SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1998
Commission File Number 0-8401
-----------------------------
CACI International Inc
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(Exact name of registrant as
specified in its charter)
Delaware
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(State or other jurisdiction of
incorporation or organization)
54-1345888
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(I.R.S. Employer Identification No.)
1100 North Glebe Road, Arlington, VA 22201
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(Address of principal executive offices)
(703) 841-7800
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(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
CACI International Inc Common Stock, $0.10 par value
----------------------------------------------------
(Title of each class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
----- -----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of December 31, 1998: CACI International Inc Common
Stock, $0.10 par value, 10,882,000 shares.
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
- -------------------------------
Item 1. Financial Statements
Unaudited Condensed Consolidated Statements of Operations for the
Three Months Ended December 31, 1998 and 1997
Unaudited Condensed Consolidated Statements of Operations for the
Six Months Ended December 31, 1998 and 1997
Unaudited Condensed Consolidated Balance Sheets as of December 31,
1998 and June 30, 1998
Unaudited Condensed Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1998 and 1997
Unaudited Consolidated Statements of Comprehensive Income for the
Three and Six Months Ended December 31, 1998 and 1997
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
Item 5. Forward Looking Statements
INDEX TO EXHIBITS
SIGNATURES
<PAGE>
PART 1
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended December 31,
1998 1997
-------------------------------
Revenues $103,720 $ 79,145
Costs and expenses
Direct costs 59,392 42,550
Indirect costs and selling expenses 35,276 29,151
Depreciation and amortization 1,912 1,846
Goodwill amortization 766 495
------- -------
Total operating expenses 97,346 74,042
------- -------
Income from operations 6,374 5,103
Interest expense 972 472
-------
- -------
Income before income taxes 5,402 4,631
Income taxes 2,040 1,759
------- -------
Net income $ 3,362 $ 2,872
======= =======
Basic earnings per share $ 0.31 $ 0.27
======= =======
Diluted earnings per share $ 0.30 $ 0.26
======= =======
Average shares outstanding 10,874 10,755
======= =======
Average shares and equivalent
shares outstanding 11,197 11,127
======= =======
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(dollars in thousands, except per share data)
Six Months Ended December 31,
1998 1997
-----------------------------
Revenues $196,071 $149,814
Costs and expenses
Direct costs 111,035 80,587
Indirect costs and selling expenses 68,132 55,590
Depreciation and amortization 3,655 3,561
Goodwill amortization 1,394 805
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Total operating expenses 184,216 140,543
------- -------
Income from operations 11,855 9,271
Interest expense 1,468 717
------- -------
Income before income taxes 10,387 8,554
Income taxes 3,886 3,250
------- -------
Net income $ 6,501 $ 5,304
======= =======
Basic earnings per share $ 0.60 $ 0.49
======= =======
Diluted earnings per share $ 0.58 $ 0.48
======= =======
Average shares outstanding 10,866 10,730
======= =======
Average shares and equivalent
shares outstanding 11,199 11,101
======= =======
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, 1998 June 30, 1998
----------------- -------------
(Unaudited)
ASSETS
Current assets
Cash and equivalents $ 64 $ 2,081
Accounts receivable:
Billed 97,733 83,995
Unbilled 14,521 9,350
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Total accounts receivable 112,254 93,345
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Income taxes receivable 822 -
Prepaid expense and other 4,799 4,362
Deferred contract costs 1,768 2,383
Deferred income taxes 209 209
------- -------
Total current assets 119,916 102,380
------- -------
Property and equipment, net 12,999 11,351
Accounts receivable, long term 7,163 6,075
Goodwill 69,546 37,474
Other assets 6,742 4,884
Deferred contract costs, long-term 1,163 480
Deferred income taxes 4,964 416
------- -------
Total assets $222,493 $163,060
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable & accrued expenses $ 30,277 $ 24,257
Accrued compensation and benefits 16,456 17,010
Income taxes payable - 4,390
Deferred income taxes 1,371 1,845
------- -------
Total current liabilities 48,104 47,502
------- -------
Note payable, long-term 77,352 29,800
Deferred rent expenses 1,119 1,289
Deferred income taxes 144 142
Other long-term obligations 4,570 -
Shareholders' equity
Common stock -
$.10 par value, 40,000,000
shares authorized, 14,408,000
& 14,371,000 shares issued 1,441 1,437
Capital in excess of par 12,831 12,344
Retained earnings 90,916 84,415
Cumulative currency
translation adjustments (322) (207)
Treasury stock, at cost (3,526,000 shares) (13,662) (13,662)
------- -------
Total shareholders' equity 91,204 84,327
------- -------
Total liabilities & shareholders' equity $222,493 $163,060
======= =======
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
Six Months Ended December 31,
1998 1997
-----------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,501 $ 5,304
Reconciliation of net income to net cash
provided by (used in) operating activities
Depreciation & amortization 5,049 4,366
Provision for deferred income taxes 1,666 312
Loss (gain) on sale of property
& equipment 31 (32)
Changes in operating assets & liabilities
Accounts receivable (9,439) (4,487)
Prepaid expenses & other assets (617) 851
Deferred contract costs (67) -
Accounts payable & accrued expenses (700) (1,709)
Accrued compensation & benefits (439) 1,172
Other long-term obligations (280) -
Deferred rent expense (131) (455)
Income taxes (receivable) payable (3,853) 3,307
------- -------
Net cash provided (used) by
operating activities (2,279) 8,629
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property & equipment (3,160) (2,207)
Purchase of businesses (44,291) (36,154)
Proceeds from sale of property & equipment 9 382
Capitalized software cost & other (324) (105)
------- -------
Net cash used in investing activities (47,766) (38,084)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under line-of-credit 114,531 90,000
Payments under line-of-credit (66,979) (61,900)
Proceeds from stock options 491 716
------- -------
Net cash provided by financing activities 48,043 28,816
------- -------
Effect of changes in currency rates on
cash & equivalents (15) (8)
------- -------
Net increase in cash & equivalents (2,017) (647)
Cash & equivalents, beginning of period 2,081 2,015
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Cash & equivalents, end of period $ 64 $ 1,368
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash (received) paid during the period
for income taxes, net $ 5,994 $ (867)
======= =======
Interest paid during the period $ 1,013 $ 502
======= =======
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(dollars in thousands)
Three Months Six Months
Ended December 31, Ended December 31,
1998 1997 1998 1997
------------------ ------------------
Net income $3,362 $2,872 $6,501 $5,304
Currency translation adjustment (543) 316 (115) (329)
----- ----- ----- -----
Comprehensive income $2,819 $3,188 $6,386 $4,975
===== ===== ===== =====
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. Basis of Presentation
- --------------------------
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in the
annual financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to those rules
and regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading.
In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all necessary adjustments and reclassifications
(all of which are of a normal, recurring nature) that are necessary for fair
presentation for the periods presented. It is suggested that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
annual report to the Securities and Exchange Commission on Form 10-K for the
year ended June 30, 1998.
Certain reclassifications have been made to the prior period's financial
statements to conform to the current presentation.
