<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- ---------
Commission file number 1-5439
------
DEL LABORATORIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1953103
-------- ----------
(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
565 Broad Hollow Road, Farmingdale, NY 11735
- -------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 293-7070
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, $1 par value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 21, 1996 was $64,214,171. On such date, the mean price at
which the stock was sold was $28.25 per share.
The number of shares of Common Stock, $1 Par Value, outstanding as of March 21,
1996 was 4,178,414 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Part of the Form 10-K into
which the Document is
Document Incorporated
- -------- ------------
Definitive Proxy Statement Part III, items 10, 11, 12 and 13
to Shareholders
<PAGE>
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
a) GENERAL DEVELOPMENT OF BUSINESS
(1) The Registrant was organized and incorporated in 1961. The Registrant
is a manufacturer and distributor of cosmetics and proprietary
pharmaceuticals.
(2) INFORMATION REQUIRED FOR BUSINESSES NOT SUBJECT TO SECTION 13(a)
OR 15(d) OF THE EXCHANGE ACT
Not Applicable.
b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
INDUSTRY SEGMENTS (In thousands of dollars)
1995 1994 1993
---- ---- ----
Sales to unaffiliated customers:
Cosmetics $162,348 $141,687 $120,964
Pharmaceuticals 49,700 48,415 45,532
Operating Income:
Cosmetics 6,358 4,331 3,154
Pharmaceuticals 9,049 8,939 7,920
Identifiable assets:
Cosmetics 96,121 89,197 79,806
Pharmaceuticals 17,003 15,760 15,380
c) NARRATIVE DESCRIPTION OF BUSINESS
(1) (i) PRINCIPAL PRODUCTS AND PRINCIPAL MARKETS
The principal products in the cosmetics segment are nail care, color
cosmetics, beauty implements, bleach and depilatories, hair care products,
personal care products and other related cosmetics items. The products
in the Company's cosmetics segment are marketed under such well-known
brand names as Sally Hansen "Hard As Nails" and Sally Hansen
Professional Nail in nail care; Quencher and Natural Glow In color
cosmetics; and Naturistics, Nutri-Tonic and La Cross in personal care
products. The principal products in the pharmaceutical segment are all of
a proprietary nature and range from oral analgesics to acne treatment
products and ear drop medications. The products in the pharmaceutical
segment are marketed under such well-known brand names as Orajel in oral
analgesics; Propa P.H. in acne treatment; Pronto in personal hygiene;
Arthricare in topical arthritis treatment; and Auro-Dri in water-clogged
ear remedies. The products are sold principally in the United States and
Canada, through the Registrant's sales force and independent sales
representatives to wholesalers, independent and chain drug, variety and
food stores.
The Registrant seeks to increase sales by aggresively marketing its
products under established brand names. Products from the cosmetics and
pharmaceutical divisions of the Registrant are targeted to the mass market
including the major national chain drug stores such as Walgreens,
RiteAid, CVS, Eckerd and Revco, chain mass merchandisers such as
Wal-Mart, Kmart and Target and numerous regional chains. The mass market
channels account for a major portion of the decorative color cosmetics
market and the majority of over-the-counter pharmaceutical product sales.
The Registrant's pharmeceutical products are also distributed to drug
wholesalers such as Mckesson Drug and Bergen Brunswig.
Sales of the Registrant's products are promoted by two in-house national
sales forces, one for its cosmetics business and one for its pharmaceutical
business. Manufacturers' representatives are used only selectively in
those geographical areas where a full-time representative cannot be
economically justified. There are no material arrangements or agreements
in this area.
The Registrant advertises its products on television, radio and in
magazines. In-store displays and promotional activities are utilized to
attract consumer attention and to inform them of the products available
in the various brands. Cooperative advertising programs with retailers
are also employed to further consumer awareness of our product lines.
Although the Registrant's products are sold in some foreign countries,
export net sales (which exclude sales in Canada and Puerto Rico) have
historically not exceeded 5% of total net sales in any year. In 1995,
export net sales were approximately 1.6% of the Registrant's total net
sales.
The Registrant's cosmetics business is operated primarily through the
Registrant and its wholly-owned subsidiary, Del Laboratories (Canada)
Inc., which sells to the Canadian market. The Registrant's
pharmaceuticals business is conducted primarily through the Registrant's
wholly-owned subsidiary, Del Pharmaceuticals, Inc., and that
corporation's wholly-owned subsidiary, Del Pharmaceutics (Canada) Inc.,
which sells to the Canadian market. The Registrant has also organized a
limited number of subsidiaries to conduct business in specific foreign
countries. In certain other countries, the Registrant licenses local
representatives to sell the Registrant's products.
<PAGE>
(ii) DESCRIPTION OF NEW PRODUCTS OR SEGMENTS REQUIRING MATERIAL INVESTMENT
OF ASSETS
Not applicable.
(iii) SOURCES AND AVAILABILITY OF RAW MATERIALS
For both the cosmetics and pharmaceutical segments, the Registrant
purchases raw materials from various basic manufacturers, paper board
suppliers and bottle distributors. During 1995, the Registrant
experienced no difficulty in obtaining raw materials.
(iv) PATENTS AND TRADEMARKS
For both the cosmetics and pharmaceutical segments, the Registrant's
major trademarks are registered in the United States and in many other
countries throughout the world. Some of the products of the cosmetics
and pharmaceutical segments are manufactured and sold under patents
owned by the Registrant. Continued trademark registration and patent
protection are important to the Registrant's business.
(v) EXTENT TO WHICH BUSINESS SEGMENTS MAY BE SEASONAL
Not applicable.
(vi) WORKING CAPITAL PRACTICES
The Registrant operates in a highly competitive packaged goods
industry and does not manufacture special products for its customers.
Quick response on standard merchandise to customer orders is expected.
Future orders do not represent a material portion of the Registrant's
business. Although the Registrant does not have a policy regarding a
customer cancellation, cancellations by customers are not frequent or
material. It is the Registrant's practice, consistent with the
packaged goods industry practice, to accept authorized returns for
reasons of quality and product discontinuation by the manufacturer.
(vii) DEPENDENCE OF A BUSINESS SEGMENT ON LIMITED CUSTOMERS
In 1995, 1994 and 1993, sales to Wal-Mart Stores
Inc. were in excess of 10% of consolidated net sales.
(viii) BACKLOG
See response to Item (vi) above.
(ix) MATERIAL GOVERNMENT CONTRACTS
Not applicable.
(x) COMPETITION
Competition in both the cosmetics and pharmaceutical industries is
intense. Many of the principal competitors in each of the
Registrant's industry segments are well-established firms with larger
financial resources and with sales believed to be in excess of sales
made by the Registrant in each applicable segment. The cosmetics
industry is particularly sensitive to consumer purchasing power.
Consumer brand preferences in the cosmetics and proprietary drug
industries are generally influenced by advertising and promotional
support. The cosmetics industry is characterized by frequent
introduction of new products and the attendant intensification of
advertising. See (i) above for a description of the Registrant's
advertising activities. Advertising expenditures were $26.0 million
in 1995 (12.3% as a percentage of total net sales).
(xi) SPENDING ON RESEARCH AND DEVELOPMENT
In the past three (3) years, commencing with 1995, the Registrant
expended $4,589,000, $3,452,000 and $3,952,000, respectively, on
research activities relating to the development of new products,
clinical and regulatory affairs and quality control/assurance of the
Registrant's product lines, all of which activities
<PAGE>
were conducted by the Registrant.
(xii) COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
See response to Item 3 - Legal Proceedings.
(xiii) NUMBER OF EMPLOYEES
The Registrant has approximately 1,243 employees.
d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Not material.
ITEM 2 - DESCRIPTION OF PROPERTIES
The Registrant's executive offices and principal manufacturing facilities for
both the cosmetics and pharmaceutical segments are located in two buildings at
565 Broad Hollow Road, Farmingdale, New York. One building is a brick faced
concrete block structure containing approximately 120,000 square feet of floor
space. The other is a steel beamed and brick faced concrete block building,
adjacent to the Farmingdale facility described above, containing approximately
20,000 square feet of floor space. Both buildings are owned by the Registrant.
The Registrant also owns certain property used for manufacturing facilities for
its cosmetics segment in Newark, New Jersey. The Newark buildings are brick
faced concrete block and contain approximately 90,000 square feet of floor
space.
The Registrant's principal warehouse and shipping facility for both the
cosmetics and pharmaceutical segments is located at 1 Arnold Drive, Huntington,
New York. This steel beamed and brickfaced concrete block building contains
approximately 130,000 square feet of floor space. The building is leased by the
Registrant.
The Registrant also owns property at 163 East Bethpage Road, Plainview, New
York. This steel beamed and brick faced concrete block building contains
approximately 63,000 square feet of floor space. The facility is used for both
offices and warehousing.
The Registrant owns property located in Canajoharie, New York, consisting of a
two-story brick and steel building with approximately 50,000 square feet of
floor space. This building is occupied by the Registrant's LaSalle Laboratories
division.
The Registrant owns property located in the City of Barrie, Province of Ontario,
Canada, consisting of a building with approximately 39,000 square feet of floor
space. The facility is used for manufacturing and shipping and contains the
administrative offices of its Canadian division.
The Registrant also owns property located in the City of Little Falls, New York,
consisting of a building with approximately 63,000 square feet of floor space.
The facility is used for production and warehousing. The building was owned
subject to a mortgage issued as part of an industrial revenue bond financing
through the Herkimer County Development Authority. The mortgage was repaid
in full in September 1995.
The Registrant owns a second building located in close proximity to the Little
Falls facility described above. It was purchased in late 1986 and is subject to
a first mortgage. This 100,000 square foot facility is a one-story steel and
masonry industrial plant built in 1974 and is used for production and
warehousing.
The Registrant also has short-term leases for space in public warehouses. The
space is primarily used for the cosmetics segment.
The Registrant believes that its facilities adequately meet the needs of the
Registrant, operating at reasonable levels of production.
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS
The Registrant has been notified that it has been identified as a potentially
responsible party with respect to environmental remediation activities required
at a site in Pennsylvania. The total cost to the Registrant of remediation
activities that it may be required to undertake cannot yet be quantified,
although the Registrant is one of over 900 potentially responsible parties that
have been identified at the site. Although no dollar amount can be assigned to
remediation costs because of inherent uncertainties, on the basis of current
available information, management has determined that such costs will not have a
material adverse effect on the Registrant's financial position. It is the
Registrant's policy to meet all regulatory requirements for the protection of
the environment and to take prompt remedial action where necessary.
In July 1994, the Equal Employment Opportunity Commission ("EEOC") filed suit
against the Registrant in the United States District Court for the Eastern
District of New York alleging sexual discrimination against certain present
and former employees of the Registrant, in violation of Title VII of the
Civil Rights Act of 1964, as amended. On August 3, 1995, the Court approved
a consent decree between the Registrant and the EEOC settling the case. The
Registrant denied that it engaged in any unlawful conduct, and the consent
decree expressly acknowledges that the settlement does not constitute an
admission by the Registrant of any violation of any law, rule or regulation
relating to employment discrimination. The Board of Directors determined that
the settlement was in the best interest of the Registrant and its
shareholders, considering the expense that would have resulted from continued
litigation and the time and attention of management and employees that would
necessarily have been required.
Pursuant to the settlement, the Registrant agreed to pay 15 former employees a
total sum of $1,185,000. The settlement also incorporated the Registrant's
revised sexual harassment policy which includes a revised complaint procedure.
On August 9, 1995, two stockholder derivative actions were filed in the State of
Delaware Chancery Court against the Registrant and members of its Board of
Directors, alleging breach of fiduciary duty and waste of corporate assets by
the directors in connection with the Registrant's response to and investigation
of the claims of sexual harassment made against the Registrant which were the
subject of the lawsuit filed by the EEOC. One action also names a former
director and a person mistakenly named as a director. Plaintiffs have moved to
consolidate these actions. The derivative actions seek restitution of amounts
paid in connection with the defense and settlement of the lawsuit and certain
other relief. The Registrant believes that these derivative actions are without
merit.
The Registrant is of the opinion, on the basis of currently available
information, that none of the matters referred to above will have a material
effect on the Registrant's results of operations or financial condition.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's common stock is traded on the American Stock Exchange. The
range of high and low sales prices as reported in the consolidated transaction
reporting system of such exchange for each quarterly period during the past two
years is as follows:
1995 1994
------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ---
First Quarter $ 22.75 $ 17.63 $11.63 $10.69
Second Quarter $ 25.75 $ 21.00 $11.82 $10.60
Third Quarter $ 22.50 $ 19.75 $13.32 $11.75
Fourth Quarter $ 20.88 $ 18.88 $19.25 $13.07
There were 544 holders of record of the Registrant's common stock at
December 31, 1995. This does not include beneficial holders whose shares are
held of record by nominees, such number not being known by the Registrant.
The Registrant paid regular quarterly dividends of $.028 from January 1994
through May 1994, $.032 from June 1994 through August 1994, $.033 from
September 1994 through August 1995 and $.035 from September 1995 through
December 1995. The Registrant has paid uninterrupted dividends for the past
twenty two years. The per share information set forth above has been adjusted
for a 2-for-1 stock split effective June 16, 1995 and a 4-for-3 stock split
effective June 15, 1994.
The terms of the Registrant's various borrowing agreements provide, among other
things, for restrictions on the payment of cash dividends and certain other
expenditures. At December 31, 1995 retained earnings available for dividends
and certain other expenditures amounted to approximately $986,000.
<PAGE>
ITEM 6 - SELECTED FINANCIAL DATA
(Amounts in Thousands Except Per Share and Employee Data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $212,048 $190,102 $166,496 $143,768 $127,566
Net earnings before
extraordinary item 7,025 5,681 4,173 3,314 2,140
Extraordinary item - - (2,310) - -
Net earnings 7,025 5,681 1,863 3,314 2,140
Earnings before
extraordinary item
per common share (a) (b) 1.45 1.20 .87 .68 .50
Extraordinary item per
common share (a) - - (.47) - -
Earnings per common
share (a) (b) 1.45 1.20 .40 .68 .50
Cash dividends per share (a) .14 .13 .12 .12 .12
Weighted average number of
shares outstanding (a) (b) 4,853 4,800 4,966 5,158 5,010
Other data:
Capital additions $ 7,569 $ 5,827 $ 4,802 $ 3,715 $ 3,397
Total assets 113,124 104,957 95,186 94,372 96,237
Long term debt 40,000 40,070 40,637 30,769 37,132
Working capital 40,441 38,813 38,777 29,886 33,836
Shareholders' equity 38,021 34,203 30,913 31,102 29,228
Approximate # of employees 1,243 1,175 1,080 985 970
</TABLE>
(a) Adjusted to reflect a 2-for-1 stock split effective June 16, 1995 and
4-for-3 stock splits effective June 15, 1994 and September 20, 1991.
(b) Fully diluted earnings per common share were $1.14 for the year ended
December 31, 1994 based on 5,002,000 weighted average common shares
outstanding. In the years 1991-1993 and 1995, primary and fully diluted
earnings per common share were the same.
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Under its institutional debt covenants, the Registrant is permitted a level of
short-term borrowing not to exceed $15,000,000. Currently, the Registrant has
arrangements with banks which provide up to $27,500,000 of short-term lines of
credit at the prime rate of interest. Short-term debt was $0 at December 31,
1995.
The Registrant has, from time to time, acquired shares of its common stock
pursuant to a plan approved by the Board of Directors in 1987. The
Registrant will generally undertake such purchases if, as and when management
believes that the prevailing market price for its Common Stock does not
adequately reflect the intrinsic value of the Registrant's business. In 1995,
the Registrant purchased 385,477 shares at an average cost of $21.39 per
share, and such shares were placed in treasury. The shares purchased in 1995
were predominantly from employees who held shares issued pursuant to the
Registrant's stock option plans, with the balance through open market
purchases. As of December 31, 1995 the Registrant was authorized to purchase
up to 133,321 additional shares based on the then existing Board
authorization.
Net accounts receivable at December 31, 1995 increased by $5,933,000 from the
December 31, 1994 level. The increase is attributable to a large sales increase
in the latter part of the fourth quarter of 1995.
Inventories at December 31, 1995 increased by $2,390,000 versus the December 31,
1994 level. The increase is primarily attributable to an increased level of
finished goods within the Cosmetics Divison.
The Registrant believes that it would have no difficulty in supplementing
internally-generated funds with other sources, including, principally, the
amounts available under the short-term lines of credit referred to above.
During 1995, the Registrant generated approximately $9,732,000 of cash from
operations. The Registrant believes that existing cash on hand, plus cash
from future operations and amounts available under the short-term lines of
credit referred to above, will be sufficient to satisfy the Registrant's
liquidity needs for the foreseeable future.
RESULTS OF OPERATIONS
SALES
In 1995, net sales were $212.0 million, 11.5% above 1994. For 1994, net sales
were $190.1 million, 14.2% above 1993.
Net sales for the Cosmetics Division in 1995 were $162.3 million, a 14.6%
increase from the $141.7 million in 1994. The $141.7 million of net sales for
the Cosmetics Division in 1994 was an increase of 17.1% from the $121.0 million
in 1993. The Pharmaceutical Division had net sales of $49.7 million, a 2.7%
increase from the $48.4 million in 1994. The $48.4 million of net sales for the
Pharmaceutical Division in 1994 was an increase of 6.3% from the $45.5 million
in 1993.
