SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 2000
Commission file number 1-1043
BRUNSWICK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-0848180
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 N. Field Ct., Lake Forest, Illinois 60045-4811
(Address of principal executive offices) (Zip Code)
(847) 735-4700
(Registrant's telephone number, including area code)
Indicate by a check mark, whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X No
At May 8, 2000, there were 87,877,796 shares of the
Company's Common Stock ($.75 par value) outstanding.
<TABLE>
Part I- Financial Information
Item I-Financial Statements
Brunswick Corporation
Consolidated Statements of Income
for the three months ended March 31
(in millions, except per share data)
(unaudited)
2000 1999
<S> <C> <C>
Net sales 1,149.0 1,083.0
Cost of sales 835.3 792.4
Selling, general and administrative expense 195.8 181.0
Strategic charge 7.0 0.0
Operating earnings 110.9 109.6
Interest expense (16.4) (15.5)
Other income (expense) 0.3 (1.2)
Earnings before income taxes 94.8 92.9
Income tax provision (36.1) (35.3)
Net earnings 58.7 57.6
Earnings per common share:
Basic 0.64 0.63
Diluted 0.64 0.62
Average shares used for computation of:
Basic earnings per share 91.4 92.0
Diluted earnings per share 91.5 92.6
Cash dividends declared per common share 0.125 0.125
The notes are an integral part of these
consolidated statements.
</TABLE>
<TABLE>
Brunswick Corporation
Consolidated Balance Sheets
As of March 31, 2000, December 31, 1999, and March 31, 1999
(in millions, except share data)
(unaudited)
March 31, December 31, March 31,
2000 1999 1999
Assets
Current assets
Cash and cash equivalents, at cost,
<S> <C> <C> <C>
which approximates market 123.8 100.8 81.2
Accounts and notes receivable,
less allowances of $24.3, $27.2 and $21.3 638.8 515.7 589.4
Inventories
Finished goods 399.2 350.3 410.5
Work-in-process 160.9 148.0 138.0
Raw materials 123.5 125.0 121.3
Net inventories 683.6 623.3 669.8
Prepaid income taxes 259.6 257.2 212.1
Prepaid expenses 57.0 56.1 51.9
Income tax refund receivable 0.0 25.1 0.0
Current assets 1,762.8 1,578.2 1,604.4
Property
Land 73.2 73.5 70.7
Buildings 403.8 403.1 405.4
Equipment 1,051.6 1,036.2 960.2
Total land, buildings and equipment 1,528.6 1,512.8 1,436.3
Accumulated depreciation (782.6) (762.2) (714.7)
Net land, buildings and equipment 746.0 750.6 721.6
Unamortized product tooling costs 128.7 131.2 118.8
Net property 874.7 881.8 840.4
Other assets
Goodwill 564.5 569.6 713.2
Other intangibles 85.6 88.8 98.1
Investments 80.3 65.9 80.3
Other long-term assets 178.6 170.5 165.0
Other assets 909.0 894.8 1,056.6
Total Assets 3,546.5 3,354.8 3,501.4
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt, including
current maturities of long-term debt 298.2 107.7 274.7
Accounts payable 321.2 310.7 273.3
Accrued expenses 630.9 670.0 543.6
Income taxes payable 32.3 0.0 42.4
Current liabilities 1,282.6 1,088.4 1,134.0
Long-term debt
Notes, mortgages and debentures 620.1 622.5 635.6
Deferred items
Income taxes 135.8 131.9 161.8
Postretirement and postemployment benefits 142.0 141.7 141.4
Compensation and other 72.5 70.1 68.7
Deferred items 350.3 343.7 371.9
Common shareholders' equity
Common stock; authorized: 200,000,000 shares,
$.75 par value; issued: 102,538,000 shares 76.9 76.9 76.9
Additional paid-in capital 314.5 314.3 312.6
Retained earnings 1,228.8 1,181.5 1,235.6
Treasury stock, at cost:
13,596,000; 10,727,000 and 10,556,000 shares (265.9) (214.0) (205.7)
Unamortized ESOP expense and other (47.2) (49.3) (54.1)
Accumulated other comprehensive income (13.6) (9.2) (5.4)
Common shareholders' equity 1,293.5 1,300.2 1,359.9
Total liabilities and shareholders' equity 3,546.5 3,354.8 3,501.4
The notes are an integral part of these consolidated statements.
</TABLE>
<TABLE>
Brunswick Corporation
Consolidated Statements of Cash Flows
for the three months ended March 31
(dollars in millions)
(unaudited)
2000 1999
Cash flows from operating activities
<S> <C> <C>
Net earnings 58.7 57.6
Depreciation and amortization 40.4 41.5
Changes in noncash current assets and current liabilities (189.4) (234.4)
Litigation settlement payments (30.5) -
Income taxes 57.7 29.1
Strategic charge 7.0 -
Other, net (2.4) 0.3
Net cash used for operating activities (58.5) (105.9)
Cash flows from investing activities
Capital expenditures (27.3) (31.1)
Investments (16.0) (1.5)
Other, net 0.4 3.4
Net cash used for investing activities (42.9) (29.2)
Cash flows from financing activities
Net issuances of commercial paper and other short-term debt 188.2 104.8
Cash dividends paid (11.4) (11.5)
Stock repurchases and other (52.4) (3.1)
Net cash provided by financing activities 124.4 90.2
Net increase(decrease)in cash and cash equivalents 23.0 (44.9)
Cash and cash equivalents at January 1 100.8 126.1
Cash and cash equivalents at March 31 123.8 81.2
Supplemental cash flow disclosures:
Interest paid 17.1 16.3
Income taxes paid (refunds received), net (21.6) 6.2
Treasury stock issued for compensation plans and other 0.1 4.9
The notes are an integral part of these consolidated statements.
</TABLE>
Brunswick Corporation
Notes to Consolidated Financial Statements
March 31, 2000, December 31, 1999 and March 31, 1999
(unaudited)
Note 1 - Accounting Policies
This unaudited financial data has been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and disclosures normally included
in financial statements and footnotes prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. Brunswick Corporation (the Company) believes that the
disclosures in these statements are adequate to make the
information presented not misleading. Certain previously reported
amounts have been reclassified to conform with the current-period
presentation.
