretary shall have custody of the seal of the
Corporation and any officer of the Corporation shall have authority to affix the
same to any instrument requiring it and when so affixed, it may be attested by
the signature of the Secretary or any other officer.
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(f) The Corporate Controller, if there be one, shall be the Corporation=s
principal accounting officer, and shall have all duties and authority in
connection with financial reporting and related matters that are incident to
such position.
(g) Any assistant officer shall have such duties and authority as the
officer such assistant officer assists and, in addition, such other duties and
authority as the Board of Directors, the Chairman of the Board or President
shall from time to time assign.
ARTICLE V
CONTRACTS, ETC.
SECTION 1. CONTRACTS. The Board of Directors may authorize any person or
persons, in the name and on behalf of the Corporation, to enter into or execute
and deliver any and all deeds, bonds, mortgages, contracts and other obligations
or instruments, and such authority may be general or confined to specific
instances. In addition, the officers may enter into, execute and deliver such
undertakings in the ordinary course of business, and authorize other persons to
enter into, execute and deliver such undertakings in the ordinary course of
business, in connection with the officers= exercise of their powers enumerated
in these By-Laws.
SECTION 2. PROXIES; POWERS OF ATTORNEY; OTHER INSTRUMENTS. (a) The
Chairman, the President, any Vice President, the Treasurer or any other person
designated by any of them shall have the power and authority to execute and
deliver proxies, powers of attorney and other instruments on behalf of the
Corporation in connection with the execution of contracts, the purchase of real
or personal property, the rights and powers incident to the ownership of stock
by the Corporation and such other situations as the Chairman, the President,
such Vice President or the Treasurer shall approve (to the extent in the
ordinary course of business or, in other instances, as may be authorized by the
Board of Directors), such approval to be conclusively evidenced by the execution
of such proxy, power of attorney or other instrument on behalf of the
Corporation.
(b) The Chairman, the President, any Vice President, the Treasurer or any
other person authorized by proxy or power of attorney executed and delivered by
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any of them on behalf of the Corporation may attend and vote at any meeting of
stockholders of any company in which the Corporation may hold stock, and may
exercise on behalf of the Corporation any and all of the rights and powers
incident to the ownership of such stock at any such meeting, or otherwise as
specified in the proxy or power of attorney so authorizing any such person. The
Board of Directors, from time to time, may confer like powers upon any other
person.
ARTICLE VI
BOOKS AND RECORDS
SECTION 1. LOCATION. The books and records of the Corporation may be kept
at such place or places as the Board of Directors or the respective officers in
charge thereof may from time to time determine. The record books containing the
names and addresses of all Stockholders, the number and class of shares of stock
held by each and the dates when they respectively became the owners of record
thereof shall be kept by the Secretary as prescribed in the By-Laws or by such
officer or agent as shall be designated by the Board of Directors.
SECTION 2. ADDRESSES OF STOCKHOLDERS. Notices of meetings and all other
corporate notices may be delivered personally or mailed to each Stockholder at
the Stockholder's address as it appears on the records of the Corporation, and
shall be deemed given when delivered personally or mailed to such address.
SECTION 3. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. (a)
In order that the Corporation may determine the Stockholders entitled to notice
of or to vote at any meeting of Stockholders or any adjournment thereof, the
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors and which record date shall not be more than 60 days nor less
than 10 days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining Stockholders entitled to
notice of or to vote at a meeting of Stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of Stockholders of record entitled
to notice of or to vote at a meeting of Stockholders shall apply to any
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adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the Stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the Stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action not contemplated by paragraph (a) of this Section 3, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted and which record
date shall be not more than 60 days prior to such action. If no record date is
fixed, the record date for determining Stockholders for any such purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
SECTION 1. CERTIFICATES; SIGNATURES. The shares of the Corporation shall
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate, signed by or in the name of the Corporation by
the Chairman or Vice-Chairman of the Board of Directors, or the President or any
Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form. Any or all of the signatures on any such
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
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SECTION 2. RECORD OWNERSHIP. The names and addresses of the holders of
record of the shares of each class and series of the Corporation=s capital
stock, together with the number of shares of each class and series held by each
record holder and the date of issue of such shares, shall be entered on the
books of the Corporation. The Corporation shall be entitled to treat the holder
of record of any share of stock as the holder in fact thereof, and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
any share on the part of any other person, whether or not it shall have express
or other notice thereof, except as required by Delaware Law. The Board of
Directors shall have power and authority to make all such rules and regulations
as it may deem expedient concerning the issue, transfer and registration of
certificates representing shares of the Corporation.