The net sales increase in the Cosmetics Division is largely attributable to
increased volume in the Sally Hansen, Natural Glow, Naturistics and LaCross
brands plus the introduction of a skin treatment line.
The net sales increase in the Pharmaceutical Division is largely attributable to
increases in the Orajel, Propha PH and Pronto brands.
Net sales to new customers during 1995, 1994 and 1993 were immaterial (less
than 1.0% in each year).
COST OF SALES
Cost of sales was 41.7%, 40.0% and 40.6% of net sales in 1995, 1994 and 1993,
respectively.
The increased cost of sales in 1995, compared with 1994 and 1993, is largely
attributable to an increased level of sales in the Cosmetics Division, which
has a higher cost of goods than the Pharmaceutical Division, and the mix of
business within the Cosmetics Division (principally as a result of higher
sales of Naturistics and La Cross brand products, which have a relatively
higher cost of goods).
<PAGE>
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased in 1995 and 1994, but decreased
as a percentage of net sales to 51.0% in 1995, as compared to 53.0% in 1994
and 52.8% in 1993. A combination of increased net sales, specific cost
containment programs which have resulted in relatively small increases in
shipping, travel and product promotion expenses and a leveling of advertising
expenditures are the primary reasons for the decreased percentage in 1995.
Advertising expenditures were $26.0 million in 1995, compared with $25.9 million
in 1994 and $21.9 million in 1993.
NET INTEREST EXPENSE
Net interest expense was $3,501,000 in 1995, compared with $3,641,000 in 1994
and $4,067,000 in 1993. The decrease in 1995 is attributable to increased
interest income plus a reduction in interest expense arising from the
elimination of short- term borrowings. The decrease from 1993 to 1994 is
primarily attributable to decreased short-term borrowings, a reduced rate of
interest and increased interest income.
INCOME TAXES
The Registrant's effective tax rate was 41.0% in both 1995 and 1994, and 40.5%
in 1993. The slight increase in the effective rate was primarily attributable
to higher state income taxes for both 1995 and 1994.
NET EARNINGS
Net earnings for 1995 were $7,025,000, 23.6% above the $5,681,000 reported for
1994. The 1994 net earnings of $5,681,000 were 36.1% above the $4,173,000
reported for 1993. Net earnings for 1993 stated above does not give effect to
an extraordinary charge of $2,310,000 incurred during the second quarter of
1993.
LEGAL MATTERS
The Registrant has been notified that it has been identified as a potentially
responsible party with respect to environmental remediation activities required
at a site in Pennsylvania. The total cost to the Registrant of remediation
activities that it may be required to undertake cannot yet be quantified,
although the Registrant is one of over 900 potentially responsible parties that
have been identified at the site. Although no dollar amount can be assigned to
remediation costs because of inherent uncertainties, on the basis of current
available information, management has determined that such costs will not have a
material adverse effect on the Registrant's financial position. It is the
Registrant's policy to meet all regulatory requirements for the protection of
the environment and to take prompt remedial action where necessary.
In July 1994, the Equal Employment Opportunity Commission ("EEOC") filed suit
against the Registrant in the United States District Court for the Eastern
District of New York alleging sexual discrimination against certain present
and former employees of the Registrant, in violation of Title VII of the
Civil Rights Act of 1964, as amended. On August 3, 1995, the Court approved
a consent decree between the Registrant and the EEOC settling the case. The
Registrant denied that it engaged in any unlawful conduct, and the consent
decree expressly acknowledges that the settlement does not constitute an
admission by the Registrant of any violation of any law, rule or regulation
relating to employment discrimination. The Board of Directors determined that
the settlement was in the best interest of the Registrant and its
shareholders, considering the expense that would have resulted from continued
litigation and the time and attention of management and employees that would
necessarily have been required.
Pursuant to the settlement, the Registrant agreed to pay 15 former employees a
total sum of $1,185,000. The settlement also incorporated the Registrant's
revised sexual harassment policy which includes a revised complaint procedure.
On August 9, 1995, two stockholder derivative actions were filed in the State of
Delaware Chancery Court against the Registrant and members of its Board of
Directors, alleging breach of fiduciary duty and waste of corporate assets by
the directors in connection with the Registrant's response to and investigation
of the claims of sexual harassment made against the Registrant which were the
subject of the lawsuit filed by the EEOC. One action also names a former
director and a person mistakenly named as a director. Plaintiffs have moved to
consolidate these actions. The derivative actions seek restitution of amounts
paid in connection with the defense and settlement of the lawsuit and certain
other relief. The Registrant believes that these derivative actions are without
merit.
The Registrant is of the opinion, on the basis of currently available
information, that none of the matters referred to above will have a material
effect on the Registrant's results of operations or financial condition.
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of"
(SFAS No. 121), effective for fiscal years beginning after December 15, 1995,
requires, among other things, that long-lived and certain identified intangibles
to be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment losses should be based upon the fair value of the
asset and reported in the period in which the recognition criteria are first
applied and met. The management of the Registrant does not believe that the
implementation of SFAS No. 121 will have a significant impact on its financial
position or results of operations.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation," which must be adopted by the
Registrant in 1996. The Registrant has elected not to implement the fair value
based accounting method for employee stock options, but has elected to disclose,
commencing in 1996, the pro forma net income and earnings per share as if such
method had been used to account for stock-based compensation cost as described
in the statement.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Schedule included separately herein.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information required with respect to Directors is set forth under the
caption "Election of Directors - Information Concerning Directors" in
Registrant's definitive Proxy Statement to be filed pursuant to Regulation 14A
and incorporated herein by reference.
(b) The executive officers of the Registrant, the positions held by them, their
ages and the years in which they began to serve in the positions or office held
as of December 31, 1995 are as follows:
Year in
Which Began
to Serve in
Position or as
Name Position Age Executive Officer
---- -------- --- -----------------
Dan K. Wassong Chairman, President and
Chief Executive Officer, Director 65 1969
Charles J. Hinkaty Vice President, President of
Del Pharmaceuticals, Inc.,
Director 46 1985
Melvyn C. Goldstein Vice President of Finance,
Treasurer 55 1982
William H. McMenemy Executive Vice President of
Marketing, Cosmetics Division,
North America 49 1980
Harvey P. Alstodt Executive Vice President of Sales,
Cosmetics Division, North America 56 1988
<PAGE>
James F. Lawrence Group Vice President - Operations 61 1993
There is no arrangement or understanding between any executive officer
and any other person pursuant to which he was selected as an officer. The
executive officers of the Registrant are elected annually at the meeting of
the Board of Directors immediately following the Annual Meeting of the
Stockholders. No family relationship exists among any of the executive
officers and directors of the Registrant.
During the past five years, the principal occupation and employment of each
of the Registrant's executive officers has been his service in the respective
position shown for him in the above table, except as follows:
James F. Lawrence has been Group Vice President-Operations of the
Registrant since April 1993. Prior to that time, Mr. Lawrence served as an
independent consultant from September 1992 to April 1993, Vice President,
Operations of Artmatic Cosmetics, Inc. from April 1991 to September 1992,
Senior Vice President, Sales and Marketing of Kolmar Laboratories, Inc., a
contract manufacturer, from April 1990 to April 1991 and President of Hazel
Bishop, a cosmetics manufacturer, from December 1987 to April 1990.
ITEM 11 - EXECUTIVE COMPENSATION
The information required is set forth under the caption "Executive
Compensation" in Registrant's definitive Proxy Statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) and (b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required is set forth under the captions "Securities
Ownership of Certain Beneficial Owners" and "Election of Directors - Information
Concerning Directors" in Registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A and is incorporated herein by reference.
(c) CHANGES IN CONTROL
Not applicable.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required is set forth under the caption "Executive
Compensation" in Registrant's definitive Proxy Statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) Documents filed as part of this report:
(1) and (2) See Index to Consolidated Financial Statements and Schedule
included herein.
(3) Exhibit Index
<TABLE>
<CAPTION>
Item No. Item Title Exhibit No. Description
- -------- ---------- ----------- -----------
<S> <C> <C> <C>
2 Plan of Not Applicable.
acquisition,
reorganization
arrangement,
liquidation or
succession
3 Articles of (1) Restated Certificate of Incorporation
and By-Laws as filed with the Delaware Secretary
Incorporation of State on March 29, 1996.
(2) By-Laws as amended through December 14, 1995.
4 Instruments defining Not Applicable.
the rights of security
holders including
indentures
9 Voting Trust Agreement Not Applicable
10 Material (a) Employee Pension Plan, effective January
Contracts 1, 1989. (Amended and restated).*
(b) Employees Stock Ownership Plan, effective
January 1, 1989.*
(c) Amendment No. 1 to Employees Stock Ownership Plan.*
(a) Amendment No. 2 to Employees Stock Ownership Plan.*
(c) 1984 Stock Option Plan, as amended to date.*
(d) 1994 Stock Plan.*
(d) Annual Incentive Plan.*
(c) Loan agreement with Dan K. Wassong dated as of
August 22, 1984 and related promissory notes.
(a) Loan Agreement with Dan K. Wassong, dated as of April 9, 1988.
(e) Loan agreement with Dan K. Wassong, dated as of November 14, 1990.
(a) 401(k) Plan effective January 1, 1989. (amended and restated).*
(a) Supplemental Executive Retirement Plan. (amended and restated).*
* Constitutes a "management contract or compensatory plan or arrangement"
required to be filed pursuant to Item 14 (c) of the Form 10-K.
<PAGE>
<CAPTION>
Item No. Item Title Exhibit No. Description
- -------- ---------- ----------- -----------
<S> <C> <C> <C>
(f) Employment agreement with Dan K. Wassong, dated as of November 13, 1992.*
(a) Amendment to Employment Agreement with Dan K. Wassong, dated March 21, 1994.*
(g) Loan Agreement dated as of May 26, 1993 with Jackson National Life Insurance Company
and Jackson National Life Insurance Company of Michigan.
(c) Employment Agreement with Charles J. Hinkaty, as amended.*
(3) Amendment to Employment Agreement with Charles J. Hinkaty dated April 14, 1995.*
(c) Employment Agreement with Harvey P. Alstodt, as amended.*
(4) Amendment to Employment Agreement with Harvey P. Alstodt dated April 14, 1995.*
(c) Employment Agreement with William H. McMenemy, as amended.*
(5) Amendment to Employment Agreement with William H. McMenemy dated April 14, 1995.*
(c) Employment Agreement with Melvyn C. Goldstein, as amended.*
(6) Amendment to Employment Agreement with Melvyn C. Goldstein dated April 14, 1995.*
(c) Life Insurance Agreement with Robert H. Haines, as trustee, dated as of February 18,
1993.*
11 Statements Re: (7) Computation of per share earnings.
computation of per
share earnings
12 Statements Re: Not Applicable.
computation of ratios
13 Annual Report to Not Applicable.
security holders
16 Letter Re: change Not Applicable.
in certifying accountant
18 Letter Re: change Not Applicable.
in accounting principles
21 Subsidiaries of (h) Listing of Subsidiaries.
Registrant.
22 Published report regarding Not Applicable.
matters submitted to vote
of security holders.
* Constitutes a "management contract or compensatory plan or arrangement"
required to be filed pursuant to Item 14 (c) of the Form 10-K.
<PAGE>
<CAPTION>
Item No. Item Title Exhibit No. Description
- -------- ---------- ----------- -----------
<S> <C> <C> <C>
23 Consents of experts (8) Consent of KPMG Peat Marwick LLP dated March 27, 1996.
and counsel
24 Power of Attorney Not Applicable.
28 Information from Not Applicable.
reports furnished
to state insurance
regulatory authorities.
99 Additional exhibits Not Applicable.
</TABLE>
---------------------------------
(a) These exhibits were filed on March 31, 1995 as exhibits to the
Registrant's Form 10-K for the year ended December 31, 1994 (File No. 1-
5439) and are incorporated herein by reference. The exhibit numbers in
such Form 10-K are as follows: Employee Pension Plan, Exhibit 2;
Amendment No. 2 to Employees Stock Ownership Plan, Exhibit 3; Loan
Agreement with Dan K. Wassong, Exhibit 4; 401 (k) Plan, Exhibit 5;
Supplemental Executive Retirement Plan, Exhibit 6; Amendment to
Employment Agreement with Dan K. Wassong, Exhibit 7.
(b) This exhibit was filed on April 2, 1990 as an exhibit to the Registrant's
Form 10-K for the year ended December 31, 1989 (File No. 1-5439) and is
incorporated herein by reference. The exhibit number in such Form 10-K
is Exhibit 2.
(c) These exhibits were filed on March 31, 1994, as exhibits to the
registrant's Form 10-K for the year ended December 31, 1993 (File No. 1-
5439) and are incorporated herein by reference. The exhibit numbers in
such Form 10-K are as follows: Amendment No. 1 to Employees Stock
Ownership Plan, Exhibit 2; 1984 Stock Option Plan, Exhibit 3; Loan
Agreement with Dan K. Wassong dated August 22, 1984, Exhibit 4;
Employment Agreement with Charles J. Hinkaty, Exhibit 5; Employment
Agreement with Harvey P. Alstodt, Exhibit 6; Employment Agreement with
William H. McMenemy, Exhibit 7; Employment Agreement with Melvyn C.
Goldstein, Exhibit 8; Life Insurance Agreement with Robert H. Haines, as
trustee, Exhibit 9.
(d) These exhibits were filed on or about April 25, 1994, as exhibits to the
Registrant's Definitive Proxy Statement dated April 25, 1994, relating
to the Registrant's 1994 Annual Meeting of Stockholders (File
No. 1-5439) and are incorporated herein by reference. The exhibit
numbers in such Proxy Statement are as follows: 1994 Stock Plan,
Annex A; Annual Incentive Plan, Annex B.
(e) This exhibit was filed on April 1, 1991, as an exhibit to the
Registrant's Form 10-K for the year ended December 31, 1990 (File No. 1-
5439) and is incorporated herein by reference. The exhibit number in
such Form 10-K is Exhibit 2.
(f) This exhibit was filed on March 31, 1993, as an exhibit to the
Registrant's Form 10-K for the year ended December 31, 1992 (File No. 1-
5439) and is incorporated herein by reference. The exhibit number in
such Form 10-K is Exhibit 1.
(g) This exhibit was filed on July 1, 1993, as an exhibit to the Registrant's
Current Report on Form 8-K dated June 29, 1993 (File No. 1-5439) and is
incorporated herein by reference. The exhibit number in such Form 8-K is
Exhibit 1.
(h) This exhibit was filed on March 30, 1992, as an exhibit to the
Registrant's Form 10-K for the year ended December 31, 1991 (File No. 1-
5439) and is incorporated herein by reference. The exhibit number in
such Form 10K is Exhibit 4.
(b) Not Applicable.
(c) See (a) (3) above.
<PAGE>
OTHER MATTERS
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos. 2-51603
(filed February 26, 1974), 2-57313 (filed September 30, 1976), 2-69841 (filed
November 7, 1980), 33-27777 (filed March 23, 1989) and 33-64777 (filed
December 6, 1995).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K/A to be
signed on its behalf by the undersigned, thereunto duly authorized.
DEL LABORATORIES, INC.
(Registrant)
By /s/ Dan K. Wassong December 16, 1996
----------------------------------
Dan K. Wassong, Chairman, President & Chief Executive Officer
By /s/ Melvyn C. Goldstein December 16, 1996
----------------------------------
Melvyn C. Goldstein, Vice President of Finance & Principal
Accounting Officer
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
and Schedule
Independent Auditors' Report
Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Consolidated Statements of Earnings for the years ended December 31, 1995,
1994 and 1993.
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Schedules:
II Valuation and Qualifying Accounts for the years ended December 31,
1995, 1994 and 1993.