B. Accounts Receivable
- ------------------------
Total accounts receivable are net of allowance for doubtful accounts of
$3,064,000 and $3,637,000 at December 31, 1998, and June 30, 1998,
respectively. Accounts receivable are classified as follows:
(dollars in thousands) December 31, 1998 June 30, 1998
----------------- -------------
Billed receivables
Billed receivables $ 88,895 $ 76,458
Billable receivables at end of period 8,838 7,537
------- -------
Total billed receivables 97,733 83,995
Unbilled receivables
Unbilled pending receipt of contractual
documents authorizing billing 14,246 9,195
Unbilled retainages and fee withholds
expected to be billed within the
next 12 months 275 155
------- -------
14,521 9,350
Unbilled retainages and fee withholds
expected to be billed beyond the
next 12 months 7,163 6,075
------- -------
Total unbilled receivables 21,684 15,425
------- -------
Total accounts receivable $119,417 $ 99,420
======= =======
C. Acquisitions
- -----------------
On November 13, 1998, the Company acquired all of the common stock of
QuesTech, Inc. ("QuesTech"), a company that specializes in the development and
application of information technology and engineering services for the defense
and national security communities, for $18.13 per share in cash. The total
consideration paid by CACI, including the assumption of liabilities, was
approximately $42 million. The transaction was funded through borrowings
under the Company's existing line of credit with a group of banks. For the
year ended December 31, 1997, QuesTech reported revenues of $78.5 million.
The transaction has been recorded using the purchase method of accounting.
Approximately $31 million of the purchase consideration has been preliminarily
allocated to goodwill based upon the excess of the purchase price over the
estimated fair value of net assets acquired, and will be amortized over 30
years. The preliminary purchase price allocation may change during the year
ending June 30, 1999, as additional information concerning the net asset
valuation is obtained. QuesTech contributed revenues of $8.9 million for the
period from November 13, 1998 to December 31, 1998.
On August 13, 1998, the Company purchased the assets of Information Decision
System ("IDS") for $2.6 million in cash and, therefore, the transaction has
been recorded using the purchase method of accounting. IDS provided internet
access to demographic site information and the acquisition is expected to
enhance the current U.S. market share of the Company's Marketing Systems Group
("MSG") in the industry. Approximately $2.4 million has been preliminarily
allocated to goodwill, based upon the excess of the purchase price over the
estimated fair value of net assets acquired, and will be amortized over 15
years. Since its acquisition, the operations acquired from IDS have
contributed approximately $0.2 million in revenue through September 30, 1998.
The acquisition was financed with available bank borrowings.
D. Other Long-Term Obligations
- -------------------------------
The Company acquired certain long-term obligations in connection with the
QuesTech transaction discussed in Note C. At December 31, 1998, approximately
$3.0 million was accrued in connection with the Officers and Managers Deferred
Compensation Plan ("DefCom"). DefCom allows eligible employee participants to
defer current compensation and provides supplemental postretirement benefits
along with certain specified death benefits to the participants'
beneficiaries. Postretirement benefits under DefCom are payable upon the
participant's termination of employment, and are paid in equal installments
over a period equal to the length of time the employee deferred compensation,
but no longer than ten years. Termination or retirement benefits are based
upon the employee's actual deferrals plus interest credited annually, as
determined by the Administrator. Supplemental death benefits are payable, in
some cases, over a period of ten years provided death occurs while the
participant is an active employee of the Company. DefCom is a non-qualified,
defined contribution plan which has been valued based on the actual
participant account balances plus interest earned to date. The remaining
liability consists primarily of amounts accrued in connection with other
benefit plans which provide medical and insurance coverage. The liability
associated with these other plans is actuarily determined on an annual basis.
E. Commitments and Contingencies
- ----------------------------------
The Company is involved in various lawsuits, claims, and administrative
proceedings arising in the normal course of business. Management is of the
opinion that any liability or loss associated with such matters will not have
a material adverse effect on the Company's operations and liquidity.
F. Recent Accounting Pronouncements
- -------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." As specified by these Statements, the
Company will apply these Statements beginning in fiscal 1999 and reclassify
its annual financial statements for earlier periods for comparative purposes.
SFAS No. 130 requires that all items defined under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements. The
Company adopted SFAS No. 130 during the first quarter of fiscal 1999 and has
reported the effects of foreign currency translation gains or losses as a
component of comprehensive income in a separate financial statement.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographics areas, and major customers. This Statement supersedes
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," but
retains the requirement to report information about major customers. It
amends SFAS No. 94, "Consolidation of All Majority-Owned Subsidiaries," to
remove the special disclosures requirements for previously unconsolidated
subsidiaries. At this point, the Company has not fully determined the impact
of the adoption of SFAS No. 131.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations For the Three and Six Months Ended December 31, 1998
and 1997
- --------------------------------------------------------------------------
REVENUES. The table below sets forth the customer mix in revenues with
related percentages of total revenues for the three and six months ended
December 31, 1998 (FY99) and December 31, 1997 (FY98), respectively:
(dollars in thousands)
<TABLE>
<CAPTION>
Second
Quarter First Six Months
FY99
FY98 FY99 FY98
------------------ -----------------
- ------------------ ------------------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Department of Defense $ 48,680 46.9% $ 39,407 49.8% $
90,423 46.1% $ 75,754 50.6%
Federal Civilian Agencies 31,993 30.9% 21,073 26.6%
61,226 31.2% 39,420 26.3%
Commercial 18,272 17.6% 16,850 21.3%
35,580 18.2% 31,113 20.8%
State & Local Governments 4,775 4.6% 1,815 2.3%
8,842 4.5% 3,527 2.3%
------- ----- ------- -----
- ------- ----- ------- -----
Total $103,720 100.0% $ 79,145 100.0%
$196,071 100.0% $149,814 100.0%
======= ===== ======= =====
======= ===== ======= =====
</TABLE>
For the three months and six months ended December 31, 1998, the Company's
total revenues increased by 31%, or $24.6 million, and by 31%, or $46.3
million, respectively, over the same periods last year. Approximately $15.4
million, or 63% of the increase, and $26.5 million, or 57% of the increase,
was achieved through internal or organizational growth in all market segments
for the quarter and six months ended December 31, 1998, respectively, over the
same periods a year ago. The remaining increase of $9.2 million and $19.8
million for the three and six months of FY99, respectively, as compared to
FY98 was primarily the result of acquisitions described below.
On November 13, 1998, the Company acquired 100% of the issued and outstanding
common stock of QuesTech, Inc. ("QuesTech") which contributed approximately
$8.9 million of incremental revenues for the three and six months ended
December 31, 1998. On August 13, 1998, the Company purchased the assets of
Information Decision Systems ("IDS"). Since its acquisition, the operations
of IDS have contributed approximately $0.4 million of revenues through
December 31, 1998. In the prior year, the Company purchased the business and
assets of Government Systems, Inc. ("GSI") on November 1, 1997, which
generated incremental revenues of $9.6 million for the first three months of
FY99.
Department of Defense revenues increased 24%, or $9.3 million, for the
quarter, and 19%, or $14.7 million, for the first six months. The QuesTech
and GSI acquisitions accounted for primarily all of the growth, contributing a
combined $7.8 million and $11.8 million for the three and six month periods,
respectively.
Revenues from Federal Civilian agencies increased 52%, or $10.9 million, for
the quarter, and 55% or $21.8 million, for the first six months of FY99, as
compared to the same periods a year ago. Approximately 54% of Federal
Civilian agency revenues are derived from the Department of Justice ("DoJ") in
providing litigation support services and in developing an automated debt
collection system. Revenues for DoJ were $16.1 million and $32.8 million for
the quarter and six months ended December 31, 1998, as compared to $13.9
million and $29.0 million for the respective periods a year ago. Significant
growth in contracts with Civilian agencies other than DoJ was led by expanding
efforts under contract vehicles with the Federal Aviation Administration
("FAA") and the General Services Administration ("GSA"). A higher level of
communication services and equipment provided to the FAA has resulted in
incremental revenues of $1.5 million for the second quarter of FY99 and of
$5.2 million for the first half of FY99. The remaining increase of $7.2
million for the second quarter and $12.8 million for the first half of FY99
was mainly generated from growth in a GSA multiple task order contract, which
provides primarily Year 2000 software renovation services to several Civilian
agencies.