These financial statements should be read in conjunction with, and
have been prepared in conformity with, the accounting principles
reflected in the consolidated financial statements and related
notes included in the Company's 1999 Annual Report on Form 10-K.
These interim results include, in the opinion of the Company, all
normal and recurring adjustments necessary to present fairly the
results of operations for the quarters ended March 31, 2000 and
1999. The 2000 interim results are not necessarily indicative of
the results that may be expected for the remainder of the year.
Note 2 - Earnings Per Common Share
There is no difference in the net earnings used to compute the
Company's basic and diluted earnings per share. The difference in
the average shares of common stock outstanding used to compute
basic and diluted earnings per share is caused by potential common
stock relating to employee compensation plans. The average number
of shares of potential common stock was 0.1 million and 0.6
million for the quarters ended March 31, 2000 and 1999,
respectively.
Note 3 - Debt
During the first quarter of 2000, commercial paper outstanding
increased to $285.4 million at March 31, 2000, versus $95.0
million at December 31, 1999, to fund working capital
requirements, stock repurchases and capital expenditures.
Note 4 - Legal and Environmental
On March 24, 2000, the United States Court of Appeals for the
Eighth Circuit issued an opinion reversing and vacating an adverse
verdict entered against the Company in the case Concord Boat
Corporation, et al. v. Brunswick Corporation (Concord). In June
1998, a jury had awarded the Concord plaintiffs treble damages
totaling $133.2 million based on alleged antitrust violations
involving the sale of sterndrive and inboard marine engines. The
Concord plaintiffs were also awarded attorney fees and costs. The
Company appealed the verdict and award of fees and costs and the
appellate court reversed and vacated the judgment in favor of the
Concord plaintiffs, including the award of fees and costs, and
remanded the case for entry of judgment in favor of the Company.
The Concord plaintiffs are seeking a rehearing to overturn the
decision by the appellate court.
The Company previously reached agreements to settle or dismiss six
additional suits, including five class-action lawsuits, filed
after the 1998 Concord verdict, seeking to rely on the allegations
and findings in the Concord suit. Reserves related to these
settlements decreased from $58.4 million at December 31, 1999, to
$27.9 million at March 31, 2000, as a result of payments made
under the terms of the settlements. As a part of a settlement
with a subset of one of the classes, additional payments could
have been required based on the final resolution of the Concord
suit. Based on the appellate court's decision, the Company is not
required to make any additional payments under this settlement.
Refer to Note 6 to the consolidated financial statements in the
Company's 1999 Annual Report on Form 10-K for a more detailed
description of the Concord and settled actions.
The Company is involved in certain legal and administrative
proceedings under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and other federal and state
legislation governing the generation and disposition of certain
hazardous wastes. These proceedings, which involve both on-and
off-site waste disposal, in many instances seek compensation from
the Company as a waste generator under Superfund legislation,
which authorizes action regardless of fault, legality of original
disposition or ownership of a disposal site. In April 2000, the
Company was notified by the Wisconsin Department of Natural
Resources that it must complete a feasibility study and begin work
that addresses polychlorinated biphenyl contamination in a creek
and associated bank soils alleged to have come from a
manufacturing facility that the Company closed in 1980. In light
of existing reserves, the Company's environmental claims,
including those discussed, when finally resolved, will not, in the
opinion of management, have a material adverse effect on the
Company's consolidated financial position.
Note 5 - Segment Data
The following table sets forth net sales and operating earnings of
each of the Company's operating segments for the quarters ended
March 31, 2000 and 1999 (in millions):
Quarter Ended March 31
2000 1999
Net Operating Net Operating
Sales Earnings Sales Earnings
Marine Engine $ 429.0 $ 60.9 $ 386.7 $ 53.5
Boat 418.5 37.9 368.4 29.4
Marine eliminations (79.4) -- (69.7) --
Total Marine 768.1 98.8 685.4 82.9
Outdoor Recreation 193.8 4.9 213.1 13.6
Indoor Recreation 187.3 25.0 184.8 23.6
Corporate/Other (0.2) (10.8) (0.3) (10.5)
Segment operating results $1,149.0 117.9 $1,083.0 109.6
Strategic charge (1) (7.0) --
Operating earnings $ 110.9 $ 109.6
(1) As described in Note 6, the Company recorded a $7.0 million
strategic charge in the first quarter of 2000 related to the
restructuring of the bicycle business.
Note 6 - Asset Write-Downs and Strategic Charges
During the fourth quarter of 1999, the Company committed to and
initiated plans in the bicycle business to exit manufacturing,
reduce warehouse capacity and administrative expenses and
rationalize product offerings. As a result of these actions, the
Company recorded a $178.0 million charge relating to the bicycle
business in the fourth quarter of 1999. These charges included
the write-off of goodwill of $133.6 million, inventory write-downs
of $27.0 million and $10.5 million of fixed asset write-downs,
along with other incremental costs associated with the actions of
$6.9 million. An additional charge of $7.0 million for severance,
related to the termination of approximately 1,250 employees, and
other incremental costs was recorded in the first quarter of 2000.
During the third quarter of 1998, the Company recorded a pretax
charge of $60.0 million to cover costs associated with strategic
initiatives designed to streamline operations and enhance
operating efficiencies in response to the effect of the economic
situation in Asia and other emerging markets on its businesses.
The Company's accrued expense balances relating to the above-
mentioned strategic charges as of March 31, 2000, and December 31,
1999, were as follows (in millions):
December 31, 2000 2000 March 31,
1999 Charge Activity 2000
Severance $ -- $ 4.0 $ -- $ 4.0
Lease termination 10.9 -- (1.4) 9.5
Other incremental costs 5.5 3.0 (1.2) 7.3
Total $16.4 $ 7.0 $ (2.6) $20.8
The balance of the severance-related accruals covers future
payments to be made for severance actions. Lease termination
costs are expected to be paid over the contractual terms of the
leases. Fixed assets to be disposed under the 1999 charge totaled
$16.5 million at December 31, 1999, and March 31, 2000. Related
reserves were $10.5 million at December 31, 1999, and $10.8
million at March 31, 2000.