All other schedules are omitted as the required information is inapplicable or
the information is presented in the consolidated financial statements or related
notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Shareholders
Del Laboratories, Inc.:
We have audited the consolidated financial statements of Del Laboratories,
Inc. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Del
Laboratories, Inc. and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Jericho, New York
February 14, 1996
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,563,375 $ 10,125,568
Accounts receivable less allowance for doubtful accounts
of $1,700,000 in 1995 and $1,300,000 in 1994 24,626,182 18,692,993
Inventories 37,077,909 34,688,184
Prepaid expenses and other current assets 1,282,464 1,958,917
------------ ------------
Total current assets 71,549,930 65,465,662
------------ ------------
Property, plant and equipment, at cost 42,159,925 40,127,958
Less accumulated depreciation and amortization (15,319,126) (15,321,675)
------------ ------------
Net property, plant and equipment 26,840,799 24,806,283
Intangibles arising from acquisitions, at cost less
accumulated amortization 9,259,050 9,669,506
Other assets 5,474,214 5,015,394
------------ ------------
Total assets $113,123,993 $ 104,956,845
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 70,395 $ 334,754
Accounts payable 15,147,737 14,931,062
Accrued liabilities 14,494,724 10,703,484
Income taxes payable 1,395,607 683,532
------------ ------------
Total current liabilities 31,108,463 26,652,832
Long-term pension liability, less current portion 3,632,432 2,176,826
Deferred income taxes 361,863 1,853,538
Long-term debt, less current portion 40,000,000 40,070,395
------------ ------------
Total liabilities 75,102,758 70,753,591
------------ ------------
Shareholders' equity:
Common stock $1 par value, authorized 10,000,000
shares in 1995 and 5,000,000 shares in 1994;
issued 6,588,544 shares in 1995 and 1994 6,588,544 6,588,544
Additional paid-in capital 5,027,940 2,895,714
Foreign currency translation adjustment (492,831) (546,242)
Retained earnings 52,659,920 46,203,176
------------ ------------
63,783,573 55,141,192
Less: Treasury stock at cost, 2,410,554 shares in 1995
and 2,375,276 shares in 1994 (23,867,674) (18,637,618)
Receivable for stock options exercised (1,894,664) (2,300,320)
------------ ------------
Total shareholders' equity 38,021,235 34,203,254
------------ ------------
Total liabilities and shareholders' equity $ 113,123,993 $ 104,956,845
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $ 212,047,952 $190,102,052 $166,495,888
------------- ------------ ------------
Cost of goods sold 88,437,543 76,083,243 67,594,104
Selling and administrative expenses 108,203,207 100,748,947 87,827,414
------------- ------------ ------------
196,640,750 176,832,190 155,421,518
------------- ------------ ------------
Operating income 15,407,202 13,269,862 11,074,370
------------- ------------ ------------
Interest expense 3,830,954 3,878,660 4,182,883
Interest income (329,465) (238,002) (116,333)
------------- ------------ ------------
Interest expense, net 3,501,489 3,640,658 4,066,550
------------- ------------ ------------
Earnings before income taxes
and extraordinary item 11,905,713 9,629,204 7,007,820
Income taxes 4,881,000 3,948,000 2,835,000
------------- ------------ ------------
Earnings before extraordinary item 7,024,713 5,681,204 4,172,820
Extraordinary item - related to
early retirement of debt (net
of income tax benefit of $1,540,000) - - (2,310,000)
------------- ------------ ------------
Net earnings $ 7,024,713 $ 5,681,204 $ 1,862,820
------------- ------------ ------------
------------- ------------ ------------
Earnings before extraordinary
item per common share:
Primary $ 1.45 $ 1.20 $ 0.87
------------- ------------ ------------
------------- ------------ ------------
Fully diluted $ 1.14
------------
------------
Extraordinary item per common share $ (0.47)
-------------
-------------
Earnings per common share:
Primary $ 1.45 $ 1.20 $ 0.40
------------- ------------ ------------
------------- ------------ ------------
Fully diluted $ 1.14
------------
Weighted average common shares
outstanding:
Primary 4,853,000 4,800,000 4,966,000
----------- ----------- ----------
----------- ----------
Fully diluted 5,002,000
-----------
-----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,024,713 $ 5,681,204 $ 1,862,820
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 5,945,401 4,012,137 3,819,538
Deferred income taxes (1,491,675) (496,484) (97,607)
Provision for doubtful accounts 655,000 548,400 201,000
Other non-cash operating items 192,161 (39,362) 534,067
Changes in operating assets and liabilities:
Accounts receivable (6,588,189) (3,069,854) 1,372,413
Inventories (2,389,725) 503,093 (3,587,495)
Prepaid expenses and other current assets 676,453 (276,974) 1,122,477
Other assets and other liabilities 996,786 (377,547) 293,450
Income taxes receivable - 130,349 (130,349)
Accounts payable 208,200 3,302,965 (2,191,309)
Accrued liabilities 3,791,240 4,131,389 2,361,177
Income taxes payable 712,075 683,532 (175,905)
---------- ---------- ----------
Net cash provided by operating activities 9,732,440 14,732,848 5,384,277
---------- ---------- ----------
Cash flows used in investing activities:
Property, plant and equipment additions (7,569,461) (5,826,656) (4,802,402)
----------- ------------ -----------
Net cash used in investing activities (7,569,461) (5,826,656) (4,802,402)
----------- ------------ -----------
Cash flows used in financing activities:
Proceeds from long-term debt borrowings - - 40,000,000
Decrease in notes payable - (1,600,000) (3,050,000)
Principal payments of long-term debt (334,754) (663,771) (36,030,887)
Exercise of stock options and related
tax benefit 5,147,922 1,298,064 1,343,405
Decrease (increase) in receivable for stock
options exercised 265,656 40,134 (157,015)
Purchase of treasury stock (8,245,752) (3,133,984) (3,280,332)
Dividends paid (559,494) (511,042) (484,192)
Other financing activities - (6,633) -
---------- ---------- -----------
Net cash used in financing activities (3,726,422) (4,577,232) (1,659,021)
---------- ---------- -----------
Effect of exchange rate changes on cash 1,250 (18,625) (13,460)
---------- ---------- -----------
Net increase (decrease) in cash and cash equivalents (1,562,193) 4,310,335 (1,090,606)
Cash and cash equivalents at beginning of year 10,125,568 5,815,233 6,905,839
---------- ---------- -----------
Cash and cash equivalents at end of period $ 8,563,375 $ 10,125,568 $ 5,815,233
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Foreign
Common Additional Currency Receivable For
Stock $1 Paid-In Translation Retained Treasury Stock Options Shareholders'
Par Value Capital Adjustment Earnings Stock Exercised Equity
--------- ------- ---------- -------- ----- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1992 $ 6,588,544 $ 2,787,391 $ (176,111) $39,668,491 $ (15,269,504) $ (2,496,500) $ 31,102,311
Foreign currency translation
adjustment (135,676) (135,676)
Issuance of treasury stock upon exercise
of stock options (241,206 shares) (333,807) 1,677,212 (206,295) 1,137,110
Purchase of treasury stock
(300,808 shares) (3,280,332) (3,280,332)
Income tax benefit arising from
stock options exercised 473,221 473,221
Payment for stock options exercised 232,342 232,342
Dividends declared ($.12 per share) (478,776) (478,776)
Net earnings for the year 1,862,820 1,862,820
----------- ----------- ----------- ----------- ------------- ----------- ------------
Balance December 31, 1993 $ 6,588,544 $ 2,926,805 $ (311,787) $41,052,535 $ (16,872,624) $(2,470,453) $ 30,913,020
Foreign currency translation
adjustment (234,455) (234,455)
Issuance of treasury stock upon exercise
of stock options (182,338 shares) (70,926) 1,368,990 1,298,064
Purchase of treasury stock
(220,280 shares) (3,133,984) (3,133,984)
Income tax benefit arising from
stock options exercised 46,468 46,468
Payment for stock options exercised 170,133 170,133
Dividends declared ($.13 per share) (530,563) (530,563)
Net earnings for the year 5,681,204 5,681,204
Cash paid for fractional shares (6,633) (6,633)
----------- ----------- ----------- ----------- ------------- ----------- ------------
Balance December 31, 1994 $ 6,588,544 $ 2,895,714 $ (546,242) $46,203,176 $ (18,637,618) $ (2,300,320) $ 34,203,254
Foreign currency translation
adjustment 53,411 53,411
Issuance of treasury stock upon
exercise of stock options
(353,001 shares) (204,311) 3,015,696 2,811,385
Purchase of treasury stock
(385,477 shares) (8,245,752) (8,245,752)
Income tax benefit arising from
stock options exercised 2,336,537 2,336,537
Payment for stock options exercised 405,656 405,656
Dividends declared ($.14 per share) (567,969) (567,969)
Net earnings for the year 7,024,713 7,024,713
----------- ----------- ----------- ----------- ------------- ----------- ------------
Balance December 31, 1995 $ 6,588,544 $ 5,027,940 $ (492,831) $52,659,920 $ (23,867,674) $(1,894,664) $ 38,021,235
----------- ----------- ----------- ----------- ------------- ----------- ------------
----------- ----------- ----------- ----------- ------------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF ACCOUNTING POLICIES
(a) DESCRIPTION OF BUSINESS
The Company is a manufacturer and distributor of cosmetics and proprietary
pharmaceuticals. The principal products in the cosmetics segment are nail care,
color cosmetics, beauty implements, personal care products and other related
cosmetics items. The principal products in the pharmaceutical segment are of a
proprietary nature and range from oral analgesics to acne treatment products and
ear drop medications.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Del Laboratories, Inc. and Subsidiaries
(the Company) include the accounts of all wholly-owned domestic and foreign
subsidiaries. The net assets and results of foreign operations are not
significant to the consolidated financial statements. The accounts of foreign
subsidiaries are translated in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation."
As such, balance sheet accounts are translated at the exchange rate as of
December 31, of each year and income statement accounts are translated at
average exchange rates when transactions occurred. All intercompany accounts and
transactions have been eliminated in consolidation.
(c) CASH AND EQUIVALENTS
Cash and cash equivalents include deposits in banks, short term commercial
paper, United States Treasury bills and money market funds with an initial term
of less than three months. For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with original maturities of
three months or less to be cash equivalents.
(d) REVENUE RECOGNITION
The Company sells its products to wholesalers, independent and chain drug,
variety and food stores. Sales of such products and services are principally
denominated in U.S. dollars. The Company's accounts receivable reflect the
granting of credit to these customers. Revenues are recognized and product
discounts are recorded when merchandise is shipped. Net sales comprise of gross
revenues less expected returns, trade discounts and customer allowances.
Merchandise returns are accrued at the earlier of receipt of goods or customer
notification of a return. The Company generally grants credit based upon
analysis of the customer's financial position and previously established buying
and selling patterns.
(e) INVENTORIES
Inventories are valued at the lower of cost (principally first-in/first-out) or
market value. The components of inventories are as follows:
1995 1994
---- ----
Raw materials $15,645,998 $15,533,967
Work in process 3,888,456 3,797,247
Finished goods 17,543,455 15,356,970
----------- -----------
$37,077,909 $34,688,184
----------- -----------
----------- -----------
(f) PROPERTY, PLANT AND EQUIPMENT
The Company provides for depreciation on the straight-line method over the
estimated useful lives of the assets. The range of estimated lives applicable
to the assets are as follows:
Building & building improvements 10 to 40 years
Machinery & equipment 3 to 15 years
Furniture & fixtures 3 to 10 years
-1-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(g) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
(SFAS) No. 109 "Accounting for Income Taxes" which requires recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns. The
provision for income taxes includes federal, foreign, state and local income
taxes currently payable and those deferred because of temporary differences.
Under this method, deferred tax liabilities and assets are determined based upon
differences between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the years in which the
differences are expected to reverse.
(h) RESEARCH AND DEVELOPMENT
The Company has expended $4,589,000, $3,452,000 and $3,952,000 during 1995, 1994
and 1993, respectively, for research and development relating to the development
of new products, clinical and regulatory affairs, and quality control/assurance
of the Company's product lines. All costs associated with research and
development are expensed as incurred, and included in selling and administrative
expenses in the accompanying consolidated statements of earnings.
(i) ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expenses were
$26,000,000, $25,900,000 and $21,900,000 in 1995, 1994 and 1993, respectively.
(j) EARNINGS PER SHARE
For all years presented, earnings per common share is computed under the
"modified treasury stock method" which assumes the exercise of all outstanding
options and warrants and the use of the proceeds thereof to acquire up to 20% of
the outstanding common stock of the Company. Excess proceeds not utilized for
the purchase of such shares are assumed utilized, first to reduce outstanding
debt and then any remainder is assumed invested in interest bearing securities
with net earnings increased for the hypothetical interest expense savings or
interest income, net of taxes. Primary earnings per common share was based on
4,853,000, 4,800,000 and 4,966,000 shares outstanding for 1995, 1994 and 1993,
respectively. Fully diluted earnings per common share was based on 5,002,000
shares outstanding for 1994. In 1995 and 1993, primary and fully diluted
earnings per common share were the same.
(k) STOCK SPLITS
On May 25, 1995, the Company's Board of Directors approved a two for one split
of the Company's common stock which was effective June 16, 1995. In addition,
on May 26, 1994, the Company's Board of Directors approved a four for three
split of the Company's common stock which was effective June 15, 1994. All
share, per share and conversion amounts relating to common stock and stock
options included in the accompanying consolidated financial statements and
footnotes have been restated to reflect the stock splits.
(l) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
(2) SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental information relating to the consolidated
statements of cash flows:
1995 1994 1993
---- ---- ----
Cash paid during the year for:
Interest $3,822,000 $3,894,622 $4,528,799
---------- ---------- ----------
---------- ---------- ----------
Income taxes $3,255,000 $3,787,000 $1,226,000
---------- ---------- ----------
---------- ---------- ----------
-2-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment, at cost, are as follows:
1995 1994
---- ----
Land $ 2,290,479 $ 2,290,479
Building & building improvements 11,356,987 10,349,613
Machinery & equipment 24,633,952 24,151,750
Furniture & fixtures 3,878,507 3,336,116
------------ -----------
$ 42,159,925 $40,127,958
------------ -----------
------------ -----------
Depreciation expense for 1995, 1994 and 1993 was $5,534,945, $3,705,386 and
$3,520,274, respectively.
In 1995, the Company changed, on a prospective basis, the maximum estimated
useful life utilized for tools, molds and dyes from five years to four years.
The impact of this change in accounting estimate was to increase depreciation
expense and decrease operating income by approximately $858,000.
(4) INTANGIBLES ARISING FROM ACQUISITIONS
Intangibles represent the excess of the purchase prices paid for companies and
product lines over amounts assigned to net tangible assets. Total intangibles
related to acquisitions prior to 1971 amount to $6,660,000. Management is of
the opinion that there is no diminution in $6,282,000 of this amount.
Therefore, no amortization has been provided for this amount. The remaining
$378,000 was fully amortized in 1995. The portion of intangibles acquired in
1980 ($3,350,000) is being amortized using the straight-line method over 30
years and the trademarks acquired in 1984 ($3,000,000) are being amortized using
the straight-line method over 20 years. Accumulated amortization amounted to
$3,751,054 at December 31, 1995 and $3,340,598 at December 31, 1994.
Amortization expense amounted to $410,456 for 1995, $306,751 for 1994 and
$299,264 for 1993. The Company continually evaluates the recoverability of the
intangible assets by assessing whether the amortization of the intangible
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation.
-3-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES
As discussed in note 1(g), the Company adopted Statement No. 109 as of January
1, 1993. The cumulative effect of this change in accounting for income taxes is
not material and is not reported separately in the consolidated statement of
earnings for the year ended December 31, 1993.
The components of income tax expense (benefit) are as follows:
1995 Federal State Foreign Total
---- ------- ----- ------- -----
Current tax $5,560,000 $739,000 $74,000 $6,373,000
Deferred tax (1,356,000) (136,000) - (1,492,000)
----------- --------- ------- ----------
$4,204,000 $603,000 $74,000 $4,881,000
---------- -------- ------- ----------
---------- -------- ------- ----------
1994
----
Current tax $3,834,000 $536,000 $74,000 $4,444,000
Deferred tax ( 588,000) 92,000 - (496,000)
---------- -------- ------- ----------
$3,246,000 $628,000 $74,000 $3,948,000
---------- -------- ------- ----------
---------- -------- ------- ----------
1993
----
Current tax $2,339,000 $339,000 $59,000 $2,737,000
Deferred tax 85,000 13,000 - 98,000
---------- -------- ------- ----------
$2,424,000 $352,000 $59,000 $2,835,000
---------- -------- ------- ----------
---------- -------- ------- ----------
Total income tax expense differed from the statutory United States Federal
income tax rate of 34% of earnings before income tax as a result of the
following items:
1995 1994 1993
---- ---- ----
Tax provision at statutory rate: $4,067,000 $3,274,000 $2,383,000
Increases in taxes resulting from:
State income taxes, net of Federal
income tax benefit 398,000 433,000 223,000
Amortization of intangibles 51,000 51,000 51,000
Other 365,000 190,000 178,000
--------- ---------- ----------
Actual provision for income taxes 4,881,000 3,948,000 2,835,000
Extraordinary item - related to
early retirement of debt - (1,540,000)
---------- ---------- ----------
$4,881,000 $3,948,000 $1,295,000
---------- ---------- ----------
---------- ---------- ----------
-4-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. For presentation
purposes, certain of such tax assets and liabilities are shown net on the
accompanying balance sheets. Significant components of the Company's deferred
tax liabilities and assets as of December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred Tax Assets
Accounts receivable, principally $ 594,000 $ 449,000
due to allowance for doubtful accounts
Supplemental Executive Retirement Plan
(SERP) expense, principally due to
accrual for financial statement
purposes 611,000 449,000
Inventory principally due to reserves 543,000
Pension accrual for financial reporting purposes 270,000
Other 594,000 330,000
---------- ----------
Total gross deferred tax assets 2,612,000 1,228,000
Less valuation reserve - -
---------- ----------
Net deferred tax assets 2,612,000 1,228,000
---------- ----------
Deferred Tax Liabilities
Plant, equipment and other amortizable
assets principally due to differences
in depreciation methods (2,836,000) (2,923,000)
Other assets, principally due to
different amortizable lives for
book purposes (106,000) (92,000)
Other (32,000) (67,000)
---------- -----------
Total gross deferred tax liabilities (2,974,000) (3,082,000)
---------- -----------
Net deferred tax liability $ (362,000) $(1,854,000)
----------- -----------
----------- -----------
</TABLE>
Based upon its history of taxable income and the projections for future
earnings, management of the Company believes that it is more likely than not
that the Company will generate sufficient future taxable income to realize the
net deferred tax asset at December 31, 1995.