During the quarter and six months ended December 31, 1998, commercial revenues
increased by 8%, or $1.4 million, and 14%, or $4.5 million, respectively, over
the same periods a year ago. These increases are primarily the result of
increased demand for European systems integration services provided by our
Marketing Systems Group ("MSG") in the United Kingdom.
Revenues from state and local governments increased $3.0 million and $5.3
million for the quarter and six months ended December 31, 1998, as compared to
the same periods a year ago due to increased demand for Year 2000 software
renovation services.
The following table sets forth the relative percentage that certain items of
expense and earnings bear to revenues for the quarter and six months ended
December 31, 1998 and December 31, 1997, respectively.
<TABLE>
<CAPTION>
Dollar Amount (in
thousands) Percentage of Revenue
Second Quarter First Six
Months Second Quarter First Six Months
FY99 FY98 FY99
FY98 FY99 FY98 FY99 FY98
- ----------------------------------------------
- ---------------------------------------
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Revenues $103,720 $ 79,145 $196,071
$149,814 100.0% 100.0% 100.0% 100.0%
Costs and
expenses:
Direct costs 59,392 42,550 111,035
80,587 57.3% 53.8% 56.6% 53.8%
Indirect costs & selling expenses 35,276 29,151 68,132
55,590 34.0% 36.8% 34.7% 37.1%
Depreciation & amortization 1,912 1,846 3,655
3,561 1.8% 2.3% 1.9% 2.4%
Goodwill amortization 766 495 1,394
805 0.7% 0.7% 0.7% 0.5%
------- ------- -------
- ------- ----- ----- ----- -----
Total operating expenses 97,346 74,042 184,216
140,543 93.8% 93.6% 93.9% 93.8%
Income from operations 6,374 5,103 11,855
9,271 6.2% 6.4% 6.1% 6.2%
Interest expense 972 472 1,468
717 0.9% 0.6% 0.7% 0.5%
------- ------- -------
- ------- ----- ----- ----- -----
Earnings before income taxes 5,402 4,631 10,387
8,554 5.3% 5.8% 5.4% 5.7%
Income taxes 2,040 1,759 3,886
3,250 2.1% 2.2% 2.1% 2.2%
------- ------- -------
- ------- ----- ----- ----- -----
Net income $ 3,362 $ 2,872 $ 6,501 $
5,304 3.2% 3.6% 3.3% 3.5%
======= ======= =======
======= ===== ===== ===== =====
INCOME FROM OPERATIONS. Operating income increased 25% and 28% for the quarter
and six months ended December 31, 1998 as compared to the same periods a year
ago. This is due to the 31% growth in revenues for both the second quarter
and first half of FY99 offset by a higher proportion of other direct costs to
total direct costs which generally provide a lower margin.
As a percentage of revenues, total direct costs for the second quarter of FY99
were 57.3% versus 53.8% a year ago and for the first six months of FY99 were
56.6% versus 53.8% a year ago. Direct costs include direct labor and other
direct costs such as equipment purchases, subcontract costs and travel
expenses. The largest component of direct costs, direct labor was $29.9
million and $25.2 for the second quarter of FY99 and FY98, respectively. For
the six months ended December 31, 1998 and 1997, direct labor was $57.2
million and $49.0 million, respectively. Other direct costs were $29.5
million and $17.4 million for the second quarters of FY99 and FY98,
respectively, and $53.8 million versus $31.6 million for the first six months
of FY99 and FY98, respectively. Other direct costs have grown at a more rapid
pace as the Company has a higher number of contracts with an increased level
of other direct costs. The most notable increases have come from equipment
purchases for contracts with the FAA and DoJ as well as subcontract and travel
costs incurred with Year 2000 software services.
Indirect costs and selling expenses include fringe benefits, marketing and bid
proposal costs, indirect labor and other discretionary costs, most of which
are highly variable. As a percentage of revenues, indirect costs have
decreased due to the impact of higher other direct costs on revenues for the
second quarter and first half of FY99.
Depreciation and amortization expense increased slightly in the second quarter
and first half of FY99 as compared to the same periods a year ago, primarily
due to the acquisition of QuesTech.
Goodwill amortization expense has increased $0.3 million for the second
quarter and $0.6 million for the first half of FY99 as compared to the same
periods a year ago due to the acquisitions of QuesTech and IDS in the current
fiscal year as well as the incremental impact from the GSI acquisition in the
prior year.
INTEREST EXPENSE. Interest expense increased $0.5 million and $0.7 million
for the second quarter and first six months of FY99 as compared to the same
periods in FY98. This is directly attributable to the increased borrowings of
$42 million necessary to complete the QuesTech acquisition as well as an
increase in average borrowings since the acquisition of GSI in the prior year.
INCOME TAXES. The effective income tax rate for the quarter and six months
ended December 31, 1998 was 37.8% and 37.4% as compared to 38.0% for both the
quarter and six months ended December 31, 1997. The slight decrease for both
periods is due to a lower effective state income tax rate offset by the impact
of non-deductible goodwill amortization from the QuesTech acquisition.
Liquidity and Capital Resources
- -------------------------------
Historically, the Company's positive cash flow from operations and available
credit facilities provided adequate liquidity and working capital to fully
fund the Company's operational needs and support the acquisition activities.
Working capital was $71.8 million and $54.9 million as of December 31, 1998
and June 30, 1998, respectively. The increase in working capital in the first
six months of FY99 is related both to internal growth and to the QuesTech
acquisition. Operating activities used cash of $2.3 million for the six
months of FY99 as compared to FY98 when operating activities provided cash of
$8.6 million. This decrease in cash provided by operating activities since
the prior year is primarily due to $6.0 million of income tax payments in the
first half of FY99 as compared to $3.1 million of income tax refunds in FY98.
In addition, the decrease is due to cash payments related to higher other
direct costs as well as growth in receivables resulting from the 31% growth in
revenues for the first six months of FY99 as compared to the same period of
FY98.
The Company used $47.8 million in investing activities for the six months
ended December 31, 1998 versus $38.1 million for the same period a year ago.
This is primarily due to the acquisitions of QuesTech of $41.6 million and of
IDS for $2.6 million in FY99, and of GSI for $33.5 million in FY98.
The Company financed its investing activities from operating cash flows and
from a net increase in borrowings of $47.6 million under its line of credit.
In June 1998, the Company executed a new five-year unsecured revolving line of
credit, which permits borrowings of up to $125 million with annual sublimits
on amounts borrowed for acquisitions. The Company also maintains a 500,000
pound sterling unsecured line of credit in London, England, which expires in
November 1999. At December 31, 1998, the Company had approximately $48.5
million available for borrowings under its lines of credit.
The Company believes that the combination of internally generated funds,
available bank borrowings and cash on hand will provide the required liquidity
and capital resources for the foreseeable future.
Year 2000
- ---------
The following discussion addresses the Company's response to the Year 2000
issue, caused by the fact that many computer systems have not been designed to
process dates for the Year 2000 and beyond.
The Company has undertaken a multi-faceted compliance program to address its
readiness to handle the date issue in connection with both Information
Technology ("IT") and non-IT systems (such as those using embedded chip
technology) in the following areas: CACI-developed software products and
systems, infrastructure hardware and software applications, business
applications, office equipment, leasehold facilities, and critical business
partners. The Company believes that continued awareness and communication are
critical to the successful execution of this program. We are currently
addressing each one of these elements listed above.