SECTION 3. TRANSFER OF RECORD OWNERSHIP. Transfer of stock in
certificated form shall be made on the books of the Corporation only by
direction of the person named in the certificate or such person's attorney,
lawfully constituted in writing, and only upon the surrender of the certificate
therefor and a written assignment of the shares evidenced thereby, which
certificate shall be canceled before the new certificate is issued.
SECTION 4. FRACTIONAL SHARES. The Corporation may, but shall not be
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a Stockholder except as therein
provided.
SECTION 5. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may
issue a new certificate in place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the Board of Directors may
require the owner of any lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
any such new certificate.
SECTION 6. TRANSFER AGENTS; REGISTRANTS; RULES RESPECTING CERTIFICATES.
The Board of Directors may appoint, or authorize any officer or officers
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to appoint, one or more transfer agents and one or more registrars. The Board
of Directors may make such further rules and regulations as it may deem
expedient concerning the issue, transfer and registration of stock certificates
of the Corporation.
ARTICLE VIII
DIVIDENDS
Subject to the provisions of Delaware Law and the Certificate of
Incorporation, the Board of Directors shall have full power to declare and pay
dividends on the capital stock of the Corporation. Before payment of any
dividend, there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, may determine for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
ARTICLE IX
RATIFICATION
Any transaction, questioned in any lawsuit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or Stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or after
judgment, by the Board of Directors or by the requisite majority of
Stockholders, to the fullest extent permitted by Delaware Law, and if so
ratified shall have the same force and effect as if the questioned transaction
had been originally duly authorized. Such ratification shall be binding upon
the Corporation and its Stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
ARTICLE X
CORPORATE SEAL
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The corporate seal shall be in form of a circular inscription which
contains the words "Corporate Seal" and such additional information as the
officer inscribing such seal shall determine in such officer's sole discretion.
The corporate seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise displayed or it may be manually
inscribed.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board of Directors. Unless otherwise fixed by the Board of
Directors, the fiscal year of the Corporation shall end on the Saturday closest
to September 30.
ARTICLE XII
WAIVER OF NOTICE
Whenever notice is required to be given by these By-Laws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XIII
AMENDMENTS
By-Laws may be adopted, amended or repealed by either the Board of
Directors or the affirmative vote of the holders of at least 66 2/3% of the
voting power of all shares of the Corporation's capital stock then entitled to
vote generally in the election of directors.
ARTICLE XIV
INDEMNIFICATION
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SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact (a) that he or she is or was a director or officer of the Corporation, or
(b) that he or she, being at the time a director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer,
member, employee, fiduciary or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (collectively, "another enterprise" or "other
enterprise"), shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by Delaware Law as the same exists or may hereafter be
amended (but, in the case of any such amendment, with respect to alleged action
or inaction occurring prior to such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including,
without limitation, attorneys' and other professionals' fees and expenses,
claims, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred or suffered by such person in
connection therewith ("Losses"). Without diminishing the scope of
indemnification provided by this Section 1, such persons shall also be entitled
to the further rights set forth below.
SECTION 2. ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE
RIGHT OF THE CORPORATION. Subject to the terms and conditions of this Article,
the Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any Proceeding (other than an action by or in
the right of the Corporation) by reason of the fact that such person is or was a
director, officer or employee of the Corporation, or, being at the time a
director, officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, member, employee, fiduciary
or agent of another enterprise, against all Losses, actually and reasonably
incurred or suffered by such person in connection with such Proceeding if such
person acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. The termination of any Proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Corporation,
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and, with respect to any criminal action or proceeding, had reasonable cause to
believe that the conduct was unlawful.
SECTION 3. ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION. Subject to the terms and conditions of this Article, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any Proceeding by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or was
a director, officer or employee of the Corporation, or being at the time a
director, officer or employee of the Corporation, is or was serving at the
request of the Corporation as a director, officer, member, employee, fiduciary
or agent of another enterprise against all Losses actually and reasonably
incurred or suffered by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
a person is proper in the circumstances because such person has met the
applicable standard of conduct required by Section 1 or set forth in Section 2
or 3 of this Article, as the case may be. Such determination shall be made,
with respect to a person who is a director or officer at the time of such
determination, in a reasonably prompt manner (i) by the Board of Directors by a
majority vote of directors who were not parties to such action, suit or
proceeding, whether or not they constitute a quorum of the Board of Directors,
(ii) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, (iii) if there are no such directors,
or if such directors so direct, by independent legal counsel in a written
opinion, (iv) by the stockholders or (v) as Delaware Law may otherwise permit.
To the extent, however, that a present or former director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified
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against expenses (including attorneys' and other professionals' fees) actually
and reasonably incurred by such person in connection therewith, without the
necessity of authorization in the specific case.