-5-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) LONG-TERM DEBT
Long-term debt is summarized as follows:
1995 1994
---- ----
9.5% promissory notes
9.56% Industrial Revenue Bond due in $40,000,000 $40,000,000
quarterly installments of $90,000
through 1995 - 270,000
9.68% mortgage note due in monthly
installments of $6,259 through
December 1996 70,395 135,149
----------- -----------
$40,070,395 $40,405,149
Less current portion 70,395 334,754
----------- -----------
$40,000,000 $40,070,395
----------- -----------
----------- -----------
In June 1993, the Company issued to an institutional lender $40,000,000 of
senior notes due May 31, 2005 with interest at 9.5%. The proceeds of the loan
were used principally to repay the entire $35,000,000 principal amount of 11.04%
promissory notes with another institutional lender plus a prepayment premium of
$3,850,000. During the second quarter of 1993, the Company recorded an
extraordinary loss of $2,310,000 (net of an income tax benefit of $1,540,000) in
connection with the early retirement of the 11.04% promissory notes.
The 9.5% notes require annual principal repayment of $8,000,000 beginning May
31, 2001 through May 31, 2005.
In September 1985, the Company obtained $1,800,000 of financing through the
issuance of an Industrial Revenue Bond for the addition of a new production
facility. The bond bore interest at 9.56% and was required to be repaid in
twenty equal quarterly installments which began in 1990. The bond was repaid in
full in September 1995.
The terms of the various agreements include covenants which provide, among other
things, for the maintenance of certain financial covenants and ratios relating
to consolidated net worth and consolidated working capital as well as
restrictions on cash dividends and certain other expenditures. At December 31,
1995, retained earnings available for dividends and certain other expenditures
amounted to approximately $986,000. At December 31, 1995, the Company was in
compliance with all covenants.
There are no required principal payments of long-term debt over the next five
years. The mortgage notes aggregating $70,395 in 1995 and $135,149 in 1994, are
secured by land and buildings having a net book value of approximately $522,000
and $553,000 in 1995 and 1994, respectively.
(7) FINANCIAL ARRANGEMENTS
At December 31, 1995, the Company had arrangements with banks providing
$27,500,000 of lines of credit. These lines, which are renewable annually, are
currently in force and are expected to be renewed at their respective expiration
dates. Borrowings under the lines averaged $0 in 1995 and $400,000 in 1994 based
on month-end balances. The maximum borrowings were $0 in 1995 and $1,600,000 in
1994 with the related weighted average interest rates based on average
borrowings of approximately 6.0% in each year. No compensating balances are
required for these lines or for drawings thereunder and there are no restrictive
covenants.
-6-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) EMPLOYEE RETIREMENT PLANS
(a) PENSION PLANS
The Company maintains non-contributory defined benefit pension plans covering
all eligible employees. The Company also has a supplemental executive
retirement plan ("SERP") for certain of its executives. The SERP Plan is a non-
qualified plan under the Internal Revenue Code. The Company has made payments
of $310,000, $450,000 and $150,000 for 1995, 1994, and 1993, respectively, as
determined by the plans' actuaries in accordance with SFAS No. 87 "Employer's
Accounting for Pensions":
<TABLE>
<CAPTION>
1995
---------------------------------------------------
Del Non- Del LaCross
Union Plan Union Plan SERP
---------- ---------- ----
<S> <C> <C> <C>
Actuarial present value of accumulated
plan benefit obligation:
Vested benefit obligation $ 9,292,453 $ 928,193 $ 2,287,430
Non-vested benefit obligation 1,150,856 9,525 26,184
------------ ------------ ------------
Accumulated benefit obligation $ 10,443,309 $ 937,718 $ 2,313,614
------------ ------------ ------------
------------ ------------ ------------
Projected benefit obligation for services
rendered to date $(12,564,718) $ (937,718) $ (2,453,669)
Plan assets at fair value 9,150,406 472,506 -
------------ ------------ ------------
Plan assets under projected
benefit obligation ( 3,414,312) ( 465,212) ( 2,453,669)
Unrecognized net loss (gain) (1) 2,579,615 139,345 280,962
Unrecognized net (asset) obligation at
December 31 being amortized (2) ( 439,969) 148,659 -
Unrecognized prior service cost 598,195 46,702 460,508
Additional minimum liability for unfunded
accumulated benefit obligation (3) (616,432) (334,706) (601,415)
------------ ------------ ------------
Accrued pension expense (4) $ (1,292,903) $ (465,212) $ (2,313,614)
------------ ------------ ------------
------------ ------------ ------------
Net pension expense is comprised of the
following components:
Service cost $ 772,186 $ 27,356 $ 200,424
Interest cost on projected benefit
obligation 701,325 54,563 132,544
Return on assets ( 599,779) ( 35,958) -
Amortization of net (assets) obligation ( 62,576) 24,776 -
Amortization of past service cost 56,156 6,902 88,020
Amortization of (gain) 168,242 2,615 25,542
------------ ------------ ------------
Net pension expense $ 1,035,554 $ 80,254 $ 446,530
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
-7-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1994
---------------------------------------------------
Del Non- Del LaCross
Union Plan Union Plan SERP
---------- ---------- ----
<S> <C> <C> <C>
Actuarial present value of accumulated
plan benefit obligation:
Vested benefit obligation $ 6,779,86 $ 783,538 $ 1,892,729
Non-vested benefit obligation 872,899 6,287 7,594
----------- ----------- -----------
Accumulated benefit obligation $ 7,652,767 $ 789,825 $ 1,900,323
----------- ----------- -----------
----------- ----------- -----------
Projected benefit obligation for services
rendered to date $(9,070,799) $ (789,825) $(1,900,323)
Plan assets at fair value 7,387,240 448,685 -
----------- ----------- -----------
Plan assets under projected
benefit obligation (1,683,559) (341,140) (1,900,323)
Unrecognized net loss (gain) (1) 1,907,365 27,848 86,125
Unrecognized net (asset) obligation at
December 31 being amortized (2) (502,545) 173,435 -
Unrecognized prior service cost 125,322 53,605 548,528
Additional minimum liability for unfunded
accumulated benefit obligation (3) (112,110) (254,888) (634,653)
----------- ----------- -----------
Accrued pension expense (4) $ (265,527) $ (341,140) $(1,900,323)
----------- ----------- -----------
----------- ----------- -----------
Net pension expense is comprised of the
following components:
Service cost $ 545,249 $ 21,802 $ 168,095
Interest cost on projected benefit
obligation 603,876 54,281 120,853
Return on assets (699,344) ( 41,806) -
Amortization of net (assets) obligation (62,576) 24,776 -
Amortization of past service cost 20,887 6,902 88,020
Amortization of (gain) 42,551 - 7,177
----------- ----------- -----------
Net pension expense $ 450,643 $ 65,955 $ 384,145
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
-8 -
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1993
---------------------------------------------------
Del Non- Del LaCross
Union Plan Union Plan SERP
---------- ---------- ----
<S> <C> <C> <C>
Actuarial present value of accumulated
plan benefit obligation:
Vested benefit obligation $ 5,982,361 $ 717,956 $ 1,067,139
Non-vested benefit obligation 895,868 7,853 -
------------ ------------ -------------
Accumulated benefit obligation $ 6,878,229 $ 725,809 $ 1,067,139
------------ ------------ -------------
------------ ------------ -------------
Projected benefit obligation for services
rendered to date $ (8,213,929) $ (725,809) $ (1,067,139)
Plan assets at fair value 7,268,682 433,476 -
------------ ------------ -------------
Plan assets under projected
benefit obligation (945,247) (292,333) (1,067,139)
Unrecognized net loss (gain) (1) 1,233,385 (108) 93,301
Unrecognized net (asset) obligation at
December 31 being amortized (2) (565,121) 198,212 -
Unrecognized prior service cost 146,209 37,932 92,313
Additional minimum liability for unfunded
accumulated benefit obligation (3) - (236,036) (185,614)
------------ ------------ -------------
Accrued pension expense (4) $ (130,774) $ (292,333) $ (1,067,139)
------------ ------------ -------------
------------ ------------ -------------
Net pension expense is comprised of the
following components:
Service cost $ 433,076 $ 17,893 $ 89,565
Interest cost on projected benefit
obligation 541,130 49,931 70,165
Return on assets (593,630) ( 37,511) -
Amortization of net (assets) obligation (62,576) 24,776 -
Amortization of past service cost 20,887 4,667 46,156
Amortization of (gain) - (4,924) 5,683
------------ ------------ -------------
Net pension expense $ 338,887 $ 54,832 $ 211,569
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
(1) Represents the change in the value of the projected liabilities resulting
from using a lower discount interest rate than in prior years and changes
in the values of projected assets and liabilities resulting from experience
different than actuarial assumptions.
(2) Represents the difference between the assets and the projected benefit
obligation as of January 1, 1987 (the transition date), amortized over the
average future service period of the active plan members.
(3) Represents the additional minimum liability required to recognize the
excess of the unfunded accumulated benefit obligation over previously
accrued pension expense. In accordance with SFAS No. 87, a concomitant
intangible asset of an equal amount was recognized and included in
investments and other assets.
(4) The short-term portion of accrued pension expense is included in accrued
liabilities.
Total pension expense for the years ended December 31, 1995, 1994 and 1993
amounted to approximately $1,562,000, $901,000 and $605,000, respectively.
-9-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
For 1995 and 1994, the actuarial assumptions used for the weighted average
discount rate were 6.25% and 7.5% respectively; for the return on assets 8.0%
and 9.5% were used respectively; and for the rates of increase in future
compensation 5.5% was used for 1995 and 1994.
Assets held by these plans consist of cash and cash equivalents, fixed income
securities consisting of government and corporate bonds and common stock.
The Company contributes to a multi-employer (union) pension plan for the benefit
of its union employees not covered by the above plans. This plan is a defined
benefit plan based on years of service. The costs recognized for 1995, 1994 and
1993 were approximately $419,000, $358,000 and $365,000, respectively.
Effective January 1, 1991, the Company established a defined contribution plan
for the benefit of its Canadian employees not covered by the above plans. The
costs recognized for 1995, 1994 and 1993 were approximately $50,000, $41,000 and
$30,000 in U.S. dollars, respectively.
(b) EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan and related trust, covering
substantially all full-time non-union employees. Under the terms of the plan,
the Company may make contributions to the trust in cash, shares of Company stock
or other property in amounts as may be determined by the Board of Directors.
The Board of Directors authorized contributions of $400,000, $250,000 and
$275,000 for the years 1995, 1994 and 1993, respectively. At December 31, 1995
the trust held 280,644 shares of Company common stock.
(c) EMPLOYEE 401(k) SAVINGS PLAN
The Company maintains an Employee 401(k) Savings Plan. The plan is a defined
contribution plan which is administered by the Company. All regular, full-time
employees are eligible for voluntary participation upon completing six months of
service and having attained the age of twenty-one. The plan provides for growth
in savings through contributions and income from investments. It is subject to
the provisions of the Employee Retirement Income Security Act of 1974 (ERISA),
as amended. Plan participants are allowed to contribute a specified percentage
of their base salary. However, the company retains the right to make optional
contributions for any plan year. No such optional contributions were made for
the years ended December 31, 1995, 1994 and 1993.
(9) SHAREHOLDERS EQUITY
(a) STOCK OPTION PLANS
The 1994 Stock Plan (the "1994 Plan") provides for the granting of incentive and
non-incentive options and other stock- based awards. A total of 489,646 shares
have been authorized for issuance under the 1994 Plan. At December 31, 1995,
non-incentive options have been the only awards issued under the 1994 Plan. The
exercise price of options granted under the 1994 Plan shall not be less than the
fair market value of the common stock at the date of the grant. The
Compensation Committee of the Board of Directors determines the persons to whom
options will be granted, the prices at which options may be exercised and
whether the options will be incentive or non-incentive. Incentive options, if
granted, are exercisable for a period of up to ten years from the date of the
grant. The exercise price of the shares to be purchased shall be paid either
in cash, delivery (i.e. surrender) of shares of common stock owned by the
optionee at the time of exercise of the option, in installments payable in
cash if permitted by the Committee or in any combination of the foregoing.
Shares received by an optionee upon exercise of a non-incentive option may not
be sold or otherwise disposed of for a period ("restricted period") determined
by the Committee upon grant of the option, which shall be not less than six
months or more than three years from the date of the exercise, during which
period the Company is entitled, in the event the employment of the optionee with
the Company terminates, to repurchase the shares at the exercise price.
Following the restricted period, the Company shall have a right of first refusal
to purchase the shares at fair market value. Shares issuable upon exercise of
options granted to date under the 1994 Plan are subject to a six month
restricted period.
-10-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) STOCK OPTION PLANS (CONT'D.)
At December 31, 1995, 113,416 of the 357,002 options outstanding were
exercisable under the 1994 Plan.
The 1984 Stock Option Plan, as amended (the "1984 Plan"), provided for the
granting of incentive and non-incentive options to purchase shares of the
Company's common stock at prices which are not less than the fair market value
of the common stock at the dates of grant. Options are exercisable as
determined by the Compensation Committee for a period up to ten years and one
day from the date of grant. Incentive options granted to a 10% stockholder must
be granted at 110% of fair market value and may be exercised up to five years
from the date of grant. Payment of the exercise price of options may be made in
the same manner as provided by the 1994 Plan, and shares issued upon exercise
are subject to a restricted period similar to that provided under the 1994 Plan.
At December 31, 1995, all 898,233 options outstanding under the 1984 Plan were
exercisable. No further options will be granted under the 1984 Plan.
The Company's Restricted Stock Plan (1971), as amended ("1971 Plan"), provided
for the granting of options at the fair market value of the common stock at the
date of grant, for a term up to ten years. Shares are subject to a restricted
period similar to that imposed by the 1994 Plan and 1984 Plan. At December 31,
1995, there were no options outstanding under the 1971 Plan and no additional
options will be granted.
The 1994 Plan and 1984 Plan permit the Compensation Committee to grant stock
appreciation rights. No stock appreciation rights have been granted under
either plan.
Limited stock appreciation rights also may be granted under the 1994 Plan and
1984 Plan, which will be effective only upon a change in control of the Company
(as defined). These plans also accelerate the exercisability of all unexercised
options or stock appreciation rights immediately in the event of a change in
control of the Company.
Shares outstanding and option prices under option and option transactions during
the last three years, are summarized below:
<TABLE>
<CAPTION>
1994 Stock Plan
Shares Option Price
------ ------------
<S> <C> <C>
Outstanding December 31, 1993 - -
Granted 96,200 $13 - 18
Exercised - -
Forfeited - -
------- --------
Outstanding December 31, 1994 96,200 13 - 18
Granted 282,020 19 - 24
Exercised (4,358) 13 - 19
Forfeited (16,860) 13 - 24
------- --------
Outstanding December 31, 1995 357,002 $13 - 23
-------
-------
<CAPTION>
1984 Stock Option Plan Restricted Stock Plan (1971)
Shares Option Price Shares Option
------ ------------ --------- ------
<S> <C> <C> <C> <C>
Outstanding December 31, 1992 1,470,910 $5 - 10 109,820 $7 - 9
Granted 129,554 11 - -
Exercised (241,206) 6 - -
Forfeited (26,074) 6 - 9 - -
--------- -------- -------- ------
Outstanding December 31, 1993 1,333,184 5 - 11 109,820 7 - 9
Granted - - - -
Exercised (180,470) 6 - 9 (1,866) 7
Forfeited (1,778) - - -
--------- -------- -------- ------
Outstanding December 31, 1994 1,150,936 5 - 11 107,954 7 - 9
Granted - - - -
Exercised (240,689) 5 - 11 (107,954) 7 - 9
Forfeited (12,014) 8 - 11 - -
--------- -------- -------- ------
Outstanding December 31, 1995 898,233 $5 - 11 0 -
--------- --------
--------- --------
</TABLE>
At December 31, 1995, a total of 1,255,235 shares of common stock were subject
to outstanding options under its stock option plans.
-11-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(b) RECEIVABLE FOR STOCK OPTIONS EXERCISED
In 1984, the Company loaned an officer $367,000 in connection with the payment
of taxes arising from the exercise of stock options (the "1984" Loan). The
Company also loaned the officer $1,065,313 in 1988 (the "1988" Loan) and
$1,100,000 in 1990 (the "1990" Loan), each in connection with the exercise of
stock options and the tax liability arising therefrom. These loans were payable
in annual installments. In addition, the 1988 Loan and the 1990 Loan agreements
provided that, if the officer was employed by the Company at the time any
interest or debt payments were due, such payment would be forgiven.
Pursuant to an amendment to this officer's employment agreement, the 1984
Loan, the 1988 Loan and the 1990 Loan were consolidated, effective as of
January 1, 1994, with the aggregate principal balance to be repaid, with
interest at the rate of 6.0% per annum, in annual amounts of $130,000 in
1994, $140,000 for each year during the period from 1995 through 2003 and a
final payment of $642,250 on January 20, 2004, provided that each payment of
interest and principal will be forgiven when due so long as the officer is
then employed by, or then serves as a consultant to the Corporation and,
provided further, that the Corporation may (but is not required to) forgive,
during any year until 2003, in excess of $140,000 of principal, so long as
the aggregate of principal and interest forgiven by the Corporation in any
such year shall not exceed $360,000. This loan must be secured by collateral
with a fair value of 110% of the unpaid principal. The loan balance at
December 31, 1995 was $1,762,250 and was collateralized by 104,000 shares of
the Company's common stock.
During 1992, the Company loaned another officer $130,000 to enable him to
exercise an option for 7,289 shares. The loan bears interest at the prime rate
and is payable in quarterly installments commencing in 1993. The loan balance
at December 31, 1995 was $91,000 and was secured by a pledge of 8,500 shares of
the Company's common stock.