Through the use of questionnaires, compliance testing, and continued
discussions, we have determined that a substantial portion of the CACI
software products currently offered are compliant and have published the
status of all CACI software products on the Company's internet site at
http://www.caci.com. The Company's plan is to achieve full compliance by July
1999. Regarding the custom systems previously developed by CACI for its
customers, the Company is working to evaluate the contractual commitments that
would obligate CACI to remediate non-compliant systems, as well as CACI's
potential legal exposure concerning systems for which CACI has no continuing
express warranty or maintenance obligations.
Based on the present state of our knowledge and of the law as it applies to
this aspect of the Year 2000 issue, we are unable at this time to determine
the full extent of exposure or to estimate the probable cost and timing of any
required remediation.
Over the past few years, the Company has made a concerted effort to update its
desktop and laptop computers and its internal communications network equipment
and software. With current technology in place, the Company believes that
most of these systems are already compliant. The Company has taken the
additional step of requesting that its 160 suppliers of such systems and
components provide information as to Year 2000 compliance of their products.
To date, approximately 60% have been found to be compliant or require only
minor changes. The Company is proceeding in accordance with a plan that is
scheduled to achieve material compliance of these systems by June 1999.
At this point, the Company has identified the following systems as our key
business applications: finance & project management, payroll, human resources,
and contracts. Our human resources information and contracts database systems
are largely compliant with only minor issues remaining. We are currently
reviewing the project forecasting systems for Year 2000 readiness. In
addition, we recently completed the upgrade of our payroll system to a fully
compliant MS-Windows(R)-based version supplied by an outside vendor.
In January 1998, we began our implementation of a new finance system, which is
supplied by Deltek Systems, a leading supplier of such systems to the
government contracting industry. This system is represented as being
compliant and our plan is on schedule to have it implemented by June 1999.
We have and will continue to determine and assess our critical business
partners as a part of our compliance program. Presently, such significant
business partners include, but are not limited to, our suppliers, the utility
companies, our bank lending group, an outside vendor used to process payroll,
insurance and benefit providers, and property management firms. CACI's
operations are dependent to varying degrees on the readiness of these and
other partners. CACI has issued questionnaires to identified business
partners. To date, the number of responses received indicate that many of our
business partners are actively addressing the Year 2000 issue. The Company is
continuing to aggressively pursue responses in order to complete our
evaluations and develop any appropriate contingency plans, as necessary.
The Company is heavily dependent upon the effectiveness of its customers'
systems, principally in the U.S. Government, for the administration of
contracts and payment of the Company's invoices. The Company has made formal
inquiries and continues to vigorously pursue responses concerning the efforts
of its larger U.S. Government customers to determine the status and encourage
correction of any problems in their systems. The primary concern is that
there will be delays in contract payments to the Company, which would require
a temporary increase in working capital. The Company has substantial
borrowing capacity available under its current line of credit, which extends
to June 2003, but will further evaluate the potential cash flow impact of the
problem and determine if additional steps are necessary to insure that
adequate contingency financing is available.
The financial impact of preparing the Company to be compliant is not fully
determinable at this time. Presently, the most significant costs are related
to our implementation of our new business systems in finance and project
management, which are discussed above. Costs for this project, including
software, hardware, consulting fees and labor are estimated at $2 million, of
which approximately 50% has been spent to date. These costs are being
capitalized and will be depreciated when the system is operational. In
addition, we anticipate incurring approximately $200 thousand in incremental,
internal labor costs that relate specifically to management of the Year 2000
compliance program. The Company has devoted one full-time individual, an
oversight committee of 15 individuals and approximately 40 LAN administrators
at various offsite locations to communicate and implement all aspects of the
Year 2000 compliance program. The Company has found that many of the upgrades
or patches necessary to fix the software are being provided at no cost by
major vendors. In addition, a majority of the CACI software product upgrades
are currently planned using existing technical staff without a significant
effect on other new product development.
In summary, the Company has established a Year 2000 compliance program plan
which is progressing as described above. We have not yet proceeded far enough
through performance of that plan to make a more complete assessment of the
Company's state of readiness, costs to address Year 2000 issues, or risks to
the Company. Moreover, because the Company's Year 2000 compliance program
plan appears, on the basis of our present knowledge, to adequately address the
matter, we have not yet developed specific contingency plans. Investors
should be aware of the fact that the process of addressing the Year 2000 issue
is necessarily incremental. The Company will continue to report on the status
of its Year 2000 compliance program. Investors are cautioned, however, that
the Company's assessment of its readiness, of the costs of performing the
program and the risks attended thereto, and of the need for any contingency
plans may change materially in the future as we gain more complete knowledge
and proceed further through plan performance.
<PAGE>
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
CACI, INC. - FEDERAL v. Arizona Department of Transportation
- ------------------------------------------------------------
Reference is made to Part II, Item 1, Legal Proceedings, in the Registrant's
Report on Form 10-Q for the quarter ended September 30, 1998 for the most
recently filed information concerning the lawsuit filed on June 25, 1996, by
CACI, INC. - FEDERAL ("CACI"), the Registrant's wholly-owned subsidiary, in
Superior Court for Maricopa County, Arizona, against the Arizona Department of
Transportation ("ADOT"). This suit seeks the following: (i) a declaratory
judgment that the disputes procedures mandated by the Arizona Procurement Code
is unconstitutional; (ii) a declaratory judgment that ADOT cannot assert
claims against CACI under the mandated disputes procedure; (iii) a declaratory
judgment that ADOT is not entitled to recover consequential damages in
connection with the dispute; (iv) $2,938,990 plus interest in breach of
contract damages; (v) the return of CACI's property seized by ADOT in
connection with the termination of the contract; and (vi) lawyers' fees. ADOT
has counterclaimed, seeking in excess of $100 million in damages allegedly
caused by CACI's breach of contract.
Since the filing of Registrant's report indicated above, the parties have
reopened settlement discussions, with no resolution to date.
ITEM 5. OTHER INFORMATION
Other Information
- -----------------
At a meeting held on February 9, 1999, the Board of Directors of the Company
unanimously amended the By-laws of the Company to establish ministerial and
administrative procedures governing any solicitation of written consents for
corporate action pursuant to Section 228 of the Delaware General Corporation
Law. Among other things, the By-law amendments permit the Board of Directors
of the Company to set a record date for determining shareholders entitled to
act by written consent, to provide that written consents may only be valid for
up to 60 days, and to establish procedures for the inspection and review of
the validity of consents and revocations. The full text of the amendments is
filed as Exhibit 3.2 hereto.
Forward Looking Statements
- --------------------------
This filing may contain "forward-looking" statements, as that term is defined
in the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements concerning expectations of the
Company's future performance in terms of revenues and earnings. The Company
cautions investors that there can be no assurance that actual results will not
differ materially from those projected or suggested in such forward-looking
statements. Factors which could cause a material difference in results
include, but are not limited to, the following: regional and national economic
conditions; changes in interest rates; changes in government spending policies
and/or decisions concerning specific programs; individual business decisions
of customers and clients; developments in technology; competition for employee
resources; competitive factors and pricing pressures; the Year 2000 compliance
of the Company's customers, contracting partners supplies and landlords; our
ability to achieve the objectives of our business plans; and changes in governme
nt laws or regulations.