Note 7 - Comprehensive Income
Accumulated other comprehensive income includes cumulative
translation, unrealized gains and losses on investments and
minimum pension liability adjustments. Comprehensive income for
the quarters ended March 31, 2000 and 1999, was as follows (in
millions):
Quarter Ended
March 31
2000 1999
Net earnings $58.7 $57.6
Other comprehensive income (loss) (4.4) 0.4
Comprehensive income $54.3 $58.0
Item 2. - Management's Discussion and Analysis
Overview
The Company's financial results in the first quarter of 2000
continue to reflect the favorable effect of its growth strategy:
creating superior products and services by pursuing innovation and
aggressively marketing its leading brands. Sales increased 6.1
percent to $1,149.0 million on strong contributions from the Boat
and Marine Engine segments and from the fitness equipment
business. Further, the Company focuses on effective cost
management and investment in technology to enhance its cost
position.
Results of Operations
Consolidated
The following table sets forth certain amounts, ratios and
relationships calculated from the consolidated statements of
income for the quarters ended March 31, 2000 and 1999 (dollars in
millions, except per share data):
Quarter Ended March 31
2000 1999
Net sales $1,149.0 $1,083.0
Percent increase 6.1% 19.8%
Operating earnings $ 110.9 $ 109.6
Net earnings $ 58.7 $ 57.6
Diluted earnings per share $ 0.64 $ 0.62
Expressed as a percentage of net sales:
Gross margin 27.3% 26.8%
Selling, general and administrative expense 17.0% 16.7%
Operating margin 9.7% 10.1%
The amounts in the above table include a $7.0 million pretax ($4.5
million after tax) strategic charge recorded in the first quarter
of 2000 related to the restructuring of the bicycle business. On
a pro forma basis, excluding this item, amounts are as follows
(dollars in millions, except per share data):
Quarter Ended March 31
2000 1999
Operating earnings $117.9 $109.6
Percent increase 7.6% 1.4%
Operating margin 10.3% 10.1%
Net earnings $ 63.2 $ 57.6
Diluted earnings per share $ 0.69 $ 0.62
Sales increased by $66.0 million to $1,149.0 million in the first
quarter of 2000 from $1,083.0 million in 1999. This increase
primarily reflects continued improvements in boat sales driven by
an improved mix of larger, higher-margin boats; gains in sales of
marine engines due to strong demand for sterndrive engines and new
low-emission outboard engines; and an increase in sales of fitness
equipment due to a continuing strong health club market in the
United States and the success of new product launches in the high-
end consumer segment.
Gross margin percentages increased to 27.3 percent in 2000 from
26.8 percent in 1999. This increase reflects the benefits from
the aforementioned shift in mix of boat sales and improved pricing
and production efficiency in the boat business. In addition,
prior year results include a $5.0 million inventory write-down in
the camping business that favorably affects comparisons. These
factors more than offset lower margins in the fishing tackle
business due to pricing pressures on lower price-point products
and reduced production volumes. In addition, margins in the
bicycle business declined reflecting significant reductions in
market pricing that principally occurred in the second half of
1999 and sales of close-out inventory which more than offset
product cost reductions.
Selling, general and administrative expenses as a percent of sales
increased to 17.0 percent in the first quarter of 2000 from 16.7
percent in the first quarter of 1999. This increase resulted from
investment in new products and market development costs primarily
in the marine engine and fitness equipment businesses that were
partially funded through cost reduction efforts.
Operating earnings totaled $110.9 million in 2000 and $109.6
million in 1999. Excluding the $7.0 million strategic charge
recorded in the first quarter of 2000 related to the restructuring
of the bicycle business, operating earnings totaled $117.9 million
and operating margins were 10.3 percent in 2000 versus 10.1
percent in 1999.
Other income and expense amounted to income of $0.3 million in
2000 compared with expense of $1.2 million in the first quarter of
1999. The Company's effective tax rate was 38.0 percent in the
first quarters of 2000 and 1999.
Net earnings were $58.7 million in 2000 versus $57.6 million in
1999, and diluted earnings per share increased to $0.64 in the
first quarter of 2000 from $0.62 in 1999. Excluding the
previously mentioned strategic charge, net earnings were $63.2 million
and diluted earnings per share were $0.69 in the first quarter of
2000, an 11.3 percent increase in diluted earnings per share
versus 1999. Average common shares outstanding used to calculate
diluted earnings per share decreased to 91.5 million in 2000 from
92.6 million in 1999 primarily reflecting stock repurchased during
the first quarter of 2000.
Marine Engine Segment
The following table sets forth Marine Engine segment results for
the quarters ended March 31, 2000 and 1999 (dollars in millions):
Quarter Ended March 31
2000 1999
Net sales $429.0 $386.7
Operating earnings $ 60.9 $ 53.5
Operating margin 14.2% 13.8%
Capital expenditures $ 8.4 $ 10.4
Marine Engine segment sales increased 10.9 percent to $429.0
million in the first quarter of 2000 from $386.7 million resulting
from double-digit growth in outboard and sterndrive engines driven
by consumer demand, new products and a favorable shift in product
mix to larger sterndrives.
Operating earnings were $60.9 million in the first quarter of
2000, compared with $53.5 million in the same period last year,
and operating margins were 14.2 percent in 2000 versus 13.8
percent in 1999. The operating margin increase reflects effective
cost management efforts that more than offset investments made in
new product and market development. In addition, the segment
results continued to reflect the unfavorable margin differential
between low-emission and traditional outboard offerings due to
higher initial production costs.
Boat Segment
The following table sets forth Boat segment results for the
quarters ended March 31, 2000 and 1999 (dollars in millions):
Quarter Ended March 31
2000 1999
Net sales $418.5 $368.4
Operating earnings $ 37.9 $ 29.4
Operating margin 9.1% 8.0%
Capital expenditures $ 8.5 $ 6.4
The Boat segment reported a 13.6 percent increase in sales to
$418.5 million in the first quarter of 2000 from $368.4 million as
a result of continued strong demand for larger boats.
Operating earnings for the segment were $37.9 million in the first
quarter of 2000, compared with $29.4 million in the same period of
1999. Operating margins were 9.1 percent versus 8.0 percent in
1999. The change in operating margins reflects improved pricing,
the benefits from continued growth in sales of larger, higher-
margin boats and actions taken in 1999 to improve the segment's
cost position.