During 1992, the Company loaned an aggregate of $111,187 to two additional
officers to enable them to exercise options for 6,500 shares. The loans bear
interest at the prime rate and are payable in quarterly installments
commencing in 1993. One of the loans was repaid in full in April 1995. The
balance of the other loan at December 31, 1995 was $41,414 and was secured by
3,400 shares of the Company's common stock.
During 1993, the Company loaned an aggregate of $151,496 to two other officers
to enable them to exercise options for an aggregate of 8,889 shares. The loans
bear interest at the prime rate and are payable in quarterly installments
commencing in 1994. The loans were repaid in full in January 1995.
During 1993, the Company loaned two employees an aggregate of $54,800 to enable
them to exercise options for an aggregate of 2,666 shares. The loans bear
interest at the prime rate and are payable in quarterly installments which
commenced in 1994. The loans were repaid in full in January 1995.
The balance of all loans made to officers and employees is reflected as a
reduction of Shareholders' Equity in the accompanying consolidated financial
statements.
(c) AMENDMENT TO CERTIFICATE OF INCORPORATION
On May 26, 1995, the Company's stockholders approved an amendment to the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 5,000,000 shares to 10,000,000 shares.
(10) ACCRUED LIABILITIES
Accrued liabilities at December 31, 1995 and 1994 consisted of the following:
1995 1994
---- ----
Salaries, wages, commissions & employee benefits $2,771,037 $ 2,002,334
Interest 317,243 308,595
Advertising and promotion costs 9,227,230 6,764,276
Other 2,179,214 1,628,279
----------- -----------
$14,494,724 $10,703,484
----------- -----------
----------- -----------
-12-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) COMMITMENTS AND CONTINGENCIES
The Company has been notified that it has been identified as a potentially
responsible party with respect to environmental remediation activities required
at a site in Pennsylvania. The total cost to the Company of remediation
activities that it may be required to undertake cannot yet be quantified,
although the Company is one of over 900 potentially responsible parties that
have been identified at the site. Although no dollar amount can be assigned to
remediation costs because of inherent uncertainties, on the basis of current
available information, management has determined that such costs will not have a
material adverse effect on the Company's financial position. It is the
Company's policy to meet all regulatory requirements for the protection of the
environment and to take prompt remedial action where necessary.
In July 1994, the Equal Employment Opportunity Commission ("EEOC") filed suit
against the Company in the United States District Court for the Eastern
District of New York alleging sexual discrimination against certain present
and former employees of the Company, in violation of Title VII of the Civil
Rights Act of 1964, as amended. On August 3, 1995, the Court approved a
consent decree between the Company and the EEOC settling the case. The
Company denied that it engaged in any unlawful conduct, and the consent
decree expressly acknowledges that the settlement does not constitute an
admission by the Company of any violation of any law, rule or regulation
relating to employment discrimination. The Board of Directors determined
that the settlement was in the best interest of the Company and its
shareholders, considering the expense that would have resulted from continued
litigation and the time and attention of management and employees that would
necessarily have been required.
Pursuant to the settlement, the Company agreed to pay 15 former employees a
total sum of $1,185,000. The settlement also incorporated the Company's revised
sexual harassment policy which includes a revised complaint procedure.
On August 9, 1995, two stockholder derivative actions were filed in the State of
Delaware Chancery Court against the Company and members of its Board of
Directors, alleging breach of fiduciary duty and waste of corporate assets by
the directors in connection with the Company's response to and investigation of
the claims of sexual harassment made against the Company which were the subject
of the lawsuit filed by the EEOC. One action also names a former director and a
person mistakenly named as a director. Plaintiffs have moved to consolidate
these actions. The derivative actions seek restitution of amounts paid in
connection with the defense and settlement of the lawsuit and certain other
relief. The Company believes that these derivative actions are without merit.
The Company is of the opinion, on the basis of currently available information,
that none of the matters referred to above will have a material effect on the
Company's results of operations or financial condition.
The Company leases data processing equipment, transportation equipment and
warehouse space under terms of leases expiring through 2001. Rentals under
these operating leases aggregate approximately $1,881,000, $1,768,000 and
$1,240,000 in 1995, 1994 and 1993, respectively. The Company's obligations
under non-cancelable leases are summarized as follows:
1996 $1,001,733
1997 644,963
1998 240,435
1999 195,679
2000 129,510
Thereafter 54,357
----------
$2,266,677
----------
(12) FINANCIAL INSTRUMENTS
The carrying value of all financial instruments classified as a current asset or
current liability are deemed to approximate fair value because of the short
maturity of these instruments.
The difference between the fair value of long-term debt and its carrying value
at December 31, 1995 is not material. The fair value of the Company's long-
term debt is estimated based upon current rates offered to the Company for a
similar liability. Because considerable judgement is required in interpreting
market data to develop estimates of fair value, the estimates are not
necessarily indicative of the amounts that could be realized or would be paid in
a current market exchange. The effect of using different market assumptions or
estimation methodologies may be material to the estimated fair value amount.
The carrying value of all financial instruments approximates fair value.
-13-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) SEGMENT INFORMATION
The following is a summary of segment information for 1995, 1994 and 1993 (in
thousands of dollars):
<TABLE>
<CAPTION>
1995
---------------------------------------------
Cosmetics Pharmaceutical Consolidated
--------- -------------- ------------
<S> <C> <C> <C>
Sales to unaffiliated customers $162,348 $49,700 $212,048
-------- ------- --------
-------- ------- --------
Operating income $ 6,358 $ 9,049 $ 15,407
-------- ------- --------
Interest expense (net) $ 3,501
--------
Earnings before taxes $ 11,906
--------
Identifiable assets at December 31, 1995 $ 96,121 $17,003 $113,124
-------- ------- --------
-------- ------- --------
Depreciation and amortization $ 5,617 $ 328 $ 5,945
-------- ------- --------
-------- ------- --------
Capital expenditures $ 7,377 $ 192 $ 7,569
-------- ------- --------
-------- ------- --------
<CAPTION>
1994
---------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers $141,687 $48,415 $190,102
-------- ------- --------
-------- ------- --------
Operating income $ 4,331 $ 8,939 $ 13,270
-------- ------- --------
Interest expense (net) $ 3,641
--------
Earnings before taxes $ 9,629
--------
--------
Identifiable assets at December 31, 199 $ 89,197 $15,760 $104,957
-------- ------- --------
-------- ------- --------
Depreciation and amortization $ 3,815 $ 197 $ 4,012
-------- ------- --------
-------- ------- --------
Capital expenditures $ 5,652 $ 175 $ 5,827
-------- ------- --------
-------- ------- --------
<CAPTION>
1993
---------------------------------------------
<S> <C> <C> <C>
Sales to unaffiliated customers $120,964 $45,532 $166,496
-------- ------- --------
-------- ------- --------
Operating income $ 3,154 $ 7,920 $ 11,074
-------- ------- --------
Interest expense (net) $ 4,066
--------
Earnings before taxes $ 7,008
--------
--------
Identifiable assets at December 31, 1993 $ 79,806 $15,380 $ 95,186
-------- ------- --------
-------- ------- --------
Depreciation and amortization $ 3,490 $ 330 $ 3,820
-------- ------- --------
-------- ------- --------
Capital expenditures $ 4,706 $ 96 $ 4,802
-------- ------- --------
-------- ------- --------
</TABLE>
In 1995, 1994 and 1993, sales to Wal-Mart Stores Inc. were in excess of 10%
of consolidated net sales.
Two customers and one customer accounted for 35.1% and 19.1% of the Company's
net accounts receivables at December 31, 1995 and 1994, respectively.
-14-
<PAGE>
DEL LABORATORIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) UNAUDITED QUARTERLY FINANCIAL DATA
The following is a summary of quarterly operating results for 1995 and 1994 (in
thousands of dollars except per share amounts):
<TABLE>
<CAPTION>
1995
--------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $50,697 $52,656 $55,114 $53,581
Cost of goods sold 19,539 21,587 23,669 23,643
Net earnings 1,836 1,702 1,977 1,510
Earnings per common share $ .38 $ .34 $ .41 $ .32
------- ------- ------- -------
------- ------- ------- -------
<CAPTION>
1994
--------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $45,513 $46,806 $49,608 $48,175
Cost of goods sold 18,064 18,291 20,616 19,112
Net earnings 1,494 1,390 1,640 1,157
Earnings per common
share (A) $ .31 $ .30 $ . 35 $ .24
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Earnings per share calculations for each of the quarters are based on weighted
average number of shares outstanding in each period. Therefore, the sum of the
quarters in a year does not necessarily equal the year's earnings per share.
(A) Fully diluted earnings per share for the year was $1.14.
-15-
<PAGE>
SCHEDULE II
DEL LABORATORIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance at
beginning costs and end
Description of period Expenses Deductions(1) of period
- --------------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1993
allowances for doubtful
accounts $1,200,000 $ 201,000 $ 301,000 $1,100,000
---------- --------- --------- ----------
---------- --------- --------- ----------
Year ended December 31, 1994
allowances for doubtful
accounts $1,100,000 $ 548,400 $ 348,400 $1,300,000
---------- --------- --------- ----------
---------- --------- --------- ----------
Year ended December 31, 1995
allowances for doubtful $1,300,000 $ 655,000 $ 255,000 $1,700,000
accounts ---------- --------- --------- ----------
---------- --------- --------- ----------
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
-16-
<PAGE>
EXHIBIT INDEX
ITEM EXHIBIT
NO. ITEM TITLE NO. DESCRIPTION
- ---- ---------- -------- -----------
3 Articles of (1) Restated Certificate of
Incorporation and Incorporation as filed with
By-Laws the Delaware Secretary of
State on March 29, 1996
(2) By-Laws as amended through
December 14, 1995
10 Material Contracts (3) Amendment to Employment
Agreement with Charles J.
Hinkaty dated April 14,
1995
(4) Amendment to Employment
Agreement with Harvey P.
Alstodt dated April 14,
1995
(5) Amendment to Employment
Agreement with William H.
McMenemy dated April 14,
1995
(6) Amendment to Employment
Agreement with Melvyn C.
Goldstein dated April 14,
1995
11 Statements Re: (7) Computation of per share
computation of per earnings
share earnings
23 Consents of experts (8) Consent of KPMG Peat
and counsel Marwick LLP dated
March 27, 1996
Financial Data (27) Financial Data Schedule
Schedule
<PAGE>
Exhibit 1 to Annual
Report On Form 10-K
For the Year Ended
December 31, 1995
RESTATED
CERTIFICATE OF INCORPORATION
OF
DEL LABORATORIES, INC.
TO THE SECRETARY OF STATE OF THE STATE OF DELAWARE:
The undersigned officer of Del Laboratories, Inc., a Delaware
corporation ("Corporation"), does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation was
originally filed with the Secretary of State of the State of Delaware
("Secretary of State") on October 25, 1961. The name of the Corporation under
which it was originally incorporated was "Maradel Products, Inc."
2. This Restated Certificate of Incorporation has been duly adopted
in accordance with the provisions of Section 245 of the General Corporation Law
of the State of Delaware. This Restated Certificate only restates and
integrates and does not further amend the provisions of the Corporation's
Certificate of Incorporation as theretofore amended or supplemented, and there
is no discrepancy between those provisions and the provisions of this Restated
Certificate.
3. The text of the Corporation's Certificate of Incorporation, as
heretofore amended or supplemented, is hereby restated to read in its entirety
as follows:
FIRST: The name of the corporation (which is hereinafter referred
to as the Corporation) is
DEL LABORATORIES, INC.
SECOND: The principal office of the Corporation in the State of
Delaware is located at 1013 Centre Road, in the City of Wilmington, in the
County of New Castle. The name and address of its resident agent is the
United States Corporation Company, 1013 Centre Road, in the City of
Wilmington, Delaware.
<PAGE>
-2-
THIRD: The nature of the business of the Corporation and the
objects or purposes proposed to be transacted, promoted or carried on by it are
as follows:
(1) To manufacture, produce, import, export, hold, own, trade,
deal in, sell, exchange and otherwise dispose of, as agent or as
principal, all kinds of chemical, mineral, vegetable, and other
products, in raw state or in compounds, preparations, compositions,
and concentrations thereof, as well as any and all other articles and
kinds of merchandise, known as creams, powders, lotions, cosmetics,
perfumes, colognes, toilet articles, druggist sundries, proprietary
articles, pharmaceuticals, medical and cosmetic preparations,
lipsticks, bleaches, nail polishes, oils, and general products, used
as toilet articles in solid or liquid preparations, as well as all
other substances, materials, articles or merchandise useful in the
manufacture, preparation, distribution or sale of any of the foregoing
or in connection therewith.
(2) To design, develop, experiment with, manufacture,
merchandise, acquire, produce, assemble, buy, lease or otherwise
acquire, hold, own, operate, use, install, equip, replace, maintain,
service, process, reprocess, repair, remodel, recondition, import,
export, sell, lease or otherwise dispose of and generally to deal in
and with (as contractor, subcontractor, principal, agent, commission
merchant, broker, factor or any combination of the foregoing, and at
wholesale or retail or both) any and all kinds of products, natural
products, raw materials, articles, equipment, machinery, devices,
systems, parts, supplies, tools, implements, apparatus, and goods,
wares, merchandise and tangible property of every kind, used or
capable of being used for any purpose whatever.
(3) To purchase, lease or otherwise acquire, hold, own,
mortgage, pledge, hypothecate, build, erect, construct, maintain and
operate, develop, improve and sell, lease or otherwise dispose of
land, and improvements, warehouses, factories, buildings, structures,
piers, wharves, mills, dams, stores and dwellings and all other
property and things of whatsoever kind and nature, real, personal or
mixed, tangible or intangible, within or without the State of
Delaware, and in any part of the world, suitable or necessary in
connection with any of the purposes
<PAGE>
-3-
hereinabove or hereinafter set forth, or otherwise deal with or in any
such properties.
(4) To apply for, obtain, purchase, lease, take licenses in
respect of or otherwise acquire, and to hold, own, use, operate,
enjoy, turn to account, grant licenses in respect of, manufacture
under, introduce, sell, assign, mortgage, pledge or otherwise dispose
of
(a) any and all inventions, devices and processes and any
and all improvements and modifications thereof;
(b) any and all letters patent of the United States of
America or of any other country, state, territory or locality,
domestic or foreign, and all rights connected therewith or
appertaining thereto;
(c) any and all copyrights granted by the United States of
America or any other country, state, territory or locality,
domestic or foreign; and
(d) any and all trademarks, trade names trade symbols and
other indications of origin and ownership granted by or
recognized under the laws of the United States or of any other
country, state, territory or locality, domestic or foreign.
(5) To acquire by purchase, exchange or otherwise all, or any
part of, or any interest in, the properties, assets, business and good
will of any one or more persons, partnerships, associations, trusts,
corporations, syndicates or other entities, engaged in any business
similar to any business which the Corporation has power to conduct; to
pay for the same in cash, property or its own or other securities; to
hold, operate, reorganize, liquidate, sell or in any manner dispose of
the whole or any part thereof; and in connection therewith to assume
or guarantee performance of any liabilities, obligations or contracts
of such persons, partnerships, associations, trusts, corporations,
syndicates or other entities, and to conduct in any lawful manner the
whole or any part of any business thus acquired.
(6) To participate in syndicates of all kinds; and to make and
carry out contracts of underwriting of
<PAGE>
-4-
the securities of any person, partnership, association, trust,
corporation, syndicate, government or subdivision or agency or
instrumentality thereof, domestic or foreign, or combination,
organization or entity whatsoever, domestic or foreign, and to act as
manager of any underwriting or purchasing or selling syndicate.
(7) To borrow money for any of the purposes of the Corporation,
from time to time, and without limit as to amount; to issue and sell
its own securities in such amounts, on such terms and conditions, for
such purposes and for such prices, now or hereafter permitted by the
laws of the State of Delaware and by this Certificate of
Incorporation, as the Board of Directors may determine; and to secure
such securities, to the extent now or hereafter permitted by the laws
of said State and by this Certificate of Incorporation, by mortgage
upon, or the pledge of, or the conveyance or assignment in trust of,
the whole or any part of the properties, assets, business and good
will of the Corporation, then owned or thereafter acquired.
(8) To acquire and to invest in, hold, sell, mortgage, pledge or
otherwise dispose of, or turn to account or realize upon all forms of
securities including, but not by way of limitation, stocks, bonds,
debentures, notes, scrip, mortgages, certificates of indebtedness, and
certificates of interest issued or created by corporations,
associations, partnerships, firms, trustees, syndicates, individuals,
governments or subdivisions thereof, and all trust, participation and
other certificates of, and receipts evidencing, interest in any such
securities, and to issue in exchange therefor or in payment thereof,
in any manner permitted by law, its own stock, bonds, debentures or
its other obligations or securities or to make payment therefor by any
other lawful means of payment whatsoever, and to exercise any and all
rights, powers and privileges of individual ownership of interest in
respect of any and all such securities or evidences of interest
therein, including the right to vote thereon and to consent and
otherwise act with respect thereto for any and all purposes.
(9) To aid by loan, guaranty, subsidy or in any other manner
whatsoever, insofar as may be permitted by law, any corporation or
association, any shares of the capital stock or bonds or other
securities or evidences
<PAGE>
-5-
of indebtedness of which shall be held by or for the Corporation or in
which, or in the welfare of which, the Corporation shall have any
interest, and to do any acts or things designed to protect, preserve,
improve or enhance the value of any such shares, bonds or other
securities or evidences of indebtedness, and the property of any such
corporation or association.