<PAGE>
CACI INTERNATIONAL INC AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Title
- ------- -----
3.2 By-laws of CACI International Inc, as amended February 9, 1999
11 Computation of Basic and Diluted Earnings Per Share
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CACI International Inc
----------------------------------
(Registrant)
Date: February 12, 1999 By: /s/
--------------------------- ----------------------------------
Dr. J.P. London
Chairman of the Board,
Chief Executive Officer,
and Director
(Principal Executive Officer)
Date: February 12, 1999 By: /s/
--------------------------- ----------------------------------
Dr. J.P. London
Acting Chief Financial Officer
and Treasurer
(Principal Financial Officer)
</TABLE>
EXHIBIT 11
CACI INTERNATIONAL INC AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
------------------ ------------------
Net income $ 3,362 $ 2,872 $ 6,501 $ 5,304
Average shares outstanding
during the period 10,874 10,755 10,866 10,730
Dilutive effect of stock options
after application of treasury
stock method 323 372 333 371
------ ------ ------ ------
Average number of shares
outstanding during the period 11,197 11,127 11,199 11,101
====== ====== ======
======
Basic earnings per share $ 0.31 $ 0.27 $ 0.60 $ 0.49
====== ====== ======
======
Diluted earnings per share $ 0.30 $ 0.26 $ 0.58 $ 0.48
====== ====== ======
======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10-Q FOR THE PERIOD ENDED DECEMBER 31, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 64,000
<SECURITIES> 0
<RECEIVABLES> 122,481,000
<ALLOWANCES> (3,064,000)
<INVENTORY> 0
<CURRENT-ASSETS> 119,916,000
<PP&E> 46,803,000
<DEPRECIATION> (33,804,000)
<TOTAL-ASSETS> 222,493,000
<CURRENT-LIABILITIES> 48,104,000
<BONDS> 77,352,000
0
0
<COMMON> 1,441,000
<OTHER-SE> 89,763,000
<TOTAL-LIABILITY-AND-EQUITY> 222,493,000
<SALES> 0
<TOTAL-REVENUES> 196,071,000
<CGS> 0
<TOTAL-COSTS> 111,035,000
<OTHER-EXPENSES> 72,810,000
<LOSS-PROVISION> 371,000
<INTEREST-EXPENSE> 1,468,000
<INCOME-PRETAX> 10,387,000
<INCOME-TAX> 3,886,000
<INCOME-CONTINUING> 6,501,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,501,000
<EPS-PRIMARY> $0.58<F1>
<EPS-DILUTED> $0.58
<FN>
<F1>EARNINGS PER SHARE HAS BEEN PRESENTED ON THE FINANCIAL STATEMENTS IN
ACCORDANCE WITH SFAS #128 AS SHOWN BELOW:
EARNINGS PER SHARE-BASIC $0.60
EARNINGS PER SHARE-DILUTED $0.58
</FN>
</TABLE>
Exhibit 3.2
Amended as of February 9, 1999
BY-LAWS
OF
CACI International Inc
(a Delaware Corporation)
ARTICLE I.
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office for the transaction
of business of the Corporation is hereby fixed and located at 1100 North Glebe
Road, County of Arlington, Commonwealth of Virginia. The Board of Directors is
hereby granted full power and authority to change said principal office from
one location to another in said County.
Section 2. OTHER OFFICES. Branch of subordinate offices may at any
time be established by the Board of Directors at any place or places where the
Corporation is qualified to do business.
ARTICLE II.
MEETING OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. All annual and other meetings of
shareholders shall be held either at the principal office of the Corporation
or at any other place which may be designated either by the Board of Directors
pursuant to authority hereafter granted to said Board, or by written consent
of all shareholders entitled to vote thereat, given either before or after the
meeting and filed with the Secretary of the Corporation.
Section 2. ANNUAL MEETING. The annual meetings of the shareholders
shall be held on the third Friday of October of each year, at 9:00 o'clock
a.m. or at such other date and time, not inconsistent with Delaware law, as
may be approved by the Board of Directors; provided, however, should said day
fall upon a legal holiday, then such annual meeting of shareholders shall be
held at the same time and place on the next day thereafter which is not a
legal holiday.
Written notice of each annual meeting shall be given to each shareholder
entitled to vote thereat, either personally or by mail or other means of
written communication, charges prepaid, addressed to such shareholder at his
or her address appearing on the books of the Corporation or given by him or
her to the Corporation for the purpose of notice. If a shareholder gives no
address, notice shall be deemed to have been given him or her if sent by mail
or other means of written communication addressed to the place where the
principal office of the Corporation is situated, or if published at least once
in some newspaper of general circulation in the county in which said office is
located. All such notices shall be sent to such shareholder entitled thereto,
not less than twenty (20) days nor more than sixty (60) days before such
annual meeting, and shall specify the place, day, and hour of such meeting,
and shall also state the general nature of the business or proposal to be
considered or acted upon at such meeting before action may be taken at such
meeting on:
(a) A proposal to sell, lease, convey, exchange, transfer, or
otherwise dispose of all or substantially all of the property or assets of the
Corporation, except under Section 272 of the Delaware General Corporation Law,
and except for a transfer to a wholly-owned subsidiary;
(b) A proposal to merge or consolidate with another corporation,
domestic or foreign;
(c) A proposal to reduce the stated capital of the Corporation;
(d) A proposal to amend the Articles of Incorporation;
(e) A proposal to wind up and dissolve the Corporation; and
(f) A proposal to adopt a plan of distribution of shares, securities,
or any consideration other than money in the process of winding up.
Advance Notice of Stockholder Proposed Business at Annual Meeting: At an
Annual Meeting of the Shareholders, only such business shall be conducted as
shall have been properly brought before the meeting:
(a) As specified in the notice of the meeting (or any supplement
thereto);
(b) By, or at the direction of, the Board of Directors; or
(c) Otherwise properly brought before the meeting by a stockholder.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the offices of the Secretary of the Corporation, not
less than one hundred fifty (150) days prior to the first anniversary of the
date of the last Annual Meeting of stockholders of the Corporation. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder purposes to bring before the Annual Meeting (i) a brief
description of the business desired to be brought before the Annual Meeting
and reasons for conducting such business at the Annual Meeting; (ii) the name
and record address of the stockholder proposing such business; (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder; and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in the By-laws to the contrary, no business
shall be conducted at the Annual Meeting except in accordance with the
procedures set forth in this section, provided, however, that nothing in this
section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the Annual Meeting in accordance with said
procedure.
The Chairman of the Annual Meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this section, and if he should so
determine, he shall so declare to the meeting that any such business not
properly brought before the meeting shall not be transacted.
Section 3. SPECIAL MEETINGS. Special Meetings of the shareholders, for
any propose or purposes whatsoever, may be called any time by the Chairman of
the Board, the President, or by the Board of Directors. Except in special
cases where other express provision is made by statute, notice of such special
meetings shall be given in the same manner as for annual meetings of
shareholders.
Notices of any special meeting shall specify, in addition to the place,
day and hour of such meeting, the general nature of the business to be
transacted.
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be
adjourned from time to time by vote of a majority of the shares, the holders
of which are either present in person or by proxy, but in the absence of a
quorum, no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special, is adjourned
for thirty (30) days or more, notice of the adjourned meeting shall be given
as in the case of an original meeting. In all other instances of adjournment,
it shall not be necessary to give any notice of an adjournment or of the
business to be transacted ad an adjourned meeting, other than by announcement
at the meeting at which such adjournment is taken.
Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled to vote
has been absent from any meeting or shareholders, whether annual or special,
an entry in the minutes to the effect that notice has been duly given shall be
sufficient evidence that due notice of such meeting was given to such
shareholder, as required by the law and the By-laws of the Corporation.
Section 6. VOTING. At all meetings of shareholders, every shareholder
entitled to vote shall have the right to vote in person or by proxy the number
of shares standing in his or her name on the stock records of the Corporation.