Outdoor Recreation Segment
The following table sets forth Outdoor Recreation segment results
for the quarters ended March 31, 2000 and 1999 (dollars in
millions):
Quarter Ended March 31
2000 1999
Net sales $193.8 $213.1
Operating earnings $ 4.9 $ 13.6
Operating margin 2.5% 6.4%
Capital expenditures $ 5.9 $ 8.4
In the first quarter of 2000, Outdoor Recreation segment sales
decreased 9.1 percent to $193.8 million from $213.1 million.
Bicycle sales declined as pricing pressures, particularly at lower
price points, led to lower average selling prices in the current
year. The Company continues to experience strong demand at retail
for Mongoose-branded bikes. However, sales volume comparisons
with the prior year were unfavorable due to expanded distribution
of product into the mass merchant channel in the prior year when
retailers were building inventories. Sales of camping equipment
also declined reflecting weakness in demand following the year
2000 rollover, along with softness in pricing and a decrease in
product offerings. Sales of coolers and fishing tackle were
comparable with the prior-year levels.
Operating earnings decreased 64.0 percent to $4.9 million in the
first quarter of 2000, from $13.6 million in 1999, and operating
margins for the segment were 2.5 percent in 2000 compared with 6.4
percent in 1999. The margin decline reflects decreases in fishing
margins due to pricing pressures on lower price-point products,
decreased production volumes and increased investment in new
products and information systems. In the bicycle business, the
previously mentioned decreases in market pricing for bicycles
versus the prior period along with the effects of liquidating
bicycle inventory were partially offset by product cost
reductions. In addition, camping results in the prior year
include a $5.0 million inventory write-down provision.
The results of this segment continue to reflect the effects of
pricing pressure in the bicycle, camping and fishing businesses
caused by competition from low-cost products imported from Asia.
Management is taking actions in each of the businesses to address
this issue. In the fourth quarter of 1999, the Company embarked
on a plan to address the profitability of its bicycle business
that included exiting bicycle manufacturing operations,
outsourcing bicycle manufacturing, reducing warehouse capacity and
administrative personnel and rationalizing product offerings.
This transition is expected to be completed in the second quarter
of 2000. In the first quarter of 2000, the Company recorded a
$7.0 million strategic charge related to the actions committed to
in the fourth quarter of 1999 for severance and other related exit
costs. This charge is not included in the segment's operating
results. The first quarter results reflect the disposal of
inventory that was written-down to break-even in the fourth
quarter of 1999. In the second quarter of 2000, the Company will
continue its efforts to liquidate inventory and complete the
shutdown of its bicycle manufacturing, which may result in
production inefficiencies. The Company expects to see the
benefits from these actions in the second half of 2000.
In 1999, the Company streamlined the product offerings in its
camping business, focusing on higher-margin, differentiated
products and also introduced products under the Igloo brand name
late in the year. First quarter 2000 results did not reflect the
benefits of these actions as sales of new products did not offset
the effects of reduced product offerings and competition from
imported products. Additionally, the Company continued to sell
discontinued products at break-even, which negatively affected
operating margins. In the fishing business, the Company is
transitioning to Asian sourcing on certain low-end product
offerings. The costs associated with this action are not expected
to be significant. It is unlikely that these actions in the
camping and fishing businesses will benefit results until 2001.
Additional actions could be required to address the profitability
of these businesses, which could result in significant charges to
income.
Indoor Recreation Segment
The following table sets forth Indoor Recreation segment results
for the quarters ended March 31, 2000 and 1999 (dollars in
millions):
Quarter Ended March 31
2000 1999
Net sales $187.3 $184.8
Operating earnings $ 25.0 $ 23.6
Operating margin 13.3% 12.8%
Capital expenditures $ 3.9 $ 5.7
The Indoor Recreation segment recorded sales of $187.3 million in
the first quarter of 2000, an increase of 1.4 percent from 1999.
This increase was a result of growth in fitness equipment sales
due to a continuing strong health club market in the United States
and the success of new product launches in the high-end consumer
segment. Partially offsetting these gains was a decline in
revenues from the bowling business resulting from decreases in
equipment sales due to reductions in distributor inventories and
declines in bowling center revenues due to the divestiture of five
bowling centers during the prior year. The Company continues to
experience strong improvements in sales at upgraded bowling
centers.
Operating earnings totaled $25.0 million in the first quarter of
2000 versus $23.6 million in 1999, a 5.9 percent increase.
Operating margins were 13.3 percent in 2000 compared with 12.8
percent in 1999. These improvements reflect increased sales of
fitness equipment and continued cost containment in the bowling
business.
Cash Flow, Liquidity and Capital Resources
Cash generated from operating activities, available cash balances
and selected borrowings are the Company's major sources of funds
for investments and dividend payments. Cash and cash equivalents
totaled $123.8 million at March 31, 2000, up from $100.8 million
at the end of 1999.
Cash used for operating activities for the first quarter of 2000
reflects a seasonal build in working capital and totaled $58.5
million in 2000 versus $105.9 million in 1999. The improvement in
cash used for operating activities between periods reflects the
benefits of improved working capital management and an improvement
in income tax-related cash flows that more than offset $30.5
million of payments made in connection with antitrust litigation
settlements.
During the first quarter of 2000, the Company invested $27.3
million in capital expenditures, compared with $31.1 million in
1999. Total debt at March 31, 2000, increased to $918.3 million
versus $730.2 million at the end of 1999 due to increased
commercial paper borrowings to fund working capital requirements,
stock repurchases and capital expenditures. Debt-to-
capitalization ratios at these dates were 41.5 percent and 36.0
percent, respectively.
On February 8, 2000, the Company announced a program to repurchase
$100 million of its common stock from time-to-time in the open
market or through privately negotiated transactions. During the
first quarter of 2000, the Company repurchased 2.9 million shares
of its common stock for $51.9 million in open market transactions
under this program. The Company also repurchased additional
shares for $0.5 million under a systematic repurchase program in
the first quarter of 2000.
The Company's financial flexibility and access to capital markets
is supported by its balance sheet position, investment-grade
credit ratings and ability to generate significant cash from
operating activities. The Company had $285.4 million in
outstanding commercial paper at March 31, 2000, with additional
borrowing capacity of $114.6 million under the Company's $400
million long-term credit agreement with a group of banks. The
Company has $150 million available under a universal shelf
registration filed in 1996 with the Securities and Exchange
Commission for the issuance of equity and/or debt securities.