(10) To have one or more offices and to carry on its operations
and transact its business in all of its branches in the State of
Delaware or elsewhere, and without restriction or limit as to amount,
to purchase or otherwise acquire, use, hold, own, mortgage, sell,
convey or otherwise dispose of real or personal property of every
class and description in any of the states, districts, territories or
dependencies of the United States, and in any and all foreign
countries, subject always to the laws of such state, district,
territory, dependency or foreign country.
(11) To purchase, hold, cancel, reissue, sell, exchange,
transfer or otherwise deal in its own securities (including shares of
its capital stock of any class) from time to time to such an extent
and in such manner and upon such terms as the Board of Directors shall
determine; provided that the Corporation shall not use its funds or
property for the purchase of its own shares of capital stock when such
use would cause any impairment of its capital; and provided further
that shares of its own capital stock belonging to the Corporation
shall not be voted upon directly or indirectly.
(12) To do all and everything necessary, suitable, convenient or
proper for the accomplishment of any of the purposes of attainment of
any one or more of the objects herein enumerated or incidental to the
powers herein specified, or which shall at any time appear conducive
to or expedient for the accomplishment of any of the purposes or
attainment of any of the objects hereinbefore enumerated not
inconsistent with the laws of the State of Delaware; and to execute
from time to time such general or special powers of attorney, and to
such persons, as the Board of Directors may approve, granting to such
persons all powers, either in the United States or in any other
country, state or locality, which the Board of Directors may deem
proper, and to revoke such powers of attorney as and when the Board of
Directors may desire.
<PAGE>
-6-
The foregoing provisions of this Article THIRD shall be construed both
as purposes and powers and each as an independent purpose and power. The
foregoing enumeration of specific purposes and powers shall not be held to limit
or restrict in any manner the purposes and powers of the Corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provisions of this or any other Article of this
Certificate of Incorporation; provided that nothing herein contained shall be
construed as authorizing the Corporation to issue bills, notes or other evidence
of debt for circulation as money, or to carry on the business of receiving
deposits of money or the business of buying gold or silver bullion or foreign
coins or as authorizing the Corporation to engage in the business of banking or
insurance or to carry on the business of constructing, maintaining or operating
public utilities in the State of Delaware; and provided, further, that the
Corporation shall not carry on any business or exercise any power in any state,
territory or country which under the laws thereof the Corporation may not
lawfully carry on or exercise.
FOURTH: CAPITAL STOCK
A. AUTHORIZED CAPITAL STOCK. The total number of shares of all
classes of stock which this Corporation shall have authority to issue is ELEVEN
MILLION (11,000,000) shares, consisting of TEN MILLION (10,000,000) shares of
Common Stock, par value $1.00 per share (hereinafter, the "Common Stock"), and
ONE MILLION (1,000,000) shares of Preferred Stock, par value $.01 per share
(hereinafter, the "Preferred Stock").
B. PREFERRED STOCK. Shares of Preferred Stock may be issued from
time to time in one or more series as may from time to time be determined by the
Board of Directors. Each series shall be distinctly designated. All shares of
any one series of the Preferred Stock shall be alike in every particular event
except that there may be different dates from which dividends thereon, if any,
shall be cumulative, if made cumulative. The powers, preferences and relative,
participating, optional and other rights of each series, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. Subject to the provisions of
subparagraph (4) of Paragraph (D) of this Article FOURTH, the Board of Directors
of this Corporation is hereby expressly granted authority to fix by resolution
or resolutions granted authority to fix by resolution or resolutions adopted
prior to the issuance of any shares of each particular series of Preferred
Stock, the designation, powers, preferences and
<PAGE>
-7-
relative, participating, optional and other rights, and the qualifications,
limitations and restrictions thereof, if any, of such series, including but
without limiting the generality of the foregoing, the following:
(1) The distinctive designation of and the number of shares of
Preferred Stock which shall constitute the series, which number may be
increased (except as otherwise fixed by the Board of Directors) or
decreased (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors;
(2) the rate and times at which, and the terms and conditions
upon which, dividends, if any, on shares of the series shall be paid,
the extent of preferences or relation, if any, of such dividends to
the dividends payable on any other class or classes of stock of this
Corporation, or on any series of Preferred Stock or of any other class
or classes of stock of this Corporation, and whether such dividends
shall be cumulative or non-cumulative;
(3) the right, if any, of the holders of shares of the series to
convert the same into, or exchange the same for, shares of any other
class or classes of stock of this Corporation, or of any series of
Preferred Stock of this Corporation, and the terms and conditions of
such conversion or exchange;
(4) whether shares of the series shall be subject to redemption,
and the redemption price or prices including, without limitation, a
redemption price or prices payable in shares of the Common Stock and
the time or times at which, and the terms and conditions upon which,
shares of the series may be redeemed;
(5) the rights, if any, of the holders of shares of the series
upon voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of this
Corporation;
(6) the terms of the sinking fund or redemption or purchase
account, if any, to be provided for shares of the series; and
(7) the voting powers, if any, of the holders of shares of the
series which may, without limiting the generality of the foregoing,
include (i) the right to more or less than one vote per share on any
or all matters voted upon by the stockholders and (ii) the right to
vote, as a
<PAGE>
-8-
series by itself or together with other series of Preferred Stock or
together with all series of Preferred Stock as a class, upon such
matters, under such circumstances and upon such conditions as the
Board of Directors may fix, including, without limitation, the right,
voting as a series by itself or together with other series of
Preferred Stock or together with all series of Preferred Stock as a
class, to elect one or more directors of this Corporation in the event
there shall have been a default in the payment of dividends on any one
or more series of Preferred Stock or under such other circumstances
and upon such conditions as the Board may determine.
C. COMMON STOCK.
(1) After the requirements with respect to preferential
dividends on Preferred Stock (fixed in accordance with provisions of
paragraph (B) of this Article FOURTH), if any, shall have been met and
after this Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of paragraph (B) of this Article FOURTH) and subject
further to any other conditions which may be fixed in accordance with
the provisions of paragraph (B) of this Article FOURTH, then but not
otherwise, the holders of Common Stock shall be entitled to receive
such dividends, if any, as may be declared from time to time by the
Board of Directors.
(2) After distribution in full of the preferential amount (fixed
in accordance with the provisions of paragraph (B) of this Article
FOURTH), if any, to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution or
sale of assets, dissolution or winding-up of this Corporation, the
holders of the Common Stock shall be entitled to receive all the
remaining assets of this Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders, ratably in
proportion to the number of shares of the Common Stock held by each.
(3) Except as otherwise be required by law, this Certificate of
Incorporation or the provisions of the resolution or resolutions as
may be adopted by the Board of Directors pursuant to paragraph (B) of
this Article FOURTH, each holder of Common Stock shall have one vote
in respect of each share of Common Stock held by such holder on each
matter voted upon by the stockholders.
<PAGE>
-9-
(D) OTHER PROVISIONS
(1) The relative powers, preferences and rights of each series
of Preferred Stock in relation to the powers, preferences and rights
of each other series of Preferred Stock shall, in each case, be as
fixed from time to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in paragraph (B) of
this Article FOURTH, and the consent, by class or series vote or
otherwise, of the holders of the Preferred Stock or such of the series
of Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other
series of Preferred Stock whether the powers, preferences and rights
of such other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and rights of
such outstanding series, or any of them, PROVIDED, HOWEVER, that the
Board of Directors may provide in such resolution or resolutions
adopted with respect to any series of Preferred Stock that the consent
of the holders of a majority (or such greater proportion as shall be
therein fixed) of the outstanding shares of such series voting thereon
shall be required for the issuance of any or all other shares of
Preferred Stock.
(2) Subject to the provisions of subparagraph (1) of this
paragraph, shares of any series of Preferred Stock may be issued from
time to time as the Board of Directors shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(3) Shares of the Common Stock may be issued from time to time
as the Board of Directors shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(4) No holder of any of the shares of any class or series of
stock or of options, warrants or other rights to purchase shares of
any class or series of stock or of other securities of the Corporation
shall have any preemptive right to purchase or subscribe for any
unissued stock of any class or series or any additional shares of any
class or series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or series, or
bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the Corporation of any
class or series, or carrying any right to purchase stock of any class
or series.
<PAGE>
-10-
FIFTH: The names and places of residence of each of the
incorporators are as follows:
Names Residence
----- ---------
Paul J. Chase Cherry Lane
Glen Head, L.I.
Garrard Bennett 118 Pine Street
Garden City, L.I.
Ernest H. Lorch 200 East End Avenue
New York, N.Y.
SIXTH: The number of directors constituting the Board of Directors
shall be seven. The Board of Directors shall be divided into two classes of two
directors each (Class I and Class II) and one class of three directors (Class
III). Directors elected at the annual meeting of stockholders in 1972 to
Classes I, II and III shall hold office until the annual meetings of
stockholders in 1973, 1974 and 1975, respectively, and until their successors
shall be elected and shall qualify. Persons elected as directors at annual
meetings of stockholders subsequent to 1972 shall hold office for a period of
three years and until their successors shall be elected and shall qualify.
Directors elected by the Board of Directors or by the stockholders to
fill a vacancy, shall hold office for a term expiring at the annual meeting at
which the term of the class to which they shall have been elected expires.
SEVENTH: For the management of the business and for the conduct of
the affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and
stockholders, it is further provided:
(a) The directors need not be stockholders. The election of
directors of the Corporation need not be by ballot unless the By-laws so
require. A majority of the directors shall constitute a quorum for the
transaction of business, unless the By-laws shall provide that a different
number shall constitute a quorum, which in no case shall be less than one-third
of the total number of directors nor less than two directors. The directors may
hold their meetings and have an office or offices outside of the State of
Delaware if the By-laws so provide.
<PAGE>
-11-
(b) In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered:
(i) To make, alter, amend and repeal the By-laws of the Corporation,
in any manner not inconsistent with the laws of the State of Delaware or
the Certificate of Incorporation of the Corporation, subject to the power
of the stockholders to alter or repeal the By-laws made by the Board of
Directors.
(ii) Subject to the applicable provisions of the By-laws then in
effect, to determine from time to time, whether and to what extent and at
what times and places under what conditions and regulations the accounts
and books and documents of the Corporation, or any of them, shall be open
to the inspection of the stockholders, and no stockholder shall have any
right to inspect any account or book or document of the Corporation, except
as conferred by the laws of the State of Delaware, unless and until
authorized so to do by resolution of the Board of Directors or of the
stockholders of the Corporation.
(iii) Without the assent or vote of the stockholders, to authorize
and issue obligations of the Corporation, secured or unsecured, to include
therein such provisions as to redeemability, convertibility or otherwise,
as the Board of Directors, in its sole discretion, may determine, and to
authorize the mortgaging or pledging, as security therefor, of any property
of the Corporation, real or personal, including after-acquired property.
(iv) To fix from time to time the amount of profits of the
Corporation to be reserved as working capital or for any other lawful
purpose.
In addition to the powers and authorities hereinbefore or by statute expressly
conferred upon it, the Board of Directors may exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the laws of the State of Delaware,
of the Certificate of Incorporation and of the By-laws of the Corporation.
(c) Any action to be taken by a vote of stockholders of the
Corporation may not be taken except at a meeting of stockholders, duly noticed,
at which a quorum is present. The affirmative vote of the holders of not less
than 80% of the issued and outstanding shares of each class of capital stock of
<PAGE>
-12-
the Corporation shall be required to amend, alter, change or repeal this
paragraph (c) of this Article SEVENTH.
EIGHTH: The affirmative vote of not less than 80% of the issued and
outstanding shares of the Common Stock of the Corporation shall be required:
(i) for a merger or consolidation by the Corporation with any
corporation other than a wholly-owned, direct or indirect subsidiary of the
Corporation.
(ii) for any sale, lease or other disposition, other than in the
ordinary course of business (in a single transaction or in a related series of
transactions) to any other corporation, person or other entity, except a
wholly-owned subsidiary, direct or indirect of the Corporation, of any
"Substantial Assets" of the Corporation, or the voting of any proxies to permit
such sale, lease or other disposition by any subsidiary of the Corporation.
For the purposes of this Article EIGHTH "Substantial Assets" shall
mean assets in excess of 33-1/3% of the value of the gross assets of the
Corporation on a consolidated basis as determined by the Board of Directors.
NINTH: Special Meetings of Stockholders may be called by the Board
of Directors, the Chairman of the Board or the President of the Corporation, or
upon the written request of the holders of not less than 80% of the issued and
outstanding shares of Common Stock of the Corporation.
TENTH: If it should be deemed advisable in the judgment of the
Board of Directors that the Corporation be dissolved, the Board, after the
adoption of a resolution to that effect by not less than four directors at any
meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon such resolution. At such meeting of
stockholders, the affirmative vote of not less than 80% of the issued and
outstanding shares of Common Stock of the Corporation shall be required to
authorize such dissolution
ELEVENTH: Any director may be removed, without cause, at any time by
the affirmative vote of not less than 80% of the issued and outstanding shares
of Common Stock of the Corporation at a special meeting of stockholders called
for the purpose; and the vacancy on the Board caused by any such removal may be
filled by the stockholders at such meeting.
<PAGE>
-13-
TWELFTH: The stockholders shall be entitled to receive, when, as and
if declared by the Board of Directors of the Corporation, such dividends,
payable out of earnings, surplus or any other assets of the Corporation legally
available therefor, as the Board of Directors may from time to time declare.
THIRTEENTH: No contract or other transaction between the
Corporation and any other corporation and no other act of the Corporation shall,
in the absence of fraud, in any way be affected or invalidated by the fact that
any of the directors of the Corporation are pecuniarily or otherwise interested
in, or are directors or officers of, such other corporation. Any director of
the Corporation individually or any firm or association of which any director
may be a member, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Corporation, provided that the
fact that he individually or such firm or association is so interested shall be
disclosed or shall have been known to the Board of Directors or a majority of
such members thereof as shall be present at any meeting of the Board of
Directors at which action upon any such contract or transaction shall be taken;
and any director of the Corporation who is also a director or officer of such
other corporation or who is so interested may be counted in determining the
existence of a quorum at any meeting of the Board of Directors which shall
authorize any such contract or transaction, and may vote thereat to authorize
any such contract or transaction with like force and effect as if he were not
such director or officer of such other corporation or not so interested. Any
director of the Corporation may vote upon any contract or other transaction
between the Corporation and any subsidiary or affiliated corporation without
regard to the fact that he is also a director of such subsidiary or affiliated
corporation.
Any contract, transaction or act of the Corporation or of the
directors, which shall be ratified by a majority of a quorum of the stockholders
of the Corporation at any annual meeting, or at any special meeting called for
such purpose, shall, insofar as permitted by law or by the Certificate of
Incorporation of the Corporation, be as valid and as binding as though ratified
by every stockholder of the Corporation; provided, however, that any failure of
the stockholders to approve or ratify any such contract, transaction or act,
when and if submitted, shall not be deemed in any way to invalidate the same or
deprive the Corporation, its directors, officers or employees, of its or their
right to proceed with such contract, transaction or act.
<PAGE>
-14-
FOURTEENTH: No holder of any share or shares of any class of stock
of the Corporation, whether now or hereafter authorized, shall, as such holder,
have any preemptive or preferential right of subscription to any share or shares
of any class of stock of the Corporation, whether now or hereafter authorized,
or to any obligations convertible into stock of the Corporation, issued or sold,
nor any right of subscription to any thereof, other than such, if any, and for
such consideration, and upon such terms and conditions, as the Board of
Directors, in its discretion from time to time, may determine, pursuant to the
authority hereby conferred, and the Board of Directors may issue stock of the
Corporation or obligations convertible into stock of the Corporation without
offering such issue of stock or obligations either in whole or in part to the
stockholders of the Corporation. Should the Board of Directors as to any
portion of the stock of the Corporation, whether now or hereafter authorized, or
as to any obligations convertible into stock of the Corporation, offer the same
to the stockholders or any class thereof, such offer shall not in any way
constitute a waiver or release of the right of the Board of Directors
subsequently to dispose of other portions of said stock or other obligations
convertible into stock, without so offering the same to the stockholders.
FIFTEENTH: (a) The Corporation shall, to the full extent permitted
under the laws of the State of Delaware, indemnify any person who is serving or
has served as director, officer, employee or agent of the Corporation, or, at
its request, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against all expenses
actually and reasonably incurred by him in connection with any pending,
threatened or completed action, suit or proceeding (civil, criminal,
administrative or investigative), in which he is made a party by reason of his
being or having been such a director, officer, employee or agent.
(b) Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the specific case upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount in the event
that it shall be ultimately determined that he is not entitled to be
indemnified by the Corporation. The term "expenses" as used in this Article
FIFTEENTH shall, to the extent permitted under the laws of the State of
Delaware, include, without limitation, costs of litigation, attorneys' fees,
judgments, fines, penalties and amounts paid in settlement.
<PAGE>
-15-
(c) The Corporation may, to the extent available and in amounts
deemed appropriate, 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 the
Corporation would have the power to indemnify him against such liability under
the provisions hereof and the laws of the State of Delaware.
(d) The indemnification provided in this Article FIFTEENTH shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any By-Law, agreement, vote of
shareholders or disinterested directors or otherwise, or of any other
indemnification which may be granted to any person apart from this Article
TWELFTH, both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
SIXTEENTH: Subject to the last sentence of this Article SIXTEENTH,
from time to time any of the provisions of this Certificate of Incorporation may
be amended, altered or repealed, and other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any time
conferred upon the stockholders of the Corporation by this Certificate of
Incorporation are granted subject to the provisions of this Article.