Such vote may be given viva voce or by ballot; provided, however, that all
elections for directors must be by ballot upon demand made by a shareholder at
any election and before the voting begins.
Section 7. QUORUM. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum. When a quorum is present at any
meeting, a majority in interest of the stock represented thereat shall decide
any question brought before such meeting, unless the question is one upon
which by express provision of law, the Articles of Incorporation, or these
By-laws, a larger or different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 8. CONSENT OF ABSENTEES. The proceedings and transactions of
any meeting of shareholders, either annual or special, however called and
noticed, shall be as valid as though had at a meeting duly held after regular
call and notice, if a quorum be present either in person or by proxy, and if,
either before or after the meeting, each of the shareholders entitled to vote,
not present in person or by proxy, sign a written waiver of notice, a consent
to the holding of such meeting, or an approval of the minutes thereof. All
such waivers, consents, or approvals shall be filed with the corporate records
or made apart of the minutes of the meeting.
Section 9. ACTION WITHOUT MEETING. Any action, which under the
provisions of Section 228 of the Delaware General Corporation Law may be taken
at a meeting of the shareholders, may be taken without a meeting if authorized
by a writing signed by the holders of outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or take such
action at any meeting at which all shares entitled to vote thereon were
present and voted, and filed with the Secretary of the Corporation.
Consents to corporate action shall be valid for a maximum of sixty (60)
days after the date of the earliest dated consent delivered to the corporation
in the manner provided in Section 228(c) of the Delaware General Corporation
Law. Consents may be revoked by written notice (i) to the Corporation, (ii)
to the stockholder or stockholders soliciting consents or soliciting
revocations in opposition to action by consent (the "Soliciting
Stockholders"), or (iii) to a proxy solicitor or other agent designated by the
Corporation or the Soliciting Stockholders.
Within ten (10) business days after receipt of the earliest dated consent
delivered to the Corporation in the manner provided in Section 228(c) of the
Delaware General Corporation Law or the determination by the Board of
Directors of the Corporation that the Corporation should seek corporate action
by written consent, as the case may be, the Secretary of the Corporation shall
engage nationally recognized independent inspectors of elections for the
purpose of performing a ministerial review of the validity of the consents and
revocations. The cost of retaining inspectors of election shall be borne by
the Corporation.
Following appointment of the inspectors, consents and revocations shall
be delivered to the inspectors upon receipt by the Corporation, the Soliciting
Stockholders or their proxy solicitors or other designated agents. As soon as
practicable following the earlier of (i) the receipt by the inspectors, a copy
of which shall be delivered to the Corporation, of any written demand by the
Soliciting Stockholders, or (ii) sixty (60) days after the date of the
earliest dated consent delivered to the Corporation in the manner provided in
Section 228(c) of the Delaware General Corporation Law, the inspectors shall
issue a preliminary report to the Corporation and the Soliciting Stockholders
stating the number of valid and unrevoked consents and whether, based on their
preliminary count, the requisite number of valid and unrevoked consents has
been obtained to authorize or take the action specified in the consents.
Unless the Corporation and the Soliciting Stockholders shall agree to a
shorter or longer period, the Corporation and the Soliciting Stockholders
shall have 48 hours to review the consents and revocations and to advise the
inspectors and the opposing party in writing as to whether they intend to
challenge the preliminary report of the inspectors. If no written notice of
an intention to challenge the preliminary report is received within 48 hours
after the inspectors' issuance of the preliminary report, the inspectors shall
issue to the Corporation and the Soliciting Stockholders their final report
containing the information from the inspectors' determination with respect to
whether the requisite number of valid and unrevoked consents was obtained to
authorize and take the action specified in the consents. If the Corporation
or the Soliciting Stockholders issue written notice of an intention to
challenge the inspectors' preliminary report within 48 hours after the
issuance of that report, a challenge session shall be scheduled by the
inspectors as promptly as practicable. Following completion of the challenge
session, the inspectors shall as promptly as practicable issue their final
report to the Soliciting Stockholders and the Corporation, which report shall
contain the information included in the preliminary report, plus any change in
the vote total as a result of the challenge and certification of whether the
requisite number of valid unrevoked consents was obtained to authorize or take
the action specified in the consents.
Section 10. PROXIES. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or
agents authorized by a written proxy executed by such person or his or her
duly authorized agent and filed with the Secretary of the Corporation;
provided, that no such proxy shall be valid after the expiration of eleven
(11) months from the date of its execution, unless the shareholder executing
it specifies therein the length of time for which such proxy is to continue in
force, which in no case shall exceed seven (7) years from the date of its
execution.
ARTICLE III.
DIRECTORS
Section 1. POWERS. Subject to limitations of the Articles of
Incorporation, of the By-laws, and particularly Article II, Section 6 of these
By-laws, and Section 141 of the Delaware General Corporation Law as to action
to be authorized or approved by the shareholders, and subject to the duties of
directors as prescribed by the By-laws, all corporate power shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be controlled by, the Board of Directors. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the directors shall have the following powers, to-wit:
First: To select and remove all other officers, agent, and employees of
the Corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the Articles of Incorporation or by By-laws, fix their
compensation, and require from them security for faithful service.
Second: To conduct, manage, and control the affairs and business of the
Corporation, and to make such rules and regulations therefore not inconsistent
with law, the Articles of Incorporation or the By-laws, as they may deem best.
Third: To change the principal office for the transaction of the
business of the Corporation from one location to another within the same
county as provided in Article I, Section 1 hereof; to fix and locate from time
to time, one or more branch or subsidiary offices of the Corporation within or
without the State of Delaware as provided in Article I, Section 2 hereof; to
designate any place within or without the State of Delaware for the holding of
any shareholders' meetings; and to adopt, make, and use a corporate seal, and
to prescribe the form of certificates of stock, and to alter the form of such
seal and of such stock certificates from time to time, as in their judgment
they may deem best; provided, such seal and such certificates shall at all
times comply with the provisions of the law.
Fourth: To authorize the issuance of stock of the Corporation from time
to time, upon such terms as may be lawful, in consideration of money paid,
labor done, or services actually rendered, debts or securities canceled, or
tangible or intangible property actually received, or in case of shares issued
as a dividend, against amounts transferred from surplus to stated capital.
Fifth: To borrow money and incur indebtedness for the purposes of the
Corporation and to cause to be executed and delivered therefore, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidence of debt and securities
therefore.
Sixth: To appoint an executive committee and other committees, and to
delegate to the executive committee any of the powers and authority of the
Board in the management of the business and affairs of the Corporation, except
the power to declare dividends and to adopt, amend, or repeal By-laws. The
executive committee shall be composed of two or more directors.
Seventh: To impose such restriction(s) on the transfer of the stock of
the Corporation, specifically including by way of illustration only, and not
of limitation, e.g., the requirement that such stock not be transferable on
the books of the Corporation except with a simultaneous transfer of the stock
of any other corporation(s), as is or may be permitted by law, and to remove
any such restriction(s) thereon.
Section 2. NUMBER AND QUALIFICATIONS OF DIRECTORS. The authorized
number of directors of the Corporation shall be a number between nine (9) and
eleven (11) inclusive, as the Board of Directors from time to time by vote of
a supermajority (a majority plus one) may set, until changed by amendment of
the Articles of Incorporation or by a by-law amending this Section 2, Article
III of these By-laws duly adopted by the vote or written assents of the
shareholders entitled to exercise fifty-one percent (51%) of the voting power
of the Corporation.