Management believes that these factors provide adequate sources of
liquidity to meet its long-term and short-term needs.
Refer to Note 4 to the consolidated financial statements and Note
6 to the consolidated financial statements in the Company's 1999
Annual Report on Form 10-K for disclosure of the potential cash
requirements of environmental proceedings. On October 27, 1999,
the United States Tax court issued a ruling that upheld an
Internal Revenue Service determination that resulted in an
increase in the short-term capital gains and income distributions
from two partnership investments for 1990 and 1991. This decision
increases the Company's tax liability relating to those years by
approximately $60.0 million, plus accrued interest, but will not
have an unfavorable effect on the Company's results of operations.
The Company is evaluating whether to appeal this decision. This
matter is more fully described in Note 13 to the consolidated
financial statements in the Company's 1999 Annual Report on Form
10-K
Legal Proceedings
On March 24, 2000, the United States Court of Appeals for the
Eighth Circuit issued an opinion reversing and vacating an adverse
verdict entered against the Company in favor of a buying group of
boat-builder customers in the case Concord Boat Corporation, et
al. v. Brunswick Corporation (Concord). In June 1998, a jury had
awarded the Concord plaintiffs treble damages totaling $133.2
million based on alleged antitrust violations involving the sale
of sterndrive and inboard marine engines. The Concord plaintiffs
were also awarded attorney fees and costs. The Company appealed
the verdict and award of fees and costs and the appellate court
reversed and vacated the judgment in favor of the Concord
plaintiffs, including the award of fees and costs and remanded the
case for entry of judgment in favor of the Company. The Concord
plaintiffs are seeking a rehearing to overturn the decision by the
appellate court.
The Company previously reached agreements to settle or dismiss six
additional suits, including five class-action lawsuits, filed
after the 1998 Concord verdict, seeking to rely on the allegations
and findings in the Concord suit. As previously discussed, the
Company made payments totaling $30.5 million relating to these
settlements in the first quarter of 2000. The remaining payments,
estimated at $27.9 million, are expected to be paid through 2001.
As a part of a settlement with a subset of one of the classes,
additional payments could have been required based on the final
resolution of the Concord suit. Based on the appellate court's
decision, the Company is not required to make any additional
payments under this settlement.
Forward Looking Statements
Certain statements in this Form 10-Q are forward looking as
defined in the Private Securities Litigation Reform Act of 1995.
These statements involve certain risks and uncertainties that may
cause actual results to differ materially from expectations as of
the date of this filing. These risks include, but are not limited
to, the effect of economic conditions on market demand for the
Company's products; inventory adjustments by major retailers;
competitive pricing pressures; the success of marketing and cost-
management programs; the ability to liquidate inventory and cease
bicycle manufacturing operations within the time, cost and manner
estimated; the ability to outsource the production of bicycles and
fishing reels; imports from Asia and competition from Asian
competitors; the dependence of the Outdoor Recreation segment on
mass merchants; the Company's ability to develop and produce new
products; new and competing technologies; and adverse weather
conditions retarding sales of outdoor recreation products.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Note 4 to Consolidated Financial Statements in Part I of this
Quarterly Report on Form 10-Q on pages 6 and 7 is hereby
incorporated by reference.
Item 4. Submission of Matters to a Vote of Security Holders
At the April 26, 2000, Annual Meeting of Shareholders of the
Company, Messrs. George W. Buckley, Michael J. Callahan, Manuel A.
Fernandez, Peter B. Hamilton and Roger W. Schipke were elected
directors of the Company for terms expiring at the 2003 Annual
Meeting and Ms. Dorrit J. Bern was elected a director of the
Company for a term expiring at the 2002 Annual Meeting. The
numbers of shares voted with respect to these directors were:
Nominees For Withheld
Dorrit J. Bern 75,510,550 1,243,210
George W. Buckley 75,376,538 1,377,223
Michael J. Callahan 75,557,983 1,195,778
Manuel A. Fernandez 75,544,973 1,208,778
Peter B. Hamilton 75,491,265 1,262,495
Roger W. Schipke 75,347,321 1,406,440
At the Annual Meeting, the Board of Directors' appointment of
Arthur Andersen LLP as auditors for the Company and its
subsidiaries for the year 2000 was ratified pursuant to the
following vote:
Number of
Shares
For 75,934,076
Against 376,540
Abstain 443,146
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3. By-Laws of the Company
(b) Reports on Form 8-K.
1. The Company filed a Current Report on Form 8-K dated
January 4, 2000, reporting in Item 5 that it had settled a
class-action lawsuit.
2. The Company filed a Current Report on Form 8-K dated
January 20, 2000, reporting in Item 5 that it had announced
plans to restructure its bicycle division.
3. The Company filed a Current Report on Form 8-K dated
March 29, 2000, reporting in Item 5 that the United States
Court of Appeals for the Eighth Circuit had issued an opinion
reversing and vacating a $133.2 million verdict entered
against the Company in an antitrust lawsuit.
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.
BRUNSWICK CORPORATION
May 11, 2000 By: /s/ Victoria J. Reich
Victoria J. Reich
Senior Vice President and
Chief Financial Officer
*Ms. Reich is signing this report both as a duly authorized
officer and as the principal accounting officer.
Exhibit 3
BRUNSWICK CORPORATION
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices in the City
of Lake Forest, State of Illinois, and at such other places as the
board of directors may from time to time determine or the business
of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders may be held at such time
and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. An annual meeting of stockholders shall be held at
such time and on such day in the month of April or in such other
month as the board of directors may specify by resolution. At the
annual meeting the stockholders shall elect by a plurality vote of
those stockholders voting at the meeting, by ballot, a board of
directors, and transact such other business as may properly be
brought before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of meeting shall be given not less than ten
nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 4. At least ten days before every election of
directors, a complete list of the stockholders entitled to vote at
said election arranged in alphabetical order, shall be prepared or
caused to be prepared by the secretary. Such list shall be open at
the place where the election is to be held for said ten days, to
the examination of any stockholder, and shall be produced and kept
at the time and place of election during the whole time thereof,
and subject to the inspection of any stockholder who may be
present.