SECTION 5. GOOD FAITH DEFINED. For purposes of any determination under
Section 4 of this Article, a person shall be deemed to have acted in good faith
if the action is based on (a) the records or books of account of the Corporation
or another enterprise, or on information supplied to such person by the officers
of the Corporation or another enterprise in the course of their duties or on (b)
the advice of legal counsel for the Corporation or another enterprise, or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant, independent financial
adviser, appraiser or other expert selected with reasonable care by the
Corporation or the other enterprise. The provisions of this Section 5 shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct.
SECTION 6. PROCEEDINGS INITIATED BY INDEMNIFIED PERSONS. Notwithstanding
any provisions of this Article to the contrary, the Corporation shall not
indemnify any person or make advance payments in respect of Losses to any person
pursuant to this Article in connection with any Proceeding (or portion thereof)
initiated against the Corporation by such person unless such Proceeding (or
portion thereof) is authorized by the Board of Directors or its designee;
PROVIDED, HOWEVER, that this prohibition shall not apply to a counterclaim,
cross-claim or third-party claim brought in any Proceeding or to any claims
provided for in Section 7 of this Article.
SECTION 7. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 4 of this Article, and
notwithstanding the absence of any determination thereunder, any director,
officer or employee may apply to any court of competent jurisdiction for
indemnification to the extent otherwise permissible under Section 1, 2 or 3 of
this Article. Notice of any application for indemnification pursuant to this
Section 7 shall be given to the Corporation promptly upon the filing of such
application.
SECTION 8. LOSSES PAYABLE IN ADVANCE. Losses reasonably incurred by an
officer or director in defending any threatened or pending Proceeding shall be
paid by the Corporation in advance of the final disposition of such Proceeding
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that such person is not
entitled to be
20
<PAGE>
indemnified by the Corporation as authorized in this Article. Losses shall be
reasonably documented by the officer or director and required payments shall be
made promptly by the Corporation. Losses incurred by former directors and
officers or other employees and agents may be so paid upon such terms and
conditions, if any, as the Corporation deems appropriate.
SECTION 9. NON-EXCLUSIVITY AND SURVIVAL OF INDEMNIFICATION. The
indemnification and advancement of expenses provided by or granted pursuant to
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under the
Certificate of Incorporation, any By-Law, agreement, contract, vote of
Stockholders or of disinterested directors, or pursuant to the direction
(howsoever embodied) of any court of competent jurisdiction or otherwise. The
provisions of this Article shall not be deemed to preclude the indemnification
of any person who is not specified in Section 1, 2 or 3 of this Article but whom
the Corporation has the power or obligation to indemnify under the provisions of
Delaware Law, or otherwise. The rights conferred by this Article shall continue
as to a person who has ceased to be a director, officer or employee and shall
inure to the benefit of such person and the heirs, executors, administrators and
other comparable legal representatives of such person. The rights conferred in
this Article shall be enforceable as contract rights, and shall continue to
exist after any rescission or restrictive modification hereof with respect to
events occurring prior thereto. No rights are conferred in this Article for the
benefit of any person (including, without limitation, officers, directors and
employees of subsidiaries of the Corporation) in any capacity other than as
explicitly set forth herein.
SECTION 10. MEANING OF CERTAIN TERMS IN CONNECTION WITH EMPLOYEE BENEFIT
PLANS, ETC. For purposes of this Article, references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
references to "serving at the request of the Corporation" shall include any
service as a director, officer or employee of the Corporation which imposes
duties on, or involves services by, such director, officer or employee, with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who has acted in good faith and in a manner reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article.
SECTION 11. INSURANCE. The Corporation may, but shall not be required to,
purchase and maintain insurance on behalf of any person who is or was a
21
<PAGE>
director, officer or employee of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, member, employee, fiduciary
or agent of another against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article.
Dated: December 1, 1998.
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001056874
<NAME> U.S. INDUSTRIES, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-END> JAN-02-1999
<CASH> 51
<SECURITIES> 0
<RECEIVABLES> 606
<ALLOWANCES> 44
<INVENTORY> 606
<CURRENT-ASSETS> 1,377
<PP&E> 1,059
<DEPRECIATION> 520
<TOTAL-ASSETS> 2,737
<CURRENT-LIABILITIES> 549
<BONDS> 938
0
0
<COMMON> 1
<OTHER-SE> 976
<TOTAL-LIABILITY-AND-EQUITY> 2,737
<SALES> 796
<TOTAL-REVENUES> 796
<CGS> 556
<TOTAL-COSTS> 556
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 38
<INCOME-TAX> 15
<INCOME-CONTINUING> 23
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