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of the shareholders, but if any such annual meeting is
not held, or the directors are not elected thereat, the directors may be
elected at any special meeting of the shareholders held for that purpose. All
directors shall hold office at the pleasure of the shareholders or until their
respective successors are elected. The shareholders may at any time, either at
a regular or special meeting, remove any director and elect his or her
successor.
NOMINATIONS OF DIRECTORS. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors.
Nominations of candidates for election as directors of the Corporation at any
meeting of shareholders may be made (a) by, or at the direction of, a majority
of the Board of Directors, or (b) by any shareholder of that class of stock
entitled to vote for the election of directors of that class of stock. Only
persons nominated in accordance with the procedures set forth in this section
shall be eligible for election as directors. Such nomination, other than those
made by, or at the direction of the board, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
office of the Secretary of the Corporation not less than sixty (60) days prior
to the first anniversary of the date of the last meeting of stockholders of
the Corporation called for the election of directors. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director: (i)
the name, age, business address, and residence address of the person; (ii) the
principal occupation of the employment of the person; (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the person; and (iv) any other information related to the person that
is required to be disclosed in solicitations for proxies for elections of
directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as
amended; and (b) as to the stockholder giving the notice: (i) the name and
record address of the stockholder, and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth
herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting that the defective nomination shall be disregarded.
Section 4. VACANCIES. Vacancies in the Board of Directors may be
filled by the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until his
or her successor is elected at an annual or special meeting of the
shareholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in case of the death, resignation, or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at
any annual or special meeting of the shareholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
The shareholders may elect a director of directors at any time to fill
any vacancy or vacancies of a director tendered to take effect at a future
time; the Board or the shareholders shall have the power to elect a successor
to take office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of his or her term of office.
Section 5. PLACE OF MEETING. Regular meetings of the Board of
Directors shall be held at any place within or without the State of Delaware
which has been designated from time to time by resolution of the Board or by
written consent of all members of the Board. In the absence of such
designation, regular meetings shall be held at the principal office of the
Corporation. Special meetings of the Board may be held either at a place so
designated or at the principal office.
Section 6. ORGANIZATION MEETING. Immediately following each annual
meeting of shareholders, the Board of Directors shall hold a regular meeting
for the purpose of organization, election of officers, and the transaction of
other business. Notice of such meetings is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board
of Directors shall be held on the third Friday of January, April, and July of
each year at 9:00 o'clock a.m. thereof; provided, however, that should said
day fall upon a legal holiday, then said meeting shall be held at the same
time and place on the next day thereafter which is not a legal holiday. Notice
of regular meetings of the Board of Directors is required and shall be given
in the same manner as notice of special meetings of the Board of Directors.
Section 8. SPECIAL MEETINGS. Special meetings of the board of
Directors for any purpose or purposes may be called at any time by the
Chairman of the Board, by the Executive Committee, or by any three (3) members
of the Board.
Written notice of the time and place of special meetings shall be
delivered personally to the directors or sent to each director by mail or
other form or written communication, charges prepaid, addressed to him or her
at his or her address as it is shown upon the records of the Corporation, or
if it is not shown on such records or is not readily ascertainable, at the
place in which the meetings of the directors are regularly held. In case such
notice is mailed or telegraphed, it shall be deposited in the U.S. Mail or
delivered to the telegraph company in the place in which the principal office
of the Corporation is located at least one hundred twenty (120) hours prior to
the time of holding of the meeting. In case such notice is delivered
personally as above provided, it shall be so delivered at least forty eight
(48) hours prior to the time of the holding of the meeting. Such mailing,
telegraphing, or delivery as above provided, shall be due, timely, legal and
personal notice to such director.
NOTICE FOR A PARTICULAR SPECIFIED ACTION. Notwithstanding the above
requirements for regular or special meetings, the Chairman of the Board, the
Chief Executive Officer, or any two directors may require at least thirty (30)
calendar days notice of any action, by writing delivered to the Secretary of
the Corporation, before or during any regular or special meeting, and if such
notice is given, no vote or written consent may be taken upon such action
until the passage of such time (at another special meeting or by written
consent). Provided, however, if eighty percent (80%) of the directors agree to
waive such notice, the meeting or vote of consent on such action shall proceed
without the requirement for extended notice.
Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given to absent directors if the time
and place be fixed at the meeting adjourned.
Section 10. ENTRY OF NOTICE. Whenever any director has been absent
from any special meeting of the Board of Directors, any entry in the minutes
as to the effect that notice has been duly given shall be sufficient evidence
that due notice of such special meeting was given to such director, as
required by law and the By-laws of the Corporation.
Section 11. WAIVER OF NOTICE. The transactions of any meeting of the
Board of Directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present, and if either before or after the meeting, each of the
directors not present, signs a written waiver of notice or a consent to
holding such meeting or an approval of the minutes thereof. All such waivers,
consents, or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 12. QUORUM. A majority of the authorized number of directors
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. With the exception of Section 4 of
this Article, an action of the directors shall be regarded as the act of the
Board of Directors only if a majority of the entire authorized number of
directors shall vote affirmatively on such action.
Section 13. ADJOURNMENT. A quorum of the directors may adjourn any
directors' meeting to meet again at a stated time, place, and hour; provided,
however, that in the absence of a quorum, the directors present at any
directors' meeting, either regular or special, may adjourn from time to time,
until the time fixed for the next regular meeting of the Board.
Section 14. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board of Directors under any provision of law or these
By-laws may be taken without a meeting if all members shall individually or
collectively consent in writing to such action. Such written consent or
consents shall be filed with the minutes of the proceedings of the Board. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors, any certificate or other document filed under any
provisions of the Delaware General Corporation Law which related to action so
taken shall state that the action was taken by unanimous written consent of
the Board of Directors without a meeting and that the By-laws authorize the
directors to so act, and such statement shall be prima facie evidence of such
authority.
Section 15. FEES AND COMPENSATION. Directors shall not receive any
stated salary for their services as directors, but, by resolution of the Board
of Directors, a fixed fee, with or without expenses of attending, may be
allowed for attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent, employee, or otherwise, and receiving
compensation therefore.
ARTICLE IV.
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall be:
1. Chairman of the Board
2. President
3. Vice President
4. Secretary
5. Treasurer
The Corporation may also have, at the discretion of the Board of
Directors, one or more additional vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article.
Officers other than the President and Chairman of the Board of Directors need
not be directors. One person may hold two or more offices, except those of
President and Secretary.
Section 2. ELECTIONS. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Sections 3
or 5 of this Article, shall be chosen annually by the Board of Directors, and
each shall hold his or her office at the pleasure of the Board of Directors,
who may, either at a regular or special meeting, remove any such officers and
appoint his or her successor.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
appoint such other officers as the business of the Corporation may require,
each of whom shall hold office for such period, have such authority, and
perform such duties as are provided in the By-laws or as the Board of
Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by a majority of the directors at the time in office,
at a regular or special meeting of the Board, or, except in the case of an
officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board
of Directors or to the President, or to the Secretary of the Corporation. Any
such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause shall be filled in
the manner prescribed in the By-laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as
may be from time to time assigned to him or her by the Board of Directors as
prescribed by the By-laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the Chairman of the Board, if there
be such an officer, the President shall be the Chief Executive Officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and affairs of the
Corporation. He shall preside at all meetings of the shareholders, and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex-officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a Corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or by the By-laws.
Section 8. VICE PRESIDENT. In the absence or disability of the President
, the Chairman of the Board or in the event of his absence or disability, the
Vice Presidents in order of their rank as fixed by the Board of Directors, or
if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to all restrictions upon, the President. Absence and
disability are defined as follows: absence is physical absence from the
Corporation's principal place of business and unreachable by telephone for a
period of forty-eight (48) hours. Disability is the inability of the President
to perform his duties on an ongoing basis.