Section 5. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by
the certificate of incorporation, may be called by the chairman of
the board and shall be called by the president or secretary at the
request in writing of a majority of the board of directors. Such
request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting of
stockholders stating the place, date and hour of meeting, and the
purpose or purposes for which the meeting is called shall be given
not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the shares of the
capital stock of the corporation, issued and outstanding and
entitled to vote thereat, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all
meetings of the stockholders for the transaction of business except
as otherwise provided by statute or by the certificate of
incorporation or by these by-laws. If, however, such quorum shall
not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented
any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 9. When a quorum is present or represented at any
meeting, the vote of the holders of a majority of the stock having
voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is
one upon which by express provision of the statutes or of the
certificate of incorporation or of these by-laws, a different vote
is required, in which case such express provisions shall govern and
control the decision of such question.
Section 10. At any meeting of the stockholders every
stockholder having the right to vote shall be entitled to vote in
person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than
three years prior to said meeting, unless said instrument provides
for a longer period. Each stockholder shall have one vote for each
share of stock having voting power, registered in his name on the
books of the corporation. Except where the transfer books of the
corporation shall have been closed or a date shall have been fixed
as a record date for the determination of its stockholders entitled
to vote, no share of stock shall be voted on at any election for
directors which shall have been transferred on the books of the
corporation within twenty days next proceeding such election of
directors.
ARTICLE III
DIRECTORS
Section 1. The number of directors shall be fourteen, but the
number of directors may, from time to time, be altered by amendment
of these by-laws in accordance with the certificate of
incorporation.
Section 2. Subject to the rights of holders of any class or
series of stock having a preference over the Common Stock as to
dividends or upon liquidation, nominations for the election of
directors may be made by the board of directors or a committee
appointed by the board of directors or by any stockholder entitled
to vote in the election of directors generally. However, any
stockholder entitled to vote in the election of directors generally
may nominate one or more persons for election as directors at a
meeting only if written notice of such stockholder's intent to make
such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the
secretary of the corporation not later than (a) with respect to an
election to be held at an annual meeting of stockholders, ninety
days prior to the anniversary date of the immediately preceding
annual meeting, and (b) with respect to an election to be held at a
special meeting of stockholders for the election of directors, the
close of business on the tenth day following the date on which
notice of such meeting is first given to stockholders. Each such
notice shall set forth: (i) the name and address of the stockholder
who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is the
holder of record of stock of the corporation entitled to vote at
such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice;
(iii) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as
would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange
Commission; and (v) the consent of each nominee to serve as a
director of the corporation if so elected. The presiding officer
of the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure.
Section 3. The property and business of the corporation shall
be managed by its board of directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as
are not by statute or by the certificate of incorporation or by
these by-laws directed or required to be exercised or done by the
stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the
State of Delaware.
Section 5. The first meeting of each newly elected board
shall be held immediately after, and at the same place as, the
annual meeting of stockholders at which such board shall have been
elected, for the purpose of electing officers, and for the
consideration of any other business that may properly be brought
before the meeting. No notice of such meeting shall be necessary
to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present.
Section 6. Regular meetings of the board of directors shall
be held on such dates, not less often than once each calendar
quarter, as may be fixed from time to time by resolution of the
board of directors. No notice need be given of such meetings,
provided that notice of such resolution has been furnished to each
director. Such meetings shall be held at the Lake Forest office of
the corporation or at such other place as is stated in the notice
of the meeting. Upon the assent, given either verbally or in
writing, of a majority of the whole board, any regular meeting may
be cancelled, the time changed, or may be held at such other place
and time, as a majority of the whole board may designate, either
verbally or in writing, upon reasonable notice given to each
director, either personally or by mail or by telegram.
Section 7. Special meetings of the board of directors may be
called by the chairman of the board, or by the secretary on the
written request of two directors, to be held either at the Lake
Forest office of the corporation or at such other place as may be
convenient and may be designated by the officer calling the
meeting. Reasonable notice of such special meeting shall be given
to each director, either personally or by mail or telegram;
provided, that a majority of the whole board of directors present
at a meeting called by any of said officers, in matters requiring
prompt attention by the board, may hold a valid meeting and
transact business without the giving of notice to each director as
above provided.
Section 8. At all meetings of the board the presence of a
majority of the whole board shall be necessary and sufficient to
constitute a quorum for the transaction of business and the act of
a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the
certificate of incorporation or by these by-laws. If a quorum
shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until
a quorum shall be present.
EXECUTIVE COMMITTEE
Section 9. (a) The board of directors of the corporation at
the annual or any regular or special meeting may, by resolution
adopted by a majority of the whole board, designate three or more
directors, one of whom shall be either the chairman of the board or
the president of the corporation, to constitute an executive
committee. Vacancies in the executive committee may be filled at
any meeting of the board of directors. Each member of the
executive committee shall hold office until his successor shall
have been duly elected, or until his death, or until he shall
resign or shall have been removed from office or shall cease to be
a director. Any member of the executive committee may be removed
by resolution adopted by a majority of the whole board of directors
whenever in its judgment the best interests of the corporation
would be served thereby. The compensation, if any, of members of
the executive committee shall be established by resolution of the
board of directors.
(b) The executive committee shall have and may exercise all
of the authority of the board of directors in the management of the
corporation, provided such committee shall not have the authority
of the board of directors in reference to amending the certificate
of incorporation, adopting a plan of merger or consolidation with
another corporation or corporations, recommending to the
stockholders the sale, lease, exchange, mortgage, pledge or other
disposition of all or substantially all of the property and assets
of the corporation if not made in the usual and regular course of
its business, recommending to the stockholders a voluntary
dissolution of the corporation or a revocation thereof, amending,
altering or repealing the by-laws of the corporation, electing or
removing officers of the corporation or members of the executive
committee, fixing the compensation of officers, directors, or any
member of the executive committee, declaring dividends, amending,
altering or repealing any resolution of the board of directors
which by its terms provides that it shall not be amended, altered
or repealed by the executive committee, the acquisition or sale of
companies, businesses or fixed assets where the fair market value
thereof or the consideration therefor exceeds $10,000,000,
authorizing the issuance of any shares of the corporation, or
authorizing the creation of any indebtedness for borrowed funds, in
excess of $2,000,000.
(c) The executive committee shall have power to authorize the
seal of the corporation to be affixed to all papers which may
require it. Minutes of all meetings of the executive committee
shall be submitted to the board of directors of the corporation at
each meeting following a meeting of the executive committee. The
minute books of the executive committee shall at all times be open
to the inspection of any director.