The affirmative vote of the holders of not less than 80% of the issued
and outstanding shares of Common Stock of the Corporation shall be required to
amend, alter, change and repeal Articles SIXTH, EIGHTH, NINTH, TENTH, ELEVENTH
or this Article SIXTEENTH of this Certificate of Incorporation
SEVENTEENTH: The Corporation is to have perpetual existence.
EIGHTEENTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatsoever.
<PAGE>
-16-
NINETEENTH: To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended, a director of this Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director. Without limiting the foregoing in any respect, a director of this
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation, which restates and integrates the Corporation's
Certificate of Incorporation as heretofore amended and supplemented, after
having been duly adopted by the Board of Directors, in accordance with the
provisions of Section 245 of the Delaware General Corporation Law, to be signed
by its duly authorized officer on this 28th day of March, 1996.
DEL LABORATORIES, INC.
By: /s/ Robert H. Haines
--------------------
Robert H. Haines
Secretary
<PAGE>
Exhibit 2 to Annual
Report On Form 10-K
For the Year Ended
December 31, 1995
BY-LAWS
OF
DEL LABORATORIES, INC.
(as amended through December 14, 1995)
ARTICLE I
Stockholders
SECTION 1. ANNUAL MEETINGS. The annual meeting of stockholders of
the Corporation shall be held at such date and time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting,
for the purpose of electing Directors, and for the transaction of such other
business as may properly be brought before the meeting. Annual meetings of the
stockholders shall be held at such place, either within or without the State of
Delaware, as shall be specified in the notice hereof.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders
may be called as provided in the Certificate of Incorporation of the
Corporation. Special meetings shall be held on the date and at the time and
place either within or without the State of Delaware specified in the notice
hereof.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise expressly
required by law, the Certificate of Incorporation of the Corporation or these
By-laws, written notice stating the date, time and place of the meeting and, in
the case of a special meeting, the purpose or purposes of such meeting, shall be
given personally or by mail by the Secretary to each stockholder of record
entitled to vote at such meeting at least ten days prior to the meeting. If
such notice is mailed, it shall be directed to such stockholder at his address
as it appears on the stock transfer books of the Corporation. No business other
than that stated in the notice shall be transacted at any special meeting.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy; and if any
stockholder shall, in person or by attorney thereunto duly authorized, in
writing or by telegraph, cable or facsimile, waive notice of any meeting,
whether before
<PAGE>
or after such meeting be held, the notice thereof need not be given to him.
Notice of any adjourned meeting of stockholders need not be given except as
provided in SECTION 5 of this ARTICLE I.
SECTION 4. QUORUM. Subject to the provisions of law and the rules
of any securities exchange on which the stock of the Corporation is listed, in
respect of the vote that shall be required for a specific action, the number of
shares the holders of which shall be present or represented by proxy at any
meeting of stockholders in order to constitute a quorum for the transaction of
any business shall be one-third of all the shares issued and outstanding and
entitled to vote at such meeting. The presence or absence of a quorum shall be
determined at the opening of a meeting, and if a quorum is then present, unless
the law or the rules of any exchange on which the stock of the Corporation is
listed, or the certificate of incorporation specifically provide to the
contrary, all business properly before the meeting may be thereafter transacted
by a majority vote of the shares present in person or by proxy, though less than
a quorum as a result of abstentions or absences after the opening of the
meeting, except that directors may be elected by a plurality of the votes cast
at such meeting.
SECTION 5. ADJOURNMENTS. At any meeting of stockholders, whether
or not there shall be a quorum present, the holders of a majority of the shares
voting at the meeting, whether present in person at the meeting or represented
by proxy at the meeting, or, in the absence of all the stockholders, any officer
entitled to preside or act as secretary at such meeting, may adjourn the meeting
from time to time without notice other than by announcement at the meeting,
provided, however, that if the adjournment is for more than thirty days or, if
after the adjournment a new record date is fixed, notice of the adjourned date
shall be given to each stockholder of record entitled to vote at the meeting.
At any adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 6. ORGANIZATION. The Chairman of the Board, or in his
absence, the President, or in the absence of both of them, a Vice President,
shall call meetings of the stockholders to order, and shall act as Chairman of
such meetings. In the absence of the Chairman of the Board and the President
and all Vice Presidents, the holders of a majority in number of the shares of
the capital stock of the corporation present in person or represented by proxy
and entitled to vote at such meeting shall elect a chairman. The Secretary of
the Corporation shall act as secretary of all meetings of the stockholders; but
in the absence of the Secretary and all Assistant Secretaries, the Chairman may
appoint any person to act as Secretary of the meeting.
-2-
<PAGE>
SECTION 7. STOCKHOLDER LIST. At least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of such stockholder,
shall be prepared and held open to the examination of any stockholder for any
purpose germane to the meeting, during ordinary business hours for ten days,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and subject
to the inspection of any stockholder who may be present.
SECTION 8. VOTING. Each stockholder shall, except as otherwise
provided by law or by the Certificate of Incorporation, at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
capital stock owned by such stockholder, but no proxy shall be voted on after
three years form its date, unless said proxy provides for a longer period. The
attendance in person at any meeting of a stockholder who is also represented at
such meeting by proxy shall not have the effect of revoking such proxy unless
the stockholder attending shall request the return of such proxy by the
Secretary of the meeting. Upon the demand of any stockholder, the vote for
Directors and the vote upon any matter before the meeting, shall be by ballot.
All elections and all matters shall be decided as provided in Section 4.
Shares of the capital stock of the Corporation belonging to the Corporation
shall not be voted upon directly or indirectly, nor shall any stock so owned be
counted in determining whether a quorum is present at any meeting.
Persons holding stock in a fiduciary capacity shall be entitled to vote the
shares so held in person or by proxy, and persons whose stock is pledged shall
be entitled to vote, in person or by proxy, unless in the transfer by the
pledgor on the books of the Corporation he shall have expressly empowered the
pledgee to vote thereon, in which case only the pledgee, or his proxy, may
represent said stock and vote thereon.
SECTION 9. INSPECTORS OF ELECTION. The Board of Directors may at
any time appoint one or more persons to serve as Inspectors of Election at the
next succeeding annual meeting of stockholders or at any other meeting or
meetings and the Board of Directors may at any time fill any vacancy in the
office of Inspector. If the Board of Directors fails to appoint Inspectors, or
if any Inspector appointed be absent or refuses to act, or if his office becomes
vacant and be not filled by the Board of Directors, the Chairman of any meeting
of the
-3-
<PAGE>
stockholders may appoint one or more temporary Inspectors for such meeting. All
proxies shall be filed with the Inspectors of Election of the meeting before
being voted upon.
ARTICLE II
Board of Directors
SECTION 1. GENERAL POWERS. The property, affairs and business of
the Corporation shall be managed by the Board of Directors.
SECTION 2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number
of Directors and the term they shall serve shall be as provided in the
Certificate of Incorporation of the Corporation.
SECTION 3. QUORUM AND MANNER OF ACTING. Except as otherwise
provided by statute or by the Certificate of Incorporation of the Corporation or
by these By-laws, a majority of the whole Board of Directors shall be required
to constitute a quorum for the transaction of business at any meeting, and the
act of a majority of the Directors present and voting at any meeting at which a
quorum is present shall be the act of the Board of Directors. In the absence of
a quorum, a majority of the Directors present may adjourn any meeting from time
to time until a quorum be had. Notice of any adjourned meeting need not be
given. The Directors shall act only as a board and individual Directors shall
have no power as such.
SECTION 4. PLACE OF MEETING, ETC. The Board of Directors may hold
its meetings, have one or more offices, and keep the books and records of the
Corporation, at such place or places within or without the State of Delaware, as
the Board may from time to time determine or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
SECTION 5. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held as soon as practicable after each annual meeting of
stockholders, for the election of officers and the transaction of other
business, and other regular meetings of said Board shall be held at such times
and places as said Board may direct. No notice shall be required for any
regular meeting of the Board of Directors but a copy of every resolution fixing
or changing the time or place of regular meetings shall be mailed to every
Director at least three days before the first meeting held in pursuance thereof.
Whenever the convenience of the Directors shall so require, the Chairman of the
Board, or in his absence the President, may change the date of any regular
meeting to another date in the same calendar month; provided, however, that the
Secretary shall mail notice of such change to every Director at least three days
prior to date of such meeting.
-4-
<PAGE>
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, an
Executive Vice President or any two Directors. The Secretary or an Assistant
Secretary shall give notice of the time and place of each special meeting by
mailing a written notice of the same to each director at his last known post
office address at least two days before the meeting or by causing the same to be
delivered personally or to be transmitted by telegraph, cable or facsimile at
least twenty-four hours before the meeting to each Director. The notice of
every special meeting of the Board of Directors shall specify the business to be
transacted at such meeting, and no business shall be transacted except as set
forth in such notice. At any meeting at which every Director shall be present,
even though without any notice, any business may be transacted.
SECTION 7. ACTION BY CONSENT. Any action required or permitted to
be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, if prior to such action a written consent thereto is signed
by all members of the Board of such committee as the case may be and such
written consent is filed with the minutes of proceedings of the Board or
committee.
SECTION 8. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board, or in his absence the President, or in the
absence of both of them, a Director chosen by a majority of the Directors, shall
act as Chairman. The Secretary, or in his absence, an Assistant Secretary, or
in the absence of both the Secretary and Assistant Secretaries, any person
appointed by the Chairman shall act as Secretary of the meeting.
SECTION 9. RESIGNATIONS. Any Director of the Corporation may
resign at any time by giving written notice to the Board of Directors or to the
Chairman of the Board or to the Secretary of the Corporation. The resignation
of any Director shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 10. VACANCIES. Any vacancy in the Board of Directors
caused by death, resignation, removal, disqualification, an increase in the
number of Directors, or any other cause may be filled by the majority vote of
the remaining Directors, even though less than a quorum, at any meeting, or in
the event one or more Directors shall resign effective as of a future date, then
a majority of the Directors then in office, including those who have resigned
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations become effective, or by the
stockholders of the Corporation at the next annual meeting or any
-5-
<PAGE>
special meeting called for the purpose. Such Directors shall hold office as
provided in the Certificate of Incorporation. In case all the Directors shall
die or resign or be removed or disqualified, any stockholders having voting
powers may call a special meeting of the stockholders, upon notice given as
herein provided for meetings of the stockholders, at which Directors for the
unexpired term may be elected.
SECTION 11. COMPENSATION OF DIRECTORS. Directors shall receive
such sum for their services and expenses as may be directed by resolution of the
Board or fixed by the Compensation Committee; provided that nothing herein
contained shall be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees also may be allowed compensation for their
services and expenses.
SECTION 12. COMMITTEES. By resolution or resolutions passed by a
majority of the whole Board at any meeting of the Board of Directors, the
Directors may designate one or more committees, each committee to consist of two
or more Directors, which to the extent provided in said resolution or
resolutions, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, including the
power to authorize the seal of the Corporation to be affixed to all papers which
may require it.
SECTION 13. EXECUTIVE COMMITTEE. The Board of Directors, by the
affirmative vote of a majority of the members of the Board at the time in
office, may appoint an Executive Committee, each of the members of the Committee
to be a Director. The number of members of the Executive Committee shall be
such as the Board of Directors may by resolution direct, but not less than
three. The Executive Committee shall have and may exercise, during the
intervals between the meetings of the Directors, all of the powers vested in the
Board except those powers denied to such a committee by law or by the
Certificate of Incorporation. The Board, by a vote of a majority of the
directors then in office, shall have the power at any time to fill vacancies in,
to change the membership of, or to dissolve, the Executive Committee. A
majority of the Executive Committee shall constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
called by the President or any two members thereof. The Secretary of the
Corporation shall give notice of the time and place of each special meeting by
mail, telegraph, cable, facsimile, telephone or verbally at least twenty-four
hours before the meeting to each member of the said Executive Committee.
SECTION 14. COMPENSATION COMMITTEE. The Board of Directors, by the
affirmative vote of a majority of the members of the Board at the time in
office, may appoint a Compensation
-6-
<PAGE>
Committee, each of such members to be a Director, provided that such
Compensation Committee shall at all times meet the requirements of the
Securities and Exchange Act of 1934, as amended. The number of members of the
Compensation Committee shall be such as the Board of Directors may by resolution
direct, but not less than two. The Compensation Committee shall fix the
compensation of the chief executive officer, and may fix the compensation of all
other executive officers on the recommendations of the chief executive officer,
provided, however, that the chief executive may fix the salaries of all officers
other than his own. The Compensation Committee shall have and may exercise all
of the powers vested in the Board of Directors with respect to the execution of
employment agreements with all such persons, and shall have the authority to
approve all other compensation plans for all such persons. The Compensation
Committee shall also administer the Corporation's stock option and other plans
which contemplate the issuance of stock of the Corporation, including the grant
of stock options and other awards thereunder on the recommendation of the chief
executive officer, and the form of any agreements relating to stock options or
other awards granted under such plans. The authority of the Compensation
Committee to administer all of the foregoing is subject at all times to approval
of the stockholders when required by applicable law.
SECTION 15. HUMAN RESOURCES COMMITTEE. The Board of Directors, by
affirmative vote of a majority of the members of the Board at the time in
office, may appoint a Human Resources Committee, each of such members to be a
Director. The number of members of the Human Resources Committee shall be such
as the Board of Directors may by resolution direct, but not less than two. The
Human Resources Committee shall have authority to review and evaluate all
aspects of employee benefits, complaints, employment practices and other matters
involving the welfare of employees and prospective employees of the Corporation,
other than the negotiation of collective bargaining agreements and individual
contracts of employment and other than matters expressly reserved for action by
the Compensation Committee of the Board of Directors. In particular, the Human
Resources Committee shall have full authority to cause compliance in all
respects with the consent decree entered into by the Corporation with the Equal
Employment Opportunity Commission and to take all action necessary or desirable
to accomplish such compliance. The Board by a vote of a majority of the
Directors then in office shall have the power at any time to fill vacancies in,
to change the membership of, or to dissolve the Human Resources Committee. A
majority of the Human Resources Committee shall constitute a quorum for the
transaction of business.
-7-
<PAGE>
SECTION 16.
(a) RIGHT TO INDEMNIFICATION. (i) Each person who was or is made 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
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity
as a director, officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators, and (ii) the Corporation may indemnify and hold
harmless in such manner any person who was or is made a party or is threatened
to be made a party to a proceeding by reason of the fact that he, she or a
person of whom he or she is the legal representative, is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or a partnership, joint venture, trust or other enterprise;
PROVIDED, HOWEVER, that except as provided in paragraph (b) hereof, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. In the event a director or officer of the Corporation shall
serve as a director, officer, employee or agent of any corporation, partnership,
joint venture, trust or other enterprise in which the Corporation maintains an
investment it shall be conclusively presumed for purposes of the indemnification
provided for in subsection (ii) above that such service has been undertaken at
the request of the Corporation. The foregoing presumption shall apply
regardless of whether such director or officer is serving such entity at the
request of a third party or that his or her service with such entity was
commenced prior to the effectiveness of this Article or prior to his or her
becoming an officer or director of the Corporation. The right to
indemnification conferred in subsection (i) above shall be a contract right
based upon an off from the Corporation
-8-
<PAGE>
which shall be deemed to be accepted by such person's service or continued
service with the Corporation for any period after the adoption of this Article
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; PROVIDED,
HOWEVER, that, if the Delaware General Corporation Law requires, the payment of
such expense incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or in
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees or agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under subsection
a(1) of this Article is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders), that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in
-9-
<PAGE>
this Section shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware Corporation Law.
ARTICLE III
Officers
SECTION 1. NUMBER. The officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents (one or more of
whom may be designated Executive or Senior Vice President), a Treasurer, and a
Secretary and such other officers as may be appointed in accordance with the
provisions of SECTION 3 of this ARTICLE III. One person may hold the offices
and perform the duties of any two of said officers, except those of President
and Vice President, Secretary and Assistant Secretary and Treasurer and
Assistant Treasurer.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The
officers shall be elected annually by the Board of Directors at their first
meeting after each annual meeting. Each officer, except such officers as may be
appointed in accordance with the provisions of SECTION 3 of this ARTICLE III,
shall hold office until his successor shall have been duly elected and qualified
in his stead, or until his death or until he shall have resigned or shall have
been removed in the manner hereinafter provided. The Chairman of the Board
shall be chosen from among the Directors. Other officers need not be members of
the Board of Directors.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may from
time to time appoint such other officers as it may deem necessary, including one
or more Assistant Treasurers, and one or more Assistant Secretaries, and the
Board of Directors or the President may from time to time appoint such agents
and employees of the Corporation as may be deemed proper. Such officers, agents
and employees shall hold office for such period, have such authority, and
perform such duties as in these By-laws provided or as the Board of Directors or
the President may from time to time prescribe. The Board of Directors or the
President
-10-
<PAGE>
may from time to time authorize any officer to appoint and remove agents and
employees and to prescribe the powers and duties thereof.
SECTION 4. REMOVAL. Any officer may be removed, either with or
without cause, by the vote of a majority of the whole Board of Directors at a
special meeting called by the Board of Directors, by any committee or superior
officer upon whom the power of removal may be conferred by the Board of
Directors or by these By-laws.