The Senior Vice President and each other Vice President shall have such
other powers and perform such duties as are authorized by the laws of Delaware
and as are delegated to them respectively from time to time by the board of
Directors or the By-laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other place as the Board of
Directors may order, of all meetings of directors and shareholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those directors and
shareholders present, the names of those present at the directors' meeting,
the number of shares present or represented at shareholders' meetings, and the
proceedings thereof.
The Secretary shall keep or cause to be kept, at the principal office or
at the office of the Corporation's transfer agent, a share register or a
duplicate share register showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and the
date of certificates issued for the same; and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given, notice of all meetings of
shareholders and the Board of Directors, as required by the By-laws or by law
to be given, and he or she shall keep the seal of the Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or the By-laws.
Section 10. TREASURER. The Treasurer shall keep and maintain, or
cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
surplus, and surplus shares. Any surplus, including earned surplus, paid-in
surplus, and surplus arising from a reduction of stated capital, shall be
classified according to source and shown in a separate account. The books of
account shall at all times be open for inspection by any director.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He or she shall disburse the funds of
the Corporation as may be ordered by the Board of Directors and shall render
to the President and directors, when they request it, an account of all of his
or her transactions as Treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or the By-laws.
ARTICLE V.
MISCELLANEOUS
Section 1. RECORD DATE AND CLOSING STOCK BOOKS.
A. Fixed Date: The Board of Directors may fix a time, in the
future, not less than twenty (20) nor more than sixty (60) days preceding the
date of any meeting of shareholders, and not more than sixty (60) days
preceding the date fixed for the payment of any dividend or distribution, or
for the allotment of rights, or when any change, conversion, or exchange of
shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of and to vote at any such meeting, or
entitled to receive any such dividend or distribution, or any such allotment
of rights, or to exercise the rights in respect to any such change,
conversion, or exchange of shares, and in such case only shareholders of
record on the date so fixed shall be entitled to notice of and to vote at such
meeting, or to receive such rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after any record date
fixed as aforesaid. The Board of Directors may close the books of the
Corporation against transfer of shares during the whole, or any part of any
such period.
B. No Fixed Date: As an alternative to an action taken under
Subsection A of this Section 1 of Article V, if no record date has been or is
fixed for the purpose of determining shareholders entitled to receive payment
of any dividend, the record date for such purpose shall be at the close of
business of the date on which the Board of Directors adopts the resolution
relating thereto.
C. Action by Written Consent: In order that the Corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date for
determination of such stockholders, 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 date shall not be more than ten (10) days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors. Effective beginning February 9, 1999, any stockholder of record
seeking to have the stockholders authorize or take corporate action by written
consent shall, by written notice to the Secretary of the Corporation, request
the Board of Directors to fix a record date. The Board of Directors shall
promptly, but in all events within ten (10) days after the date on which such
a request is received by the Secretary, adopt a resolution fixing the record
date. If no record date has been fixed by the Board of Directors within ten
(10) days of the date on which such a request is received, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required
by applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or any officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
Section 2. INSPECTION OF CORPORATE RECORDS. The share register or
duplicate share register, the books of account, and minutes of proceedings of
the shareholders and directors shall be open to inspection upon the written
demand of any shareholder or the holder of a voting trust certificate, at any
reasonable time, and for a purpose reasonably related to his or her interests
as a shareholder, and shall be exhibited at any time when required by the
demand of ten percent (10%) of the shares represented at any shareholders'
meeting. Such inspection may be made in person or by an agent or attorney, and
shall include the right to make extracts. Demand of inspection other than at a
shareholders' meeting shall be made in writing upon the President, Secretary,
or Assistant Secretary of the Corporation.
Section 3. CHECKS, DRAFTS, ETC.: All checks, drafts, or other orders
for payment of money, notes, or other evidence of indebtedness issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 4. CONTRACTS, ETC.: HOW EXECUTED. The Board of Directors,
except as the By-laws or Articles of Incorporation otherwise provide, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances; and unless so
authorized by the Board of Directors, no officer, agent, or employee shall
have any power or authority to bind the Corporation by any contract or
agreement or to pledge its credit to render it liable for any purpose or to
any amount.
Section 5. ANNUAL REPORTS. The Board of Directors shall cause an
annual report or statement to be sent to the shareholders of this Corporation
not later than one hundred and twenty (120) days after the close of the fiscal
or calendar year.
Section 6. CERTIFICATES OF STOCK. A certificate or certificates for
shares of the capital stock of the Corporation shall be issued to each
shareholder when any such shares are fully paid up. All such certificates
shall be signed by the President or a Vice President and the Secretary or an
Assistant Secretary. Such certificates may be paired with, deemed to
represent, and subjected to restrictions on transfer without simultaneous
transfer of, certificates for: (a) shares of stock of any other
corporation(s), (b) beneficial interests in such shares, (c) interests in
voting trust(s), or (d) other kinds of interests in any other kind of entity.
Certificates for shares may be issued prior to full payment thereof,
under such restrictions and for such purposes as the Board of Directors or the
By-laws may provide; provided, however, that any such certificate so issued
prior to full payment shall state the amount remaining unpaid and the terms of
payment thereof.
Section 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice President and the Secretary or Assistant Secretary of
this Corporation are authorized to vote, represent, and exercise on behalf of
this Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of
this Corporation any and all shares held by this Corporation or corporations,
may be exercised either by such officers in person or by any person authorized
to do so by proxy or power of attorney.
Section 8. INSPECTION OF BY-LAWS. The Corporation shall keep in its
principal office for the transaction of business the original or a copy of the
By-laws as amended or otherwise altered to date, certified by the Secretary,
which shall be open to inspection by the shareholders at all reasonable times
during business hours.
Section 9. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Every person who
was or is a party or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that he or a person of whom he is the
legal representative is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director or officer of
another corporation, shall be indemnified and held harmless to the fullest
extent legally permissible under the General Corporation Law of the state of
Delaware from time to time against all expense, liability, and loss (including
attorneys' fees, judgments, fines, and, if approved by the Board of Directors,
amounts paid or to be paid in settlement) reasonably incurred or suffered by
him in connection therewith.
If authorized by the Board of Directors, expenses incurred in connection
with the defense of any civil or criminal action, suit, or proceeding may be
paid by the Corporation in advance of the disposition of the action, suit, or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay such amounts if it shall be ultimately determined that he is
not entitled to be indemnified by the Corporation.
The foregoing right of indemnification shall be in addition to, and not
exclusive of, all other rights to which such director or officer may be
entitled. Payments pursuant to the Corporation's indemnification of any person
hereunder shall be reduced by any amounts such person may collect as
indemnification under any policy of insurance purchased and maintained on his
behalf by this or any other Corporation.
ARTICLE VI.
AMENDMENTS
Section 1. POWER OF SHAREHOLDERS. New By-laws may be adopted or these
By-laws may be amended or repealed by the vote of shareholders entitled to
exercise fifty-one percent (51%) of the voting power of the Corporation or by
the written assent of such shareholders.
Section 2. POWERS OF DIRECTORS. Subject to the right of shareholders
as provided in Section 1 of this Article VI to adopt, amend, or repeal
By-laws, By-laws other than a By-law or amendment thereof changing the
authorized number of directors may be adopted, amended, or repealed by the
Board of Directors.
ARTICLE VII.
SEAL
The Corporation shall have a common seal, and shall have inscribed
thereon the name of the Corporation, the year of its incorporation, and the
word Delaware.