(d) The executive committee shall meet at the call of the
chairman of the executive committee, chairman of the board, the
president, or any two members of the executive committee. Three
members of the executive committee shall constitute a quorum for
the transaction of business and the act of a majority of those
present shall constitute the act of the committee.
AUDIT AND FINANCE COMMITTEE
Section 10. (a) The board of directors of the corporation at
the annual or any regular or special meeting shall, by resolution
adopted by a majority of the whole board, designate three or more
independent directors to constitute an audit and finance committee
and appoint one of the directors so designated as the chairman of
the audit and finance committee. Membership on the audit and
finance committee shall be restricted to those directors who are
independent of the management of the corporation and are free from
any relationship that, in the opinion of the corporation's board of
directors, would interfere with the exercise of independent
judgment as a member of the committee. Vacancies in the committee
may be filled at any meeting of the board of directors. Each
member of the committee shall hold office until his successor shall
have been duly elected, or until his death, or until he shall
resign or shall have been removed from the audit and finance
committee by the board or shall cease to be a director. Any member
of the audit and finance committee may be removed from the
committee by resolution adopted by a majority of the whole board of
directors whenever in its judgment (1) such person is no longer an
independent director or free from any relationship with the
corporation or any of its officers prohibited by this section, or
(2) the best interests of the corporation would be served thereby.
The compensation, if any, of members of the committee shall be
established by resolution of the board of directors.
(b) The audit and finance committee shall be responsible for
recommending to the board of directors the appointment or discharge
of independent auditors, reviewing with management and the
independent auditors the terms of engagement of independent
auditors, including the fees, scope and timing of the audit and any
other services rendered by such independent auditors; reviewing
with independent auditors and management the corporation's policies
and procedures with respect to internal auditing, accounting and
financial controls, and dissemination of financial information;
reviewing with management, the independent auditors and the
internal auditors, the corporation's financial statements, audit
results and reports and the recommendations made by the auditors
with respect to changes in accounting procedures and internal
controls; reviewing the results of studies of the corporation's
system of internal accounting controls; and performing any other
duties or functions deemed appropriate by the board of directors.
The committee shall have such powers and rights as may be necessary
or desirable to fulfill these responsibilities including, the power
and right to consult with legal counsel and to rely upon the
opinion of such legal counsel. The audit and finance committee is
authorized to communicate directly with the corporation's financial
officers and employees, internal auditors and independent auditors
on such matters as it deems desirable and to have the internal
auditors and independent auditors perform such additional
procedures as it deems appropriate. The audit and finance
committee shall periodically report to the board of directors on
its activities.
(c) Minutes of all meetings of the audit and finance
committee shall be submitted to the board of directors of the
corporation. The minute books of the committee shall at all times
be open to the inspection of any director.
(d) The audit and finance committee shall meet at the call of
its chairman or any two members of the committee. Two members of
the audit and finance committee shall constitute a quorum for the
transaction of business and the act of a majority of those present,
but no less than two members, shall constitute the act of the
committee.
HUMAN RESOURCE AND COMPENSATION COMMITTEE
Section 11. (a) The board of directors of the corporation at
the annual or any regular or special meeting shall, by resolution
adopted by a majority of the whole board, designate three or more
directors to constitute a human resource and compensation committee
and appoint one of the directors so designated as the chairman of
the human resource and compensation committee. Membership on the
human resource and compensation committee shall be restricted to
disinterested persons which for this purpose shall mean any
director, who, during the time he is a member of the human resource
and compensation committee is not eligible, and has not at any time
within one year prior thereto been eligible, for selection to
participate in any of the compensation plans administered by the
human resource and compensation committee. Vacancies in the
committee may be filled at any meeting of the board of directors.
Each member of the committee shall hold office until his successor
shall have been duly elected, or until his death or resignation, or
until he shall have been removed from the committee by the board of
directors, or until he shall cease to be a director or a
disinterested person. Any member of the human resource and
compensation committee may be removed by resolution adopted by a
majority of the whole board of directors whenever in its judgment
the best interests of the corporation would be served thereby. A
majority of the human resource and compensation committee shall
constitute a quorum and an act of the majority of the members
present at any meeting at which a quorum is present, or an act
approved in writing by each of the members of the committee without
a meeting, shall be the act of the human resource and compensation
committee.
(b) The human resource and compensation committee shall
administer the Brunswick Performance Plan, Strategic Incentive
Plan, 1991 Stock Plan, and Supplemental Pension Plan. The human
resource and compensation committee shall have the power and
authority vested in it by any plan of the corporation, which the
committee administers. The human resource and compensation
committee shall from time to time recommend to the board of
directors the compensation of the officers of the corporation
except for assistant officers whose compensation shall be fixed by
the officers of the corporation.
CORPORATE GOVERNANCE COMMITTEE
Section 12. (a) The board of directors of the corporation at
the annual or any regular or special meeting shall, by resolution
adopted by a majority of the whole board, designate three or more
directors to constitute a corporate governance committee of the
board of directors and appoint one of the directors so designated
as its chairman. Members on the corporate governance committee of
the board of directors shall be restricted to disinterested persons
which for this purpose shall mean any director who, during the time
the director is a member of the corporate governance committee of
the board of directors, is neither an officer or employee of the
corporation. Vacancies in the committee may be filled at any
meeting of the board of directors. Each member of the committee
shall hold office until his successor shall have been duly elected,
or until his death or resignation, or until he shall have been
removed from the committee by the board of directors, or until he
shall cease to be a director. Any member of the corporate
governance committee of the board of directors may be removed by
resolution of the whole board of directors whenever in its judgment
the best interests of the corporation would be served thereby. A
majority of the corporate governance committee of the board of
directors shall constitute a quorum and an act of the majority of
the members present at any meeting at which a quorum is present, or
an act approved in writing by each of the members of the committee
without a meeting, shall be the act of the corporate governance
committee. The compensation, if any, of members of the committee
shall be established by resolution of the board of directors.