SECTION 5. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any resignation shall take effect at the date of 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 6. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in these By-laws for
regular election or appointment to such office.
SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of Directors and stockholders of the Corporation and
shall perform such other duties as may be assigned to him by the Board of
Directors.
SECTION 8. PRESIDENT. The President shall be the chief executive
officer of the Corporation and shall have general care, supervision and
direction of the affairs of the Corporation and he may execute all contracts,
deeds, certificates, bonds or other obligations authorized by the Board of
Directors, and sign certificates of stock and records or certificates required
by law to be signed by the President. He shall perform such other duties as may
from time to time be prescribed by the Board of Directors. In the absence or
disability of the Chairman of the Board, the President shall perform the duties
of the Chairman of the Board.
SECTION 9. VICE PRESIDENTS. Each Vice President shall have such
powers and shall perform such duties as from time to time may be assigned to him
by the President or the Board of Directors. A Vice President may also sign with
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary certificates of stock of the Corporation. In the event of the absence
or disability of the Executive Vice Presidents, a majority of the Board of
Directors may temporarily vest one of the Vice Presidents with the powers of the
Executive Vice President.
-11-
<PAGE>
SECTION 10. THE SECRETARY. The Secretary shall keep or cause to be
kept in books provided for the purpose the minutes of the meetings of the
stockholders, of the Board of Directors and of any Committee when so required;
shall see that all notices are duly given in accordance with the provisions of
these By-laws and as required by law; shall be custodian of the records and of
the seal of the Corporation and see that the seal is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized in accordance with the provisions of these By-laws; shall keep or
cause to be kept, a register of the post office address of each stockholder; may
sign with the President or Vice President certificates of stock of the
Corporation; and in general, the Secretary shall perform all duties incident to
the office of Secretary and such other duties as may, from time to time, be
assigned to him by the President or the Board of Directors.
SECTION 11. ASSISTANT SECRETARIES. At the request of the
Secretary, or in his absence or disability, the Assistant Secretaries shall
perform the duties of the Secretary and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them by the President, the Secretary or the Board of Directors.
SECTION 12. THE TREASURER. The Treasurer shall have charge and
custody of, and be responsible for, all funds and securities of the Corporation,
and deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositaries as shall be selected in accordance with the
provisions of these By-laws; at all reasonable times exhibit his books of
account and records, and cause to be exhibited the books of account and records
of any corporation all of whose stock except directors' shares is owned by the
Corporation, to any of the Directors of the Corporation upon application during
business hours at the office of the Corporation, or such other corporation,
where such books and records are kept; render a statement of the condition of
the finances of the Corporation at all regular meetings of the Board of
Directors, and a full financial report at the annual meeting of the
stockholders; if called upon to do so, receive, and give receipts for, moneys
due and payable to the Corporation from any source whatsoever; may sign with the
President or Vice President certificates of stock of the Corporation; and, in
general,perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the President or the
Board of Directors.
SECTION 13. ASSISTANT TREASURERS. At the request of the Treasurer,
or in his absence or disability, the Assistant Treasurers shall perform the
duties of the Treasurer, and when so
-12-
<PAGE>
acting, shall have all the powers of, and be subject to all the restrictions
upon, the Treasurer. The Assistant Treasurers shall perform such other duties
as form time to time may be assigned to them by the President, the Treasurer or
the Board of Directors.
SECTION 14. BONDS OF OFFICERS. The Board of Directors may secure
the fidelity of any or all of such officers by bond or otherwise, in such terms
and with such surety or sureties, conditions, penalties or securities as said
Board shall require.
ARTICLE IV
Contracts, Checks, Drafts, Bank Accounts, etc.
SECTION 1. CONTRACTS, ETC., HOW EXECUTED. The Board of Directors,
except as in these By-laws otherwise provided, may authorize any officer or
officers, agent or agents, of the Corporation to enter into any contract or
execute and deliver 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 or by such
Committee or by these By-laws, no officer, agent or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to
pledge its credit or to render it liable pecuniarily for any purpose or to any
amount.
SECTION 2. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for the payment of money, notes, or other evidences of indebtedness
issued in the name of the Corporation, shall be signed by such officer or
officers, employee or employees, of the Corporation as shall from time to time
be determined by resolution of the Board of Directors.
SECTION 3. DEPOSITS. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositaries as the Board of Directors may from time to
time designate, or as may be designated by an officer or officers of the
Corporation to whom such power may be delegated by the Board of Directors, and
for the purpose of such deposit, the President, or a Vice President, or the
Treasurer or an Assistant Treasurer, or the Secretary, or an Assistant
Secretary, may endorse, assign, and deliver checks, drafts, and other orders for
the payment of money which are payable to the order of the Corporation.
SECTION 4. GENERAL AND SPECIAL BANK ACCOUNTS. The Board of
Directors may from time to time authorize the opening and keeping with such
banks, trust companies or other depositaries as it may designate of general and
special bank
-13-
<PAGE>
accounts, and may make such special rules and regulations with respect thereto,
not inconsistent with the provisions of these By-laws, as it may deem expedient.
SECTION 5. PROXIES. Except as otherwise in these By-laws or in
the Certificate of Incorporation of the Corporation provided, and unless
otherwise provided by resolution of the Board of Directors, the Chairman of the
Board or the President may from time to time appoint any attorney or attorneys,
or agent or agents, of the Corporation, in the name and on behalf of the
Corporation to cast the votes which the Corporation may be entitled to cast as a
stockholder or otherwise in any other corporation any of whose stock or other
securities may be held by the Corporation, at meetings of the holders of the
stock or other securities of such other corporation, or to consent in writing to
any action by such other corporation, or may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, all such written proxies or other
instruments as he may deem necessary or proper in the premises.
ARTICLE V
Shares and Their Transfer
SECTION 1. CERTIFICATES OF STOCK. Certificates for shares of the
capital stock of the Corporation shall be in such form not inconsistent with
law, as shall be approved by the Board of Directors. They shall be numbered in
order of their issue, and shall be signed by the President or Vice President and
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation and the seal of the Corporation shall be affixed
thereto; provided, that if such certificate is countersigned (1) by a transfer
agent other than the corporation or its employee, or (2) by a registrar other
than the corporation or its employee, any other signature on the certificate and
the seal of the corporation upon such certificate may be made by facsimiles. In
case any officer or officers who shall have signed, or whose facsimile signature
or signatures shall have been used on any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature shall have been used thereon had not ceased to be such
officer or officers of the Corporation.
-14-
<PAGE>
SECTION 2. TRANSFER OF STOCK. Transfers of shares of the capital
stock of the Corporation shall be made only on the books of the Corporation by
the holder thereof, or by his attorney thereunto authorized by a power of
attorney duly executed and filed with the Secretary of the Corporation, or a
transfer agent of the Corporation, if any, and on surrender of the certificate
or certificates for such shares properly endorsed. A person in whose name
shares of stock stand on the books of the Corporation shall be deemed the owner
thereof as regards the Corporation and the Corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware; provided that
whenever any transfer of shares shall be made for collateral security, and not
absolutely, such fact, if known to the Secretary or to said transfer agent,
shall be so expressed in the entry of transfer.
SECTION 3. ADDRESSES OF STOCKHOLDERS. Each stockholder shall
designate to the Secretary of the Corporation an address at which notices of
meetings and all other corporate notices may be served or mailed to him, and if
any stockholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his last known post office address.
SECTION 4. LOST, DESTROYED AND MUTILATED CERTIFICATES. The holder
of any stock issued by the Corporation shall immediately notify the Corporation
of any loss, destruction, or mutilation of the Certificate therefor, or failure
to receive a certificate of stock issued by the Corporation, and the Board of
Directors or the Secretary of the Corporation, may in its or his discretion,
cause to be issued to him a new certificate or certificates of stock, upon
compliance with such rules, regulation and/or procedure as may be prescribed, or
has been prescribed, by the Board of Directors with respect to the issuance of
new certificates in lieu of such lost, destroyed or mutilated certificates, or
certificates of stock issued by the Corporation which are not received.
SECTION 5. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The
Corporation shall, if and whenever the Board of Directors shall so determine,
maintain one or more transfer offices or agencies, each in charge of a transfer
agent designated by the Board of Directors where the shares of the capital stock
of the Corporation shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares of
the capital stock of the Corporation, in respect of which a Registrar and
Transfer Agent shall have been designated, shall be valid unless countersigned
by such Transfer Agent and registered
-15-
<PAGE>
by such Registrar. The Board of Directors may also make such additional rules
and regulations as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the Corporation.
SECTION 6. CLOSING OF TRANSFER BOOKS. The Board of Directors
shall have power to close the stock transfer books of the Corporation for a
period of not more than sixty nor less than ten days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect or for a period of not more than sixty nor
less than ten days in connection with obtaining the consent of stockholders for
any purpose; provided, however, that in lieu of closing the stock transfer books
as aforesaid, the Board of Directors may fix in advance a date, not more than
sixty nor less than ten days preceding the date of any meeting of stockholders,
or the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining such consent, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, or to give such consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
SECTION 7. EXAMINATION OF BOOKS BY STOCKHOLDERS. The Board of
Directors shall, subject to the laws of the State of Delaware, have power to
determine, from time to time, whether and to what extent and under what
conditions and regulations the accounts and books of the Corporation, or any of
them, shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any book or document of the Corporation, except
as conferred by the laws of the State of Delaware, unless and until authorized
so to do by resolution of the Board of Directors.
-16-
<PAGE>
ARTICLE VI
DIVIDENDS, SURPLUS, ETC.
Subject to the provisions of the Certificate of Incorporation and any
restrictions imposed by statute, the Board of Directors may declare dividends
from the surplus of the Corporation or from the net profits arising from its
business, whenever, and in such amounts as, in its opinion, the condition of the
affairs of the Corporation shall render advisable. The Board of Directors in
its discretion may use and apply any of such surplus or net profits in
purchasing or acquiring any of the shares of the capital stock of the
Corporation in accordance with law, or any of its bonds, or from time to time
may set aside from such surplus or net profits such sum or sums as it, in its
absolute discretion, may think proper as a reserve fund to meet contingencies,
or for equalizing dividends, or for the purpose of maintaining or increasing the
property or business of the Corporation, or for any other purpose it may think
conducive to the best interests of the Corporation. All such surplus or net
profits, until actually declared in dividends, or used and applied as aforesaid,
shall be deemed to have been so set aside by the Board for one or more of said
purposes.
ARTICLE VII
Seal
The Board of Directors shall provide a suitable seal containing the
name of the Corporation, which seal shall be in charge of the Secretary and
which may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise. If and when so directed by the Board of
Directors a duplicate of the seal may be kept and be used by an officer of the
Corporation designated by said Board.
ARTICLE VIII
Miscellaneous Provisions
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall
begin on the first day of January in each year and terminate on the last day of
December in the same year.
SECTION 2. WAIVERS OF NOTICE. Whenever any notice whatever is
required to be given by law, or under the provisions of the Certificate of
Incorporation or of these By-laws, a waiver
-17-
<PAGE>
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 IX
Amendments
All By-laws of the Corporation shall be subject to alteration or
repeal, and new By-laws not inconsistent with any provision of the Certificate
of Incorporation of the Corporation or any provision of law, may be made, either
by the affirmative vote of the holders of record of a majority of the
outstanding stock of the Corporation entitled to vote in respect thereof, given
at an annual meeting or any special meeting, provided that notice of the
proposed alteration or repeal of the proposed new By-laws be included in the
notice of such meeting, or by the Board of Directors at any regular or special
meeting.
ARTICLE X
The Corporation hereby elects not to be governed by the provisions of
Section 203 of the General Corporation Law of Delaware. Notwithstanding the
provisions of Article IX of these By-laws, this Article X may not be further
amended by the Board of Directors.
-18-
<PAGE>
Exhibit 3 to Annual
Report On Form 10-K
For the Year Ended
December 31, 1995
April 14, 1995
Mr. Charles Hinkaty
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. Hinkaty:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By: /s/ Dan K. Wassong
---------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
/s/ Charles Hinkaty
- --------------------
Charles Hinkaty
<PAGE>
Exhibit 4 to Annual
Report On Form 10-K
For the Year Ended
December 31, 1995
April 14, 1995
Mr. Harvey P. Alstodt
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. Alstodt:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By: /s/ Dan K. Wassong
---------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
/s/ Harvey P. Alstodt
- ---------------------
Harvey P. Alstodt
<PAGE>
Exhibit 5 to Annual
Report On Form 10-K
For the Year Ended
December 31, 1995
April 14, 1995
Mr. William McMenemy
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. McMenemy:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 2000.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By: /s/ Dan K. Wassong
----------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
/s/ William McMenemy
- ---------------------
William McMenemy
<PAGE>
Exhibit 6 to Annual
Report On Form 10-K
For the Year Ended
December 31, 1995
April 14, 1995
Mr. Melvyn C. Goldstein
c/o Del Laboratories, Inc.
565 Broad Hollow Road
Farmingdale, New York 11735
Dear Mr. Goldstein:
This will confirm that your Employment Agreement, as amended and extended,
is further extended to March 31, 1998.
In all other respects the Employment Agreement, as amended and extended,
shall continue in full force and effect.
Please signify your agreement with the foregoing by counter-signing the
copy of this letter and returning it to me.
Very truly yours,
DEL LABORATORIES, INC.
By:/s/ Dan K. Wassong
----------------------
Dan K. Wassong
Chairman of the Board
ACCEPTED AND AGREED:
/s/ Melvyn C. Goldstein
- -----------------------
Melvyn C. Goldstein
<PAGE>
ITEM 11
COMPUTATION
OF
EARNINGS PER SHARE INFORMATION
<PAGE>
ITEM 11
DEL LABORATORIES, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
COMPUTATION OF EARNINGS PER SHARE INFORMATION
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATE)
<TABLE>
<CAPTION>
1994
-----------------------
1995 (A) Primary Fully Diluted 1993 (A)
---- ------- ------------- ----
<S> <C> <C> <C> <C>
Earnings before extraordinary
items $7,025 $5,681 $5,681 $4,173
Extraordinary item (net off
income tax benefit of
$1,540,000) - - - (2,310)
------ ------ ------ ------
Net earnings 7,025 5,681 5,681 1,863
Reduction of interest expense
net of tax effect - 48 - 118
------ ------ ------ ------
Net earnings for computing
earnings per common share $7,025 $5,729 $5,681 $1,981
------ ------ ------ ------
------ ------ ------ ------
Weighted average number of
common shares outstanding (B) 4,199 4,228 4,228 4,262
Net additional shares issuable
on conversion of stock options
net of 20% repurchase
limitation (B) 654 572 774 704
------ ------ ------ ------
Adjusted shares outstanding (B) 4,853 4,800 5,002 4,966
------ ------ ------ ------
------ ------ ------ ------
Earnings before extraordinary
item per common share (B) 1.45 1.20 1.14 .87
Extraordinary item per
common share (B) - - - (.47)
Net earnings per common
share (B) $ 1.45 $ 1.20 $ 1.14 $ 0.40
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
Earnings per common share for the years ended December 31, 1995, 1994 and 1993
were computed using the modified treasury stock method which assumes the
exercise of all outstanding options and warrants and the use of the proceeds
thereof to acquire up to 20% of the outstanding common stock of the Company.
Excess proceeds, not utilized for the purchase of such shares, are assumed
utilized, first to reduce outstanding debt and then any remainder is assumed
invested in interest bearing securities with net income increased for the
hypothetical interest expense savings or interest income, net of taxes.
(A) Primary and fully diluted earnings per common share were the same
in 1995 and 1993.
(B) Adjusted to reflect a 2-for-1 stock split effective June 16, 1995 and a
4-for-3 stock split effective June 15, 1994.
<PAGE>
Independent Auditors' Consent
-----------------------------
The Board of Directors and Stockholders
Del Laboratories, Inc.:
We consent to the incorporation by reference in the Registration Statement
(No. 2-69841) on Form S-8, as amended, Registration Statement (No. 33-27777)
on Form S-8 and Registration Statement (No. 33-64777) on Form S-8 of Del
Laboratories, Inc. of our report dated February 14, 1996, relating to the
consolidated balance sheets of Del Laboratories, Inc. and subsidiaries as of
December 31, 1995 and 1994 and the related consolidated statements of
earnings, shareholders' equity, and cash flows and related financial
statement schedule II for each of the years in the three-year period ended
December 31, 1995, which report appears in the December 31, 1995 annual
report on Form 10-K of Del Laboratories, Inc.
KPMG PEAT MARWICK LLP
Jericho, New York
March 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 8,563,375
<SECURITIES> 0
<RECEIVABLES> 26,326,182
<ALLOWANCES> 1,700,000
<INVENTORY> 37,077,909
<CURRENT-ASSETS> 71,549,930
<PP&E> 42,159,925
<DEPRECIATION> 15,319,126
<TOTAL-ASSETS> 113,123,993
<CURRENT-LIABILITIES> 31,108,463
<BONDS> 0
0
0
<COMMON> 6,588,544
<OTHER-SE> 31,432,691
<TOTAL-LIABILITY-AND-EQUITY> 113,123,993
<SALES> 212,047,952
<TOTAL-REVENUES> 212,047,952
<CGS> 88,437,543
<TOTAL-COSTS> 196,640,750
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,830,954
<INCOME-PRETAX> 11,905,713
<INCOME-TAX> 4,881,000
<INCOME-CONTINUING> 7,024,713
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,024,713
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 0
</TABLE>