(b) The corporate governance committee of the board of
directors shall be responsible for all matters of corporate
governance and director affairs including, but not limited to:
(i) considering and making recommendations to the
board with regard to changes in the size of the board;
(ii) developing and maintaining appropriate
criteria for the composition of the board of directors
and its nominees;
(iii) overseeing the selection of and making
recommendations to the board regarding nominees for
election as directors to be submitted to the
stockholders and nominees to fill vacancies on the
board of directors as they occur;
(iv) coordinating an annual evaluation by the
board, with input from senior management, of the
structure of the board and its committees and the
processes employed in their deliberations; and
(v) periodically evaluating the performance of
members of the board.
(c) Nothing in this by-law is intended to prevent any
individual director from making a recommendation of a person to be
a director of the corporation either to the corporate governance
committee or to the board.
OTHER COMMITTEES
Section 13. The board of directors may from time to time
create and appoint such committees in addition to the executive,
audit and finance, human resource and compensation and corporate
governance committees as it deems desirable. Each additional
committee shall bear such designation, shall have such powers and
shall perform such duties, not inconsistent with these by-laws or
with law, as may be assigned to it by the board of directors;
provided that no such additional committee may exercise the powers
of the board of directors in the management of the business and
affairs of the corporation except such as shall be expressly
delegated to it. The board of directors shall have the power to
change the members of any such additional committee at any time, to
fill vacancies, and to discharge any such additional committee at
any time. The compensation, if any, of members of any such
committee shall be established by resolution of the board of
directors.
COMPENSATION OF DIRECTORS
Section 14. Directors shall receive such fees and
reimbursement of reasonable expenses as may be fixed from time to
time by resolution of the board. Members of special or standing
committees shall also be allowed such fees and reimbursements for
reasonable expenses in connection with service on such committees
as may from time to time be fixed by resolution of the board. Such
fees may be fixed on the basis of meetings attended or on an annual
basis or both and may be payable currently or deferred.
ACTION BY WRITTEN CONSENT
Section 15. Any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of
the board or committee.
ACTION BY TELEPHONE OR OTHER COMMUNICATIONS EQUIPMENT
Section 16. Directors may participate in a meeting of the
board or any committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this section shall constitute presence in
person at such meeting.
ALTERNATE COMMITTEE MEMBERS
Section 17. The board of directors may designate one or more
directors as alternate members of any committee, any of whom may be
selected by the chairman of a committee to replace any absent or
disqualified member at any meeting of a committee. In the absence
or disqualification of a member of a committee and of the alternate
members of such committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not such
member or members constitutes a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in
place of any such absent or disqualified member.
ARTICLE IV
NOTICES
Section 1. Except as may be otherwise provided for in these
by-laws, whenever under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is
required to be given to any director or stockholder, it shall not
be construed to mean personal notice, but such notice may be given
in writing, by mail, addressed to such director or stockholder at
such address as appears on the books of the corporation, and such
notice shall be deemed to be given at the time when the same shall
be mailed. Notice to directors may also be given by telegram or
telex.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of
incorporation, or of these by-laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V
OFFICERS
Section 1. The Board of Directors shall elect a Chairman of
the Board from among its members. The Board of Directors shall
also elect a Chief Executive Officer and such other officers as the
Board of Directors determines, none of whom need to be members of
the Board of Directors.
Section 2. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officer of the
corporation may be removed at any time by the affirmative vote of a
majority of the whole board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. The corporation may indemnify to the fullest
extent that is lawful, any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including an action by or in the
right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, taxes, penalties and
amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding.
Section 2. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status
as such, whether or not he would be entitled to indemnity against
the same liability under the provisions of this article.
Section 3. The corporation may enter into an indemnity
agreement with any director, officer, employee or agent of the
corporation, upon terms and conditions that the board of directors
deems appropriate, as long as the provisions of the agreement are
not inconsistent with this article.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the
corporation by the chairman of the board, the president or a vice
president and the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of the corporation, certifying
the number of shares owned by him in the corporation. If the
corporation shall be authorized to issue more than one class of
stock or more than one series of any class, designations,
preferences and relative, participating, optional and other special
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions or such preferences and
rights shall be set forth in full or summarized on the face or back
of the certificate which the corporation shall issue to represent
such class or series of stock; provided, however, that, to the full
extent allowed by law, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock,
a statement that the corporation will furnish without charge to
each stockholder who so requests the designations, preferences and
relative, participating, optional or other special rights of each
class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and rights.
Section 2. If such certificate is countersigned (1) by a
transfer agent, or (2) by a registrar, any other signature on the
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 he were such officer, transfer agent, or registrar at the date
of issue.
LOST CERTIFICATES
Section 3. The board of directors may authorize the transfer
agents and registrars of the corporation to issue and register,
respectively, new certificates in place of any certificates alleged
to have been lost, stolen or destroyed, and in its discretion and
as a condition precedent to the issuance thereof, may prescribe
such terms and conditions as it deems expedient, and may require
such indemnities as it deems necessary to protect the corporation
and said transfer agents and registrars.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. 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, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a
record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the
board of directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books
as the owner of shares, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on
the party of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of
incorporation, if any, may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. 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 directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such
reserve in the manner in which it was created.
Section 3. The board of directors shall present at each
annual meeting and when called for by vote of the stockholders at
any special meeting of the stockholders, a full and clear statement
of the business and condition of the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to time
designate. The board of directors, in its discretion, may delegate its
responsibilities contained in this section to any officer or officers
of the corporation.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall begin on
the first day of January, and terminate on the thirty-first day of
December, in each year.
SEAL
Section 6. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the
words "Incorporated Delaware". The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE IX
TENNESSEE AUTHORIZED CORPORATION PROTECTION ACT
Section 1. This corporation shall be subject to Section
404(a) of the Tennessee Authorized Corporation Protection Act.
ARTICLE X
AMENDMENTS
Section 1. The holders of shares of capital stock of the
corporation entitled at the time to vote for the election of
directors shall have the power to adopt, alter, amend, or repeal
the by-laws of the corporation by vote of such percentage of such
shares as is required by the Certificate of Incorporation, or if no
percentage is specified by the Certificate of Incorporation, by
vote of not less than 66-2/3% of such shares. The board of
directors shall also have the power to adopt, alter, amend or
repeal the by-laws of the corporation by vote of such percentage of
the entire board as is required by the Certificate of
Incorporation, or if no percentage is specified by the Certificate
of Incorporation, by vote of not less than a majority of the entire board.
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